Founders’ Friday: The Emerging Legal Marijuana Industry

Founders’ Friday: The Emerging Legal Marijuana Industry

So you want to get in on the emerging marijuana industry? Despite the fact that 29 states currently allow the cultivation, sale and distribution of marijuana for medical purposes and legal recreational use in 8 other states and the District of Columbia, there remains significant barriers into the entry of this industry given that it remains illegal to grow, sell or otherwise distribute marijuana on a nation-wide basis because it remains contrary to federal law. Until federal law changes, your marijuana growing or distributing business will be limited to your state where marijuana has been state legalized, and therefore, you will have a single market for your marijuana product which cannot cross state lines. This is not to say that limiting your marijuana business to a single state cannot be a lucrative enterprise (e.g. marijuana dispensaries), however, some innovators are looking to develop businesses that support the marijuana industry, and therefore, are able to offer those products on a wider scale in all states where marijuana is or will become legalized.

For example, there are many new industries that are being targeted by entrepreneurs and investors that support the growing, distribution or consumption of marijuana and that are not illegal under federal law.   Virtually all states require a method of tracking marijuana from the growth facility through testing to transportation, to distribution and ultimately for resale in order to properly regulate and tax the marijuana product. Companies are materializing, such as bar coding and packaging companies to securely track the supply chain of marijuana. There are also industries such as LED grow lights, testing labs and kits that measure potency, and prefabricated buildings designed to grow marijuana that are able to exist because of the wider reach of their markets.

Agricultural innovators are looking for ways to grow marijuana with less water since many legalized states have water distribution issues as well as methods and products that will assists in accelerating the growth rate of marijuana products. All of these innovations and products that support marijuana growth and distribution will be available to the entire legalized marijuana market as opposed to being limited to a single state. Additionally, the European marijuana market is presently twice in revenue as the United States legalized marijuana market presently at around $67 billion annually.

Innovators in the emerging marijuana industry will look for products that support marijuana growing and distribution as those products are available to market globally rather than limited to single the state distribution as is the marijuana product itself. Of course even if your enterprise involves growing, distribution or sales and is limited to a state marketplace careful planning and establishing a brand as with any other product or commodity is the key to the success of your business.  Founders know that with early risk comes the chance for early reward, but, as a regulated industry, albeit one with changing regulations, it will be important to understand and navigate legal issues facing your business.

Ultimately, founders looking to participate in the legal marijuana industry must know the following:

  1. What regulations apply to your marijuana business
  2. Is your marijuana business legal, considering state, international and potentially federal laws
  3. How do you best structure your marijuana business in order to mitigate your legal risk and maximize your revenue potential

 

Founders’ Friday is a series published by attorney Brian A. Hall of Traverse Legal, PLC d/b/a Hall Law dedicated to legal considerations facing founders and start-ups. This week’s post contributed by Traverse Legal marijuana attorney Mark Clark.

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