State and Federal Legal Considerations and Complications for PE Sponsors Contemplating Cannabis Investments (Part One of Two)

Although cannabis remains illegal at the federal level, it is a growing industry that is likely to accelerate as awareness and social acceptance increases. Market segments for both medicinal and recreational cannabis are considered emerging areas of the industry. To assist PE sponsors that may be contemplating investing in cannabis companies, Seward & Kissel hosted a webinar that featured partners Jaimie L. Nawaday and Kevin Neubauer. This first article in a two-part series assesses the current relationship between private funds and the cannabis industry, along with evaluating state and federal legal complications. The second article will identify compliance and fundraising considerations for fund managers entering the cannabis space, as well as forecast the future of cannabis legislation. For additional commentary from Seward & Kissel, see our two-part series on its study of key terms in seed deals: “Structuring the Seeder’s Interest, Key Person Covenants and Lock-Ups” (Oct. 12, 2017); and “Consent Rights, Indemnification and Manager Buyout Rights” (Oct. 19, 2017).

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