High Claims and Legalization
By: Lisa Romeo, Director of ADR Services, AAA® Commercial Division
The days of back-alley sales of “weed,” “mary jane,” and all the other slang expressions for marijuana are over in a growing number of states; adult-use cannabis, or recreational marijuana, is big business—and a fast-growing arbitration caseload.
Since the legalization of cannabis beginning in 2012, 15 states have fully legalized adult-use cannabis, with 27 additional states offering access to cannabis with a medical card.1 The number of states legalizing cannabis is expected to increase over the next few years.
Where there is big business, there are disputes—and cannabis is big business. Sales have increased rapidly in concert with legalization, essentially doubling over the last three years.
US Cannabis Sales2,3
| 2018 | $9.1 Billion |
| 2019 | $12.4 Billion |
| 2020 | $17.5 Billion |
Accordingly, at their core, cannabis disputes are business disputes. As opposed to manufacturing and selling widgets, the product at issue is cannabis. As with other industries, disputes can arise at any point in the process from producing the product through the sales channels to the ultimate consumers. Among others, disputes in cannabis businesses may be related to construction and real estate for grow facilities and storefront dispensaries; shareholder arguments among investors; challenges between vendors and suppliers around intellectual property regarding proprietary strains or licensing agreements; or routine contract disputes.
Following are just three examples of the types of cannabis arbitrations that can occur:
- A partner in a storefront cannabis business claims that the other partner has started a second cannabis delivery business utilizing their joint records.
- A dispute over the condition upon delivery of a contracted-for machine used in processing hemp.
- Because the cannabis industry is heavily regulated at the state level, the number of licenses any one company can hold in a state can be limited, which can lead to a web of entities and investors and disputes about ownership of dispensary chains.
The illicit nature of cannabis is diminishing as it becomes embraced as a legitimate trade at all levels of business and the law. Accordingly, many attorneys and arbitrators now are highlighting their experience in these often-complex cannabis cases on their resumes.
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1https://disa.com/map-of-marijuana-legality-by-state
2https://www.analyticalcannabis.com/news/legal-cannabis-sales-nearly-doubled-from-2018-to-2019-report-finds-312399
3https://www.forbes.com/sites/willyakowicz/2021/03/03/us-cannabis-sales-hit-record-175-billion-as-americans-consume-more-marijuana-than-ever-before/?sh=4878731f2bcf
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