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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, this Article shows how uncertainty drives firms to pursue risky legal strategies. This Article 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 Article 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.
Introduction
In 1937, the commissioner of the U.S. Federal Bureau of Narcotics proclaimed: "The sprawled body of a young girl lay crushed on the sidewalk the other day after a plunge from the fifth story of a Chicago apartment house. Everyone called it suicide, but actually it was murder. The killer was a narcotic known to America as marijuana ... ,'n Cannabis was blamed for: "slaughterings, cruel mutilations, maimings, done in cold blood, as if some hideous monster was amok in the land."2 The now-cult classic 1936 film "Reefer Madness" claimed that cannabis was "turning our children into hooligans and whores."3 The filmmaker declared cannabis as "dangerous as a coiled rattlesnake."4 Users of marijuana, according to one newspaper, became "bestial demoniacs, filled with a mad lust to kill."5 American public opinion was so strongly behind this construction of cannabis that the drug...