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Across the United States, public and state legislative support for medical and recreational cannabis is on the rise — and the state of Connecticut is no exception. As the governor’s office and state legislature discuss legalizing recreational cannabis (in addition to the currently approved medical uses), investors, growers, distributors and other businesses must act now to prepare for the opening of this new market.

At Shipman & Goodwin, we understand the complex interplay of legal, regulatory and competitive pressures that businesses must reckon with during this period of transition. Although two-thirds of US states and the District of Columbia have legalized some form of cannabis use, at the federal level it remains a controlled substance. Our team includes lawyers with years of firsthand experience at the highest levels of state government and law-enforcement and an extensive record working with startups and emerging-growth companies to establish and expand businesses in highly regulated industries. We can help cannabis-industry participants navigate the challenges of — and claim their place in — this new environment.

We offer broad-ranging, step-by-step counsel to investors, private-equity companies, owners, growers, distributors and retailers involved in the production of cannabis, hemp, CBD and related products, including:

  • Investing in and establishing a cannabis business
  • Operating a cannabis business
  • Dispute resolution

Investing In and Establishing a Cannabis Business

Even before the approval of recreational cannabis in the state, it is likely that a number of procedures will be established — modeled on current Connecticut medical marijuana requirements and policies established by other states — that businesses must follow in order to participate in the local cannabis marketplace. These unique issues arise in addition to traditional investment, startup and business-formation concerns. We provide sophisticated, knowledgeable legal guidance in the following:

  • Obtaining seed and early state financing and angel investments
  • Applying for and maintaining applicable licenses
  • Creating and implementing effective compliance programs
  • Establishing investment, transaction and business-relationship structures that meet relevant requirements
  • Negotiating supplier and vendor contracts
  • Identifying and protecting intellectual property, including trademarks and copyrights
  • Negotiating real estate acquisitions, leases and construction agreements
  • Pursuing Opportunity Zone and other tax incentives
  • Advising and commenting on legislative and regulatory proposals

Operating a Cannabis Business

Once a retail cannabis structure has been put in place, businesses will face a broad spectrum of day-to-day compliance and operational concerns. Drawing on our experience in similar regulated industries, we can help clients make effective, strategic decisions that protect their investments and support long-term objectives. We regularly advise clients on:

  • Labor and employment matters, including hiring, contract, termination and promotion, and development of employment policies and manuals
  • Data privacy and information security
  • Tax reporting and compliance
  • Ongoing compliance matters, including internal audits, product testing, labeling requirements, and other agricultural and production facility reporting requirements

Dispute Resolution

Our litigation team has extensive experience handling commercial and criminal disputes at trial, at the appellate level, and in settlement negotiations and alternative dispute resolution. We recognize the friction between state and federal cannabis laws and help clients achieve an appropriate resolution whenever possible. We represent clients in the following areas:

  • Data breaches and cybersecurity incidents, including disclosures and public relations
  • Government investigations
  • Product liability
  • White-collar criminal defense

In addition to working with cannabis-industry clients, Shipman & Goodwin has advised numerous businesses in the banking and finance, health care, education, manufacturing and other sectors on issues related to the legalization of medical and recreational cannabis. Among other areas, we have advised on drug testing and other policies relating to employees using prescribed medical marijuana, lending risks associated with the conflict between state and federal laws, and data security matters relating to software developed for and used by cannabis companies.

Representative Experience

  • We are advising an entrepreneur in Puerto Rico on the structuring of holding companies and the use of Opportunity Zone tax credits to support the acquisition of industrial warehouses, some of which are used to provide indoor growing facilities for cannabis. Our lawyers are also advising other investors and businesses seeking information on qualifying for Opportunity Zone investments relating to cannabis growing, production and distribution.
  • Lawyers from our employer defense and labor relations practice group have written articles and blog posts, created webinars, spoken at industry events and advised clients on employer issues arising out of the legal use of medical marijuana by employees. Among other examples, we have advised hospitals and health systems on concerns involving drug testing, effects of other state cannabis laws on employers in states where cannabis has not been legalized, and the management of employees prescribed medical marijuana.
  • We advised a software and services company on privacy-related matters and the creation of a patient-user portal, in conjunction with the company’s engagement by a state to manage the state’s medical marijuana program.

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