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I've been doing some research for a presentation I'm going to do. The proposition would be that a Big Tobacco company (Altria - Phillip Morris) transition into growing and distributing marijuana.

My research has led to a lot of skepticism mainly around legality, but also that big tobacco companies are selling a completely different product and prefer to not get more scrutiny and regulations over marijuana.

However, my plan only needs to be viable. I am curious about the legality of Altria from getting into this.

Would Altria be able to incorporate a completely new company/open a subsidiary that would operate marijuana growing operations in states that have legalized some form of marijuana? I know that controlling interest in a firm rolls up to the balance sheet of Altria so just wanted to know this wouldn't be an issue.

We are looking to target one state that could produce and allow us to legally distribute to all other legalized states (NW Region for Washington, Oregon, California, etc).

The industry right now is running into commerce issues because banks are federally regulated, credit/debit/bank cards can't by used, so they only operate in cash.

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  • This is tricky because it's less a matter of law and more a matter of policy. As it stands, any company that grows or sells marijuana, regardless of where it is incorporated or who owns it, is in violation of federal law. Currently the federal government is choosing not to pursue those violations, at least in cases where the company operates only within a "legalization" state. But they could decide to start doing so tomorrow, without requiring any changes in the law.
    – Nate Eldredge
    Apr 17, 2017 at 23:30
  • On the other hand, state law might also limit who can own or operate a marijuana business, and might prohibit ownership by an out-of-state corporation. This would be a state-by-state question and it is probably too broad to ask about all the states at once, so for that part you should specify a particular state that you want to know about.
    – Nate Eldredge
    Apr 17, 2017 at 23:35
  • @NateEldredge Thanks for the insight, my focus would be primarily in the states in the Northwest (Washington, Oregon, California) where the quality is viewed as superior, and the demand is higher. However, I know in some of these states there are strict regulations on things such as the people who grow it, can't distribute, etc.
    – adrenom
    Apr 18, 2017 at 0:08
  • Please edit your question to clarify that. If you can pick a single state, you have a better chance of a good answer. Someone might pick one of those states to answer about, but it's not likely you'll get an answer discussing all three in detail, because that would be too much work.
    – Nate Eldredge
    Apr 18, 2017 at 0:14
  • Some players are investigating ways to be involved not as investors, but through some other kind of relationship such a brand licensing, cross-advertising, vending, consulting, or having a few employees leave the Big Company form their own small company, and having "friendly relations" of some kind or another until such time, if ever, that regulations permit a more formal relationship.
    – ohwilleke
    Apr 18, 2017 at 17:08

1 Answer 1

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For Washington, the answer is in part that nobody new can produce marijuana – the period for applying for a license was a month at the end of 2013. But if you set that aside, the regulations governing producer licenses are here, especially here for producer requirements. This section spells out license qualifications, wherein lies the rub. Suppose a publicly held corporation wanted to produce, then by WAC 314-55-035, you first determine the "true parties of interest", which would be "All corporate officers (or persons with equivalent title) and their spouses. All stockholders and their spouses". These parties are subject to vetting, and,

After licensure, a true party of interest, including financiers, must continue to disclose the source of funds for all moneys invested in the licensed business. The WSLCB must approve these funds prior to investing them into the business.

They operate a point system for criminal records, and do not normally issue a license if you have more than 8 points. You get 12 points for a felony conviction, 5 for a gross mindemanor, 4 for a misdemeanor, and 8 for being under supervision for a felony conviction. There are also "other violations" such as 4+ regulatory violations, which are a permanent disbarment from a marijuana license.

Apart from age requirements (everyone at a production facility must be over 21) and the violation filter, there is no specific regulation pertaining to what kind of work you do. However, if the stated rules for publicly held corporations is enforced and they check the criminal histories of all of the true parties of interest, then there is effectively no possibility for a tobacco corporation – or a software corporation – to produce marijuana in Washington. There is in fact a contrast between the definitions of "true party of interest", with respect to liquor vs. marijuana licenses. There is a similar criminal vetting of applicants for liquor license which includes board members. For a liquor license, it does not include stockholders in the case of a publicly held corporation, and only includes stockholders with more that 10% interest for a privately held corporation, whereas for a marijuana license it includes all stockholders.

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  • Thank you! Any knowledge of a public company like Altria operating in Washington and not facing any federal regulations as long as they adhere to state regulations?
    – adrenom
    Apr 18, 2017 at 1:36
  • One of Altria's companies is St. Michelle Wineries, which is located in Washington. Like everybody, they would "face" federal regulations (mostly prohibition), which per administrative decision of the moment, are not being enforced
    – user6726
    Apr 18, 2017 at 14:35
  • Colorado's regime is quite similar to that of Washington's in the respects mentioned, and like Washington includes not just equity but debt investors. Equity investment by out of state parties is also forbidden in Colorado although liberalization of that rule has been considered.
    – ohwilleke
    Apr 18, 2017 at 17:03

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