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Running a cannabis business is difficult and many people fail. These ventures bottom out for myriad reasons, although owners tend to blame federal law issues first of all. It’s true that federal law creates a tough environment for cannabis businesses (tax issues, market saturation, geographic constraints, etc.), but federal prohibition also has kept big money sidelined, giving small business a real head start.
My view, after seeing many spectacular failures and slow motion crashes over the past several years, is that most bad outcomes are a combination of the following: 1) a challenging legal and regulatory environment, 2) saturated markets, and 3) operator error.
A start-up cannabis business cannot control the first two items listed above, but should be able to navigate them. The third item is a different animal. Margins of error tend to be slim for most cannabis ventures, and self-inflicted wounds are difficult to overcome. This blog post covers the five biggest mistakes we continue to see in early-stage cannabis businesses—specifically in Oregon—and gives suggestions to avoid them.
The Oregon legislature passed a moratorium on new marijuana license applications last year. This means that market entrants must buy their way in through asset or stock sales from existing licensees. The OLCC has a small team of change-in-ownership investigators who work with both buyers and sellers on these transactions. Based on current, published timelines, applications submitted the first week in April are currently being assigned and reviewed. So, we’re a little over two months out.
Does this mean a new market entrant can expect to be licensed two or three months after inking a deal? No, it doesn’t. Five or so months is a more common timeframe. Here is how the process works:
As a general rule of thumb, change-in-location applications tend to take longer than purchases of licenses “in place.” But many of these processes take five to seven months regardless. The trick for buyers is to deploy as little capital as possible during the dead zone.
It’s worth noting that cannabis business sales aren’t unique in taking some time. I’ve seen many non-cannabis business sales delayed by diligence issues, lease negotiations, ironing out terms in final agreements, etc. In the Oregon cannabis industry, administrative vetting and disclosure requirements must be added to that list.
Finally, I’ll add that delays are usually (but not always) on the buyer side, stemming from initial business structuring, filling out OLCC forms, submitting fingerprints, etc. Again, buyers should create realistic timelines to avoid hemorrhaging cash during this phase, and should strongly consider working with someone who has navigated the change-in-ownership process before. It’s a singular process and there is some art to it.
A couple of months ago, I wrote a post called “Please Do Not Use Agreements from Brokers.” I wrote this after dealing with three or four messed up transactions in a compressed period, all stemming from brokers providing recycled forms for OLCC transactions. In fairness, the problematic deals are not always broker-related. Many purchasers and sellers wing these deals in one way or another. I recommend hiring qualified counsel to assist with these.
The place to save a few bucks in license acquisition is the OLCC application process. Our Portland office philosophy has always been not to blow through client retainers on lawyers doing ministerial work: We want people to succeed so we can work with them for years. For that reason, we have licensing paralegals who help push these applications through efficiently and expertly. Attorneys only come in for unusual situations. The bottom line here is that new businesses should save their legal budgets for work that cannot be done by non-lawyers.
In 2025, the word is out that you are not going to sell your marijuana for $2,000 a pound in Oregon. But we still see unrealistic projections up and down the supply chain.
You should not budget a six-figure salary for yourself. You should avoid oppressive lease and financing terms—and debt at all costs, if you can. You should realize that marijuana is likely not going to Schedule III this year, and that IRC 280E will continue to kneecap margins. You should understand that industry standards can be low, and that vendors and other parties will sometimes let you down.
In short, it is crucial to dial in your research and expectations before starting out – especially if you are taking on investment and the legal risk attached to that. An Oregon cannabis license is not a certificate to print money, especially in 2025.
For whatever reason, employment practices are often subpar with cannabis businesses. There are a couple of important things to note here.
The first is that employee actions, even if unauthorized, can lead to license revocation in Oregon. This means you must ensure your employees are well versed in compliance, and you have to watch them.
