RICO Lawsuits Complicating Cannabis Industry

A well-known RICO case in Colorado was quietly dismissed by plaintiffs, but this news is not as good as it seems for the cannabis industry. When federal prosecutors use the Racketeer Influenced and Corrupt Organizations act in lawsuits against cannabis business, it poses huge problems not only for the company but also for anyone who does any kind of business with them. This can include lawyers, accountants, builders and many others.

A hotel owner in Frisco, Colorado was the one who originally filed the lawsuit, claiming that the planned opening of a closely located cannabis dispensary caused the hotel to lose business. The chances of the hotel owner winning this lawsuit were very small, since it is basically impossible to trace lost profits directly to the dispensary.

It appears as if there was little intention of the case ever making it to court. Instead, all of the bad press and potential for legal fees was enough to cause damage to those working on the cannabis industry. The cannabis company was not alone in the suit, it also went after companies who were involved in the financing or insuring of the cannabis business.

One of the original defendants was Bank of the West, but they were dismissed by the plaintiffs after the bank stated that it didn’t know the company was involved with cannabis and that they severed all ties after they did find out. The accounting firm and bonding company that worked with the business were both named in the suit as well, but they were dropped after cash settlements were reached. The proposed dispensary didn’t even open in the end, and the hotel owner dropped the lawsuit claiming that they had made enough money in settlements to cover any losses.

Even though people doing business in the cannabis industry will not likely be put in jail, they face an incredibly tough time doing business when their main product is still illegal under federal laws. Due to the legal situation, cannabis businesses can’t even use basic banking functions and they are forced to work entirely in cash. This causes trouble for customers wanting to buy, as well as the companies attempting to pay taxes in cash.

Lawsuits such as these are troublesome for the industry as well as other businesses that associate with cannabis companies in one way or another. This suit showed that negative press and the threat of litigation can make other businesses less likely to associate with any cannabis related group. This problem could go away if marijuana is ever legalized federally in the US, but until then the industry and related groups will have to tread very carefully in order to avoid being caught up in a federal lawsuit such as the one in Frisco.