United States: Legal Landscape And Guidance For Companies Involved In Marijuana Activity

Last Updated: July 25 2014
Article by Michael J. Werner and William F. Gould

Michael J. Werner and William F. Gould are Partners in our Washington DC office.


  • Many states now permit the use of marijuana for medical or recreational purposes and the federal government has revised certain enforcement policies related to marijuana-related crimes.
  • The possession, use, manufacture, and sale of marijuana remains illegal under federal law, creating a complex marketplace for marijuana-related businesses.

The FDA has been conducting an analysis of marijuana at the request of the U.S. Drug Enforcement Administration (DEA), with the possible outcome of changing its status as a Schedule I drug under the federal Controlled Substances Act, according to Douglas Throckmorton, deputy director for Regulatory Programs in the U.S. Food and Drug Administration's (FDA) Center for Drug Evaluation and Research, during recent testimony before the U.S. House Committee on Oversight and Government Reform's Government Operations Subcommittee.1 With this latest development, the FDA has once again brought the regulatory and legal status of the drug into the news.

The laws governing marijuana are currently in flux, as federal and state laws often contain contradictory rules. While many states have taken action to allow for the lawful manufacturing and use of marijuana in certain circumstances, the use, manufacturing, distribution and possession of marijuana remain illegal under federal law. To aid the increasing numbers of businesses and individuals expressing interest in learning about how marijuana is regulated, the time has come for a thorough analysis of current law.2

State Laws

State rules vary widely on marijuana use. For example, possessing an ounce of marijuana is a criminal act in many states, but 23 states and the District of Columbia allow marijuana use for medical purposes. Two of them even allow recreational use.3 Moreover, two additional states currently have initiatives relating to marijuana on their ballots for the November 4, 2014 election. Alaska's ballot initiative calls for legalizing up to one ounce of marijuana (and six plants) and will legalize the use, possession and manufacturing of marijuana paraphernalia. Likewise, Florida citizens will vote on an initiative that would allow for the cultivation, purchase, possession and use of marijuana to treat medical conditions when recommended by a licensed physician. Oregon, Oklahoma and the District of Columbia are also considering ballot initiatives.

Federal Law: FDA Regulation

In his testimony, Dr. Throckmorton reiterated the FDA's position that it has not approved marijuana as a safe and effective drug for any indication. However, the FDA has approved one drug containing a synthetic version of a substance that is present in the marijuana plant,4 as well as a drug containing a synthetic substance not present in marijuana but which acts similarly to compounds in marijuana.5

Additionally, FDA guidance indicates that the agency is aware of the medical use of marijuana to treat disease.6 In its guidance, FDA also notes that – as with other drugs that are not approved by the FDA – the agency works closely with the medical and patient communities as well as other federal agencies when necessary to allow access to experimental treatments through current expanded access provisions described in the FDA's statute and regulations. The FDA's expanded access provisions are designed to facilitate the availability of investigational products to patients with serious diseases or conditions when there is no comparable or satisfactory alternative therapy available. Through this process, a drug manufacturer recently announced that it has made a drug composed of cannabinoids – chemical compounds that are active in marijuana – available to patients.7

The FDA notes that manufacturers seeking approval for products containing marijuana ingredients would have to undergo the same review as other products, a demonstration of safety and efficacy through adequate and well-controlled clinical trials performed under an approved Investigational New Drug (IND) application. The FDA has publicly stated that it supports scientifically valid research conducted under an IND application and believes it is the best way to determine what patients could benefit when using drugs derived from marijuana.8

According to the FDA, these clinical trials could conceivably lead to the development of safe and effective marijuana-based medical treatment products. The FDA pledges to continue to facilitate the work of companies interested in appropriately bringing such products to market. To that end, the FDA has published special guidance regarding the process for researchers looking to perform human subject research with marijuana.9 According to this guidance, the FDA is one of three agencies – along with the National Institute on Drug Abuse (NIDA) and the DEA – involved in such research.

