DEA’s Marijuana Rescheduling Plan Has Law Firms High on Expanding Relationships with Cannabis Clients
The likelihood of marijuana’s federal reclassification to Schedule III status has Big Law leaders eyeing opportunities to expand relationships with clients who have historically lacked the same tax benefits and bankruptcy protections as other sectors.
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Under cannabis’s current Schedule I status, Section 280E of the tax codes prevents businesses from deducting expenses involving the “trafficking” of Schedule I or II substances, restricting the amount of operating capital.
But removing 280E’s restrictions would “drop millions of dollars into these companies over time” because of the taxes they no longer have to pay, said Frank Segall, co-chair of Blank Rome’s newly formed cannabis practice, which launched upon his arrival from Burns & Levinson this week.
“That will have an impact on public companies to use their stocks as currency to fund M&A and will be able to put money back into business in a way they couldn’t before,” Segall said. “It will spur on an acquisition spree and regular growth.”
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Blank Rome, a late bloomer in formally launching a cannabis practice, has been eyeing the launch of a cannabis practice for years, having serviced cannabis and cannabis-adjacent clients in small-scale transactions, according to firm leaders. The firm formally launched a cannabis practice this week in its newly established Boston office by recruiting all the cannabis practitioners from local firm Burns & Levinson, including Segall.
Segall said his group’s move to the Am Law 100 firm provides his cannabis clients with deeper resources in tax, financing, health care and cybersecurity.
“Having a footprint in major markets for cannabis, like New York and New Jersey, allows us to provide another level of service and commitment to our clients,” he said.
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"DEA’s Marijuana Rescheduling Plan Has Law Firms High on Expanding Relationships with Cannabis Clients," by Justin Henry was published in The American Lawyer on May 2, 2024.