Source: https://cannabislaw.report/the-business-model-listed-on-the-nyse-violating-the-controlled-substances-act-analysis-of-innovative-industrial-properties-a-marijuana-ancillary-business/
Timestamp: 2019-04-21 00:13:38+00:00

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Many investors would be mistaken if they believed that pot stocks have just arrived on the New York Stock Exchange. Before companies selling pot outright were listed, it was the marijuana ancillary businesses that were all the buzz. Companies such as Scotts Miracle-Gro and lighting companies were looked to as a way to earn returns off of marijuana operations. These ancillary businesses did not own or control the marijuana plant which is the reason that investors felt safe to invest their capital in them. This belief that if a company merely does not touch the marijuana plant, that they are free from prosecution is severely mistaken.
For the government to prove a violation of § 856(a)(2) they must prove that IIPR (1) manages or controls (2) as an owner and (3) knowingly and intentionally rents the building (4) of which the tenant’s purpose is to unlawfully manufacture a controlled substance.
As seen in all three of the aforementioned cases, IIPR likewise manages or controls its properties through its ownership of the buildings.24 Although if ownership is not enough, IIPR collects a “management fee” from every tenant and in some situations may even monitor its tenants by “periodically conducting site visits and meeting with tenants to discuss their operations.”25 IIPR’s actions satisfy the first and second elements.
IIPR is a landlord and similarly knows and intends to rent out space to tenants that have the purpose of growing marijuana in violation of the CSA. IIPR purchases the buildings in its portfolio from marijuana growers with the knowledge that its future tenants intend to continue to grow marijuana once they become tenants.
IIPR’s entire business model is based on leasing out their properties to marijuana growers of which they know intend to manufacture marijuana in violation of the CSA.
1 David Reid, Corona beer owner set to buy into world’s largest cannabis grower, CNBC (Oct. 30, 2017), https://www.cnbc.com/2017/10/30/cannabis-drinks-planned-as-constellation-brands-invests-in-canopy-growth-corporation.html.
2 Michael Sheetz, Corona beer maker Constellation ups bet with $4 billion investment in Canopy Growth, CNBC (Aug. 15, 2018), https://www.cnbc.com/2018/08/15/corona-maker-constellation-ups-bet-on-cannabis-with-4-billion-investment.html.
3 Jen Skerritt and Craig Giammona, Coca-Cola is eyeing the cannabis market, Bloomberg (Sept. 24, 2018), https://www.bloomberg.com/news/articles/2018-09-17/coca-cola-eyes-cannabis-market-in-push-beyond-sluggish-sodas.
4 Innovative Indus. Properties Inc., Our Business-Medical Cannabis Industry, http://Innovativeindustrialproperties.com/our-business/. (last visited Sept. 24, 2018).
5 21 U.S.C. § 812 (2018).
7 U.S. v. Oakland Buyers’ Coop., 532 U.S. 483, 493 (2001).
8 U.S. v. Oakland Cannabis Buyers’ Coop., 532 U.S. 483, 493 (2001).
9 21. U.S.C. § 841 (2018).
10 U.S. v. Gilbert, 496 F. Supp 2.d 1001, 1008 (N.D. Iowa 2007) (quoting U.S. v. Tamez, 941 F.2d 770, 774 (9th Cir. 1991).
11 U.S. v. Tebeau, 713 F.3d 955, 958 (8th Cir. 2013).
15 Id. at 960 (citing U.S. v. Harrison, 133 F.3d 1084 (8th Cir. 1998).
17 Id. (citing U.S. v. Harrison, 133 F.3d at 1086).
18 Harrison, 133 F.3d at 1086.
19 In re Rent-Rite Super Kegs W. Ltd., 484 B.R. 799 (Bankr. CO 2012).
24 Innovative Indus. Properties Inc., Annual Report (Form 10-K) p.6-8, (March 29, 2018).
26 21 U.S.C. § 802(15) (2018).
28 In re Rent-Rite Super Kegs W. Ltd., 484 B.R. at 804.
29 Innovative Indus. Properties Inc., Our Business-Medical Cannabis Industry, http://innovativeindustrialproperties.com/our-business/. (last visited Sept. 24, 2018).
30 Innovative Indus. Properties Inc., Annual Report (Form 10-K) p.25, (March 29, 2018).
Steven Monahan graduated with distinction in 2018 from the McGeorge School of Law. Steven received certificates of concentration in tax and business law while also earning two Witkin Awards for his legal writing. During law school he took internships at the California Franchise Tax Board and Wagner Kirkman Blaine Klomparens & Youmans LLP. During his time at the state, he wrote multiple opening briefs submitted to the Board of Equalization and then assisted Wagner Kirkman with their research needs. Steven benefited greatly from the knowledge of all the tax counsels working in the Tax Administration and Procedure Bureau as well as working with the outstanding partners at Wagner Kirkman.

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