Ohio Potrepreneurs Should Prepare For Regulatory Haze Of Conflicting State And Federal Rules

As Ohio prepares for its new medical marijuana law to take effect, potential pot proprietors are left wondering how things are going to shake out for the industry, legally speaking.

Even as states like Colorado and Washington enter their fourth year of full legalization, ambiguities about the legality of cannabis persist. Many banks shy away from doing business with pot-related enterprises for fear of regulator repercussions, for example. Trademarks and other federally regulated intellectual property rights also get rejected for relating directly to weed. And the U.S. Treasury’s financial crimes arm still tracks transactions related to pot.

Ohio’s eager potpreneurs should expect those issues to persist for now, said Taylor West, deputy director of the National Cannabis Industry Association, who spoke to an Ohio medical cannabis seminar put on by Dickinson Wright PLLC in downtown Columbus Thursday.

The NCIA is working to pass safe harbor legislation that would protect banks that conduct business with pot-related outfits, West said, but that legislation is parked in committees on Capitol Hill and likely won’t move until at least November, when there could be a shake-up in the control of the Senate.

“Nothing we do in this bill protects you from enforcement by the federal government,” state Sen. Bill Coley, who provided a reluctant swing vote as the medical pot bill passed in the Ohio Senate, told those in attendance.

“While the Obama administration in doing a ‘look the the other way’ with respect to the enforcement of federal marijuana laws, the Federal Reserve is not,” he said.

On paper, that’s true. But Dickinson Wright attorney Bret Kravitz said in practice, federal agencies have largely treated as law the so-called Cole Memo, which established guidelines for federal prosecution of cannabis businesses in states where it is legal.

The Cole Memo said the federal government would focus on preventing the following:

  • Distribution of marijuana to minors.
  • Revenue flowing from marijuana sales to drug cartels.
  • Interstate trafficking from states where medical is legal to ones where it isn’t.
  • Using legal medical as a cover for other illegal drug sales and trafficking.
  • The use of violence and firearms in the cultivation and distribution of marijuana.
  • Drugged driving.
  • Growing marijuana on federal lands.
  • Using or possessing marijuana on federal lands.

Coley said Ohio’s medical law was set up to avoid those outcomes.

Trademarks and patents can be particularly tricky for early entrants in the pot market, because using the word cannabis or something similar will generally end in a rejected submission, said Alexander Brown, an attorney at Dickinson Wright. For federal agencies to accept them, these sorts of applications need to be worded vaguely, he said.

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