Cannabis and the Ethical Gray Area Between Federal and State Law

Cannabis is big business in New Jersey, with sales projected to reach one billion dollars in 2024. It is, however, an intensely regulated industry, requiring detailed regulatory guidance from legal counsel at every turn, from corporate formation to drafting employment practices, and submitting and pursuing local license and land use applications. As a result, lawyers have become an essential part of starting and running cannabis businesses in New Jersey. While this has fueled extraordinary growth in the legal field, those lawyers advising clients about cannabis businesses face unique ethical issues.

1. Federal Illegality

The primary reason that ethical issues arise when an attorney is representing a client in the cannabis industry stems from the fact that cannabis remains federally illegal. Pursuant to the federal Controlled Substances Act, 21 U.S.C. 801 et seq. of 1970, cannabis, or marijuana as it is referred to in the CSA, is a Schedule I drug. Schedule I drugs such as heroin, ecstasy, and peyote are defined to have three central characteristics: (i) a high potential for abuse, (ii) no currently accepted medical use, and (iii) a lack of accepted safety for the use of the drugs. Consequently, the manufacture, possession, sale, or use of cannabis is a crime, and anyone who is engaged directly or indirectly in the cannabis industry remains potentially subject to prosecution under the CSA, which the U.S. Supreme Court has held preempts state law to the contrary.

2. Rule 1.2(d) 

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