Brian Vicente – The Marijuana Lawyer Helping Businesses

Attorney Brian Vicente

Brian Vicente is an attorney and founding partner of the firm Vicente Sederberg in Denver, Colorado.

Brian works in the dead center of the cannabis industry and its fast moving and constantly changing cannabis laws and regulations.  Brian not only advises clients how to profitably work with the existing framework of cannabis laws, but is working to help shape the laws that will effect the cannabis industry for years to come.

In 2010 Brian was elected the first-ever chair of the National Cannabis Industry Association. Learn more at: http://www.themarijuanalawfirm.com

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Brian Vicente is an attorney and founding partner of the firm Vicente Sederberg in Denver, Colorado. Brian works in the dead center of the cannabis industry in its fast moving and constantly changing cannabis laws and regulations. Brian not only advises clients how to profitably work within the existing framework of cannabis laws, but is working to help shape the laws that will effect cannabis industry for years to come.

In 2010, Brian was elected the first ever chair of the national cannabis industry association. I'm please to welcome Brian to the show today. Welcome, Brian.

Brian: Thanks so much.

Matthew: Brian, can you tell us a little bit about yourself and how you came to specialize in the practice of cannabis law?

Brian: Sure. I'm a little bit of a unique animal on that I've practiced primarily in cannabis law for my entire legal career. So for the last 10 years or so. When I was a law student, I founded the non-profit Sensible Colorado, which is sort of a lead advocacy group that works on behalf of medical marijuana patients. I've been running that ever since. And at the law firm Vicente Sederberg, we represent a lot of marijuana businesses. So I've been heavily involved in this area full time for about a decade.

Matthew: What questions do you get asked the most by new and prospective clients who are trying to orient themselves within the context of the cannabis industry?

Brian: Sure. Well, you know everyone is sort of curious about the risk associated with entering this industry, marijuana still being illegal federally. What is their sort of risk tolerance, right? I tend to think the risks are a lot lower than they were previously based on the firm federal guidance we have about what law enforcement priorities whether they're going to shut these guys down or not. So that's always an area.

But then people are really interested in how do they invest. A lot of folks see this as the next big thing. It could be this billion dollar industry in no time, and how do they sort of invest in this now. So we help people kind of structure those investments or start those businesses.

Matthew: Okay. So what are the big practice areas that - the big categories that you provide services in?

Brian: Well, we do a lot of - our law firm is kind of broken into two pieces. One is policy work. We do a lot of lobbying, writing initiatives. I was one of the two authors of Amendment 64, which made marijuana legal in Colorado. We helped with the campaigns to legalize marijuana or medical marijuana. So that's a good chunk of what we do. But then we also provide just general business legal services to marijuana business, and as such represent hundreds of marijuana businesses. And we help guide them with anything from compliance with current laws to your more traditional business legal services, such as your mergers and acquisitions, and real estate assistance, things like that.

Matthew: There's a lot of investors or potential investors out there that say maybe I want to create a grow facility and lease that out to a cultivator, but they're worried about the risks, and they try to balance those risks because we're still in a federally illegal market place for cannabis, but it's legal in Colorado, Oregon, Washington, Washington D.C. How do you reconcile these things? And even in the states where the medical marijuana is legal, how do you reconcile these things in even the states where medical marijuana is legal. How do you reconcile these things for potential investors to help them come to terms with this risk and balancing that risk?

Brian: The most important kind of threshold question is what state are you looking at going into. We have 23 medical marijuana states, and we have four legal marijuana states, and we also have D.C. now. But each one of those laws is different. So in terms of the law enforcement priorities in that area, in terms of the investment opportunities, in terms of the level of complexity of the state and local laws, they're all different. So we have to sort of do an examination of are you looking at Oregon? Are you looking at Colorado, what have you. A lot of folks get in touch with us because they want to go into Colorado, although we have offices across the country to help people in a lot of different states. But Colorado is still viewed as the main market right now or perhaps the state that is doing a very comprehensive job.

So in terms of your various opportunities to invest, I believe it was a real estate play that you were discussing renting out or purchasing a warehouse and then renting to someone who's growing marijuana, who has a license to do so under state law, is actually pretty safe investment at least in Colorado. There's other sort of investments that folks can look at such as loaning money to businesses or loaning money to the principles starting their own marijuana businesses in states that don't have residency requirements. Any sort of direct handling of marijuana is always more dangerous in some ways that the federal government could become interested in those activities, but real estate play itself, I think, is fairly safe.

