In a cannabis market only beginning to recognize the potential of home delivery, Delivered Inc. is already setting the standard.
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Welcome to the June 2025 horoscopes! Read this month's column & discover the strain that best matches this month's movements.
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In fall of 2023 I wrote about the lawsuit to end federal prohibition that wouldn’t really end federal prohibition. Last July, a federal district court ruled against Canna Provisions et al. in that case. On Wednesday, May 27th, the First Circuit Court of Appeals upheld the lower court’s ruling.
The First Circuit decision means the feds are still entitled to enforce the criminal provisions of the federal Controlled Substances Act (CSA) against against state-licensed marijuana businesses. The feds never seem to do that; so more importantly, it also means the following will continue to apply to state-licensed cannabis business: punitive taxation under IRC 280E (big deal), banking headaches (not as big a deal), and SBA loan ineligibility (frustrating).
The recent Canna Provisions rulings came down as expected– the courts are bound by U.S. Supreme Court precedent from a 2005 case, Gonzales v. Raich. That’s probably OK, because the goal of the Canna Provisions plaintiffs is seemingly to petition the U.S. Supreme Court for review and reversal of Raich. The basic argument is that “things have changed.” Specifically, plaintiffs argue that post-Raich, the feds have been restrained by Congress from CSA enforcement against medical marijuana actors (the Blumenauer bill); that Congress permitted D.C. to enact medical marijuana; and that 23 states have created non-medical, regulated cannabis markets.
Still, Wednesday’s ruling was no surprise. The Raich holding is clear, and none of these developments were going to persuade a federal court to break away from SCOTUS. The hope now is that SCOTUS grants certiorari (agrees to hear an appeal) and we get a reversal. As the plaintiffs repeatedly point out, Judge Clarence Thomas, a Raich dissenter, wrote back in 2021 that Raich should be up for reconsideration. The plaintiffs have latched onto Thomas’ key statement: “Once comprehensive, the federal government’s current approach is a half-in, half-out regime that simultaneously tolerates and forbids local use of marijuana.”
Thomas is right, of course. But the First Circuit was also correct on Wednesday to emphasize just how different the facts are in Raich and Canna Provisions. Most importantly, Raich featured what we lawyers call “sympathetic plaintiffs”; namely, two women who were seriously ill and grew marijuana for medical use in a limited network. There was nothing commercial about it. The stakes were real criminal liability, not insulation from theoretical prosecution that will never occur, plus wishes for tax relief, bank accounts, federal loans, etc.
So let’s see what happens. I have no idea how SCOTUS politicking works, or if Thomas or others on the bench can convince their colleagues to pick up Canna Provisions. If the case is taken up, I previously explained that:
Even if the plaintiffs prevail on all counts – and I hope they do! – the CSA would remain intact entirely. It would still be illegal to ship a single gram of marijuana from New York to New Jersey, from California to Oregon, or from Michigan to Minnesota. Or from anywhere to Canada. The focus of this lawsuit, instead, is application of the CSA to intrastate – and not interstate — marijuana activity and actors. A victory would help cannabis operators who are drawing within the lines, as long as they stay within those lines.
Remember that! And perhaps more importantly, remember this: marijuana reform is squarely a job for Congress or the executive branch. Not the judiciary. We need to Congress to act, especially in the context of stalled Schedule III proceedings, and we need broader reforms than what Canna Provisions seeks. Those reforms include not just interstate commerce, but decriminalization and ideally reparations of some sort.
Stay tuned and we’ll update with any developments.
Find the best THCA pre-rolls of 2025. Leafly reviewed popular THCA pre-rolls & chose the top picks for different needs & budgets.
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In cannabis contract negotiations, it’s common for the parties to execute an early-stage document called a letter of intent (“LOI”). An LOI may also be called a term sheet; naming it one over the other has no legal significance. I love these little agreements and today I will tell you why.
LOIs are used in most cannabis real estate and M&A transactions, but they can be used for any kind of contract negotiation. Parties typically circulate an LOI early on in a cannabis deal, when they are dialing in big-picture terms like purchase price and payment terms. Unless the LOI is completely binding (more on that below), it won’t contain many of the terms that find their way into final agreements, which are commonly referred to as “definitive agreements”. It will, however, include most or all of the high-level deal points.
In complex deals, you may see longer LOIs that include complex provisions, but even those are much more abbreviated than definitive agreements. In very simple deals, an LOI can be one or two pages; and in the simplest of deals, I’ll dump the high-level “LOI” terms into the body of an email, and proceed to drafting once we have a green light from the counterparty.
