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SEC OKs Share Registration for Calif. Marijuana Company

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By Mark Wilson, Esq. on January 28, 2015 11:41 AM

Every startup needs a lawyer, but startups are already shaky value propositions if you think you're going to burst onto the GC stage, or advance your extant career by working for a company that develops an app to check the temperature of your bath water. (It's even worse when you consider that a lot of startups pay their "employees" in equity that's basically kindling until they're bought by Facebook for a billion dollars.)

What's even riskier? Being GC for a pot dispensary. They're legal under state laws in Colorado, Washington, Oregon, and Alaska, but the Feds still list marijuana as a Schedule I narcotic, along with heroin and LSD.

So you'd think your new pot company can't be publicly traded, right?

Green for Green

Wrong! Apparently, the SEC couldn't care less about the Controlled Substances Act. And they don't appear to care about state laws either. The Wall Street Journal reported that the SEC gave the go-ahead for California-based Terra Tech Corp. to register shares in a company "whose business model includes cultivation and sale of marijuana."

That's noteworthy because recreational marijuana currently isn't legal in California (though the state's relatively lax medical marijuana laws make it close to recreational; it doesn't take much to get a medical marijuana prescription).

Although, while the SEC did grant the registration, the Journal notes that it didn't accelerate the registration, something it did twice in the past when Terra Tech was in the business of selling general horticulture products, not anything exclusively marijuana-related. Without acceleration, the registration becomes effective 20 days after the registration is granted instead of immediately afterward.

But it's not just formation and keeping the Feds at bay that the marijuana company GC is there for. As marijuana becomes more legit, it becomes more regulated, and the company's going to need a lawyer to work that out. In August, the National Labor Relations Board's general counsel recommended that the NLRB investigate unfair labor practices at a marijuana dispensary in Maine. So there's that.

That's Great, but What About Those 'Ethics'?

Surprisingly (read: not surprisingly), there's very little ethical advice about lawyers and pot. The Alaska State Bar recently issued an informal preliminary opinion on lawyers and pot, recommending everything up to being "directly involved in operating a business that remains illegal under federal law." Alaska lawyers, the opinion said, could advise clients on how to start a marijuana business and assist in forming the business. But beyond that, it cautioned against investing or direct involvement.

And even if you do get the coveted title of Chief Dudely Officer, will your new pot startup be profitable? It's not clear that investors are ready to sink their money into something the Justice Department could legitimately take away tomorrow. If you want to be on the bleeding edge, though, it doesn't get edgier than this.

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