When people learn that you are a cannabis attorney, there are a range of reactions. Nervous laughter bordering on incredulity may be most common. Another common reaction is the sentiment that investing in cannabis is a license to print money. Spoiler alert: This is not the case.

Consider this a public service announcement – one that applies both to cannabis operators looking to raise capital and to potential cannabis investors.

Hemp vs. Marijuana

The distinction between hemp and marijuana is enormously consequential and one that many new cannabis investors do not immediately appreciate. While the terms are often used interchangeably in common vernacular, one of the most common ways I begin conversations with potential cannabis clients is by determining whether the client is talking about hemp or marijuana.

This country’s relationship with cannabis is a complicated one, and as is often the case in complicated matters, words matter. Marijuana and hemp are different strains of the Cannabis sativa L plant. So, “cannabis” is a scientific term, not a legal one.

Although the federal Controlled Substances Act historically made no distinction between marijuana and hemp, in 2018 the federal government defined “hemp” as any part of the Cannabis sativa L plant, including all derivatives and extracts such as cannabidiol (CBD), provided that the plant contains less than 0.3% tetrahydrocannabinol (THC). Any Cannabis sativa L plant or derivative from such a plant with a higher THC level is considered “marijuana,” which remains a Schedule I substance – the most stringently regulated category of narcotics – under the Controlled Substances Act. Because THC is the psychoactive ingredient in marijuana that produces the feeling of being “high,” a critical difference between marijuana and hemp is that hemp will not produce a “high.”  In short and for relevant purposes below, hemp-derived CBD is legal to possess under federal law (and the law of…

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