The second thing to note is employment law is complex and seems to change as often as cannabis licensing rules. Whenever there is a dispute, courts and administrative bodies tend to favor employees, so it’s important to keep your team in order.
You do not need a tall stack of complex documents to start a cannabis business. You do need the basics, though, and those agreements should be thought out and solid.
If you are renting property, get a tailored industry lease. If you are organizing an LLC, get an operating agreement that covers matters important to your business— including management, distributions, protocol for when someone jeopardizes the OLCC license, etc. Or, if you have a white label agreement, ensure that all processes and intellectual property ownership are delineated. The list goes on.
Starting a business can be expensive, and people tend to skim on legal. But nearly all of the cannabis litigation matters my firm is currently handling (and there are so many right now) stem from defective contracts, and from people operating informally in that sense. Reasonably tailored contracts should be a part of any new business plan, and they should not break the bank. These contracts will set both guidelines and expectations for the business, and they operate like insurance when things go wrong.
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We’re proud to share that attorney Jason Adelstone will be a featured panelist at this year’s Cannabis Law Institute (CLI 2025), hosted by the International Cannabis Bar Association (INCBA). Taking place June 12–13, 2025 at the University of Denver Sturm College of Law, CLI 2025 is widely recognized as the leading annual conference for cannabis law professionals.
Jason will join the panel “The Next Decade of Cannabis: Springboarding Forward from Initial State Regulatory Systems,” where he and fellow experts will examine the future of cannabis policy and reform. Topics will include international regulatory developments, U.S. federal reform efforts, the standardization of state programs, and emerging intersections with industries like hospitality and gaming.
As the cannabis industry enters a critical next phase, Jason’s deep experience in regulatory compliance and international drug policy will bring valuable perspective to this forward-looking conversation.
For more information or to register, visit www.incba.org.
Time for another Oregon cannabis roundup. Time to cover some important legislative and OLCC updates, specifically.
Governor Tina Kotek signed this bill into law last week, on May 28th. There are some key differences to the law signed by Kotek and the version of SB 558 that I previewed in January, at the start of the legislative session.
CIAO, the local cannabis trade group, was a big supporter of SB 558, particularly the provisions around new trade sample limits and producer-to-producer flower transfers.
Here’s what the new law does, with a few comments from me:
Unlike a lot of cannabis laws passed in Oregon over the years, this one did not go through on an “emergency” basis, and it does not take immediate effect. Instead, SB 558 takes effect 91 days after June 29th (legislative sin die). By my calculation, that is September 28, 2025. The trade samples provisions don’t go live until January 1, 2026.
This one is very close— to use a fancy foreign phrase, its passage is a fait accompli. The Senate President signed SB 162 last week and the House Speaker signed on Tuesday. I have no reason to believe Governor Kotek won’t sign, or that she will veto the bill. Note that even if Kotek doesn’t sign, SB 162 would be enshrined next week automatically.
SB 162 is an omnibus bill, which I also previewed back in January. Like SB 558, it underwent some changes over the course of the session, but still includes certain law enforcement priorities in keeping with the original thrust of the bill. Here is what it does:
I wrote a “breaking news” post on May 20th, the day the Oregon District Court ruled in favor of a couple of Oregon cannabis plaintiffs. I explained that:
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 also wrote:
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.
Well, that happened. On May 29th, OLCC issued this welcome bulletin, which pronounced as follows:
[E]ffective immediately the Commission will no longer require as part of a new or renewal application for the license types that were subject to Measure 119, a signed labor peace agreement (LPA) between an applicant and a bona fide labor organization, or an attestation signed by the applicant and bona fide labor organization. . . .
OLCC will be processing pending renewals if the only missing information was a LPA or a LPA related attestation.
(Emphasis in original.) You love to see it. UFCW Local 555 is on record grumbling that the judge got it wrong and the state could win on appeal. I’d be surprised to see the state take it up.
