How Marijuana Laws Are Challenging for Your Business

November 14, 2019

Industry and legal experts say that the growing number of states legalizing marijuana is having a major impact on real estate markets, and professionals who operate in the space need to be careful. The cautionary comments came during the forum, “Marijuana Legalization: Business Headache or Opportunity?” during the recent 2019 REALTORS® Conference & Expo in San Francisco.

Fourteen states so far have approved adult use of cannabis. About 33 states and territories have some form of public legal medical marijuana.

“So why do we care?” Megan Booth, director of federal housing and commercial policy, told attendees at the forum. “Because marijuana has to be grown, processed, distributed, and used on real property. Every property type that’s out there, marijuana laws are impacting.”

The Trump administration has indicated that the federal government will not prosecute state-legal marijuana entities, Booth said during the forum. But she cautions there is still a federal law called civil asset forfeiture that allows the federal government to seize any property associated with illegal activity. “That’s something you should know if you get involved with cannabis business,” Booth said. “It is not very often used by the federal government for state-legal activities and I don’t think it is a tool the federal government will use randomly.”

NAR does not have an official policy on marijuana legalization, but it does have a policy on cannabis banking. “[Related] businesses in a state that has legal marijuana—because they remain illegal under federal law—do not have access to FDIC-insured banks,” Booth said. “This means they can’t accept credit cards and more of their businesses run in cash.” Booth said there is added liability of operating with cash-only businesses that can be exposed to added risks and security concerns than traditional entities.

“On the federal side, there is no way to minimize risk,” added Neil Kalin, assistant general counsel for the California Association of REALTORS®. “So you have to ask yourself, are you willing to live and work in a field where you are subject to federal prosecution?”

NAR lobbied for H.R. 1595, the Secure and Fair Enforcement Banking Act, which passed the House on Sept. 25. “It is apparent that the state-legal cannabis industry’s connection to other markets—including real estate—will continue to grow in the coming years,” John Smaby, immediate past NAR president, said following the House’s vote in September. “With current laws keeping the industry’s money out of America’s banking system, our nation is jeopardizing economic growth while forfeiting critical opportunities for oversight and transparency.”