Overall, memorializing terms in a well-built LOI is often the most efficient way to proceed in dealmaking. Definitive agreements will flow naturally from a good LOI.
Simply put, the odds of success in most deals increases, exponentially, when an LOI is used.
Related, a primary function of an LOI is to ensure the parties agree on key terms before spending outsized time and money on legal. There are few worse feelings in lawyering (and, I image, for a business) than drafting a suite of contracts, only to have the counterparty respond “this isn’t really what we agreed upon.” Nearly as deflating is to receive a fully lobotomized drafts in return, or even replacement agreements.
An LOI can also serve as an “offer” of sorts. This is more common when the parties are working through brokers, or have only had very preliminary discussions. Beware, though, of parties that routinely circulate LOIs without seeming to strike any deals; or who circulate LOIs boasting of other deals they have on deck. Often, these parties are not serious; or they may be collecting LOIs to try to raise funds off that paper. It’s effectively the same thing.
Finally, LOIs can be very effective in anchoring negotiated deal terms, at least to start. Nearly all LOIs will have an expiration date, which may keep a transaction afloat through that time.
LOIs are usually nonbinding, or nonbinding with just a couple of binding terms (e.g., confidentiality, exclusivity). It’s very important, though, to be clear about the status of an agreement: state law varies on the enforceability of LOIs when the status is not clear. Like a binding LOI, a nonbinding LOI can also serve as extrinsic evidence in a dispute if a transaction goes south, including through drafting or execution errors in definitive agreements.
Hybrid LOIs, including those limited to confidentiality and exclusivity clauses, are most commonly tailored toward sellers in a real estate sale or M&A transaction, or lessors in lease LOIs. From the buyer/lessee’s point of view, these provisions can be paramount– a buyer can suffer by inking an LOI, only for a seller to sit on it while shopping for a better purchase price. Sometimes, payment will be required to lock in these terms.
As to binding LOIs, they are less common, more comprehensive, and more risky. By definition, a binding LOI lacks many of the terms in a definitive or “final” agreement (including even material terms). There is always risk that one side could simply stop negotiating definitive agreements following binding LOI execution, if that party feels the LOI benefits them where a definitive agreement will bring constraints.
Some of common problems we see with LOIs are as follows:
Cannabis companies who use LOIs should consider working with attorneys who can put together simple yet sufficient LOIs. Having a good LOI can save a lot of time, legal fees, and headaches down the road. In most deals, it increases the chances of a closing significantly.
Please join us in taking the day off to honor all who have served, so we can do things like have a Canna Law Blog and say whatever we want.
We will be back tomorrow with our regular programs.
After soaking in the terpene-rich atmosphere of The Madrones—a weed and wine resort in Mendocino County known for its curated landrace varietals from The Bohemian Chemist—I was inspired to bring that rare, heritage vibe back with me to Los Angeles. Why landrace strains matter Landrace cannabis strains are the untamed ancestors of today’s hybrid-dominated market. […]
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The Oregon District Court issued a ruling today whereby it “PERMANENTLY ENJOINS AND RESTRAINS” the OLCC and other State actors from enforcing Measure 119 against Bubble’s Hash and Ascend Dispensary, the plaintiffs that sued over BM 119’s constitutionality. You can view Judge Simon’s Opinion and Order here, and the Judgment here. BM 119 required most Oregon cannabis businesses to enter into labor peace agreements with approved unions, in order to renew or obtain licensure.
Although the ruling is tailored toward these two plaintiffs, the Court functionally enjoins OLCC and others from enforcing BM 119 across the board. The Court found that BM 119 failed under both the National Labor Relations Act and the First Amendment to the Constitution. We’ve long anticipated this ruling here on the blog, because it wasn’t a particularly close call.
I’m not going to recap the Court’s analysis—the Opinion and Order speaks for itself. I do want to emphasize what an irresponsible waste of time and money this whole thing was, and the undue stress it caused for many of our client licensees. As I previously explained:
You don’t have to be anti-union (I’m not) to think BM 119 was poorly conceived. I previously highlighted BM 119’s Constitutional and labor law exposure, and explained how this initiative arose after a stymied legislative effort by the United Food and Commercial Workers Local 555 (“UFCW 555”). The plaintiffs’ complaint traces this history thoroughly, including how UFCW 555 brought a failed recall effort against Representative Paul Hovey for having the stones to inquire whether its proposal was unconstitutional and could be preempted.
As expected, Judge Simons’ findings mirror those of Legislative Counsel in 2023 (see here and here). UFCW 555 should have accepted the reality that their goal wasn’t legally viable, rather than put the question to Oregon voters. Many voters likely checked “yes” on BM 119 without any appreciation of its fatal legal flaws, or its prior legislative rejection.