Matthew: You touched on residency requirements. Can you talk about that a little bit maybe in Colorado and Washington, what that means, and who is included and excluded?

Brian: This is interesting because, again, because every state sort of used this differently. In Colorado there's a degree of protectionism essentially of the current medical marijuana licensed businesses. We've got a state law that says that in order to have any equity in a marijuana business - this is not an ancillary business like grow lights or something, this is direct marijuana business. In order to have any equity in a marijuana business, you have to have two years residency in the state of Colorado. So that's a major hurdle that prevents people from just starting a business if they're from New York or what have you in Colorado. So that's one that will probably change in the legislature in the next year or two, but currently it does prevent that sort of direct traditional equity investment that we see in other areas.

Washington State has a three-months residency requirement. So it's not quite as onerous as Colorado's two-year. But then you have places like Oregon, Illinois, Nevada really have no residency requirement for ownership in marijuana businesses as all. Now often it does help to have a local component to what you're doing, and that certainly can help you get ahead in a competitive licensing process by demonstrating you have these local ties. In Oregon, you have to have a sort of manager that's a local resident, but again, each state kind of takes it differently. And really, I think in terms of investors sitting back and analyzing where to put money, if they're interested in direct investment, they have to look at these places that don't have residency or else move somewhere and establish residency where you want to set up shop.

Matthew: Great point. Gosh, I didn't realize Colorado's was - two years is quite long.

Brian: Yeah. It's pretty wild. I mean a lot of people try to look for ways to get around that. And our view point on this is we have a very close relationship with the state regulators, and we don't believe in pulling the wool over their eyes, and I think they respect that. So if you own equity in Colorado, you have to be a two-year resident.

Matthew: So let's say I'm a dispensary owner, a cultivator, or even perhaps an infused product company, is there some ways that I may be exposed to laws, either state or federal generally speaking that I might now be aware of that I want to do something to mitigate my risk that you see occasionally over and over again, where this is something that should be top-of-mind for you if you were in one of these cannabis businesses?

Brian: Yeah. Certainly, again, everyone needs to have an understanding that what they are doing is illegal federally, and sort of come to terms with that and decide whether they want to be for it or not. But then a lot of folks don't understand the tax implications. We have a provision of the IRS Code called 280E that prevents particularly dispensers from making a lot of the traditional tax deductions other retail businesses may get. And some folks don't know about that and are conducting business, and are probably going to get audited and probably get a pretty nasty tax bill. So that's certainly one to keep in mind.

Generally, we also have pretty strict advertising restrictions in this area in Colorado, and also in other states. Often those advertising restrictions are at the state level and the local levels. So there's kind of different hoops you need to jump through. We don't have a ton of enforcement in this area, but I could see this being something that government officials crack down on eventually. So I really encourage any prospective businesses to really pay close attention to how they can and can't advertise.

Matthew: Now banking for cannabis businesses, particularly those that touch the plant, is just a quagmire. Can you explain a little bit why it's so difficult for cannabis businesses to get a banking account, banking relationship, and to keep that, and then where you see it going?

Brian: Sure. And this is absolutely one of the biggest issues that we have in terms of a hurdle for this industry is the lack of access to banking solutions. This has been going on for years. As we know, the marijuana was illegal for 80 years or so in our country, and then became legal for medical purposes starting in ë96 in California. And then it's been legal for recreational purposes in some states in 2012, and sort of slowly unfolding industry.

And banks just sort of being conservative by nature, and they have a lot on the line in terms of not wanting to irk the federal regulators that oversee the banking industry have been very hesitant to openly bank marijuana businesses. At the same time we've seen direct guidance from FinCEN, and federal regulators saying we don't really care if you bank marijuana businesses. We just want there to be a degree of transparency, and auditing of these businesses to be make sure that they are operating in a compliant fashion. But it's almost like that memo hasn't reached the banks yet. They're looking for an actual change in law to protect them from liability.

So this is a major problem. And I probably have a client a week that gets kicked out of their bank. It's humiliating for them. They're being discriminated against because of their business type, and also obviously it creates all sorts of problems for the business. They have to find a new bank or deal with cash or what have you. So we probably get a call a week from banks that are interested in working in this field. And I think we're going to see some banking solutions come on board fairly soon. My prediction is we'll have one or two banks that say, hey, we're going to do this. The industry will flock to them, and they'll make a bunch of money. And then once they don't get in trouble after six months or a year, then most other banks will start working in the industry as well.