The Commission actually wrote me last week, and asked to provide blog content advertising the coming prohibition on most CBN sales. This rule has actually been a long time coming, with its genesis in I said I’d write about it, so here it is:
Beginning July 1, 2025, products containing artificially derived CBN can no longer be sold in Oregon, either in the OLCC system or in the general (hemp-derived) market, unless the manufacturer has made a “Generally Recognized as Safe” (GRAS) determination, or submitted a New Dietary Ingredient Notification to the FDA and received a “no objections” response.
OLCC reports that they are unaware of any manufacturers who can currently meet these standards. I’m not either. You can read the OLCC’s full compliance bulletin here, where they trace the rulemaking history back to House Bill 3000 in 2021. I gave my take back then, here.
Finally, OLCC Executive Director Craig Prins announced that he is retiring last month. Happy trails!
Prins had a mostly uneventful tenure, at least compared to all that came before. Prins clocks out forever on July 1st, at which point someone named Tara Wasiak takes over. I don’t know anything about Wasiak, other than she works at the Portland Bureau of Transportation. Hopefully that translates, somehow.
Read our Father's Day weed gift guide for curated picks for the cannabis-loving father figure in your life.
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In yet another setback for hemp and marijuana-adjacent businesses, the U.S. Small Business Administration (SBA) has quietly reintroduced a policy that effectively disqualifies most of them from critical federal loan programs. The updated policy, effective June 1, has far-reaching consequences for small businesses operating in compliance with state law (and for some, in compliance with federal law) – especially those selling hemp-derived foods, supplements, and cosmetics (collectively, “Consumable Hemp Products”).
In a previous post, America’s Missed Opportunity in the Global Marijuana Market, I outlined the broader systemic issues facing the marijuana industry. This latest shift by the SBA, however, zeroes in on hemp operators, especially those producing or selling Consumable Hemp Products.
(A note on terminology before I get started: Given how U.S. law separates marijuana and hemp, it’s time for both the industry and regulators to stop using ‘cannabis’ as a stand-in for marijuana. Cannabis is the plant species that includes both marijuana and hemp. Using ‘cannabis’ to mean only marijuana creates unnecessary confusion – especially since ‘cannabis’ could just as easily refer to hemp. If you’re referring to both, then ‘cannabis’ is appropriate. Otherwise, be specific.)
The SBA’s latest update to its 7(a) and 504 loan programs represents a return to the more restrictive, 2020 policy. This shift may not only severely limit access to these critical funding programs for operators involved with Consumable Hemp Products but also impact ancillary businesses serving both cannabis industries
The SBA’s 7(a) and 504 loan programs have supported small business growth for almost two decades. The 7(a) loan is the SBA’s flagship program for general business financing, while the 504 program offers long-term, fixed-rate funding for major capital investments like real estate and equipment – essential tools for expansion and job creation.
Since the passage of the Agricultural Improvement Act of 2018 (commonly known as the 2018 Farm Bill), which federally legalized hemp, the SBA has updated its policies several times, including how it addresses hemp-derived businesses. These policy changes reflect not only the tension between federal and state law but also shifting political winds and agency interpretation.
The SBA’s first policy following the 2018 Farm Bill briefly acknowledged that hemp businesses complying with federal law were eligible for SBA loans
This marked a more comprehensive approach. Lenders were tasked with verifying compliance with all applicable laws, and the SBA offered detailed guidance on evaluating CBD-related businesses. These rules form the backbone of the current policy.
In a surprising shift, this policy removed all references to hemp. Instead, it simply stated that SBA loans were unavailable to businesses engaged in activities illegal under federal, state, or local law – explicitly using marijuana as an example.
Further removed the marijuana example from the August 2023 policy.
This update reintroduces and expands on the 2020 restrictions, explicitly targeting Consumable Hemp Products. Specifically, it emphasizes that the addition of CBD to any human or animal food, dietary supplement, or certain cosmetics is prohibited under the federal Food, Drug, and Cosmetic Act (FD&C Act), and links to FDA guidance that includes products with THC in this prohibition as well.