Unfortunately, the cannabis industry was caught flat-footed, and taxpayers ended up funding a defense of BM 119 which simply wasn’t viable. Today, the industry should thank Bubble Hash and Ascend Dispensary, and their stellar counsel at Fisher Phillips.
Please also stay tuned for updates from OLCC, which should explain that the LPA requirement is a goner, with license renewals and change in ownership applications proceeding as they did before this regrettable exercise.
For background on the BM 119 saga, check out the following:
This Memorial Day, honor America’s heroes by choosing to shop at a veteran-owned dispensary for all your long weekend needs.
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The long weekend of Memorial Day gives us the opportunity to celebrate—servicemen, the coming of summer, time spent with our favorite people. Whether you’re throwing a party, taking a trip, or heading to a more rustic setting for some R&R, cannabis pairs perfectly with all of them. Thirty-six states have legalized cannabis for adult (aka […]
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In June 2023, Colorado Governor Jared Polis signed SB 23-271 (codified in C.R.S. 25-5-427 and regulated by 6 CCR 1010-24), a landmark bill regulating intoxicating hemp products in the state. This legislation followed recommendations from the Intoxicating Hemp Task Force, which was established a year earlier under SB 22-205.
At a time when many states were taking a hands-off approach to hemp-derived cannabinoids, Colorado took a decisive step toward regulating a rapidly expanding and largely unregulated marketplace. A step that, if not taken, would have likely resulted in a complete prohibition of hemp products in the state– something the state’s marijuana lobby was strongly pushing for.
SB 23-271 introduces a framework that, among other things, distinguishes between:
The bill also imposes milligram limits on THC content – ranging from 1.25mg to 1.75mg per serving, depending on age and packaging size, and CBD:THC ratio requirements between 15:1 and 20:1. These limits conflicted with the industry norm of 2.5mg, 5mg, and 10mg product formulations, creating confusion and logistical challenges for manufacturers.
Adjusting product formulations and packaging can be costly, particularly for small and mid-sized companies. As a result, many hemp businesses in Colorado have continued selling products that exceed the legal THC thresholds, gambling on limited enforcement. But unlike other states, Colorado has seen some enforcement. While odds of getting caught are still low, the consequences can be severe.
Violators face civil penalties of up to $10,000 per day, per product, and per violation. For example, a company manufacturing and selling five non-compliant products could theoretically face over $36 million in annual fines.
The Colorado Attorney General’s Office is taking some action against noncompliant operators.
In 2024, the Colorado Attorney General filed suit against a Greeley-based hemp company and its owner, alleging that they sold products containing up to 35 times the legal THC limit. According to the complaint, the company’s products included intoxicating cannabinoids, such as THCA, Δ8 THC, and Δ9 THC, in concentrations exceeding the 0.3% THC and mg thresholds and violating the state’s required CBD:THC ratio.
The state further alleges that the company:
This case remains ongoing. However, the AG is seeking penalties of up to $20,000 per violation, which, as discussed above, can be calculated per product, and per day. This means liability could easily reach millions of dollars if the allegations are proven.
Also in 2024, a Pueblo-based CBD company was fined $225,000, with penalties rising to $495,000 if violations continue.
The state alleged the company:
In May 2025, the AG’s office settled with two additional companies, imposing penalties ranging from $41,000 to $50,000, escalating to $141,000 – $250,000 upon future noncompliance. One company was accused of misrepresenting its products’ origins and health claims. The other allegedly allowed third-party use of its branding to market illegal hemp products.
For hemp product manufacturers and retailers, navigating this patchwork of state-by-state regulation has never been more complex – or more critical. Whether you’re producing consumable or topical hemp products, or selling on-line or in retail stores, your compliance strategy must account for every jurisdiction in which your products are manufacture, sold, or distributed.
If your company has received a warning or enforcement action – or you’re unsure if your products meet regulatory requirements in the states in which you operate, we can help. Proactive compliance is your best defense against costly litigation and enforcement.
It’s time to throw out the lazy stoner myth. Yet another study has found that cannabis promotes more physical activity — not less!
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With regulated cannabis from the NSLC, you can rely on your product to do what you expect, when you expect it, every time.
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Hardly a week goes by without a client asking us: Can we sue the owners of a cannabis company personally for the company’s failure to pay our invoice / transfer us the license / sell us the land?
In other words, they are asking, “Can we pierce the corporate veil and access the owner’s individually owned assets to satisfy debts of the business?”
