Oregon is attempting to lump cannabis-related real estate transactions with all other real estate transactions, provided the transactions are in compliance with Oregon’s cannabis regulations.

Sponsored by Oregon State Representatives David Brock Smith and Gary Leif, House Bill 2806, if passed, would put some pretty sharp teeth into the cannabis real estate and insurance realm. HB 2806 would restrict the latitude for title insurers’ to refuse to insure cannabis-related real estate transactions.

The bill would effectively stop title insurers and associated industry players from refusing to close or insure real estate transactions due to their connection with state-compliant cannabis activities. This would include land used for cultivating, producing, manufacturing, or selling cannabis.

Those violating HB 2806 would be in conflict with Oregon statute 746.240, which covers unfair and deceptive practices related to insurance transactions. A result? The language in HB 2806 would force the Director of the Department of Consumer and Business Services to implement the rules and enforce them as needed. When all is said and done, businesses could face civil penalties of up to $5,000 per violation.

At the core

The issue centers around the conflict of marijuana as it relates to federal law versus state law. Even though states continue to legalize cannabis for medical and/or recreational use, the feds still classify weed as an illegal Schedule 1 controlled substance. The cannabis industry is trying mightily to rectify the opposing views, and by association, federal laws that prohibit cannabis. The whole situation is confusing or just plain dumb.

Scenario: a medical marijuana dispensary, operating legally per state law, purchases property insurance on the dispensary. However, the owner of the real estate may find that the title is “unmarketable” due to a lack of title insurance. As a result, the lack of title insurance may prove a sticking point if the property owner wants to sell — either at fair market value or to get financing using the real estate as collateral. That’s absurd.

Questions

While HB 2806 isn’t law yet (and might never be), the proposal brings up many questions about title insurance, the insurance industry as a whole, and the other businesses and industries that interact (knowingly or not) with the cannabis industry.

One burning question involves how the title insurance industry in Oregon — and other states where cannabis is legal — feel about this proposed legislation? Could they push back? Could insurers refuse, defaulting to federal laws as it relates to cannabis? Could banking services — or lack thereof — be used as leverage?

Using insurance as a launching pad, how could subsequent legislation affect industries, like employee benefits providers and janitorial services, that interact with cannabis?

What’s next

HB 2806 is pending in Oregon’s Legislative Assembly — specifically in the House Committee on Business and Labor. When that committee has wrapped up its review, the bill will be passed on to the House Committee on General Government. While it remains to be seen whether or not HB 2806 will move forward, it does highlight the tension and hesitation when federal and state laws are opposed to each other.

As more and more states opt to legalize cannabis, the issues involving the intersection of federal law, state law, and cannabis will continue to pop up in future legislation.