Matthew: It's a shame that the state or even counties or community banks can't be created that can then reinvest the profits locally. That seems like a huge opportunity.

Brian: Yeah. That's a great point, and believe me we've examined many options for banking. It's such a public safety issue to have our clients and their customers exposed to these cash intensive places. They don't have banking. And it often leads to a lack of transparency. So we've looked at coops and various different sort of forms to push for banking solutions. But a lot of it comes down to the fact that any bank needs to be insured by the federal government, so you need to have a degree of federal involvement in the bank. And the feds are kind of dragging their feet in terms of providing guidance. And again, the banks themselves fear the federal government and don't necessarily want to jump into this realm.

Matthew: You talked a little bit about taxes and that, for example, a dispensary owner might not understand that there's certain deductions they cannot take that a traditional business can. Is there anything else in the tax arena that are kind of gotchas or things to watch? I've heard that dispensary owners are taxed in a different way as well as far as the profit they make. Is there anything else you could touch on there?

Brian: Well, get a good accountant and get a good tax lawyer. I mean, it is a complicated field for a typical business. For a marijuana business it's even more complicated. It comes down to a series of court cases mostly out of California, and sort of explain how the IRS deals with marijuana. And in a nutshell, they allow write offs related to the cost of goods sold. So largely the production side you can write off expenses there, but not the actual retail side. And so, it's confusing because that's not how typically businesses work. The other piece is just to keep an eye on - it's difficult without having comprehensive access to banking, but making sure state and local taxes, the excise tax, and in Colorado there's several levels of taxes these businesses have to pay are really being followed in a transparent fashion. So you can document that to both the state and federal regulators.

Matthew: Now let's talk a little bit about licensing because there may be a brand, for example, here in Colorado or perhaps in Washington or in some other states where medical marijuana is legal, and they have a brand, and they want to extend the brand beyond the state they operate in, but they may not necessarily want to get a license in those other states or a license from the state. How could they create a licensing arrangement that works for them in other states? Are you seeing this type of thing going on?

Brian: We are. I think this is an issue that we will continue to deal with in the future. I think it's a growth area. What you're basically talking about is intellectual property. I've developed a brand in Colorado. I have this wonderfully successful dispensary or what have you. How can I then carry that brand to other states? And we've actually structured quite a few of these. It comes down to basically creating a separate company that's really an intellectual property holding company. So I can sell that intellectual property to this new company that I've created. That new company can then set up in another state. We're really just using the brand and the intellectual property or sell the intellectual property to a manufacturer in another state.

So it's a way to carry a brand across state lines without actually carrying the product itself. In marijuana, again, you can't cross state lines with it. We see quite a bit of this, and in Colorado, for instance, I could produce 99 percent of my marijuana soda, including the label, and then I ship it to California, and then we infuse the marijuana in a factory in California. So the product and everything can cross states lines. It's just the marijuana that can't.

Matthew: It sounds very similar to how Coca-Cola does it. They have their trade secrets centralized. Then they push it out to the outer areas to actually have the water put in it and so forth. That's an interesting subject area.

In terms of shaping future legislation and being a thought leader in the industry, what is your firm doing right now at a boots-on-the-ground level trying to change or influence?

Brian: Sure. Well, our number one goal is to make sure that Colorado continues to be the gold standard for marijuana regulations. So as such, we're very active on a number of government panels. We have an active presence at the capital and lobbyists that we hire to make sure that Colorado continues to do a thoughtful and sort of comprehensive job of regulating marijuana. We really think that the eyes of the world are still on us.

Having said that, when we legalized marijuana in 2012, really ever since then, we've been approached weekly from folks from other states and other countries that are interested in potentially adopting a Colorado-style model. So in this past election we were involved to some extent in having Florida, Oregon, and Alaska to help the efforts there to legal marijuana, or legalize medical marijuana. Two of those were successful in 2016. We really hope to be involved in six states that are pushing to legalize marijuana then. And I think a lot of them will be successful. We're looking at California, which obviously is a giant market. We're looking at Nevada, Arizona, Massachusetts, and then perhaps some other states as well.

Matthew: You mentioned California. Do you really see that as when the dam breaks, because it is such a large state. The population in general is pretty receptive to it. There's a lot of growers, technology, infrastructure, and capital there. Is that where it's going to really just break away?

