Jonathan Robbins, Akerman

Jonathan Robbins starts his day early. By 6 a.m., he's on his home computer scanning email, and then he hits the hot sheets — dozens of newsletters from attorneys, advocacy groups, legislators and associations focused on cannabis. And there is a lot to read.

Robbins, who chairs the cannabis practice at Akerman in Fort Lauderdale, believes that when he began collecting clients in the industry back in 2013, he was one of the first Big Law attorneys to practice cannabis law in the United States. The firm ranks 94th on the Am Law 100 list.

“Back when I first started practicing, I went to a conference in Vegas called MJBizCon,” he says. “At the time, it was just a bunch of guys selling nice bongs. This year, there were 28,000 people there.”

One thing has remained consistent, however, even as state after state has legalized marijuana in some form, fueling an estimated $10 billion industry. The federal government lists cannabis as a Schedule I narcotic, putting it in the same ­category as heroin, cocaine and methamphetamines — a controlled substance that's illegal on a federal level. “touching

Whether cannabis businesses are “touching the plant” (industry shorthand for directly working with marijuana plants by growing, extracting oil or dispensing) or not (investing in a cannabis farm or licensing a particular brand-name strain, for example), they all need banking.

For the most part, banks won't deal with individuals, companies or organizations that work in cannabis even though they no longer face a blanket prohibition from doing so.

The federal overhang presents problems for law firms seeking to advise and profit from clients involved in a criminal enterprise — at least as far as the federal government is concerned. While more than two dozen Am Law 200 firms have cannabis practices, few Am Law 50 firms are among them. Goodwin Procter, which checks in at 26 on the Am Law list, is an exception. Those that publicly embrace the practice tend to have a clientele consisting largely of mid-market companies — and Wall Street law firms are conspicuously absent.

Cannabis clients have a primary concern above all others, Robbins says: banking and merchant services. The drug's jurisdiction-driven legal status has created a paradox. It is both driving the growth of cannabis practices and holding them back from reaching their full potential.

Sprouting Practices

Robbins is a regulatory attorney by trade. He started working with the cannabis industry because clients ­wanted to understand their exposure under federal and state regulations. Many firms watched their cannabis practices sprout from client ­interest and then grow as the issues became more diverse and attracted more attorneys. The industry requires guidance on real estate, intellectual property, mergers and acquisitions, litigation, lobbying and more.

Robbins practices in Florida, one of 33 states that legalized medicinal marijuana. Although it's based in Fort Lauderdale, the practice he heads reaches all 50 states at this point. That's 50 different sets of rules to understand at the state level alone — it gets more complicated at the municipal level. And they are moving targets.

It's pretty rare that a day goes by without some sort of change in how the industry is regulated. New York Gov. Andrew Cuomo signed a bill Monday to decriminalize the drug. New Jersey was about to legalize recreational use, until it didn't. The Illinois Legislature was the first to pass recreational cannabis laws after many change by initiative.

Most major U.S. law firms have done some work in the cannabis space, and according to Morgan Fox, media relations director at the National Cannabis Industry Association. The stigma associated with having a cannabis practice is virtually gone — at least for small to medium firms. But the largest firms still don't advertise it. Searching their websites reveals snippets of work done but nothing that could be considered a formalized practice.

Robbins believes there is still a more conservative bent at larger firms, which have more to lose if a client skirts legality or something goes sideways as a result of regulatory changes. Akerman did a great deal of due diligence on the potential exposure of dealing with plant-touching clients. The firm concluded it was a risk worth taking.

Stigma Tamed?

Chris Davis, executive director of the National Cannabis Bar Association, says there are a few reasons the largest firms have shied away from cannabis. First, he doesn't completely agree with Fox that the stigma has been tamed. Larger institutional clients may not be thrilled if their lawyers also represent cannabis growers.

But he suggests the main reason is that the right cannabis client base doesn't yet exist for those firms, which are mainly busy with big banks, the Fortune 500 and potential Silicon Valley unicorns, all beyond the pot ecosystem.

From Robbins' perspective, it may be a good thing that larger firms aren't suddenly pushing ahead.

“Bigger firms dipping their toes into it without having the regulatory expertise could cause problems both for the firm and the client,” he says.

Seth Goldberg, a Philadelphia partner at Duane Morris and team lead of its cannabis practice, expects the practice to expand, bolstered by the constellation of practice areas the industry touches and projections that the market could grow to $50 billion in the next decade. His firm has been pleased with its revenue results since formalizing the practice in January 2017, though he declined to share them.

Zane Gilmer, a Denver partner in the cannabis practice at Stinson, believes the industry will grow, but his firm does not have an accounting system that measures the exact amount of money the practice is bringing in. The firm's practice is more about servicing existing clients that have started to do business with companies dealing with cannabis. His own work focuses on advising financial institutions that are planning to deal with companies in the cannabis space.

Davis predicts change will come to the banking side, just as societal perceptions changed on the plant's usage and legality. But the current arrangement is producing some ridiculous situations.

Robbins knows of several law firms that had issues when banks discovered they were representing cannabis clients. He recounts the story of Florida Agriculture Secretary Nikki Fried, an advocate for the expansion of medical marijuana, whose campaign account was closed by BB&T after it found out she was receiving campaign contributions from cannabis companies.

“Banks are just as confused as the clients looking for banking and merchant services,” Robbins says.

His firm represents a few banks that deal or have inquired about dealing with clients in the cannabis industry, and there are a lot of questions about exposure, differences between marijuana products and what it actually means to be in the cannabis industry.

For banks, it's mostly about exposure under federal law and a little about cost. Cannabis industry clients cost more to deal with because of the suspicious activity report filing process. Some banks simply pass along the costs.

Davis mentioned a bank in Oregon that charges cannabis clients $8,000 a month for a checking account, and there's a two-year waiting list for them.

Robbins has heard of people burying cash in their backyards or stuffing it into old clothes — anything to house it.

One of his first clients was a couple who owned eight dispensaries in Colorado. They were doing well but couldn't get a bank account for their business. The utility overhead on eight dispensaries was high, so once a month the couple drove to a payment center with $75,000 or so in cash.

“They would wrap it in brown paper bags,” he says. “And it reeked like marijuana.”