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Aaron Pelley, Partner at Harris Sliwoski – Interview Series

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Aaron Pelley is a Seattle-based attorney specializing in the very new fields of cannabis and psychedelic law as well as serving as a Partner at Harris Sliwoski LLP. As an attorney in these nascent and exciting fields of law, Pelley has served nearly every role, from criminal defense for cannabis-related cases to now representing major cannabis companies in the many legal and business-related matters that come with running a cannabis company of any size.

What made you want to become a lawyer and why did you eventually choose Willamette University?

I spent my first year out of undergrad doing social work and teaching. All my superiors were extremely jaded and disillusioned. I knew that environment would eventually change me, not for the better. My father would come home for lunch every day and watch the old black and white TV show Perry Mason. I always wanted to be Perry Mason, so off to school I went. Willamette had a very strong belief that we are here to make this world a better place. Not for ourselves alone are we born, is their motto and mission statement. It fit in with my worldview at the time and still does.

How did you become involved in the very new and specific type of law that you practice? Were there any defining cases or legislation that passed that influenced your decision to move into cannabis/psychedelic law?

Unfortunately, when I got in there were no classes and minimal legislation. We had just passed the compassionate use act in the early 2000s. I was representing people that were growing cannabis for their medicine. I was practicing criminal defense law and almost exclusively focused on cannabis. I was very lucky to have some big wins in cannabis and it made a lot press. I felt like I was part of a community and was taking on important cases. But I was also doing little cases, like getting a medical marijuana patient’s pipe back. The pipe was only worth $30, but we were taking these smaller, pro bono cases on principal.

For all the hard work that all the attorneys had done before me, taking on the Drug War, I was lucky enough to end up in the trenches right around the time that the tide was turning. To be in the thick of it, as the scales started to tip our direction was so amazing. And for all those lawyers that came before me, I know that they were part of the reason we were winning. They deserve a special salute. Back then it was not sexy or cool to be a cannabis lawyer. But, as the laws changed, so did my practice. I was already a trial lawyer and the skills transferred quite well to civil practice. But I needed to build a team, because cannabis law really traverses so many practice areas. I built a nice boutique law firm and have been at it ever since.

I obviously want to respect attorney/client privilege so I won’t ask for specific names, but what are some common reasons or complaints that your clients have either sued another party or been the defendant in a case over when it comes to cannabis/psychedelic cases?

With the criminal side of things, a lot of growers used to get in trouble because of smell. A lot of criminal investigations were born from the smell of an illegal substance. The smell of cannabis was “malem in se.” Evil in itself. The smell alone was evidence of unlawful conduct. That was the root of their probable cause. Interestingly, that argument is undermined, since it is now legal to possess and, in some instances, grow cannabis.

There is growing case law that the smell of cannabis is no longer enough for probable cause. And then, of course, there is the number most important rule that my mentor, Jeffrey Steinborn used to say, which was, only break one law at a time. So if you are going to drive around with a trunk full or weed, use your turn signals and drive the speed limit.

With regards to lawsuits, in the civil arena, most have to do with investors or business partners making money or losing money. One or the other eventually happens and then they fight. It is also a challenging space because to grow, especially indoors, requires a lot of initial capital. Which means that people that are passionate about growing have to find investment capital. We see a lot of conflict between growers and investors. Two groups of people that see the world very differently.

What qualities make for a good cannabis/psychedelics attorney and what are the major differences between practicing cannabis/psychedelics law versus another more common field of law?

It helps to understand some of the culture, especially on the cannabis production side. And having a firm grasp of the terms and regulations. The fact of the matter is, most states, not all of them, but most of them, regulate cannabis like it is plutonium. Understanding the rules and also helping your client understand the rules. Let’s face it, a majority of the folks in the industry came for the illicit market. People that did not follow the rules and have a well-grounded fear and resentment of authority. A good lawyer knows how to talk this former outlaw, and, at times, help reform him.

How will the rescheduling of cannabis to Schedule III impact both your duties as an attorney and the operations of your clients in cannabis?

Well, if marijuana is moved to Schedule III, it is unlikely to significantly change the landscape for my clients. State-licensed marijuana businesses will still violate federal law, even with the rescheduling. The most effective solution is to remove marijuana from the Controlled Substances Act (CSA) entirely. This approach has received substantial support, with half of Congress and several Senators recently advocating for this change.

While I remain hopeful, I understand that predicting the future in the bizarre political we find ourselves in is fool’s errand. However, moving marijuana to Schedule III would exempt the cannabis industry from the oppressive effects of IRC § 280E. This is the single and most significant change but it cannot be understated. I have clients that are operating under a 70% tax rate. That is untenable and has lead to many business failures or worse, diversion into illegal markets. That should not be happening in the dawn of legalization.

How would rescheduling impact the greater cannabis industry in the big picture? I would imagine Tax Code 280E causing less tax-related issues would be great, but would there be other ways that cannabis operations will be greatly altered like that?

Absolutely. But the benefits remain hypothetical. The rescheduling may lead to legislation that allow new opportunities for business expansion, both domestically and internationally, as cannabis becomes more widely accepted and legally available. Being classified as a Schedule III substance could facilitate more research and development opportunities, allowing clients to innovate and improve their products. The industry may also find it easier to access banking services, as financial institutions could become more willing to work with cannabis businesses under the new Schedule III classification.

Although to this last point, I am less optimistic, since banks still refuse to work with Federally legal, Farm Bill Compliant, Hemp companies. They just don’t like any risk.

Many fear that the Schedule III may be a pharmaceutical grab. Pharmaceutical companies already have experience navigating the FDA approval process for Schedule III substances, which could give them a significant advantage over smaller, state- licensed cannabis businesses that lack this expertise. They also exercise a much more sophisticated lobbying and massive resources, compared to the cannabis industry. The entry of pharmaceutical companies and the FDA could lead to a focus on standardized products, potentially reducing the variety of cannabis products available to consumers. It will be important for us, as an industry, to show and advocate for what we have. Or we may lose it.

Josh Kasoff is a journalist and copywriter living in Las Vegas covering all aspects of the cannabis industry. From law and politics, to arts and entertainment as well as advocacy and further criminal justice reform. Along with interviewing the Nevada cannabis industry's most important decision makers and professionals, Josh has also worked directly in the Nevada industry for over five years in a variety of packaging, manufacturing, marketing and testing analysis roles.