Sullivan
Microsoft has discontinued support for Internet Explorer. To access the Sullivan website, please install a modern browser like Microsoft Edge or Google Chrome.

Industry research has forecast the global legal cannabis market will surpass $134B by 2030.

Large tracks of marijuana are grown by local minorities for the hemp it produces

The Cannabis Industry is approximately a decade old. During that decade, the industry has grown, evolved, and now is settling into a mature industry. The approach and skill sets that defined the industry’s first decade are no longer necessarily what will work in the industry’s second decade.

As a growing and thriving industry, cannabis poses complex challenges throughout a variety of industries and markets. Sullivan’s Cannabis Group provides its clients with comprehensive legal services and assists them in achieving their business goals through deep knowledge and understanding of the cannabis industry around the world.

Our Cannabis Group is comprised of attorneys spanning multiple practice groups and offices and includes one of the first general counsels of a publicly-traded cannabis company. Members of our Cannabis Group handled some of the first financings and license applications for state-legal cannabis companies.

As laws evolve and ground-breaking decisions are made, businesses and employers face unique issues surrounding this thriving and ever-changing industry. Our lawyers advise on legal and regulatory requirements and risk management. We’ve designed our cannabis practice to meet the unique needs, challenges and opportunities of our cannabis clients with unrivaled industry knowledge.

Our clients include entrepreneurs as well as private and public companies, including:

  • Investors
  • Venture capital funds
  • Cannabis cultivators
  • R&D companies specializing in medical cannabis-based products, medicines and complementary products
  • Manufacturing and processing companies

Our areas of expertise include:

  • Emerging companies and venture capital
  • Capital markets
  • Mergers and acquisitions
  • Fund formation
  • Intellectual property
  • Government relations
  • Regulatory compliance
  • Real estate, including REITs
  • Tax
  • Employment and benefits
  • Litigation and dispute resolution
  • Restructurings and bankruptcy
Viewpoints
All Viewpoints
HHS Recommends Major Shift in the Legal Treatment of Cannabis
On August 29, 2023, the U.S. Department of Health and Human Services (“HHS”), after completing an almost year-long evaluation of cannabis’s current status as a Schedule 1 substance, recommending to the Drug Enforcement Administration (“DEA”) that cannabis be moved from Schedule I to Schedule III. While the DEA has final say on such a change, the HHS recommendation is the biggest signal yet that a change to the long-standing federal classification of cannabis is potentially forthcoming. Background The Controlled Substances Act (“CSA”) places drugs into one of five schedules, with Schedule I being the most restrictive and, as such, reserved for the most dangerous of drugs which have no deemed medical value and are consequently federally illegal.  Schedule III drugs are currently used for medical purposes, have a moderate to low potential for physical and psychological dependence and include such drugs as testosterone, anabolic steroids, ketamine, and Tylenol with codeine. The CSA grants the Attorney General rulemaking authority to reschedule substances to another schedule, as long as such transfer is based on a finding of scientific and medical considerations, an evaluation from the HHS, and a finding that the substance fits into the criteria of the intended schedule. What Will this Change? Perhaps the biggest effect of moving cannabis to Schedule III will be to the taxation of cannabis businesses. Under Internal Revenue Code Section 280E, no trade or business is allowed to deduct any business expenses (such as rent, utilities, legal costs, and other such expenses) related to the business of selling or producing Schedule I or Schedule II substances, other than the costs of goods sold. This has resulted in a disproportionally higher tax burden on cannabis businesses as compared to other businesses. Rescheduling cannabis to Schedule III would likely result in a significant, positive effect on the cashflow and viability of cannabis businesses as they would be on equal footing with other businesses in their ability to deduct business expenses. Additionally, we would expect to see significantly increased research on cannabis as well as an increase in cannabis related medicines due to this potential rescheduling. While it is still unclear if the potential rescheduling will affect the cannabis industry’s access to financial and banking services, the risks of operating a cannabis-based business will likely decrease with increased access to cashflow resultant from the change in taxation as described above. This improved cashflow could potentially change the risk analyses of banks, other financial services providers, and even security exchanges. Key Takeaways Cannabis is currently legal for medical use in 38 states, three territories, and the District of Colombia and for recreational use in 23 states, two territories, and the District of Columbia. While rescheduling cannabis will not make state-level programs federally legal, it would be, however, a significant step towards the legitimization of the cannabis industry on a national level. Rescheduling cannabis as a Schedule III substance will place cannabis on a level playing field with other businesses when it comes tax policy, and it will provide avenues for increased medical research and development. While there are further steps that must be taken—the DEA will conduct its own independent review of the scheduling of cannabis and the process towards rescheduling will require further administrative actions--the HHS recommendation is a significant step.
Interstate Cannabis Markets Can Thrive by Using Commerce Clause
Joseph Segilia co-authored an article titled "Interstate Cannabis Markets Can Thrive by Using Commerce Clause," published in Bloomberg Law [sub. req'd] on June 20. In the article, Joe explores the legal cannabis commerce backdrop at the state and federal level.
Joseph Segilia Selected to National Cannabis Industry Association’s 2024 Banking & Financial Services Committee
Boston, MA - Joseph Segilia, leader of Sullivan’s Cannabis practice team, has been selected to the National Cannabis Industry Association’s 2024 Banking & Financial Services Committee. The NCIA is the oldest and largest trade association representing the legal cannabis industry. Based in New York City, Joe and his team of attorneys spanning multiple practice groups and U.S. offices track the dynamic cannabis legal landscape and provide clients with strategic, comprehensive counsel that assists them in achieving their business goals. Learn more about Sullivan’s Cannabis practice capabilities here. About Sullivan Sullivan & Worcester (Sullivan) is a global law firm with approximately 200 attorneys in Boston, London, New York, Tel Aviv and Washington, D.C. Sullivan’s clients, including Fortune 500 companies, leading financial services firms and asset managers, boards of directors, and emerging businesses, rely on Sullivan’s ability to navigate complex legal and operational landscapes, the impeccable judgment of its lawyers, and its commitment to best‑in‑class client service.
Greenleaf Claims Pot Law Led To Bargaining Leverage Loss
Gerry Silver and Erika Todd were mentioned in the article "Greenleaf Claims Pot Law Led To Bargaining Leverage Loss," published by Law360 [sub. req'd]. The article describes a labor peace agreement provision in a Rhode Island cannabis law that led Greenleaf to lose leverage at the bargaining table with a United Food and Commercial Workers local, the employer told a federal judge, urging the court to not toss its claims that federal labor law preempts the provision. Greenleaf Compassionate Care Center Inc. argued in an opposition filing that the district court shouldn't grant state agencies' bid to dismiss the medical cannabis nonprofit's suit alleging a labor peace agreement provision in the Rhode Island Cannabis Act violates its rights under the National Labor Relations Act. Greenleaf claimed in its suit that the provision is unconstitutional and preempted by the NLRA. Gerry and Erika are mentioned as being members of the legal team representing Greenleaf in the suit.

