November’s elections saw two more states and the District of Columbia pass ballot initiatives legalizing the cultivation or sale of marijuana for recreational use.  Vermont has not yet joined their ranks—but, the State has been slowly liberalizing its laws in a couple of key areas.  While these changes in state law have created new business opportunities, marijuana remains illegal under federal law.  We’ve recently been working with clients trying to navigate these unsettled waters and manage their risk in a complex and rapidly evolving sector.

Vermont law now permits the cultivation and sale of marijuana in two forms: as medicine, pursuant to the State’s medical marijuana law, and as hemp.  Vermont's medical marijuana program stands as one of the more tightly regulated programs amongst the considerable number of states that now have such laws.  The law limits the number of dispensaries that may be operated in Vermont (four total), requires that they be operated by nonprofit entities, and closely regulates details concerning site security, retention and oversight of employees and officers, and record-keeping.  From the patient perspective, the law also more narrowly defines the conditions that qualify one to obtain medical marijuana than some other states—for example, California, where requirements to obtain medical marijuana are notoriously loose.  In addition to buying marijuana at a dispensary, registered patients in Vermont can grow their own plants or have a caregiver grow for them.

As of 2013, the Vermont legislature also legalized—under state law—the cultivation of hemp.  This change in law marks a potentially promising development for Vermont’s agricultural entrepreneurs.  Hemp is already widely used industrially (among other things, there’s a good chance the composite panels in your car contain hemp), and the plant growing in popularity as a nutritional supplement, source of food oil, and fiber for textiles. 

The catch, of course, is that hemp comes from the same plant as psychoactive marijuana: Cannabis Sativa L.  For that reason, Vermont’s law limits hemp cultivation to varieties of Cannabis containing only negligible amounts of THC—concentrations of no more than 0.3% on a dry weight basis.  (By comparison, typical black-market marijuana is reported to have a THC content in the range of 8% or 9%).  To ensure that Cannabis cultivated as hemp in Vermont meets these standards, the law provides for close oversight: growers must register with the Vermont Agency of Agriculture, Food and Markets, disclose the location and acreage of growing locations, permit inspection and testing, and affirm that the seeds being used are of a plant variety that will not exceed the maximum THC threshold.

While Vermont may be ready to embrace the potential of marijuana as medicine, foodstuff, and useful fiber, cultivation remains largely illegal under federal law.  The federal government has, until recently, made no distinction between hemp and marijuana: both are considered Schedule I drugs, which means they cannot legally be grown, processed, or sold.  There are some signs of change.  The 2013 Farm Bill, signed into law in February 2014, allows cultivation of industrial hemp under state research or pilot programs.  More broadly, the U.S. Department of Justice issued guidance in 2013 suggesting—with abundant qualifications—that it would take a hands-off approach to enforcing federal laws against marijuana in states with a well-functioning and closely regulated medical or recreational marijuana program.  For the present, however, those considering entry into the medical marijuana or hemp markets need to be aware of the risks under federal law, and attend carefully to the requirements of Vermont’s state laws.

Post by Justin B. Barnard, Esq.