The Legal Cannabis Market: Issues Concerning Obstruction of Business and the Contribution to Crime

Chloe Collins, La Salle University

Abstract

This report explores some of the issues concerning obstruction of business and the contribution to crime within the legal cannabis market. Marijuana is deemed by the federal government to be one of the nation’s most dangerous drugs. It is labeled a Schedule I substance according to the Controlled Substances Act (CSA) (CSA, 2012). Other Schedule I drugs commonly known for their dangerous nature and high risk for abuse also include heroin and ecstasy. This classification makes the drug illegal under federal law. Therefore, state-approved marijuana-related businesses (MRBs) are still illegal under the CSA and subject to prosecution upon violation. This contrast in policy leaves MRBs in compromising positions since full adherence to state law does not guarantee immunity from convictions. For many MRBs, the profitability and shift of cannabis from the black market to a regulated market for consumers to openly enjoy is worth the risk. Federal law also prohibits financial institutions from servicing MRBs (18 U.S.C. § 1956, 1957 and 1960). Financial institutions often refuse services to MRBs, leaving them unbanked. MRB owners often struggle to obtain depository accounts and therefore become forced to conduct cash-intensive operations due to banking restrictions. This issue has further resulted in challenges involving regulatory oversight, potential tax evasion, and crime. As identified upon research, banking restrictions to MRBs may result in regulatory oversight as cash-only operations leave no paper trail. Tax authorities may then struggle to reconcile correct tax payments. Cash-only operations may also lead to MRBs, staffers, and customers becoming increased targets for crime due to the handling of large sums of loose cash on site and through transport to tax offices. This issue further poses another concern as cash-handling and transport inconveniences may discourage MRBs from paying taxes altogether. Frustrations handling cash coupled with exploitive tax laws, may deter MRBs from paying their correct taxes if at all. An increasing number of states have approved the drug for both medical and recreational use in recent years, some including California, Colorado and Nevada. Growing state approval among voters and legislators has resulted in more dispensaries opening across the country. The industry continues to thrive growing into a multi-billion-dollar industry. In order to maintain the legal cannabis market and reduce crime, drug policy reform is essential. The industry’s primary setbacks appear to rest on federal prohibition of marijuana, specifically its labeling as a schedule I drug. Therefore, amendments to marijuana scheduling appears to be the first step toward policy reform and ultimately challenging obstruction of the legal market. This report examines some of the factors that obstruct business within the legal cannabis market and possible solutions toward marijuana policy reform.