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The Business Behind the Medical Marijuana Business

Medical marijuana may be legal in 17 states, but is illegal according to the federal government forcing medical marijuana businesses to shutdown.medical marijuana

Medical Marijuana Laws

Seventeen states including California, Colorado and New Mexico have legalized marijuana for medicinal purposes. Each of the seventeen states has specific requirements and regulations regarding medicinal marijuana. South Carolina is not one of the seventeen states that permit marijuana use for medicinal purposes. Currently, marijuana in any amount is illegal.

According to the Huff Post, medical marijuana users, growers, and other businesses associated with the drug, walk a fine legal line between state laws and federal laws. The fine legal line leaves many marijuana businesses under the investigation of the DEA and the IRS.  A medical marijuana business in a state in which the drug is legal can initially seem opportunistic, but soon can turn very risky.

The Business behind the Business

South Carolina law does not permit medical marijuana businesses, but the business can be a big business in states where the drug is legal. California is home to 1,000 medical marijuana dispensaries with Colorado following suit with more than 500 dispensaries, according to Aaron Smith, executive director of the National Cannabis Industry Association.

Smith states that there are also various other businesses who benefit from the medical marijuana industry including packagers, software companies and accountants. The medical marijuana market brings in an estimated $1.7 billion a year in sales, according to See Change Strategies.

The lucrative nature of the medical marijuana business, leads many people, like Christie Lunsford, to join the industry.  Lunsford’s marijuana business was short lived due to complicated state and federal regulations, as well as lack of support from banks and other financial institutions.

Lunsford’s venture in the medical marijuana business included selling marijuana-infused topical creams. Lunsford’s business, based in Colorado, did not qualify for a business bank account and did not qualify for tax deductions for expenses like rent and payroll. Lunsford did eventually sell her line of creams to the Denver-based company, Dixie Elixers and Edible.

Audits and Raids

Medical marijuana businesses are also susceptible to audits by the IRS.  Dale Sky Jones, executive chancellor of Oaksterdam University, located in Oakland, Calif. states the IRS audits are a “disingenuous attack on valid, regulated businesses”. Oaksterdam University offers training for those thinking of entering into the medical marijuana industry.

Jones, like Lunsford, believes banks need to provide medical marijuana businesses with business checking accounts. Jones states without business checking accounts the medical marijuana industry will result in a cash only business. “If you turn the entire industry into cash, everything you’re trying to do to run a legitimate business looks like money laundering,” Jones states.

The medical marijuana disparity between states and the federal government lead the medical marijuana industry subject to raids by the DEA. “If you’re in a business and selling marijuana, you run the risk of being raided or investigated federally,” states DEA spokesman, Michael Rothermund.

Jones, along with colleagues in the industry, feels the DEA should redirect their focus from legal growers to illegal growers of medical marijuana. “There are a lot of illegal growers running around—why are you cutting down reputable groups? Because we’re easy targets,” Jones states.  Jones states the federal government causes growers to experience “a psychological war in addition to a multi-front attack”.

While the focus of the national medical marijuana attention is on DEA raids, the federal government secretly forces other medical marijuana businesses to close their doors. The federal government, using asset forfeiture threats, quietly closed the door to over 400 medical marijuana facilities in California and 57 in Colorado last year.

Politically Driven or Legally Driven?

With the Presidential Election looming, many people in medical marijuana business are starting feel the raids are not legally driven, but rather politically driven. In a 2008 campaign speech, President Obama stated, “I’m not going to be using Justice Department resources to try to circumvent state laws on the issue.”

According to the medical marijuana activist group, Americans for Safe Access, during President Obama’s term in office the DEA raided approximately 200 medical marijuana dispensaries resulting in more than 60 federal indictments. The activist group states that the number of raids and indictments on medical marijuana dispensaries during Obama’s presidency are significantly higher than the number of raids and indictments during the Bush administration.

Jones recommends those thinking of entering the medical marijuana industry to think it through because it is a risky business. “I can’t in good conscience recommend people in their right minds to do this without getting educated and taking stock of their own risk and responsibilities,” Jones states.

Charged with Marijuana Possession in South Carolina?

Marijuana is an illegal drug in South Carolina. If you are caught manufacturing, possessing or distributing marijuana, you could face stiff penalties. A South Carolina drug crimes lawyer at the Strom Law Firm understands the penalties associated with marijuana possession and distribution charges. We will fight to clear your name of any drug charges. Call us today or fill out a web form to see how we can help you. 803.252.4800.

About Pete Strom

Defending criminal charges including drug crimes, DUI, CDV, mail fraud, wire fraud, bank fraud, computer crimes, money laundering, and juvenile crimes, Pete also handles Federal and State investigations. Representing individuals in Civil Matters including Class Actions, Personal Injury, Qui Tam Actions, Defective Products, Nursing Home Neglect, and Professional Licensing Defense cases. Joseph Preston “Pete” Strom, Jr., the managing partner at Strom Law Firm, L.L.C., has been fighting for justice since 1984.

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