Asset Protection for the Cannabis Industry

Asset Protection for Cannabis Industry

How to protect your cannabis-related profits

If you search the interwebs for asset protection for the cannabis industry, you mostly find companies offering services to physically protect assets like farms, products, and piles of cash. We’re talking security, alarms, armored cars, armored men, etc. But what about protecting your assets, i.e. the profits made from successfully operating a business in the cannabis industry? Since the Trump election, people have been wondering whether the federal government will crack down the industry. Remember it’s legal on the state level, but not the federal level. All indicators so far show that Attorney General Jeff Sessions is salivating at the thought of cracking down on the industry. After all, Sessions is quoted as saying “good people don’t smoke marijuana” and he thought the Ku Klux Klan was an ok group of people until he learned they smoked marijuana.

With the uncertainty of having a man like that decide the future of your successful business, you might be feeling nervous.  And if you’ve made any money in the cannabis industry, you’ve got a lot to lose.

Saving the world from hopeless insanity

I have a fond memory of my sister sharing the movie “Reefer Madness” with me. I was excited to be cool enough that she share the hilarious propaganda film with me. I’m convinced this must be one of Jeff Sessions’ favorite films. If I wrote marijuana has “its roots in hell,” you probably wouldn’t know whether it’s a line from the movie or just AG Sessions riffin’ on CSPAN.

Sessions has been in the news recently as evidence has surfaced regarding his attempts to start cracking down on the marijuana industry. He has asked Congress to allow him to prosecute medical marijuana providers. In a nutshell, laws have been put in place to prevent the Justice Department from using federal funds for medical marijuana prosecution. Here’s some more from the Seattle Weekly: Jeff Sessions is Coming for Medical Marijuana. So, there are some protections in place to protect medical marijuana.  Great.  Of course, the Trump administration may or may not follow those funding rules protecting those in the medical marijuana industry.  And those funding rules protect those in the medical marijuana industry… they do not apply to the recreational marijuana industry, that is legal and booming in many states.

If you’re just looking at the federal laws, the recreational marijuana industry is in straight up in violation of federal laws. According to the feds, you are a dealer of Schedule I narcotics. The Obama Administration had effectively decriminalized this Schedule I narcotic, but the Trump Administration can easily reverse that. You probably know this and you probably are wondering, “what happens to the profits of busted drug dealers?”

What do you have to lose?

The federal government can seize any property related to committing a drug crime or any money made from the sale of illegal drugs. Cars, homes, buildings, equipment, cash, land, etc. And for many seized assets, we’re not talking about going through a court process in which you get to make a case for yourself. The government just takes your stuff.

Many people wonder why the federal government just doesn’t legalize, regulate, and tax the hell out of the cannabis industry. But why would they do that when 1) they already get to tax revenue and income, and; 2) they can just take all of the money you make (100%+ tax!). Washington state for one has made it really easy, too! Growers and retailers in the cannabis industry report all of their sales to the state and it’s published online. It’s like a menu of the juiciest targets for prosecution. The top 3 retailers alone account for $100 million in revenue future government funding.

Can anything be done?

As an asset protection attorney, people often ask “who needs asset protection?”  Or, more specifically, “who needs offshore asset protection planning?” The cannabis industry is definitely at the top of my list. To keep assets safe, you have to remove them from US jurisdiction. That typically means some type of offshore trust or business planning in a jurisdiction that does not recognize the authority of the US court system. Think of it like geographical diversification for your investment portfolio. By moving some of your assets outside of the USA, you move them beyond the reach of the federal government or other creditors. The US government has actually been thrown out of court (twice) in the Cook Islands. It is generally regarded as the go-to location for people interested in the highest level of asset protection.

Nobody knows if Sessions will ultimately crack down on the industry. If it’s something that worries you, you might want to think about putting an asset protection plan together. If you want to learn more about what a plan might look like for you, please call us or schedule a call online.

Colin Ley is a Seattle asset protection attorney. He is also the co-founder of LayRoots along with his wife, Shreya Ley.