Specifically, researchers must work with each of these agencies for the following purposes:

  • National Institute on Drug Abuse (NIDA): to obtain marijuana for research.
  • One important source of research-grade marijuana for scientific study is through the NIDA drug supply program. The NIDA is the designated agency responsible for overseeing the cultivation of marijuana for medicinal research. As such, the NIDA contracts with the University of Mississippi to grow marijuana for use in research studies. Investigational marijuana products with varying strengths (or potencies) are also available.
  • Food and Drug Administration (FDA): to review an investigational new drug (IND) application. 
  • As with other botanical drug products, researchers need to work with the FDA and submit an IND application to conduct clinical research that can lead to an approved new drug, and this includes research using materials from plants such as marijuana. The IND describes the clinical plan and ensures that patients in trials will be protected.
  • Drug Enforcement Administration (DEA): to obtain an investigator registration and site licensure to conduct studies using marijuana. 
  • As a Schedule I controlled substance under the Controlled Substances Act (CSA), marijuana use in a clinical trial requires special licensure and registration requirements for the investigator and the site where the study will be conducted.

Federal Law: Controlled Substances Act and other Criminal Statutes

Federal prosecutors have a wide variety of legal tools related to marijuana, from the prohibited possession of the drug to sophisticated conspiracy and racketeering laws.10 However, none of the 93 U.S. Attorneys' Offices throughout the country has ever prosecuted or charged marijuana offenses federally. Thus, even before the current legal and regulatory landscape developed, federal law enforcement has historically exercised prosecutorial decision regarding which crimes would be adopted for federal prosecution. These decisions may have been driven by local policy or the perceived impact on crime by the use and sale of marijuana. Last year, the Justice Department revised its marijuana enforcement policy, based on a memorandum prepared by Deputy Attorney General James Cole that set forth the federal government's new policy.11 According to the Cole memo, "Congress has determined that marijuana is a dangerous drug and that the illegal sale and distribution of marijuana is a serious crime that provides a significant source of revenue to large-scale criminal enterprises, gangs and cartels." However, the memo also outlined the Justice Department's specific enforcement policies, including the prevention of the following:

  • distribution of marijuana to minors
  • revenue from the sale of marijuana going to criminal enterprises, gangs and cartels
  • diversion of marijuana from states where it is legal under state law in some form to other states
  • state authorized marijuana activity from being used as a cover or pretext for the trafficking of other illegal drugs or illegal activity
  • driving under the influence and the exacerbation of other adverse public health consequences associated with marijuana use
  • marijuana possession or use on federal property

The memo concludes that state and local law enforcement retain significant authority to regulate marijuana and that agency policy "rests on the expectation that states and local governments that have enacted laws authorizing marijuana-related conduct will implement strong and effective regulatory and enforcement systems that will address the threats those states could pose to public safety, public health, and other law enforcement interests."12

Earlier this year, the Treasury Department adopted the policies set forth in the Cole memo through guidance that discussed its approach to marijuana-related businesses, including those that provide financial services to marijuana-related businesses, which have been exceptionally hesitant to do business with the expanding marijuana industry.13 The Treasury's guidance reiterates Cole's assertion that illegal marijuana distribution and sale contributes greatly to criminal activity.14 However, it goes on to clarify that "the decision to open, close, or refuse any particular account or relationship should be made by each financial institution based on a number of factors specific to that institution," in addition to considerations outlined in the guidance.15

Companies' Legal Exposure

Importantly, none of the federal government's recent positions in its approach to enforcing marijuana-related laws alters existing federal law that prohibits the possession, use, manufacture and sale of marijuana everywhere in the United States. Thus, references to "legal" marijuana for medical or recreational use do not speak to federal criminal law but only to the relatively recent changes made to state criminal codes. Congress does not seem poised to alter the federal criminal law in this area, and the DEA, among other federal agencies, appears to oppose any liberalization of the federal drug laws.

To navigate this increasingly complex landscape of state and federal policy and law, a business or person should use caution if contemplating entrance into the marijuana business in the United States. First, read the Justice and Treasury guidance materials carefully and conform all conduct to the letter and spirit of those documents. Second, make sure you understand applicable FDA regulations. Third, secure legal advice prior to undertaking any marijuana-related conduct, as not all state bars regulating attorneys have permitted attorneys to provide advice to clients wanting to engage in conduct that violates federal law. Lastly, establish a compliance program that assures – to the extent possible – that all partners in the business follow the applicable laws, including FDA rules as well as the advice listed in the Justice and Treasury documents.16

Criminal law is exceptionally dynamic in this area, and all market participants must understand that regime change in the White House or the Justice Department could quickly alter the legal landscape for marijuana. This could expose conduct that the federal government is currently choosing to leave unfettered and may be subject to federal prosecution. Careful monitoring of all future Justice Department and FDA pronouncements is critical to anyone whose role may be affected by new developments in the marijuana trade.