The short answer is no, usually not.
The intertwined principles of limited liability and corporate separateness generally shield owners, including cannabis company owners, from any liability for the company’s debts and obligations beyond whatever capital they have already invested. Judges love to say that piercing the veil is an “extreme” remedy and it very much is the exception and not the rule. And, though the distinction may seem subtle, veil piercing is not a standalone claim. Instead, it is a remedy. This means it is a mechanism by which a court effectuates a judgment the court has entered awarding damages and/or other relief to a party that prevails on a substantive claim, like fraudulent misrepresentation or conversion of assets by way of commingling.
So, you cannot go into court and merely ask the judge to pierce the corporate veil of a cannabis company. Instead, you have to assert and prevail on a substantive legal claim arising out of facts and circumstances that justify the court using the extreme remedy of veil piercing to facilitate a meaningful recovery. To make threading this needle even more challenging, a proponent of veil piercing generally must demonstrate that the complained-of harm results from disregard for corporate separateness–specifically such that the company and its owner are considered each other’s “alter ego.”
For example, there could be a good argument to pierce the veil if the principal of a cannabis company gives you a basis to reasonably rely on the person and company not really being separate by telling you he or she will personally cover your debt if the company runs into trouble and cannot pay you. The same would be true if the principal disregards corporate separateness by commingling his or her assets with those of the company and the company runs into trouble because it cannot pay you.
These principles first emerged in the 19th century in England’s Chancery Court, which could provide remedies the courts of law could not such as injunctive relief (ordering someone to do or not do something), or specific performance (ordering someone to perform his or her side of a contract). Whereas courts of law were hemmed in by the common law system of following precedent (known as stare decisis), the Chancery Court could explicitly consider factors like fundamental fairness.
When the court decides if the circumstances of the case warrant some degree of veil piercing, there are some well known factors the court will consider. These are often as misunderstood as they are invoked: undercapitalization and failure to observe corporate formalities. While the terms themselves hardly need definition, the application of these factors to the veil piercing analysis can be something of a hot mess. While it is true many instances of successful veil piercing involve undercapitalization or disregard for corporate formalities, neither is sufficient on its own to trigger the remedy. Instead, the undercapitalization or inadequate corporate separateness needs to be causally related to some kind of cognizable fraud or injustice suffered by the proponent of piercing.
In sum, while the idea of holding individual owners personally liable for a cannabis company’s debts is understandably attractive to creditors left empty-handed, the threshold for piercing the corporate veil remains intentionally high. Courts are reluctant to disturb the foundational principles of corporate law unless there is clear, compelling evidence that the owners misused the corporate form to perpetrate a fraud or injustice. For better or worse, frustration with nonpayment simply is not enough.
After attending the International Cannabis Business Conference (ICBC) in Berlin at the end of April, I was reminded, yet again, of how draconian U.S. marijuana laws truly are. The excitement throughout the event was palpable. Much of it was driven by Germany’s newly formed government keeping its quasi-legalization policy intact, even if adult-use trials remain uncertain. Optimism surrounding the European cannabis market was everywhere. Unfortunately, state-legal U.S. marijuana operators can’t share in this enthusiasm.
Of note, in this blog post I use the word “cannabis” when referring to the entire plant; it is also the word used in the 1961 Single Convention. I use the word “marijuana” to refer to cannabis exceeding 0.3% THC and “hemp” when referring to cannabis at, or below, 0.3% THC.
Despite growing state-level legalization, federal marijuana policy in the United States still tracks closer to authoritarian regimes like Russia and China than to progressive jurisdictions like Europe and Canada. Most countries with any type of marijuana program now acknowledge both medical and scientific marijuana. In contrast, the U.S. only acknowledges marijuana for scientific research – and even that is highly restricted.
As I discussed in The Hidden Potential Winners of Marijuana Rescheduling: DEA-Registered Bulk Manufacturers, U.S. marijuana policy permits only marijuana for research purposes. And even within that narrow scope, access is tightly limited: only eight DEA-registered bulk manufacturers are allowed to participate. While this sounds like a valuable niche, the reality is that global demand for marijuana, solely for research, is extremely limited. U.S. policy effectively shuts the door to broader international market participation.
The global picture for hemp isn’t much better for U.S. hemp operators. Due to a patchwork international regulation, U.S. hemp operators also face limited access to foreign markets. If a hemp consumable or cosmetic product contains no THC, some opportunities exist. But if there are even trace amounts of THC, most, if not all, markets remain closed. On the bright side, consumable and cosmetic hemp operators have far fewer regulatory burdens domestically compared to marijuana businesses; giving them broader U.S. market access, lower regulatory costs, and better tax and banking treatment.
