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Start Up, Intellectual Property, and Securities Lawyers

Cannabis / Medical Marijuana


While, generally, sales of cannabis are not-for-profit, the ancillary businesses that support the industry are more profitable then ever.  In addition to acting as compliance counsel for cannabis businesses, we also serve as corporate finance counsel for profit-making ventures ancillary to cannabis businesses involved directly in growth, distribution, or sales – YES, Profit-Making Is Allowed. 


EXPERTISE that you need:

Legal Compliance; Corporate Organization; Intellectual Property Protection; and Licensing.





Yes, cannabis is still federally illegal. 


Cannabis remains a Schedule I Controlled Drug on the Federal Level under the Controlled Substances Act (“CSA”), and thus, almost all California cannabis activities violate the CSA / Federal law. Currently, however, individuals engaging in conduct permitted by state medical marijuana laws who are fully compliant with such laws are protected from federal prosecution. 



Yes, currently, California compliant medical marijuana activities cannot be federally prosecuted.  


Since at least 2013, as described in the Cole Memo, the Department of Justice (“DOJ”) has instructed US Attorneys not to prosecute marijuana “offenders” that are otherwise compliant with State Law. This “prosecutorial discretion” was significantly extended in 2015 by a congressional appropriations rider, known as the Rohrabacher–Farr amendment or Section 542, which prohibits the DOJ from spending funds to prevent states’ implementation of their medical marijuana laws. See, Consolidated Appropriations Act, 2016, Pub. L. No. 114-113, § 542, 129 Stat. 2242, 2332-33 (2015), “None of the funds made available in this Act to the Department of Justice may be used, with respect to [California and all medical States], to prevent any of them from implementing their own laws that authorize the use, distribution, possession, or cultivation of medical marijuana.”


Furthermore, and most importantly, the U.S. Court of appeals for the 9th Circuit in, U.S. v. McIntosh, held that individuals who engage in conduct permitted by state medical marijuana laws and are fully compliant with such laws cannot be federally prosecuted for said conduct. This protection, however, is only temporal in nature; Congress could appropriate funds for such prosecutions tomorrow, immediately allowing the DOJ to prosecute offenses occurring in the prior five years. The Rohrabacher-Farr amendment was recently extended by H.R. 2028 through April 28, 2017.


Thus, as of March 12, 2017, California individuals and businesses operating and or seeking to operate in the cannabis space are protected by the Compassionate Use Act of 1996 aka Proposition 215 ( HSC 11362.5 ) and the CA Medical Marijuana Program Act aka SB 420 ( HSC 11362.7 – 11362.85 ). Prop. 215 explicitly allows marijuana possession and cultivation (H&SC 11357 and 11358) for personal medical use. Hashish and concentrated cannabis, including edibles, (HSC 11357a) are also included. Within the context of a bona fide collective or caregiver relationship, SB 420 provides protection against charges for possession for sale (11359); transportation, sale, giving away, furnishing, etc. (11360); providing or leasing a place for distribution of a controlled substance (11366.5, 11570).






Under Prop. 215, patients are entitled to whatever amount of marijuana is necessary for their personal medical use. However, patients can be arrested if they exceed reasonable amounts and they can be cited or fined for exceeding local laws. Under MMRSA, which took effect Jan. 1, 2016, qualified patients can cultivate up to 100 square feet for personal medical use, and primary caregivers with five or fewer patients are allowed up to 500 square feet. Exemption under this section does not prevent a local government from further restricting or banning the cultivation of medical cannabis.



In general, sales of marijuana are NOT permitted under Prop 215. However, SB 420 authorizes legal caregivers and collective/cooperative members to charge for their expenses in growing for others on a “non-profit” basis. Hostile police sometimes misinterpret this to take any monetary proceeds as evidence of felony sales, regardless of whether the grower actually made a profit. Growers who provide for others must either be members of a collective or be bona fide “primary caregivers.”  



The A.G. has issued guidelines for operation of cannabis collectives and coops (See: which we, of course, can help you follow.




Neither the Law Offices of Nate Kelly nor any of its attorneys or service providers will ever counsel anyone to violate any Federal laws regulating Cannabis. Furthermore, compliance with California State Medical Marijuana laws is a condition for representation. Any client that believes it may not be in full compliance with California medical marijuana regulation must: (1) understand that that such actions are against the advice of the Attorneys and agree to indemnify the Attorneys for such actions; and (2) inform Attorneys immediately and such actions may be the basis for the Attorneys to immediately terminate the Attorney-Client relationship. In such an instance, Client will indemnify the Attorneys for any consequences of said termination.


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