Cannabis market is uncharted territory for law firms

Political uncertainty casts cloud over retail distribution of marijuana in B.C.

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As 2018 inches closer and announcements from the cannabis industry become more frequent, local law firms are grappling with what the future of recreational marijuana will mean for the sector’s business owners.

The commercial sale of marijuana in B.C. largely remains a question mark, and while there is an idea of what the federal regime will look like, retail distribution and regulations on cannabis-related businesses are mainly speculation at this point.

“Everything revolves around distribution,” said Tony Wilson, associate counsel at Boughton Law in Vancouver. “Are you going to be getting the product at the existing locations in Vancouver? Are you going to be able to get it at the liquor stores in British Columbia? Or is there going to be a special class of stores that are specially licensed by the provincial government for sale of marijuana products?”

Something still unresolved is what will happen to the remaining cannabis stores that have been essentially operating illegally.

“These are the people who have technically been breaking the law for years,” Wilson said. “Are we going to be licensing those entities at all?”

Wilson said the recom-men-
dations for the sale of marijuana did not favour government liquor stores, but given the uncertainty of the political climate in the country it is hard to be sure.

For business owners looking to break into the industry, there remain a number of hurdles.

“One area of challenge for industry participants is the financial institutions,” said Susan Tomaine, partner at Blake, Cassels & Graydon LLP. “I think banks are still trying to figure out how they are going to deal with this particular industry.

“The banks and financial institutions have been very cautious to back participants in the industry because of concerns about where funding and capital is coming from.”

It has become a more accepted practice to accept clients in the cannabis industry, but when an industry is emerging the best thing a lawyer can do is proceed cautiously, she said.

“Our job is just to stay on top of the legislation and, when all the regulations are finalized, make sure we can understand and advise clients on how to participate in the legal market.”

As with any emerging industry, progress and development take time.

“Five years ago, I wouldn’t have taken on a client that is related to the cannabis industry,” said Timothy Murphy, managing director of Murphy & Co. “Now it’s a lot more mainstream and we have several clients that are involved in the cannabis industry, not necessarily as growers but as inventors and engineers.”

“It has become a lot more of a legitimate business enterprise, so if I was an entrepreneur and looking at going into the cannabis area, I would be feeling pretty good about my prospects.”

Some say it might be a little too early for would-be industry participants to try to get a toehold in the business.

“My advice would be to wait,” Wilson said. “No. 1, you would be engaging in an illegal activity right now. No. 2, do you want to throw in a whole bunch of money in an illegal activity when the distribution of the product may go to government liquor stores or may go to a different kind of structure or business?”

For entrepreneurs who would take the risk of entering the market now, Murphy preaches vigilance.

“Do it right, treat it like a real business and be very mindful of new regulations, more so than you would be in more traditional businesses,” he said. “Get involved in the process, create a dialogue with local governments about what you would like to see, get a group together to try to influence legislation, have good partners and try to put yourself in touch with Small Business BC and lawyers knowledgeable on the subject.”