In 1970, Congress passed a piece of legislation called the Racketeer Influenced and Corrupt Organizations (RICO) Act. At the time, it was a considered a groundbreaking regulation intended to help the government’s efforts to heavily reduce organized crime. Though the original purpose was to give the federal organizations the power to go after high-profile mafia bosses, the act has since widened its net of influence to affect a variety of organizations or enterprises (corporation, partnership or business) that may be involved in racketeering. Anyone who acquires, establishes, operates or maintains any interest in an enterprise that illegally derives its income or commits illegal acts can be subject to prosecution.
Why this could be cause for concern for the cannabis industry is that now private citizens are using these federal racketeering laws to bypass state law to take marijuana grows and dispensaries to court. In early June, the 10th U.S. Circuit Court of Appeals in Colorado decided that the distinctive smell from a nearby cannabis cultivation site might be lowering property values and that the site’s neighbors could legally sue them in a district court under the RICO Act. The case has the potential to create a damaging precedent that could have far-reaching consequences where individuals will look for ways to attack and delegitimize the cannabis industry through civil cases that lean on federal law.
The RICO Act lists 35 crimes that can be considered racketeering including robbery, gambling, bribery, arson, extortion, kidnapping and the manufacture or distribution of a controlled substance or prohibited chemical. If an individual or organization commits two or more of the 35 crimes under RICO in a 10-year period, it’s considered racketeering. Individuals and organizations can be charged with racketeering by the Department of Justice, prosecutors on behalf of the government and private citizens, but the difference between the type of charges can have a significant impact on the procedural process as well as the outcome.
In criminal cases, the accused defendant must be found guilty by a jury. There cannot be any reasonable doubt of the crime of the individual’s affiliation with the organization or enterprise. However, in civil cases brought up by private citizens, the burden of proof is much lower. All the plaintiff has to do to prove—and most likely win—their case is to submit a preponderance of evidence that shows the defendant’s illegal actions caused them losses of any sort. When that happens, plaintiffs can be awarded up to three times the amount of money they claimed to have lost due to the actions of the defendant.
At the time an individual or enterprise is accused of committing a crime, the government can immediately seize or freeze any property, belongings or assets that are suspected to be related to racketeering through a process called forfeiture. If a RICO charge is proven, defendants can be sentenced to up to 20 years in prison and face fines up to double the amount of money they received from their illegal activities.
Because cannabis is still illegal at the federal level and considered a Schedule I substance under the Controlled Substances Act, individuals and enterprises operating in state-legalized cannabis markets can potentially become embroiled in legal battles under RICO’s broad laws. In addition to cultivators and manufacturers, this means employees of dispensaries, brands providing marijuana products, shareholders and even a company that legally rents property to a cannabis collective could be charged with racketeering.
While cannabis’s legal status in states such as Colorado and California remains protected, its vulnerability to civil RICO charges can make entering and operating in the already-risky industry even more precarious.