While there’s hope that marijuana might still be rescheduled to Schedule III, that shift won’t open up the global market to state legal U.S. operators. With the global cannabis market expected to reach $82.3 billion by 2027 – driven by both expanded medical and recreational use – American businesses risk being sidelined. Beyond lost market access, the U.S. is also forfeiting the opportunity to shape and lead the global marijuana supply chain for decades to come.
Despite the current federal ban, there are several pathways the U.S. could take to enter the global marijuana economy:
Many countries, particularly in Africa, have embraced this strategy – legalizing marijuana cultivation, manufacturing, and export for medical and scientific use, without allowing domestic consumption. If the U.S. moved marijuana to at least Schedule II, the DEA could authorize exports without obtaining Congressional approval. A DEA registrant could contract with a foreign medical marijuana operator, and if the DEA approved the export, the U.S. could begin exporting marijuana into legal foreign medical markets (subject to meeting GMP, GACP, and other foreign requirements of course). This limited but effective approach could quickly integrate U.S. marijuana producers into the global supply chain. The best part about it is that it would not require any Congressional action. Either DEA could move marijuana to schedule II or III under HHS’ current scheduling recommendation, or Attorney General Bondi could unilaterally move it to any schedule under 21 U.S.C. 811(d)(1) authority.
I have been saying for years that legalization in the U.S. will occur only under a Republican-led government, and the STATES 2.0 Act offers the most realistic vehicle. At just 15 pages, it avoids the political pitfalls of Democratic proposals like the 296-page Cannabis Administration and Opportunity Act (CAOA), which was ultimately unworkable due to burdensome tax policies and robust social equity provisions. While social equity is important, Democrats need to realize the legalization itself provides for social equity. Also, the unfortunate reality is that any bill containing robust social equity provisions will be dead on arrival in the Senate and won’t achieve the 60 votes necessary for passage.
The STATES 2.0 bill is clean, simple, and avoids controversial social equity and tax provisions. That said, one small amendment could make a big difference: allowing state-legal operators to apply to the DEA for export quotas. Operators willing to meet global GMP or GACP standards could then access international medical markets – assuming, of course, the DEA cooperates.
This is where it gets a bit nerdy, but also exciting.
During ICBC there was much talk about amending the treaties to align with modern realities. Unfortunately, removing “cannabis” from the Single Convention is unlikely due to voting requirements (although see this article from IDPC for an interesting discussion on recent voting changes at the Commission on Narcotic Drugs). There is, however, another option.
Under international law, countries that are party to a treaty may form a sub-agreement – known as an Inter Se modification – among themselves. While this reform measure has been used in other contexts, it has not been legally tested as applied to the three international drug treaties. Inter Se modification would allow a group of like-minded countries to legally regulate the production, trade, and consumption of marijuana for adult-use, without violating their broader treaty obligations under international law.
The agreement would still require a commitment to promoting global health and welfare and maintain compliance with other treaty obligations for non-participant countries. Early signs from countries like Canada and Switzerland—where adult-use programs have shown health benefits to society like reduced youth access, declining beer sales, and shrinking black markets – offer a compelling case for an Inter Se approach based on public health. And such evidence would provide some legal and political cover for countries to attempt this approach.
If the U.S. partnered with, say, Canada in such an agreement (putting aside the current political climate between Canada and the U.S.), the U.S. could begin engaging in global marijuana trade, even for non-medical and non-scientific use, without waiting for full international treaty reform.
One of the stranger paradoxes in both U.S. and global cannabis policy lies in how marijuana genetics are treated – what I call the Schrödinger’s cat of the cannabis world. Under current U.S. law (and in many international jurisdictions), marijuana genetics, such as seeds or clones, are generally classified as hemp until they grow into plants that exceed a THC threshold, typically between 0.2% and 1%, depending on the country.
This legal quirk creates a strange scenario: U.S. marijuana operators are barred from participating in the international marijuana market when it comes to finished products and flower, yet they are allowed to participate in the global trade of marijuana genetics (subject to state law permitting the export). Seeds and other genetic material (i.e. clones and tissue cultures, although they are more restricted) can cross many global borders under legal exceptions, even if the plants they’ll eventually produce are illegal under a country’s federal law.
This disconnect highlights the inconsistency and inefficiency of current global marijuana policy. If the genetics themselves are permitted for international trade, prohibiting trade in the products those genetics produce makes little practical or policy sense. It’s another example of how outdated frameworks continue to constrain rational U.S. marijuana policy, and why comprehensive reform is long overdue.
