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

Robbins, who chairs the cannabis practice at Akerman, believes that when he began to collect clients in the industry back in 2013, he was one of the first Big Law attorneys to practice cannabis law in the United States.

“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 through that time, however, even as state after state has legalized marijuana in some form, fueling an estimated $10 billion industry: According to the U.S. government, cannabis is a Schedule I narcotic, putting it in the same ­category as heroin, cocaine and methamphetamines. It is a controlled substance and is illegal on a federal level.

That presents a series of problems for law firms seeking to advise and profit from clients that are 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 launched formal cannabis practices in the last decade, few Am Law 50 firms are among them (Goodwin Proctor, which does have a formalized cannabis practice and checks in at number 26 on the Am Law list, is an exception). Those that publicly embrace the practice tend to have a clientele consisting largely of midmarket companies—and Wall Street law firms are still conspicuously absent.

Cannabis clients have one concern above all others, Robbins says: “banking and merchant services.” The drug's complex legal status has created a paradox. It is both driving the growth of cannabis practices within law firms and holding them back from reaching their full potential.

As the momentum for coast-to-coast legalization began building in earnest, beginning with California's medical marijuana regime more than two decades ago, observers began to appreciate the potential for an entire ecosystem of businesses around the industry: farmers, dispensaries, licensing companies, franchises, private equity investors, equipment manufacturers, retailers. The list goes on.

One thing those businesses share, whether they are actually “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), is the need for banking. That includes loans, deposit safety, platforms for financial transactions—the basic infrastructure of commerce that keeps businesses from having to cart around wheelbarrows of cash. That need is a massive, growth-inhibiting thorn in the industry's side.

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 2013 Cole Memo, named after then-acting U.S. Deputy Attorney General James Cole's enforcement memorandum, says that as long as states follow certain guidelines (such as keeping the drug from children and its revenue from gangs or cartels), the federal government will not, as policy, actively pursue the full criminal charges it could levy.

In February 2014, guidance issued in the Cole Memo was extended to the financial industry. The federal crime of providing banking services to businesses that generate revenue from the cannabis industry (money laundering, primarily) would be treated as a “low priority” crime, and as long as financial institutions abided by the eight directives from the original memo, they would be on terra firma.

That changed in January 2018 when then-Attorney General Jeff Sessions, an open opponent of legalized cannabis, issued a memo calling for the “return to the rule of law and the rescission of previous guidance documents,” in effect nullifying Cole's efforts to allow the cannabis industry to operate within the gray area between federal and state law. Attorney General William Barr told Congress in April that the new federal policy would essentially be a return to the directives of the Cole Memo until a more permanent and acceptable solution could be put in place.

Although financial institutions no longer operate under Sessions' draconian policies, they still don't have a great deal of clarity on what they can and can't do. They still need to fill out suspicious activity reports after every transaction with an entity that is making ­money from cannabis, and they must actively monitor their clients to root out any potential wrongdoing. It's extra legwork and extra exposure. For many financial institutions, it's not worth the risk.

The Federal Deposit Insurance Corp. insures nearly 5,000 commercial banks. The National Credit Union Administration identifies more than 5,000 credit unions. That's more than 10,000 entities capable of working with the cannabis industry to solve its banking crisis. And only about 450 are willing to do so, according to Chris Davis, executive director of the National Cannabis Bar Association. That's about a 4% participation rate. Even then, Davis says, “They don't really advertise it.”

Jonathan S. Robbins, chairman of Akerman's cannabis practice

Robbins is a regulatory attorney by trade. He started working with the cannabis industry because clients ­wanted to understand their exposure with regard to federal and state regulations. Many firms watched their cannabis practices sprout due to client ­interest and then grow as the issues became more diverse and attracted more attorneys to the work. The industry requires guidance on real estate, IP, M&A, litigation, lobbying and more.

Robbins practices in Florida, one of 33 states that has 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 Jersey was about to legalize recreational use, until it didn't. The same goes for New York. Illinois recently passed the first recreational cannabis laws via state legislature. The list is always growing, the tides ever shifting.

Most major U.S. law firms have done some work in the cannabis space at this point, and according to Morgan Fox, media relations director at the National Cannabis Industry Association, the stigma around 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 to 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, he says.

Davis, of the National Cannabis Bar Association, says there are a few reasons the largest, most profitable 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, he says.

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.