As noted, the FDA has described the process for legally performing medical research using marijuana in public documents. Recent statements from the DEA have indicated an interest by that agency and the FDA to shift marijuana from a Schedule I drug to Schedule II. This would clearly change and likely reduce the risk equation for companies, though there would still be restrictions on the manufacturing, distribution, dispensing and use of the product. As for now, however, companies involved in marijuana activity face legal risks, even in states where it has been deemed "legal." Criminal liability could still be applied to companies under violation of the Controlled Substances Act or other federal criminal statutes.


1 Testimony of Douglas C. Throckmorton, M.D before the Subcommittee on Government Operations Committee on Oversight and Government Reform, June 20, 2014.

2 American Bar Association rules regarding an attorney's ability to counsel clients in these matters conflict. For example, while American Bar Association Model Rule of Professional Conduct 1.2(d) states "a lawyer shall not counsel a client to engage, or assist a client, in conduct that the lawyer knows is criminal or fraudulent," some state bar associations authorize attorneys to advise clients about the legality of possible behavior under relevant state and federal law. For example, Connecticut Informal Opinion 2013-02 states in part that "lawyers may advise clients of the requirements of the Connecticut Palliative Use of Marijuana Act. Lawyers may not assist clients in conduct that is in violation of federal criminal law." 

3 The 23 states currently allowing marijuana use for medical purposes are: Arizona, Alaska, California, Colorado, Connecticut, Delaware, Hawaii, Maine, Maryland, Massachusetts, Michigan, Minnesota, Montana, Nevada, New Hampshire, New Jersey, New Mexico, New York, North Carolina, Oregon, Rhode Island, Vermont, and Washington. Both Colorado and Washington currently allow recreational marijuana use.

4 Marinol is intended to address loss of appetite associated with weight loss in patients with AIDS. Additional information is available at http://www.marinol.com/.

5 Cesamet is an antiemetic intended to relieve chemotherapy induced nausea and vomiting. Additional information is available at http://www.cesamet.com/.

6 See FDA, FDA and Marijuana, available at http://www.fda.gov/drugs/developmentapprovalprocess/ucm401879.htm (accessed July 21, 2014).

7 Press Release, GW Pharmaceuticals, GW Pharmaceuticals Receives Orphan Drug Designation by FDA for Epidiolex in Treatment of Lennox-Gastaut Syndrome (Feb. 28, 2014), available at http://www.gwpharm.com/Epidiolex.aspx.

8 See FDA and Marijuana, supra note 6.

9 See FDA, Marijuana Research with Human Subjects, available at http://www.fda.gov/Drugs/DevelopmentApprovalProcess/ucm401891.htm (accessed July 21, 2014).

10 See 21 U.S.C. §844 (establishing penalties for simple possession); 18 U.S.C. §§1961-68 (codifying the Racketeer Influenced and Corrupt Practices Act, Pub. L. 91-452, 84 Stat. 922 (1970)).

11 See Press Release, U.S. Department of Justice, Justice Department Announced Update to Marijuana Enforcement Policy (Aug. 29, 2013), available at http://www.justice.gov/opa/pr/2013/August/13-opa-974.html; see also Memorandum from James Cole, Deputy Attorney General to all U.S. Attorneys regarding marijuana enforcement (Aug. 29, 2013), available at http://www.justice.gov/iso/opa/resources/3052013829132756857467.pdf.

12 James Cole Memorandum, supra note 12, at 4.

13 U.S. Department of the Treasury, Financial Crimes Enforcement Network, BSA Expectations Regarding Marijuana-Related Businesses (Feb. 14, 2014), available at http://www.fincen.gov/news_room/nr/pdf/20140214.pdf.

14 Id. at 2.

15 See id. at 3-7.

16 Any attorney practicing in this area should consult their local ethics rules, state court rulings, state bar association, and other appropriate sources to ensure that he or she is complying with relevant ethics rules.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Similar Articles
Relevancy Powered by MondaqAI
In association with
Related Topics
Similar Articles
Relevancy Powered by MondaqAI
Related Articles
Related Video
Up-coming Events Search
Font Size:
Mondaq on Twitter
Mondaq Free Registration
Gain access to Mondaq global archive of over 375,000 articles covering 200 countries with a personalised News Alert and automatic login on this device.
Mondaq News Alert (some suggested topics and region)
Select Topics
Registration (please scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.


The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.


Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions