Legal Strategy During Legal Uncertainty: The Case of Cannabis Regulation

51 Pages Posted: 18 Feb 2021 Last revised: 4 May 2021

See all articles by W. Michael Schuster

W. Michael Schuster

University of Georgia - C. Herman and Mary Virginia Terry College of Business

Robert C. Bird

University of Connecticut - School of Business; University of Connecticut School of Law

Date Written: February 3, 2021

Abstract

Overcoming its checkered past and stringent regulation, cannabis is quickly becoming a highly lucrative consumer product. Accompanying this rapid decriminalization is crippling legal uncertainty, as vague statutory language, sporadic backsliding, presidential indecision, and inconsistent enforcement have introduced substantial and unnecessary legal and compliance risks. This combination of a novel industry and its ambiguous legal environment is not only ripe for reform, but also illuminates how firms can respond strategically to high levels of legal uncertainty.

After a review of the controversial history of cannabis and the legal uncertainty that pervades the industry, the manuscript shows how uncertainty drives firms to pursue risky legal strategies. This manuscript shows that firms under the stress of uncertainty respond by either aggressively leveraging their legal knowledge to capture value or attempting to circumvent the legal environment altogether. Both pathways of legal strategy impose unnecessary volatility on cannabis firms.

The manuscript then highlights how legal uncertainty drives legal strategy in a discrete legal environment – the federal government’s refusal to register marks for goods that are illegal under federal law—including most cannabis goods. We uncover five distinct legal strategies used by cannabis firms, with each strategy responding to a different combination of legal uncertainties. Finally, eschewing an unrealistic proposal for immediate uniformity, we propose pragmatic and achievable reforms that would significantly reduce legal uncertainty for firms while not upsetting further the already chaotic legal environment of cannabis regulation.

Keywords: business, cannabis, CBD, controlled substance, drug policy, entrepreneurship, federalism, hemp, legalization, legislation, marihuana, marijuana, medical marijuana, policy, preemption, prohibition, regulation, strategy, trademark, intellectual property, law and strategy

Suggested Citation

Schuster, W. Michael and Bird, Robert C., Legal Strategy During Legal Uncertainty: The Case of Cannabis Regulation (February 3, 2021). Stanford Journal of Law, Business, and Finance, Vol. 26, p. 362 (2021), Available at SSRN: https://ssrn.com/abstract=3778860

W. Michael Schuster (Contact Author)

University of Georgia - C. Herman and Mary Virginia Terry College of Business ( email )

Brooks Hall
Athens, GA 30602-6254
United States

Robert C. Bird

University of Connecticut - School of Business ( email )

368 Fairfield Road
Storrs, CT 06269-2041
United States

HOME PAGE: http://businesslaw.business.uconn.edu/robert-bird/

University of Connecticut School of Law ( email )

55 Elizabeth Street
Hartford, CT 06105
United States

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