The new policy requires hemp businesses to comply with all applicable federal, state, and local laws, but given the FD&C Act’s prohibitions, most are now categorically ineligible.
(Another quick sidebar: The Consumable Hemp Product sector has grown rapidly, and not always responsibly. Many bad actors have pushed products with little regard for compliance or consumer health & safety. These operators should not receive federal support. But compliant, responsible, and well-intentioned businesses are being swept up in the fallout. The SBA’s new policy risks punishing good actors because of bad ones.)
This new SBA policy disproportionately harms the businesses the SBA is designed to support. Large, well-capitalized companies, backed by millionaire or billionaire investors, can often secure private funding. But for small, independently owned businesses, many of which are still struggling to scale in a competitive market, these loan programs represent a critical source of support.
Similar to what I discussed in Is There a Method to the Mayhem? The Stock Market and a Potential Cannabis Collapse, the hemp market already shows signs of volatility. Denying small, compliant hemp businesses access to SBA capital will only accelerate that trend, pushing out mom-and-pop operators and concentrating industry control in the hands of a few.
Let’s be clear: the FDA has not meaningfully enforced the FD&C Act when it comes to Consumable Hemp Products. Instead, it has focused on operators making unsubstantiated medical claims. This non-enforcement created an “illusion of legality” and allowed the market to flourish – despite underlying noncompliance.
But now, the SBA is stepping in where the FDA hasn’t. By shifting the hemp compliance burden to lenders, the SBA has created a new chokepoint. Effectively enforcing federal restrictions without actual enforcement.
Since 2018, most hemp operators have focused almost exclusively on the Controlled Substances Act (CSA). They assume that since “hemp” was removed from the definition of “marihuana,” their products were legal. But that’s a dangerously narrow reading. They completely ignore the FD&C Act and state hemp laws (remember, you must comply with laws in both the originating state and destination state).
Section 301(II) of the FD&C Act, and related policies, expressly prohibit introducing or delivering for introduction into interstate commerce any food (including animal food or feed) to which THC or CBD has been added. This isn’t new. It has been around for a while. So yes, the THC/CBD hemp seltzers at Total Wine and gummies at your local convenience store are illegal under federal law.
Let me be absolutely clear: Consumable Hemp Products sold across state lines are illegal under federal law. Full stop.
Lenders must assess a hemp business’s eligibility based on several factors that “include, but are not limited to, the following:” (emphasis added)
The SBA’s policy includes language that expressly prohibits some fully legal and compliant businesses from receiving loans. It also prohibits “businesses that derive revenue from marijuana-related activities” from eligibility – a phrase vague enough to allow for near-unlimited discretion by lenders. Many of which will understandably adopt an overly cautious interpretation, resulting in de facto disqualification even where the law doesn’t expressly prohibit funding.
The FD&C Act primarily governs interstate commerce. So, hemp businesses operating entirely within a single state – and compliant with that state’s laws – may still qualify for SBA loans. But this is a narrow window, and even these businesses should expect intense lender scrutiny.
The SBA policy also disqualifies businesses selling items “primarily intended or designed for marijuana use,” like bongs, pipes, and vaporizers. But under 21 U.S.C. § 863(f)(1), these items are not illegal federally if authorized by state or local law.
In around 15 states, marijuana-related paraphernalia is explicitly legal. Yet the SBA’s blanket prohibition ignores that reality – inviting a legal challenge. For example, a head shop in Washington State selling glass marijuana pipes and vaporizers operates completely legally under state law (and thus, federal law), would be categorically denied SBA funding under this policy.
If any such paraphernalia business is interested in challenging this policy, I would encourage them to do so – particularly in light of the Supreme Court’s decision in Loper Bright Enterprises v. Raimondo, which curtailed agency deference and emphasized the judiciary’s role in reviewing whether agencies have overstepped their statutory authority. This may be an ideal test case since the agency policy directly contradicts a explicit federal statute.
