Status of Medical Marijuana in West Virginia

On January 11, 2019, Patrick Morrisey, the Attorney General of the State of West Virginia, issued a legal opinion discussing the legal risks the financial service industry may face as West Virginia implements its medical cannabis law. Marijuana, or cannabis, is classified as a Schedule I drug under the federal Controlled Substance Act.

Marijuana is still illegal under federal law. As such, federal law creates obstacles for federally regulated financial institutions. If a bank chooses not to report marijuana-related activity, it could face federal criminal charges, civil liability, and its officers could be held personally liable.

Given these complications, the Attorney General has explained the viability of several potential responses to safeguard banks from these regulations. These responses include creating one or more of the following: (i) a “Seed-to-Sale” system, wherein the State would enact its own safety regulations regarding marijuana to minimize exposure that banks face; (ii) a “Closed-Loop” system, which circumvents traditional banking methods by conducting all financial transactions involved in a state-legalized marijuana industry through a separate, state-managed portal; (iii) a state-run bank, in attempts to avoid the federal regulations altogether; and finally (iv) a “Cannabis Credit Co-op,” which would operate similar to a credit union.

Despite the lack of guidance from state and federal authorities, the medical marijuana industry is flourishing in the United States. It presents an opportunity for creative, thoughtful entrepreneurs to develop compliant payment systems that preserve the integrity of West Virginia’s medical marijuana program and minimize the potential risk of federal criminal and civil liability for financial institutions and others participating in the program.

Steptoe & Johnson lawyers have significant experience in the medical marijuana industry. We offer a multi-disciplinary approach that leverages our strengths in administrative law, regulation, government relations, labor and employment, litigation and business to comprehensively address medical marijuana businesses’ needs.