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News & Press: Industry News

Liability Issues Confront Companies Dealing with Marijuana Businesses

Tuesday, December 19, 2017  
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While civil RICO lawsuits are emerging in other states to challenge marijuana business, California regulators and politicians are trying to find a way to enable banking services for marijuana growers and retailers.

State Treasurer John Chiang is continuing to study the idea of creating a public bank while promoting federal regulatory changes. In the meantime, the State Business, Consumer Services and Housing Agency recently held a meeting with state banking representatives to discuss the idea of a financial institutions network for marijuana businesses. Such a network would involve special state oversight of transactions for the marijuana banking sector and a segregation of the business from other banking services.

As of yet, California banks appear unwilling to accept the potential liability that would accompany the marijuana business.

Reports from at least three states show a growing threat to businesses that provide services to marijuana businesses that operate legally under state law. In three states, civil federal RICO lawsuits that allege racketeering have been filed against licensed marijuana companies. The lawsuits allege a violation of federal racketeering laws because marijuana remains illegal under federal law. Under the federal Racketeering Influenced and Corrupt Organizations Act (RICO), co-conspirators can be liable for triple damages.

In two of the three lawsuits, financial institutions have been named for providing banking services for allegedly aiding and abetting the unlawful activities. A property owner or business claiming damages from an adjacent marijuana business can file a civil action as a plaintiff.

The RICO actions have been allowed to proceed by federal courts, including the 10th Circuit Court of Appeals, which covers Colorado.


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