Perhaps most troubling is the SBA’s vague application of the term “derive revenue from marijuana-related activities.” This could encompass a wide range of ancillary businesses that do not handle the plant, do not sell to consumers, and do not engage in any activity illegal under state or federal law (yes, arguments can be made for aiding and abetting and conspiracy, but that discussion is for another day). It will all depend entirely on how conservatively a lender interprets “revenue derived from marijuana-related activities.”
This could lead to an odd situation where small business competitors of some NASDAQ listed companies might not qualify for these SBA loans, despite their larger contemporaries being listed on a public exchange (subject to what I discuss below about potential delisting).
For example, some businesses that could now be denied by SBA lenders are:
While the above businesses/industries, are not expressly disqualified by the plain text of the SBA policy, the broadness of the language could lead to such an outcome. Because the burden of compliance and risk lies with lenders, many lenders will likely take an overly cautious approach and deny applications – creating de facto ineligibility for businesses that should otherwise qualify.
The SBA’s revised policy marks yet another instance where cannabis-related businesses, even those operating entirely within the bounds of state and sometimes federal law, are punished not for illegality, but for proximity and uncertainty.
What makes this policy shift so dangerous is not just what it says, but what it signals. As stated above, what makes the SBA’s current policy especially significant is that 7(a) and 504 loans place the burden of legal compliance for issuing these loans on SBA lenders, not the SBA itself. When lenders are tasked with interpreting vague legality standards, they’ll usually err on the side of risk aversion. We’ve seen this movie before in cannabis banking.
Could we see other agencies implement similar language into their regulations and policies? It wouldn’t be surprising given some of the “Refer Madness” proponents being placed in agencies throughout our federal government. Below are just a few example of what we could see, applying the same or similar language to the current SBA policy:
For years, hemp businesses relied on a combination of loopholes, non-enforcement, and regulatory ambiguity to build billion-dollar markets. But the SBA’s June 1 policy shows how fragile that foundation was. Even without an active enforcement regime, federal agencies can still erect walls by forcing third parties – like lenders – to interpret the law.
For small businesses, this is especially dangerous. Unlike well-funded operators with access to private capital, they depend on SBA programs to survive and grow. With this new policy, compliance confusion becomes a death sentence.
Further, other federal agencies may see that neither DEA nor FDA need to enforce federal law to shut down the Consumable Hemp Product industry. All that may be required is well placed federal policies that demand compliance with the FD&C Act.
If you’re a hemp operator or ancillary marijuana business affected by this policy:
This is a pivotal moment. The SBA policy could either be a temporary roadblock or the beginning of a coordinated regulatory crackdown on Consumable Hemp Products. What happens next depends on how the industry responds.
The hemp industry has come a long way since the 2018 Farm Bill, but its legal landscape remains anything but straightforward. At Harris Sliwoski, we’ve taken a steady, realistic approach to the risks and opportunities in this sector, because when the law is unsettled, good advice matters more than ever.
Yes, hemp with less than 0.3% THC is federally legal. But that doesn’t mean every hemp product is legal, or that every agency, state, or local authority agrees on what “legal” even means. Between shifting FDA guidance, banking headaches, inconsistent state rules, and sudden enforcement swings, hemp businesses operate in a thicket of legal uncertainty.
We’ve seen too many businesses get burned by legal advice that was overly confident or willfully blind to regulatory gray areas. That’s not how we work. Our focus is on helping clients move forward without getting blindsided. We do this by staying current, digging deep, and telling our clients the truth about the risks they face – even when it’s not what they want to hear.
Our clients include farmers, processors, retailers, and investors who want to build sustainable hemp businesses that can stand up to scrutiny. We help them do that with strategies grounded in law, not wishful thinking.
For hemp businesses, staying ahead means recognizing that today’s legal gray area could be tomorrow’s red line.
