Canadian publicly traded cannabis companies investing into a US federally illegal enterprise. Not smart as a foreigner. What are the risks?
More than half of U.S. states have legalized some form of medical cannabis. Eleven states and counting have enacted laws authorizing recreational adult-use. Federal appropriations bills have cut funding for enforcement of federal drug laws pertaining to cannabis. Yet, despite significant progress on cannabis policy reform in the U.S., immigration enforcement under the Trump administration proves to be immensely burdensome for non-U.S.-citizens engaging in cannabis-related business.
Under the Immigration and Nationality Act (“INA”)—which broadly governs the admissibility of travelers into the United States—those persons whom the consular officer or the Attorney General “knows or has reason to believe” has been or currently is an illicit trafficker in any controlled substance, or who has been a “knowing aider, abettor, assister, conspirator, or colluder with others in the illicit trafficking” is an inadmissible person for the purposes of entry into the United States. Because marijuana is still listed as a schedule I substance under federal law in the U.S., those engaged in cannabis business of any kind are subject to this restriction. Sales, possession, production, and distribution of marijuana, or the facilitation of the foregoing, are illegal in the U.S. and put foreign persons at risk for criminal and civil penalties. Those at risk include those investing in publicly traded marijuana companies—even those traded legally on U.S. exchanges—because such activity is considered “facilitation” of illicit drug trade. Perhaps seemingly backward, Canadian companies are able to list in the U.S. if it is not doing business domestically; yet, that same authorized action could put an operator at risk for travel bans. The higher risk, however, is for publicly listed cannabis companies doing business in the U.S. and trading on Canadian exchanges.
United States Customs and Border Protection (“CBP”) is the regulatory body that makes determinations about admissibility into the U.S., and is also tasked with deciphering whether regulatory or criminal enforcement is appropriate. CBP is tasked with broad authority to make such determinations based on “the facts and circumstances known to the officer at the time.” Subsequent to Canada’s legalization of marijuana, the CBP released a statement clarifying it’s position: “Generally, any arriving alien who is determined to be a drug abuser or addict, or who is convicted of, admits having committed, or admits committing, acts which constitute the essential elements of a violation of (or an attempt or conspiracy to violate) any law or regulation of a State, the United States, or a foreign country relating to a controlled substance, is inadmissible to the United States.” CBP additionally clarified that Canadian citizens working in the cannabis industry who come to the U.S. for reasons unrelated to the cannabis industry will generally be admissible, while those seeking to enter the U.S. for reasons related to the cannabis industry may be deemed inadmissible.
Although criminal convictions generally affect immigration status and eligibility, when it comes to cannabis and other controlled substances, merely admitting to engaging in prohibited conduct can result in negative consequences, even absent any convictions. With that, failing to be truthful about drug involvement constitutes fraud and misrepresentation, which also provide grounds for an inadmissibility determination from CBP.
At the forefront of the consequences related to receipt of a determination of inadmissibility is a lifetime ban from entry into the United States—a heavy consequence, to say the least. Regardless of the level of involvement a foreign person has in the cannabis industry, attempting to engage in cannabis-related business within U.S. territory can result in a permanent inability to enter the U.S. Permanent inadmissibility is no exaggeration: even if cannabis policy reform occurs at the federal level, substantive laws generally do not apply retroactively. As such, a ban today is likely to last a lifetime, regardless of the path cannabis policy takes in the future. Even further, cannabis-related activities can also provide a basis for criminal prosecution of other crimes in addition to violations of the Controlled Substances Act, including money laundering and the unlicensed transmission of money.
The U.S. may appear lenient on cannabis enforcement despite lack of federal reform, but the current administration is far from lenient when it comes to immigration matters, even with regards to our northern neighbors. When it comes to drug crimes, cannabis does not appear to be priority, but when the immigration layer is added to the mix, enforcement priority seems to heighten. It is critical to have full knowledge of the potential risks involved when making the decision whether to participate in the U.S. cannabis market. Former DEA task force commander, Attorney Charles Feldmann, is an experienced litigator in drug policy and corporate finance matters. Call us today if you are interested in making cannabis-related investments and want to learn about the potential costs and benefits of doing so.
Charles Feldmann is a Founding Partner and Head of International Cannabis at the law firm Feldmann Nagel Cantafio, PLLC and Gateway Proven Strategies (GPS.Global). You can read his full bio at: MJBusinessAttorneys.com.