Cannabis

The Cannabis Industry is approximately a decade old. During that decade, the industry has grown, evolved, and now is settling into a mature industry. The approach and skill sets that defined the industry’s first decade are no longer necessarily what will work in the industry’s second decade.

As a growing and thriving industry, cannabis poses complex challenges throughout a variety of industries and markets. Sullivan’s Cannabis Group provides its clients with comprehensive legal services and assists them in achieving their business goals through deep knowledge and understanding of the cannabis industry around the world.

Our Cannabis Group is comprised of attorneys spanning multiple practice groups and offices and includes one of the first general counsels of a publicly-traded cannabis company. Members of our Cannabis Group handled some of the first financings and license applications for state-legal cannabis companies.

As laws evolve and ground-breaking decisions are made, businesses and employers face unique issues surrounding this thriving and ever-changing industry. Our lawyers advise on legal and regulatory requirements and risk management. We’ve designed our cannabis practice to meet the unique needs, challenges and opportunities of our cannabis clients with unrivaled industry knowledge.

Our clients include entrepreneurs as well as private and public companies, including:

  • Investors
  • Venture capital funds
  • Cannabis cultivators
  • R&D companies specializing in medical cannabis-based products, medicines and complementary products
  • Manufacturing and processing companies

Our areas of expertise include:

