24 September 2019
The column below was first published in the October 2019 issue of Hotel Management and is reprinted with permission.
Why are so many hoteliers talking about cannabis hotels?
Jim Butler, Hotel Lawyer
Legal cannabis sales exceeded $10 billion in 2018, and are expected to exceed $20 billion by 2025. 33 states plus the District of Columbia have legalized marijuana for recreational or medical purposes (or both). With all this activity, many sense an opportunity to generate more guests and profits by developing “cannabis hotels”.
Are you recommending your hotel clients dive into this?
No, except as a limited opportunity to explore carefully. Our law firm is extremely active in the hospitality industry and is one of few full-service firms in the country with a dedicated cannabis group, so we would certainly present a cannabis opportunity to the hotel industry if we thought it was viable. But we think cannabis is a “false flag” opportunity for hotels, presenting more problems than opportunities.
You say more problems than opportunities. Why?
Cannabis is still a Schedule 1 substance prohibited by Federal law. Federal agents can seize product and arrest people trafficking in cannabis products, even in states where it is legal.
The Federal illegality spooks banks with FDIC insurance. Does any hotel want to risk its banking relationships and lines of credit to dabble with cannabis?
The IRS can deny ordinary and necessary business deductions to taxpayers who traffic in Schedule 1 substances.
The regulatory situation is very complex with widely divergent state and local regulations, making it difficult or impossible to formulate uniform procedures and business approaches.
In many jurisdictions, it is likely that the property would lose all liquor licenses if it distributes cannabis products. CONTINUE READING →