The rest of the world is moving forward on marijuana policy, while the U.S. continues to trip over its own outdated federal laws. Despite robust domestic regulated markets, U.S. marijuana operators are locked out of a booming international industry that’s forecasted to explode in value over the next few years.
Federal rescheduling won’t fix this – state operators will still be prohibited from entering the international market. Real progress requires strategic policy shifts – whether through export-only programs, legislative fixes like STATES 2.0, or bold international agreements like Inter Se modification.
Until U.S. policymakers confront the disconnect between domestic success and international irrelevance, American marijuana businesses will remain bystanders in a race they helped start.
I don’t know how it came to be, exactly, but I’ve spent countless hours of my adult working life assisting with due diligence on cannabis transactions. These transactions involve all kinds of companies, from sole proprietorships to public companies, and a variety of deals–from leasing, to financing, to good old M&A. Today, I’ll cover how diligence works in the regulated cannabis world, and some common red flags we see during the process.
Due diligence in a cannabis deal is like diligence in a non-cannabis deal, with some nuance and regulatory overlay. Simply put, due diligence is a voluntary process where one party vets and investigates another, or some asset or obligation of the other. This is principally done by requesting information and documents, which may be housed in a data room or exchanged in some other way. A purchaser or investor, or their agents, may also conduct public records searches, including FOIA requests to government bodies. In-person visits and inspections are also typical.
In some deals, diligence goes one way. In others, each side perform diligence on the other. Some common examples of transactions requiring diligence include:
This isn’t an exhaustive list, but it hits some of the high notes. Note that even in smaller deals, there is usually some kind of diligence.
For larger deals with a pronounced diligence process, the process is usually spelled out in a letter of intent (you can read about those here) or in the main purchase agreement as a condition to closing. (For this post, I’m looking at diligence in the context of a business purchase, for ease of reference.)
Usually, a small amount of diligence and negotiation occurs before a LOI or term sheet is signed, and the real legwork comes:
There are many reasons why diligence proceeds on different trajectories– each deal is a snowflake.
Some parties want to execute definitive purchase agreements quickly and conduct diligence before closing (in almost any purchase agreement, the buyer won’t be required to close if it’s not satisfied with diligence). The benefit here is that buyer can get the deal signed quickly and lock the seller into a lot of terms.
In other deals, significant diligence is done pre-signing. This allows a buyer to figure out whether or not to waste time and money negotiating a purchase price based on limited information before “getting married.” Consider the classic example where, during diligence, a buyer discovers something that causes it to want to lower the purchase price. Before a purchase agreement is signed, a discount will be easier to negotiate; afterward, not so much.
What happens in many cases is set forth in number 3 above–the buyer will do some degree of diligence pre-signing, and some post-signing. In these cases, buyers will get some of the big picture stuff up front, sign, and do nitty gritty diligence while “in contract.” This approach can be good because it’s a balance of both of the above.
Now that we’ve talked about when diligence occurs, let’s talk about how it occurs. Generally, it’s started when the inquiring party makes written requests for information to the other side. Sometimes, the requests are relatively informal; in other cases, they involve sending detailed questionnaires that can be dozens of pages long–it all depends on the size and complexity of the deal. Due diligence requests can ask for information about every aspect of the business–employment matters, litigation matters, tax matters, data security, contracts, etc.
After receiving a diligence checklist or questionnaire, the seller will usually respond to certain requests in writing, and provide documents and other data. The bigger the company is, the bigger the pile of documents. For this reason ,it’s common for parties to use “diligence rooms” or “data rooms” which are virtual solutions that allow the parties to upload documents and sort them by category (e.g., “Real Estate”, “Intellectual Property”, “Litigation”) and sub-category (e.g., within Litigation, “Demand Letters”, “Settlement Agreements”, etc.).
After receipt of documents comes the sometimes long, sometimes challenging task of reviewing them. Diligence files are usually reviewed by some combination of the principals of the buyer, attorneys for the buyer, and accountants for the buyer (for the financial information). In more complicated and larger deals, you may see a cannabis regulatory attorney hired to analyze just the responses and documents in the regulatory section, for example.
In almost any case, there are several rounds of this. The buyer will find places where it believes it hasn’t been provided sufficient information or documents. Or it may have other questions. For example, it may see a seller lease that is near the end of its term, and may want to ask what efforts have been made to renew the lease; or whether the landlord will consent to an assignment, as is typically required. This process can take a while.
