Is the RICO Act a Serious Problem for the Cannabis Industry or Just a Bunch of Smoke?

The cannabis industry has always had to fight for and extort everything it got from the hands of the law. From its current stance before state governments to the numerous open medical and recreational markets. It has always been a struggle and seems set to remain so as cannabis companies are now being targeted with the RICO statute. A tactic once reserved specifically for the mafia is now being used against legitimate cannabis companies. Read on as we examine what this means and how the cannabis industry is likely to respond.

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For a long time, the threat of charges under the Racketeer Influenced and Corrupt Organizations (RICO) Act hung over the minds of cannabis companies. It now seems more realistic than ever as cases have surfaced against legitimate cannabis companies in both Arkansas and California. For those unaware, the US RICO Act was created in 1970 when it was designed against high-profile mob bosses. Since then it has been amended to include a wide range of illicit dealings such as slavery, gambling, extortion, gambling and other illicit activities.

This isn’t the first time RICO charges have been leveled against cannabis companies. They have all been unsuccessful so far, but have caused lasting damage to the integrity and quality of these companies. Cannabis companies have always been, and always will be, at risk as long as the status of their operations continues to be considered illegal by the federal government. This has made some in the cannabis industry concerned about the new wave of RICO indictments against cannabis companies. Others, on the other hand, are more relaxed due to the failed track record of RICO indictments against cannabis companies in the past.

RICO lawsuits in California and Arkansas against cannabis companies

Two California-based cannabis companies recently faced a lawsuit over inflating the amount of THC in their products. A similar lawsuit was filed against four Arkansas marijuana companies about three months ago and is making headlines. The lawsuit against DreamFields Brands and Med for America accuses them of inflating the amounts of THC in their pre-roll products. The lawsuit alleges it was done specifically with the goal of attracting more customers and generating profits.

THC is the main cannabinoid that induces euphoric feelings and uplifted moods in cannabis products. CBD, on the other hand, is the main cannabinoid known to promote rest and relaxation. This makes them quality determinants by which consumers will purchase cannabis products. Products with higher THC levels are expected to have a more potent effect than those with lower levels. While this isn’t entirely scientifically correct, it’s the common belief among users. Therefore, products with higher THC levels fetch higher prices, which means higher profits for users.

The Jetter pre-roll products that are the subject of the lawsuits were recently reviewed by Weed Weekly to verify the levels of THC in the products. The review found that the levels of THC present in the product were significantly lower than what was stated on the products’ labels. The average product had a THC content of 23 to 27 percent. However, the labels on the products stated that the range was from 35 percent to 46 percent. Such issues have become common in the cannabis industry as various producers bow to the pressure. Many consumers believe that the higher the THC content, the stronger the effects. While the cannabis effect doesn’t work that way, it remains an important factor driving business in the cannabis industry.

Should Cannabis Companies Be Concerned?

Similar to the California case, four Arkansas cannabis companies faced similar charges that were filed on July 12. The plaintiffs are Don Plumlee, Pete Edwards, and Jakie Hanan, who argue that the medical marijuana products they purchased were 25% lower than advertised. The lawsuit is against Steep Hill Arkansas, Steep Hill, Inc (a marijuana testing service), Bold Team LLC, Osage Creek Cultivation and Natural State Medicinal. The argument being put forward to consider the case under federal RICO law is that large-scale marijuana production is illegal under federal law. However, it is expected that this will not hold water.

The RICO charges against the Arkansas cannabis companies differ significantly from some other types of cases brought against marijuana licensees in the past. Common cases in the marijuana industry have always been brought up by Abutters. These adversaries typically use the RICO statute to assert claims for damages for diminished value. Both groups of cases are still known to have low conviction rates against the cannabis companies. However, they leave considerable damage in their wake, and as such it is best for cannabis companies to comply with the jurisdiction to avoid them entirely.

Are Cannabis Companies Using The RICO Act To Their Advantage?

It also appears that some cannabis companies are turning the tables and using RICO charges to target unlicensed marijuana retailers. California cannabis industry executives have filed two such lawsuits under the RICO law in the past two months. While these lawsuits are expected to last for years, it’s good news to see the industry using a tool that was developed against them in the past.

The cases target a local group of companies and individuals who originated and benefited from the activities of illegal cannabis dispensaries. This includes advertising agencies like the alt-weekly San Diego Reader. The body has been accused of running ads for unlicensed marijuana stores, alongside others who support illegal cannabis businesses.

summary

The cannabis industry is attracting attention and will continue to do so. While it’s good that RICO cases have persisted so far, cannabis companies should be cautious. Deliberately mislabeling products for increased traffic will cause problems sooner rather than later.

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