LEGAL PERSPECTIVE

Essential Industry

The Impact of Cannabis Across Maryland

On March 23, 2020, Maryland Governor Larry Hogan issued an emergency “shut-down” order declaring that a catastrophic, statewide health Plant-touching businesses handle the Cannabis plant itself, either cultivating, distributing, processing or selling it. These tend to be the businesses most people think of when they imagine the Cannabis as growing media, lights and packaging do not have the same problems associated with interstate commerce, banking or legal liability. They can conduct business across state lines, while plant-touching businesses cannot. emergency existed within the state due to the outbreak of industry. Plant-touching businesses are generally Cannabis products produced in legal state markets COVID-19. The order closed all “non-essential businesses” subject to the strictest regulations and must navigate cannot be shipped to other legal states, as crossing state to control the spread of the disease – effective immediately. complicated licensing processes before they can boundaries constitutes interstate commerce and falls But tucked into the Governor’s order prohibiting the public begin manufacturing, processing or distributing. under federal jurisdiction. from attending large gatherings and events was a curious On the other hand, ancillary businesses support Finally, banking remains one of the last impediments to exception to the list that had never before been mentioned the growth, processing and sale of Cannabis prod- normalizing essential businesses that serve the medias critical infrastructure. ucts throughout the supply chain. These businesses cal Cannabis market. This problem primarily plagues

Indeed, the order permitted Maryland Medical Cannabis include data platforms, agriculture-technology com- plant-touching industries, because Cannabis remains illegrowers, processors and dispensaries to remain open during panies, point-of-sale systems, payment processors, gal under federal law, and is currently labeled a Schedule the pandemic and serve the public. digital marketers, attorneys, accountants and more. I drug under the Controlled Substances Act. As a result,

While it should not come as a complete surprise that They are the same types of companies that would any bank that provides services to a legal Cannabis Cannabis was listed as an “essential” industry under the support business processes in any other industry. business faces possible criminal prosecution for aiding order, it is noteworthy how quickly and dramatically its public Some examples of ancillary and abetting a federal crime, as well as reputation had changed. One might recall that less than six companies include developers of money laundering. years ago, during the heart of the war on drugs, Mary- compliance software like METRC Banks may choose to service a legal land introduced its first legislation seeking to decriminalize or BioTrackTHC, manufacturers Cannabis operator, but the government Cannabis and create a medical recommendation system for developing packaging for products requires them to file a suspicious activity patients. Less than six years later, Cannabis in Maryland has from dried flower to concentrates, report for every transaction involving a transcended its “street-drug” label. It is no longer considered the providers of cultivation equip- Cannabis business. These rules extend in Maryland to be an illegal, highly addictive, Schedule I ment and supplies such as Scotts beyond the Cannabis operator itself to drug with no known medical benefits that is unlawful to pos- Miracle-Gro’s subsidiary Hawthorne any company it interacts with, from acsess. Now it’s considered part of Maryland’s critical public Gardening Company, and the countants to cleaners, resulting in mounhealth sector. point-of-sale software and analytics tains of red tape and expense that most

But the Cannabis market around the country (or Mary- firms like Baker Technologies and banks simply choose to not deal with. Still, land’s market, for that matter) did not begin its ascendence BDS Analytics. By next year, experts most Cannabis business owners cannot as a commodity by virtue of a change in law alone. Rather, believe that the revenue from the accept credit cards, pay their payroll taxes the Cannabis industry began its rise to prominence due ancillary Cannabis market will ex- by check or make wire transfers to other to a corresponding development of companies that saw ceed the market for medical and adult-use Cannabis businesses because of the federal prohibition. the opportunity to support the industry through technology, products combined. As a result, medical Cannabis may have made the software and business processes. These companies can Beyond what these sales numbers suggest, leap to becoming an “essential” industry during the panbe best categorized by their business’ function as it relates ancillary businesses are essential for a number of demic due to Gov. Hogan’s order – however, due to its to the Cannabis plant. Not surprisingly, companies in the other reasons also. First, they do not carry the risks traditionally disfavored status, the industry still has a long Cannabis industry are termed to be either “plant-touching” associated with plant-facing businesses. Fundamen- way to go before it can enjoy the same benefits that other or “ancillary.” tally, businesses built around ancillary products such businesses enjoy under the law.

By next year, experts believe that the revenue from the ancillary Cannabis market will exceed the market for medical and adult-use Cannabis products combined.

Since 2008, Mike Rothman has counseled clients regarding Cannabis laws and regulations as the founder and principal of the Medical Cannabis Law Group and the Law Office of Mike Rothman in Rockville, Maryland. Mr. Rothman has testified on Cannabis laws and regulations before the Maryland House of Delegates, taught classes, and lobbied the federal government on behalf of patients and businesses. Mr. Rothman’s Law Office focuses on criminal defense, including use of the medical Cannabis defense.

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