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Gifting Marijuana: Clever or Criminal?

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GIFTING MARIJUANA

In November, Michigan voters approved a proposal to legalize recreational marijuana called the Michigan Regulation and Taxation of Marihuana Act, or the MRTMA. However, the state has yet to create the laws and infrastructure to allow businesses to sell recreational Cannabis in Michigan. It will likely take at least several months, if not a year, for the state to finalize procedures that will make recreational marijuana commercially available. So, for the time being, how can people who are not medical marijuana patients legally get their hands on marijuana? One intriguing method has emerged: “gifting” marijuana.

Various small businesses are taking advantage of what they see as a loophole in the law. The idea is that these companies will sell you products (t-shirts, chocolate, snack boxes, etc.) and include a free “gift” of marijuana with the purchase. That way, the company can claim that they are not technically selling you marijuana; they’re selling you a t-shirt, and the marijuana is simply a generous gift from the company free of charge.

Some of you may be thinking, “How is that legal?” Take a look at section 5.1 of the MRTMA. It says,

[T]he following acts by a person 21 years of age or older are not unlawful….  

(d) giving away or otherwise transferring without remuneration up to 2.5 ounces of marihuana, except that not more than 15 grams of marihuana may be in the form of marihuana concentrate, to a person 21 years of age or older, as long as the transfer is not advertised or promoted to the public.

So, it may be the case that savvy entrepreneurs are reaping the benefits of a gray area in Michigan’s marijuana laws. Or, are these companies taking a legal risk?

Many marijuana business attorneys, including the Cannabis attorneys at our firm, think these companies are flying in the face of the law’s intent, which is to allow the giving of marijuana from one person to another without an exchange of something of value. But when there is an exchange of money followed by an exchange of marijuana, is that really a gift, or to put it in legalese, does that constitute “remuneration”?

And, if you think it is, are you willing to risk criminal prosecution for that interpretation? The Wayne County sheriff has weighed in on this issue, saying he believes the law is clear and that you cannot distribute marijuana without a license, period. Should a problem arise, the Sheriff would work with the county’s Prosecutors and address the issue. But so far, no problems have come up. So, where does this leave us?

Looking to Other Laws

“Remuneration” is not a word used very often by most people, but it is used in other statutory schemes, healthcare being one such example. Federal healthcare laws provide the following definition of remuneration: “any payment, discount, forgiveness of debt or other benefits made directly or indirectly, overtly, in cash or in kind.”

Under this definition, it would seem rather clear that the “gifting” of marijuana after the purchase of another item would be an indirect benefit of purchasing the item, and therefore considered remuneration under the MRTMA. Thus, these sorts of transactions would not be permitted by the MRTMA, and would therefore be considered illegal.

Looking to Other States

To get a clearer understanding of this issue, it may be wise to look at how other states have encountered the gifting dilemma and how courts have interpreted similar provisions in federal healthcare laws. Cannabis gifting provisions are on the books in almost every state that has legalized marijuana: Alaska, California, Colorado, Maine, Massachusetts, Nevada, Oregon and Washington state, plus D.C. Most instituted the measure specifically as part of their new recreational marijuana program.

In Colorado, where recreational businesses have been operating since 2014, more than 15 gifting businesses were shut down by law enforcement in 2017 alone.

In Vermont, the state’s top prosecutor issued guidance that said gifting marijuana in exchange for another purchase is illegal.

A senator from Maine had a similar take on the issue, saying “Under any fair reading of the law, these businesses are illegal.”

However, there are virtually no accounts of these businesses facing criminal charges. A highly publicized case in Massachusetts in which marijuana distribution charges were brought against a store owner who gifted marijuana to her customers was dismissed, but charges can be filed at a later time.

Most states have tried to stem abuse of the laws by prohibiting businesses from advertising marijuana giveaways. However, businesses find ways to obscure what they’re doing and rely largely on word of mouth to make sales. Customers can infer how much marijuana they’re ordering judging by the price and size of the items advertised.

If a Tree Falls in a Forest…

So, can these businesses gift pot or not? From a strictly technical legal perspective, probably not. However, as the cases above indicate, just because something is technically illegal doesn’t mean that there will be any consequences for those that violate the law. It’s technically illegal to drive a couple miles per hour over the speed limit, but the risks of doing so are rather minimal.

There is an well-known adage that is particularly popular in the legal community that we believe can be used to sum up the legal status of gifting marijuana as part of another transaction. As the saying goes, “if a tree falls in a forest and no one is around to hear it, does it make a sound?” In other words, whether this type of gifting is technically legal may not be the right question to ask.

The real question is whether there is a Michigan governmental entity willing to enforce the law. The Michigan State Police and Attorney General have yet to publicly weigh in on this issue, and to our knowledge, have yet to take any sort of action against entities gifting marijuana along with the purchase of an unrelated item. The Wayne County Sherriff, as noted above, has weighed in to say that it’s not permitted, but as of yet has not taken any action to back this up. While you could certainly say that’s because they haven’t “caught” anyone engaging in these transactions, there has been at least a few companies who have openly sought to engage in these sorts of transactions.

Three companies—High Road LLC, Smoke’s Chocolate LLC, and CannaMich have all publicly stated that they intend to offer a “free” gift of marijuana with the purchase of one of their products. It appears that these companies are mostly limiting their activities to Wayne and Washtenaw counties—counties that have historically taken a more Cannabis friendly approach to enforcement of state marijuana laws. To date, no enforcement action has been taken against any of these three companies.

Until state regulators officially weigh in on the issue, or the legislation changes, some businesses will likely continue to operate in the gray area of the law despite the risk of being shut down or potentially facing criminal action. The risks of engaging in these types of activities will likely depend on the willingness of municipalities and counties to take enforcement actions, and not all municipalities and counties will approach this issue the same way. Some are very Cannabis friendly, like Washtenaw County, and some simply have more pressing issues to deal with than gifting small amounts of cannabis, like Wayne County. Other counties that have historically taken less than friendly approaches to marijuana issues—such as Oakland County—may see things differently.

So what’s the bottom line? As Cannabis Business attorneys we believe it’s still technically illegal. However, the risks of gifting marijuana as described are likely related more to where you set up shop than anything else, including the technical legal status of gifting marijuana under the MRTMA.

Scott F. Roberts Law is a Michigan cannabis business law firm focused on representing Michigan marijuana businesses of all sizes and types in licensing, as well as regulatory compliance, business, real estate and municipal matters. Contact us today  to schedule a free consultation.

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