Keep in mind too that many purchase agreements will set specific times for due diligence. This necessitates the buyer to act quickly, review documents quickly, and ask follow-up questions quickly. At the end of these periods, the buyer may lose their ability to walk away from closing on the grounds that it was not satisfied with the results of diligence. Not surprisingly, these time caps are usually negotiated by the seller.
Okay, that was a lot of information. Now let’s get to the fun part.
It’s never a good sign when a buyer wants to buy a business, but the seller isn’t telling them anything about it. I’ve even seen multiple deals where the seller threatened to walk if the buyer kept asking for info. Would you want to buy a car if the dealer refused to answer when you asked if it was functioning properly? What about if they said the deal was off if you kept asking? I don’t think so. Run!
This is not squarely a diligence issue but its certainly related, and often ties into disclosure schedules in definitive agreements. In any purchase agreement, the seller is the one making the most representations and warranties, and of the most consequential variety. If and when sellers push back on certain reps and warranties during negotiations, it should give the buyer pause. For example, imagine buying a business and asking for the sellers to represent that it was current with its taxes, but it didn’t want to make that promise.
Sometimes there are legitimate reasons why closing needs to occur quickly, such as government mandated timelines or (in the case of investments) when money is needed quickly to fund a specific aspect of the seller’s business. But in the majority of transactions, dates are flexible. Undue pressure to close can be a big warning sign.
Sloppily maintained or missing documents is yet another big red flag. Businesses need to adhere to numerous corporate governance standards while operating, and if a seller can’t produce documents in an easy, legible format, that’s a bad sign. How confident can a buyer be that the seller complied with, say, IRC 280E, when it doesn’t have a signed copy of its material corporate resolutions?
Yes, this happens–a lot! Sellers either are people, or they’re controlled by people; and, in the immortal words of Nick Cave, people they ain’t no good. Unfortunately, sellers lie to and defraud buyers all the time in cannabis land. As an unfortunate corollary, a LOT of litigation happens in M&A deals, big and small. It’s important for buyers to not take seller representations or information at face value. While fraud in the execution of a contract can be grounds for unwinding it, it’s better to avoid inking a bad deal in the first place.
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Diligence is a hugely important part of any cannabis business transaction. Buyers need to be aware of how it works and take it seriously. Please make sure to follow us for more updates on cannabis dealmaking.
Find the best THC seltzers of 2025. Leafly reviewed popular seltzers & chose what we think are the top picks for different needs & budgets.
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Deep in the tangled forests and sprawling vineyards of Anderson Valley’s wine country in Mendocino, California, is a new kind of cannabis tourism experience centered on rare landrace cannabis strains. It’s called The Madrones. In the southern-most point of the Emerald Triangle, founders Jim Roberts and Brian Adkinson combined their love of wine and rare […]
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We frequently discuss the cannabis-specific challenges that brands face when seeking trademark protection. But it’s just as important not to lose sight of the core trademark principles that apply to all businesses—especially the need for a strong, distinctive mark.
Clients often approach us with catchy, creative names that, unfortunately, are (or are likely to be) ineligible for trademark protection. That’s because not all trademarks are created equal. There is a spectrum of distinctiveness, and where a mark falls on that spectrum determines both its legal protectability and its effectiveness as a brand.
In general, the more distinctive the mark, the stronger it is in identifying the source of goods or services—and the broader the legal protection it can receive. Conversely, a mark that lacks distinctiveness or is similar to others in the market will be considered weak.
Below is a breakdown of the main categories of marks, ranked from strongest to weakest:
These are invented words with no prior meaning. Examples include MYLANTA and SYNOVUS. Fanciful marks are the most inherently distinctive, offering robust legal protection. However, they may require greater marketing effort at the outset to educate consumers about what the brand represents.
These are real words used in an unrelated context. Well-known examples include APPLE for computers and CAMEL for cigarettes. Arbitrary marks are also highly distinctive and legally strong—but note that distinctiveness depends on the context. “Apple” would be almost completely generic if used to sell apples (see Generic Marks below).
Suggestive marks hint at a product’s qualities without directly describing them. Examples include AIRBUS for aircraft and PEPTO-BISMOL for digestive relief. These marks are easier for consumers to grasp than fanciful or arbitrary marks but typically receive somewhat narrower protection.
Descriptive marks directly describe the goods or services (e.g., “Delicious Brownies”). These marks are too weak to function as trademarks unless they acquire secondary meaning—usually through long-term, exclusive use in commerce (typically five years or more).
One of the most common reasons the USPTO refuses a trademark application—whether cannabis-related or not—is because the mark is “merely descriptive.” For example, “Bob’s Beer” is likely to be refused because it combines a personal name with the product. Similarly, geographically descriptive marks like “East Seattle Cannabis Company” are typically rejected for lacking distinctiveness.
