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Conflicting state and federal laws and regulations concerning the treatment of cannabis can present risk managers involved in the industry with myriad challenges, according to a report from the Risk & Insurance Management Society Inc. on Thursday.
While “most states currently have laws on the books which decriminalize or in some manner legalize the possession and use of cannabis,” it remains a Schedule 1 Narcotic” under the Controlled Substances Act and is defined as having “no currently accepted medical use in the United States, a lack of accepted safety for use under medical supervision, and a high potential for abuse,” the report said.
Banks doing business with members of the cannabis industry can be prosecuted for money laundering, the report said, but data suggests that some banks do so regardless.
Federal enforcement attitudes are also unclear as a previous guidance to take a “hands-off” approach to enforcing federal laws was rescinded in 2018 by then-Attorney General Jeff Sessions, the report said.
The challenge of obtaining insurance for cannabis industry businesses, however, has abated somewhat, the report said.
“Until recently, finding insurance for cannabis businesses was difficult. That is no longer the case. A diverse group of providers are offering a full range of insurance products tailored to the cannabis industry,” the report said.
RIMS recommends careful legal due diligence and advice from counsel familiar with the area of law before venturing into the cannabis industry, and warns of the risks still present.
“Until the CSA is amended to remove marijuana as a Schedule I Narcotic, there is always some risk that shifting political winds or other factors in the area where the business is located may result in prosecution, even where marijuana has been legalized or decriminalized,” the report said, adding “Knowing the community where such a business is planning on operating is the best (preventive) measure any enterprise can take to avoid such uncertainty.”
Golden Bear Insurance Co. has received approval from the California Department of Insurance to lower rates on its coverage of the cannabis industry, in some cases by more than half, the commissioner’s office said in a statement Friday.