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Cannabis Law Basics

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As more states move to decriminalize cannabis, the regulatory framework becomes more complicated. How can companies successfully navigate federal and state laws?

Understanding the basic laws and regulations guiding cannabis is critical for companies looking to remain compliant and successfully bring their products to market. This requires not only knowing which local and federal agencies are involved in regulating cannabis, but also considering the implications of policy memorandums such as the Cole Memo. This post will investigate some primary agencies and policies affecting cannabis law and how agencies and policies may impact companies in the cannabis industry.

Federal Agencies

There are a variety of federal agencies involved in regulating cannabis operating outside of the FDA including the United States Patent and Trademark Office (USPTO), the National Institute on Drug Abuse (NIDA), the Drug Enforcement Administration (DEA), the U.S. Securities and Exchange Commission (SEC), the Federal Trade Commission (FTC), and the Department of Justice. Cannabis companies should be knowledgeable about the different roles these offices hold in regulating cannabis products to ensure federal compliance.


NIDA has come under scrutiny for failing to allow enough facilities to conduct research into medical cannabis. The agency has a single contract with the University of Mississippi to grow marijuana for medical research, however, this does not yield a sufficient supply of marijuana to meet the demands of researchers. As a result, NIDA and the federal government ended up facing a lawsuit, and the court provided a ruling forcing them to allow more research facilities to study medical cannabis. Despite this ruling, the FDA has not granted new licenses to applicants, slowing down research efforts into marijuana’s therapeutic potential.


The FDA’s primary objectives are to ensure that medical marijuana products are safe and efficacious and not adulterated or misbranded. The FDA can shut down marijuana facilities can if the facility cannot prove that their product is unadulterated, making it integral for companies to show evidence of their product’s purity. Promotional compliance is also important, particularly as the FDA has cracked down on the promotion of CBD products. This means that marijuana companies should remain cautious about making claims, especially as it relates to safety and efficacy.


SEC and the Department of the Treasury face a conundrum for regulating marijuana. Because marijuana is illegal at the federal level, any bank handling marijuana money could face serious penalties. The primary issue facing these agencies is determining where to put the money generated by the cannabis industry when it is legal at the state level, but potentially illegal at the federal level. This has been an ongoing issue which remains to be fully addressed, although the Department of Treasury has released some guidances on how financial institutions may be able to handle these services.

Cole Memo

During the Obama era, the US Department of Justice released the Cole Memo which allowed states to implement legal, regulated cannabis industries unhampered by federal laws. This memo stated that, as long as these states established a strong regulatory framework, the federal government would potentially leave cannabis companies alone. Attorney General Jeff Sessions rescinded the Cole Memo and allowed federal prosecutors to go after cannabis companies. Under Attorney General Barr however, there has been a reversal, and the DOJ is conducting itself as it did in the pre-Sessions era.

Important considerations

Companies within the cannabis industry should remain knowledgeable of the differences between legalization and decriminalization and the difference between recreational versus medical usage. For legalization to be viable, both states and the federal government must allow for the possession, use and marketing of marijuana. Decriminalization is when cities or states state that they will not prosecute individuals using cannabis as long as they meet certain criteria. Companies should consult with a physician to approve their product for medical use if the company wants to market marijuana as being medical. There are 33 states that have offered approved, publicly available medical marijuana programs. 

Despite growing decriminalization of cannabis among states, companies still face potential fines and penalties if they do not remain properly compliant. Repeat offenses and sales can end up in even harsher sentences. It remains important for companies in the cannabis industry to reach out to an attorney to ensure that they are meeting state and federal laws. 

If you have any other questions about how to communicate with the FDA or how your past and/or current FDA communications affect you and your business goals, reach out to me on Twitter, LinkedIn, or send me a message here.

I also host a podcast called DarshanTalks, a show that discusses newsworthy FDA issues and how they apply to bringing a product to market – and keeping it there. From patient centricity in clinical trials to the government shutdown to CRISPR and bioethics to why big data is doomed to fail in healthcare, we’ve got quite the list of topics to review! Listen to the podcast on Google Podcasts or on Apple Podcasts.

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