On the other end of the spectrum, some marks are refused because they are deceptively misdescriptive—meaning they suggest something false about the product. For example, the USPTO rejected a 2012 application for THCTEA because the tea did not contain THC.
Marks can also be geographically misdescriptive—falsely suggesting a geographic origin. A name like “Jamaican Cannabis Co.” for products not from Jamaica would likely be refused on this basis.
Generic terms are the common names of products or services and can never be protected as trademarks. For instance, you can’t register “Soda” for soft drinks. No amount of use or recognition will make a generic term protectable.
If you’re in the early stages of branding your cannabis company or products, consulting a trademark attorney early on is a smart move. An experienced attorney can help you avoid issues like descriptive or misdescriptive marks, and instead guide you toward something distinctive, protectable, and valuable.
Even if you’re not currently pursuing federal registration, that’s no reason to settle for a weak or overused mark. In a fast-moving industry like cannabis, the right trademark is more than a legal asset—it’s a strategic differentiator. Taking the time to build a strong brand from the beginning can save you from costly rebranding and enforcement issues down the road.
Welcome to May, Stargazers! Read this month's horoscope and discover the strain that best matches this month's movements.
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Hopefully this is the penultimate time I’ll write about Ballot Measure 119. Hopefully, some three weeks from now, I’ll publish one last post explaining that this landgrab initiative was annihilated, judicially speaking.
On April 29th, Judge Michael H. Simon heard arguments from the UFCW 555 and the Oregon Department of Justice, on the one hand, and two OLCC licensees, on the other, as to why BM 119 must or mustn’t stand. I didn’t attend the hearing, but trusted sources on both sides advise me that Judge Simon was skeptical of arguments that BM 119 is not preempted by the National Labor Relations Act. In other words, this thing is teetering.
If you’re a supporter of local journalism, you can read a pretty good synopsis of Tuesday’s showdown here at Oregon Live. If you’re a cannabis business that cannot hurdle the paywall, the most important takeaway is that Judge Simon promised a ruling before May 22, when the OLCC license for one of the challengers expires.
Something the Oregon Live article doesn’t explain is that Tuesday hearing was a consolidated affair. Originally, the challengers had sought a preliminary injunction (freezing the requirements of BM 119) prior to any ruling on the merits. That plea was later bundled with Tuesday’s “merits” hearing, such that Judge Simon’s ruling will be the final word in this case– absent any appeal.
I’ve explained enough about the merits of this case in prior posts (linked below)—and probably more than I should’ve endeavored, given that I’m no Constitutional or labor lawyer. So I’ll dispense with further legal analysis here. I do think it’s worth surveying the lay of the land for OLCC licensees, until we get a ruling.
I explained on March 13 that OLCC isn’t processing renewals for licensees that don’t produce a signed labor peace agreement (LPA). But they aren’t taking action against those licensees, either. OLCC has been slow-playing this thing, in essence, allowing the judicial process to play out such that non-compliant businesses may come back into compliance without ever having to sign an LPA, once Judge Simon rules, as a matter of law.
The notices OLCC gives in the case of non-renewal are putting a scare into some operators, because they read, in part, “we cannot process your license renewal until you have uploaded a signed [LPA] or attestation….”. That’s just OLCC walking the line on what BM 119 requires the Commission to do. Again, no one is being run down for continuing to operate in the context of non-renewal for want of LPA.
On March 13, I also explained that OLCC hadn’t yet determined what it would do with OLCC licensees in the buy-sell context. At that time, the Commission was still getting advice from DOJ on the issue.
I spoke with the Compliance Director a few weeks back, and she confirmed that OLCC has been advised not to process these transactions if the buyer does not have an LPA or attestation. So, they are not. This means that any buyer halfway down the pike on deal needs to either: a) hold their nose and provide an LPA/attestation; or b) slow walk the deal, if possible, for the next three weeks or so.
I liked when the BM 119 proponents snuck a Rickroll in the measure. But that’s about it. I expect that we’ll get a ruling pretty soon that BM 119 is a goner. Judge Simon’s findings are likely to mirror the analysis that Legislative Counsel put together in 2023 (see here and here), when UCFW 555 failed to push this thing through as a bill.
If Judge Simon does rule as expected, this whole thing will have been a waste of taxpayer money. That would be quite curious, in the sense that taxpayers voted for BM 119 in the first place. I just hope that our cannabis industry clients aren’t stuck with it.
For past coverage on the BM 119 morass, check out the following:
