New Law: Mississippi Medical Cannabis Act

As of May 18, 2021, some 36 states and four territories allowed for the medical use of cannabis products. On Wednesday, February 2, 2022, Gov. Tate Reeves signed SB 2095 into law, making Mississippi the 37th state to legalize medical marijuana for people with debilitating conditions such as cancer, AIDS, and sickle cell disease. Under the “Mississippi Medical Cannabis Act,” people with certain medical conditions will be able to get certified by a licensed physician, nurse practitioner, or optometrist to receive medical cannabis.

With so many states legalizing medical or recreational marijuana, where does the title industry stand on this topic? The short answer is that – due to federal law – most title insurers specifically prohibit the handling of escrow or issuing title insurance for land that is planned for use in the cultivation, manufacture, sale, or distribution of marijuana or marijuana-related products.

There are three areas of federal law that affect an insurer’s ability to insure title to land used in the cultivation, manufacture, sale, or distribution of marijuana or marijuana-related products. These areas include the Controlled Substances Act, the Money Laundering Control Act, and civil and criminal forfeiture laws.

Controlled Substances Act

Under the Controlled Substance Act, marijuana is defined as a Schedule 1 drug. According to the Drug Enforcement Administration, examples of Schedule 1 drugs include heroin, lysergic acid diethylamide (LSD), marijuana (cannabis), methylenedioxymethamphetamine (ecstasy), methaqualone and peyote. Any person or entity by association that violates the Controlled Substances Act (21 U.S.C. § 841(a) – 21 U.S.C. § 846) is subject to some hefty penalties:

  • 10 years to life for possession
  • 20 years to life if death or serious bodily injury results from use
  • Up to $10,000 (individual) or $50,0000 (party)

Money Laundering Control Act

There are also concerns for title insurance agents and companies under the Money Laundering Control Act. Under this law, any entity knowingly or unknowingly involved in handling or settling financial transactions for marijuana-related businesses could be considered complicit in “unlawful activity” (violating of the Controlled Substance Act), and subject to the following penalties:

  • Up to $500,000, or twice the value of the property involved in the transaction (whichever is greater)
  • Up to 20 years in prison, or
  • Both

Forfeiture laws

Title agents and companies also need to be aware of the risks of insuring and transferring real property that is associated with unlawful activity. Such property may be subject to civil and criminal forfeiture and guilty parties may be subject to the penalties.

Change on the Horizon

In October of 2009, the Obama Administration sent a memo to federal prosecutors encouraging them not to prosecute people who distribute cannabis for medical purposes in accordance with state law.

In late August 2013, the U.S. Department of Justice announced an update to their marijuana enforcement policy. The statement read that while cannabis remains illegal federally, the USDOJ expects states like Colorado and Washington to create “strong, state-based enforcement efforts…. and will defer the right to challenge their legalization laws at this time.” The department also reserves the right to challenge the states at any time they feel it’s necessary.

More recently, in January 2018, former Attorney General Sessions issued a Marijuana Enforcement Memorandum that rescinded the Cole Memorandum and allows federal prosecutors to decide how to prioritize enforcement of federal cannabis laws. Specifically, the Sessions memorandum directs U.S. Attorneys to “weigh all relevant considerations, including federal law enforcement priorities set by the Attorney General, the seriousness of the crime, the deterrent effect of criminal prosecution, and the cumulative impact of particular crimes on the community.”

The Agriculture Improvement Act of 2018 (2018 Farm Bill) authorized the production of hemp and removed hemp and hemp seeds from the Drug Enforcement Administration’s (DEA) schedule of Controlled Substances. It also directed the U.S. Department of Agriculture (USDA) to issue regulations and guidance to implement a program to create a consistent regulatory framework around the production of hemp throughout the United States.

As a result of the federal decriminalization of hemp, a property that is currently or will be used for the production, sale, or distribution of hemp may be eligible for title insurance. However, it will take many more changes in federal law before a property used in the cultivation, manufacture, sale, or distribution of marijuana or marijuana-related products may be eligible for title insurance.

Check with your local underwriter if you have questions regarding the insurability of title-related where marijuana is invovled.