“Skadden [Arps, Slate, Meagher & Flom] isn't chasing cannabis clients,” Davis says. “They have a full book of business.”

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.

Whitney Hodges of Sheppard Mullin

There are some firms just outside the Am Law 50, like Sheppard, Mullin, Richter & Hampton, which announced a formalized 70-attorney practice in May, that are actively looking to raise the profile of their cannabis practices. But they are doing it slowly. Sheppard Mullin's practice head, Whitney Hodges, says that although the firm made the effort to formalize its practice, it isn't in a position to discuss financial expectations.

Some smaller firms are quite happy with the fees generated by the industry. Joshua Horn, partner and co-chair of the cannabis practice at Fox Rothschild, says that in the three years since his firm formalized its practice after dabbling in the space for years, it has gone from zero cannabis-related revenue to a multimillion-dollar practice that he expects to keep growing.

Seth Goldberg, a partner at Duane Morris and team lead of its cannabis practice, concurs. He 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 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, he says, is more about servicing existing clients that have started to do business with entities dealing with cannabis. His own work focuses, in part, on advising financial institutions that are planning on dealing with companies in the cannabis space. It's a bit of a gray area.

Although Gilmer says he has been doing work that relates to the cannabis industry since his arrival at Stinson in 2014, the firm didn't formalize its official practice until last year, and he still sees a lot of room for maturity both in the emerging industry and those who service it. But there's enough business to necessitate its own practice arm.

Change will come to the banking element of the industry, Davis says, just as societal perceptions changed on the plant's usage and legality. But the current arrangement is producing some ridiculous situations.

One attorney representing a business involved in the cannabis industry had both her and her 12-year-old son's bank accounts closed after their bank discovered where the attorney made her money, Davis says. He knows of another attorney who had a 20-year relationship with a bank terminated because of his professional association with a cannabis business.

Robbins knows of several firms that had issues once 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, who had her campaign account closed by BB&T after it found that she was receiving campaign contributions from entities involved in the cannabis industry.

“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, the differences between various marijuana products and what it actually means to be in the cannabis industry.

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

Davis mentions a bank in Oregon that charges cannabis clients $8,000 a month for the privilege of having a checking account. There's a two-year waiting list to take advantage of such an opportunity, he notes.

So what happens if your cannabis business is doing well? You don't have access to banking services, so your business is all cash. But you don't have any place to put the cash, like a bank or a credit union.

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, Robbins says, the couple would drive to the payment center with $75,000 or so in cash.

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

Some attorneys, like Barak Cohen, a partner at Perkins Coie, urge clients to stay away from cash completely. He's a former federal prosecutor who got into the cannabis game after a colleague asked him to help out with a client. The client, a payment processing company, wanted to know what its exposure would be if it started working with a company in the cannabis industry. That sort of confusion about what constitutes kosher banking is pervasive and isn't helped by the federal government's current stance, Cohen says.

“It is technically illegal but enforcement agencies are allowing it to happen,” he says.

In the murky waters where state and federal law meet lies a brackish mix of uncertainty about financial transactions.

HR 1595, also known as the Safe Banking Act, means to be a fix that would offer protection and usher in legal clarity for financial institutions. Its stated goal is “to create protections for depository institutions that provide financial services to cannabis-related legitimate businesses and service providers for such businesses.”

“The Safe Banking Act doesn't decriminalize cannabis, but it does create some safe harbors,” says Anthony Moshirnia, a white-collar defense attorney who is part of the 70-person cannabis practice at Sheppard Mullin.

Cannabis-related businesses are going to need access—full access—to federally insured banking institutions if they are going to grow in an accountable way, Moshirnia says.

In order to feel as though they are not at risk, companies need to be able to provide “auditable financial records,” he says. “It's hard to keep trustworthy records simply using receipts.”

Robbins, Moshirnia and Cohen all expect the banking element of the industry to find solid footing, whether that means the passage of HR 1595 or a more comprehensive bill down the road. For the time being, they will have to continue advising their clients on a case-by-case basis.

Robbins, who has watched as cannabis practices have popped up in major firms across the nation, welcomes the competition for those clients.

“I'm feeling some heat regarding competition,” Robbins says. “But if more firms are getting into it, it means the industry is growing and good, quality attorneys are entering the space. The worst thing for the cannabis industry would be for people not to have access to quality professionals.”

Or the services those professionals provide, like banking.