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Cannabis Companies Face Financial Threat as Racketeering Cases Increase

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The number of federal civil racketeering lawsuits against marijuana businesses has increased dramatically, leaving businesses with tens of thousands in legal fees with which they have to contend. While many experts are divided on the risks these cases could pose, the increase is proving itself to be worrisome to industry watchers.

Omar Figueroa, a cannabis attorney in California, said: “There is a greater risk of [racketeering] litigation at this point because of the greater publicity, and the potential for copycat litigation is heightened.”

The cases of racketeering, filed under RICO, are placed against both state-licensed and unlicensed cannabis businesses under the premise that these businesses are operating illegally according to federal law.

RICO, the Racketeer Influenced and Corrupt Organizations Act, was enacted to target organized crime in 1970. Since then, this act has expanded to include many other federally illegal activities like drug trafficking.

A decision has yet to be reached in any of the cases across the country. A recent federal court ruling that took place in Oregon indicates that plaintiffs may face a heightened burden of proof.

There are a few things those involved in the cannabis industry should be aware of in light of this increase in racketeering cases. First off, according to Robert Mikos, a professor of cannabis law at Vanderbilt Law School, the risk marijuana businesses face “is lower than what many people believe.” Michael Mayes, a cannabis consultant and the CEO of Quantum 9 added that “if you can’t prove damages – that is, property value decreasing – then it is hard for the cases to hold weight.” There are many things those involved in the cannabis industry can do to be less vulnerable to these lawsuits, but they can’t completely eradicate the possibility. The threat will remain so long as federal marijuana reform holds off.

Another thing those working in the cannabis industry should be aware of is the cost of defending themselves against these suits. According to Figueroa, it can be costly to defend yourself even against meritless RICO suits.

The best courses of action you can take to prevent yourself from becoming vulnerable to one of these cases is to be a good neighbor and remain aware of the cases that are currently ongoing. Being aware of the legal climate surrounding your industry can help you keep away from anything that might lead you to get in hot water with law enforcement. In being a good neighbor, additional efforts can be made to sort of smooth out your community’s view on your business, such as forming a neighborhood watch or participating in public service. It’s important to note that, while these things may help to make you less vulnerable, they can’t shield you entirely from the looming threat.

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