  • Emerging companies and venture capital
  • Capital markets
  • Mergers and acquisitions
  • Fund formation
  • Intellectual property
  • Government relations
  • Regulatory compliance
  • Real estate, including REITs
  • Tax
  • Employment and benefits
  • Litigation and dispute resolution
  • Restructurings and bankruptcy
Viewpoints
All Viewpoints
HHS Recommends Major Shift in the Legal Treatment of Cannabis
On August 29, 2023, the U.S. Department of Health and Human Services (“HHS”), after completing an almost year-long evaluation of cannabis’s current status as a Schedule 1 substance, recommending to the Drug Enforcement Administration (“DEA”) that cannabis be moved from Schedule I to Schedule III. While the DEA has final say on such a change, the HHS recommendation is the biggest signal yet that a change to the long-standing federal classification of cannabis is potentially forthcoming. Background The Controlled Substances Act (“CSA”) places drugs into one of five schedules, with Schedule I being the most restrictive and, as such, reserved for the most dangerous of drugs which have no deemed medical value and are consequently federally illegal.  Schedule III drugs are currently used for medical purposes, have a moderate to low potential for physical and psychological dependence and include such drugs as testosterone, anabolic steroids, ketamine, and Tylenol with codeine. The CSA grants the Attorney General rulemaking authority to reschedule substances to another schedule, as long as such transfer is based on a finding of scientific and medical considerations, an evaluation from the HHS, and a finding that the substance fits into the criteria of the intended schedule. What Will this Change? Perhaps the biggest effect of moving cannabis to Schedule III will be to the taxation of cannabis businesses. Under Internal Revenue Code Section 280E, no trade or business is allowed to deduct any business expenses (such as rent, utilities, legal costs, and other such expenses) related to the business of selling or producing Schedule I or Schedule II substances, other than the costs of goods sold. This has resulted in a disproportionally higher tax burden on cannabis businesses as compared to other businesses. Rescheduling cannabis to Schedule III would likely result in a significant, positive effect on the cashflow and viability of cannabis businesses as they would be on equal footing with other businesses in their ability to deduct business expenses. Additionally, we would expect to see significantly increased research on cannabis as well as an increase in cannabis related medicines due to this potential rescheduling. While it is still unclear if the potential rescheduling will affect the cannabis industry’s access to financial and banking services, the risks of operating a cannabis-based business will likely decrease with increased access to cashflow resultant from the change in taxation as described above. This improved cashflow could potentially change the risk analyses of banks, other financial services providers, and even security exchanges. Key Takeaways Cannabis is currently legal for medical use in 38 states, three territories, and the District of Colombia and for recreational use in 23 states, two territories, and the District of Columbia. While rescheduling cannabis will not make state-level programs federally legal, it would be, however, a significant step towards the legitimization of the cannabis industry on a national level. Rescheduling cannabis as a Schedule III substance will place cannabis on a level playing field with other businesses when it comes tax policy, and it will provide avenues for increased medical research and development. While there are further steps that must be taken—the DEA will conduct its own independent review of the scheduling of cannabis and the process towards rescheduling will require further administrative actions--the HHS recommendation is a significant step.
Interstate Cannabis Markets Can Thrive by Using Commerce Clause
Joseph Segilia co-authored an article titled "Interstate Cannabis Markets Can Thrive by Using Commerce Clause," published in Bloomberg Law [sub. req'd] on June 20. In the article, Joe explores the legal cannabis commerce backdrop at the state and federal level.
Joseph Segilia Selected to National Cannabis Industry Association’s 2024 Banking & Financial Services Committee
Boston, MA - Joseph Segilia, leader of Sullivan’s Cannabis practice team, has been selected to the National Cannabis Industry Association’s 2024 Banking & Financial Services Committee. The NCIA is the oldest and largest trade association representing the legal cannabis industry. Based in New York City, Joe and his team of attorneys spanning multiple practice groups and U.S. offices track the dynamic cannabis legal landscape and provide clients with strategic, comprehensive counsel that assists them in achieving their business goals. Learn more about Sullivan’s Cannabis practice capabilities here. About Sullivan Sullivan & Worcester (Sullivan) is a global law firm with approximately 200 attorneys in Boston, London, New York, Tel Aviv and Washington, D.C. Sullivan’s clients, including Fortune 500 companies, leading financial services firms and asset managers, boards of directors, and emerging businesses, rely on Sullivan’s ability to navigate complex legal and operational landscapes, the impeccable judgment of its lawyers, and its commitment to best‑in‑class client service.
Greenleaf Claims Pot Law Led To Bargaining Leverage Loss
Gerry Silver and Erika Todd were mentioned in the article "Greenleaf Claims Pot Law Led To Bargaining Leverage Loss," published by Law360 [sub. req'd]. The article describes a labor peace agreement provision in a Rhode Island cannabis law that led Greenleaf to lose leverage at the bargaining table with a United Food and Commercial Workers local, the employer told a federal judge, urging the court to not toss its claims that federal labor law preempts the provision. Greenleaf Compassionate Care Center Inc. argued in an opposition filing that the district court shouldn't grant state agencies' bid to dismiss the medical cannabis nonprofit's suit alleging a labor peace agreement provision in the Rhode Island Cannabis Act violates its rights under the National Labor Relations Act. Greenleaf claimed in its suit that the provision is unconstitutional and preempted by the NLRA. Gerry and Erika are mentioned as being members of the legal team representing Greenleaf in the suit.