Duane Morris partner Seth Goldberg's interest in cannabis emerged in 2014 as part of his work as a litigator in the healthcare space. Seven years later, he's the leader of the firm's cannabis industry group, and he's seen the explosive growth of both the regulated trade and the legal work that's sprouted alongside it.

We recently talked about the developments he's seen over those seven years as well as other hot topics in cannabis law right now. Here is some of that conversation, edited for length and clarity.

Higher Law: What are some of the big changes you've seen since 2014?

Seth Goldberg: Some of the major changes have been the sophistication of the clients, the development of stronger compliance protocols and the improvement of deal terms and deal structures.

Seven years ago, and even more recently than that, the industry was being established in somewhat of an ad hoc fashion. There weren't large law firms involved. It was established by, from a legal standpoint, solo practitioners, small law firms working on a local or regional basis. Oftentimes those firms could only handle one aspect of a client's needs. So you might have a lawyer that was doing the corporate structuring but not really looking at the regulatory compliance or the real estate.

And I think over time, the industry has become a more sophisticated consumer of legal services. Many of the companies now even have in-house counsel and legal departments of some size, which was virtually non-existent seven years ago.

There's a lot of M&A activity happening right now. What's going on?

As the pandemic has been winding down, people are getting back to the cannabis industry. If you remember, 2019 was a very big year for the cannabis industry. There was some softness in the market at the end of 2020 to the beginning of 2021. But right now there is a lot of interest in the space.

You've got more states that have come online with both medical and adult use. You've got a different administration, and some more capital needs.from the MSOs, which has created M&A and deal activity. More licenses are becoming available for deals. And you just have a much greater interest in branding and products as the industry grows.

Speaking of brands, what's going on with the cannabis-infused drinks sector?

This is one of the breakthrough segments of this market now. And it's really a segment of the beverage market, just as much as it's a segment of the cannabis market. And lawyers familiar with alcoholic beverages, sports drinks, soft drinks or nutritional beverages are in as good of a position with respect to cannabis beverages as lawyers who are doing cannabis work, because the segment crosses both industries.

You've seen mega-deals from Constellation Brands, which acquired Canopy. You've got major beer companies involved. Molson Coors is involved. You've seen the Lagunitas brand name out there, Corona out there. Pabst. This is a really hot segment, and it offers consumers an alternative that is much more familiar in some ways to them than inhaling cannabis or using cannabis as a tincture or a topical.

And yet we still don't have clear guidance on the federal level about cannabis-infused foods and beverages and other consumer products.

Correct. If there's anything holding this market back, it's lack of regulatory guidance and a clear pathway to doing this on a broad scale. So cannabis beverages containing THC with the psychoactive effects are at this point limited to states where there is a medical or adult-use marijuana program. Whereas cannabis beverages that are using hemp-derived CBD for its therapeutic benefits can be marketed in states that allow those products but the FDA has said that cannabis, whether it's state-legal marijuana or hemp-derived CBD, can't be in a beverage.

With all these industry issues, it seems like law firms everywhere have launched cannabis practices.

Well, I've said a rising tide floats all boats. There are some limits of course. The size of this industry, even with its huge upside, has its limits because of the regulatory restrictions. At this point there are only so many licenses to go around. There is inhibition of growth because you don't have banking. Product innovation is stifled because you don't have trademark protection and patents may be more difficult to come by and you don't have clear guidance from the FDA.

So from a legal standpoint, this market hasn't achieved its potential yet. If you took away all those restrictions, is this an industry that can support lawyers and law firms at all different levels, from big law to solo practitioner? There's no reason to think it can't, given the projections of what an unrestricted market looks like.

What are the biggest issues in your practice right now?

The ongoing regulatory dilemma is the backdrop for all of the cannabis industry from a legal standpoint. Big issues are clients who are trying to navigate deals and need to find capital and financing and banking services. That's a key issue. You really need to have some loosening of the banking restrictions.

We represent operators in different states who have issues with their state agencies, We're always dealing with issues like that. And from a sort of global standpoint it's really continuing to push the market forward in terms of getting the regulatory structure changed.

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