Brian: Yeah. I think that will be a bit of a tipping point game changer for the reasons you laid out, but also because there's simply so many Congress people from California. When those Congress people go back to D.C., it's different than the six Congress people from Colorado. You have 20 some from California. I think it makes a pretty big difference to have them there, being in Washington D.C. and saying, listen, I don't want to criminalize people in my state, and now we have eight or ten states that legalized marijuana, and the other 16 - let's do something about this. And I'm hoping that will the main thing that pushes towards change at the federal level.

Matthew: There's just been a lot of good news, legalization happening, the conversation moving forward, people changing their mind, the stigma going away to some extent where there's less of a stigma around cannabis. Are there any threats on the horizon where this could derail the whole movement, or is the genie so far out of the bottle that you don't see any big threats?

Brian: No, I think we need to stay vigilante, absolutely. We certainly have seen some major changes in how the American public feels about legalizing marijuana and growing support for medical marijuana, which is phenomenal. I mean we've had massive social change on this in the last 10 or 15 years. But I think there's the opportunity for the pendulum to swing back.

And so, again, we need to be very vigilant about how we are regulating marijuana. When problems come along such as people perhaps making hash at that house and blowing it up, or folks maybe having an unfortunate experiences with edibles, we really need to be thoughtful about then coming up with pro- active solutions and not sort of hide and say, oh, legalization is perfect. It's the answer to everything. Well, I think we need to have a very robust discussion about how to address issues and inform them, and if we do that, I think we're pretty safe.

Matthew: Do you see cannabis being removed from the Schedule I list of drugs; and if so, when? I mean, it's a bold prediction, but I'm going to ask you.

Brian: I'm not afraid of bold predictions yet. I see it happening in 2017, and here's why. We've seen massive, again, cultural shifts on the public views marijuana. We also will probably see four to six more states legalize marijuana in 2016. I think that's going to create the wave that forces Congress to address this issue.

You're also going to have a bunch of freshman Congress people come in in 2017. That are voted in in 2016, the same time marijuana gets legalized in their states or what have you. And I think that's going to be the appropriate time that I think we could see some Congressional push.

And it's also becoming increasingly clear and you see this in editorials from the Denver Post, and other thought leaders about the fact that marijuana categorization as a Schedule I controlled substances is just flatly absurd. It's just absurd to put it in the same schedule as heroin and label it one of the most addictive dangerous drugs known to man that has no medical value. When you have those sort of laws on the books, that really just breeds mistrust in the government. And I think the government is starting to understand that they just got this one wrong. There's a rebellion happening in all these states, and they need to really need to save face by removing it from schedule I.

Matthew: Gosh. I'm really - that's great prediction. I'm so happy to hear that. As far as there are so many entrepreneurs doing cool things in the industry, and it seems like it's changing every day. Do you see any entrepreneurs doing stuff that's just really interesting that you'd like to share?

Brian: Wow. We have people in our office every day that just have marvelous ideas, some of which are going to make them a million dollars, some of which will never go anywhere. But I mean that's one of the neat things about working in the cannabis field is there's so many creative people, and they're really starting to apply their creativity to these various business or activism opportunities.

Yes, I guess a couple of things. I've been surprised sort of pleasantly by the growth in vaporizer market, particularly the vape pens that you see. I didn't really foresee those being as popular as they are. But having become familiar with them, I understand it now. It's sort of a smooth and classy way to consume marijuana. And you also now have new states that are just passing vaporizer only laws. New York and Minnesota are essentially hash oil only as opposed to flower. And I just think that's remarkable. Another group that we've started doing some work with is Women Grow, which is just sort of a women's organization that is attempting to sort of foster the role of professional women in the cannabis field. Jane West is in Colorado and does a lot events and runs that organization and a number of our attorneys belong to that group. I just think it's sort of important that we embrace the diversity that is present in the field.

Matthew: Great point. Jane is doing a lot of interesting things. And we're having her on the show later this week, so I'm glad that you said that.

Brian: That's great.

Matthew: Brian, in closing how can listeners learn more about you and your firm?

Brian: Sure. Well, I'd encourage listeners to check out web page, which is very simple. It's themarijuanalawfirm.com. And we really think that we're leading the country in terms of being a law firm that pushes for policy changes in marijuana as well as providing good guidance to businesses. So we have an office in Boston, a couple of offices in Colorado, and we're just eager to help people become sustainable businesses and good community members. So check us out at themarijuanalawfirm.com.

Matthew: And I would like to thank you for your service in helping to shape the laws into a sensible way that works for both government and recreational and medical users. That's really a great help, and I'm glad you're one of the leaders in the industry.

Brian: Thanks so much. I really appreciate the opportunity to talk with you.


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