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Capitalizing on cannabis

Powered By Canadian LawyerBusiness & Legal Issues||Written By Jim Middlemiss
Capitalizing on cannabis

As the lazy, hazy days of summer approach, most lawyers are focused on their holiday vacations.

Not so for Canada’s budding crop of cannabis counsel. It’s all hands on deck, as the country braces for retail marijuana legalization expected this year.

It’s fair to say that marijuana-related legal issues are wafting through law firms like smoke from a 420 party, as lawyers cash in on one of the biggest bonanzas the profession has experienced in decades.

Firms of all stripes and sizes are figuring out how to roll cannabis expertise into their practices.

“It’s been busy,” notes Manny Pressman, a lawyer at Osler Hoskin & Harcourt LLP.

The legalization of marijuana has “public policy, social, economic and legal implications for our country and communities,” he says.

“It translates into actionable opportunities for lawyers and law firms. It’s clear that many lawyers and law firms are capitalizing on the industry.”

It’s a welcome development. Law firms are being squeezed. Corporations are demanding more for less, the billable hour is under attack and technological upstarts are circling the legal fiefdom, threatening to disintermediate lawyers from their clients, disrupting the once venerable profession.

The Trudeau government’s plan to approve recreational marijuana use comes at a good time for the legal biz. It’s not every day a government creates a new, regulated industry from scratch.

Sure, any time government creates a law, it opens doors for law firms. Privacy legislation, for example, created demand for lawyers with new skills, while class action legislation opened doors to new forms of litigation. Minimum wage hikes and changes to health and safety laws keep employment lawyers busy.

However, recreational cannabis is an entirely different kettle of fish. It requires advice from every corner of a law firm from capital raising, finance and securities to regulatory, government relations, transportation, food, real estate, intellectual property and employment, among others.

Alexis Levine, a finance lawyer who co-leads the cannabis group at Blake Cassels & Graydon LLP, says the “number of legal areas that are engaged by the change in the cannabis law is certainly if not unprecedented pretty close to unprecedented.” He notes that you would be “hard-pressed” to find any other development in the last 20 to 30 years that has had such a broad impact across the legal business other than the digital revolution. “It’s a fast-growing and emerging market.”

Consulting giant Deloitte estimates that the recreational marijuana market potential in Canada ranges between $12.7 billion and $22.6 billion, when you factor in everything from growing to security, testing, licence fees and taxes.

Think about it. There is no recognizable brand name such as Coke, Molson’s, Tim Hortons or Doritos when it comes to cannabis, and no infrastructure in place yet to make all of that happen.

The field is wide open, and it’s the Wild West. Companies are being built from the ground up, and the current focus is on raising capital.

According to an April bulletin on the “Cannabis Frenzy” from Davies Ward Phillips & Vineberg LLP lawyers Patricia Olasker and Mindy Gilbert, Canadian cannabis companies raised $1.4 billion in equity in the first quarter of 2018.

The lawyers note that most of the financings in this space traditionally have been undertaken by independently owned investment banks. However, in 2018, BMO Capital Markets became the first of the big banks to co-lead bought offerings involving Canopy Growth and Cronos Group, and they expect other big banks to follow.

While the current attention is on financing and mergers and acquisitions, there is much legal work to come as the Cannabis Act wends its way through Parliament. There are still the final regulations to come forward, which will decide whether cannabis can be grown outdoors like wheat and barley, as opposed to confining it indoors.

Levine says that if the former were to happen, “you would have an agricultural industry around cannabis the same way you do around tobacco.”

Then there will be the next wave, such as edible products. Moreover, how long will it be before we see entrepreneurs looking to open cannabis bars or bakeries, where consumers can sample weed, in an edible, drinkable or smokable form? Behind all of this will be savvy lawyers helping entrepreneurs break new ground.

Even companies that are not part of the cannabis cabal are getting sideswiped by legalization. Lawyers, for example, are being called on to explain what employers should be doing about cannabis in the workplace.

It’s been almost two decades since courts ruled that Canadians have a constitutional right to use cannabis as a medicine. Recreational use is merely an extension of that, albeit a big leap forward.

You can say what you want about Liberal governments under a Trudeau, but what you can’t say is that they are bad for the legal business. Pierre introduced the Charter of Rights and Freedoms, which spawned a legal revolution and much work for lawyers. Now his son Justin is doing the same with cannabis. What the third generation has in store for Canada, who knows? But I am betting it can’t come soon enough for the legal industry. Party on, dudes.

Jim Middlemiss is a principal at WebNewsManagement.com.