Cannabis Law Glossary
RICO and Cannabis
Definition
Federal civil and criminal RICO (Racketeer Influenced and Corrupt Organizations Act) claims have been asserted against cannabis businesses and their investors, creating litigation risk for operators in legal states.
RICO and the Cannabis Industry
The Racketeer Influenced and Corrupt Organizations Act (RICO), originally enacted to combat organized crime, has been used — with mixed success — by private plaintiffs to bring civil claims against cannabis businesses and their service providers. Because cannabis remains a federal Schedule I substance, some plaintiffs have argued that state-licensed cannabis operations constitute a "racketeering enterprise" under RICO.
How RICO Claims Are Structured
Civil RICO claims require the plaintiff to show:
- Conduct of an enterprise
- Through a pattern of racketeering activity
- Causing injury to the plaintiff's business or property
In cannabis cases, plaintiffs have argued that operating a cannabis business involves the federal crimes of drug trafficking, money laundering, and conspiracy — all predicate RICO acts.
Key Cases
Safe Streets Alliance v. Hickenlooper (10th Cir. 2017): The 10th Circuit allowed RICO claims by neighboring property owners who alleged their land values were harmed by nearby Colorado cannabis operations to proceed past a motion to dismiss — a significant ruling that sent shockwaves through the industry.
Subsequent district court rulings have generally been more skeptical, requiring plaintiffs to show concrete injury and actual predicate acts rather than mere proximity to cannabis operations.
Investment Implications
RICO exposure affects not just cannabis operators but also investors, landlords, service providers, and ancillary businesses. Lenders, technology providers, and real estate owners have faced RICO claims simply for providing services to cannabis companies.
Mitigation Strategies
- Careful corporate structuring to isolate plant-touching entities
- Clear service agreements with liability limitations
- Comprehensive legal opinions on state-law compliance
- Proactive risk assessment for ancillary service providers
Related Terms
See also: [Cannabis Banking IRC 471(c)](/glossary/cannabis-banking-irc-471c), [SAFE Banking Act](/glossary/safe-banking-act), [Controlled Substances Act](/glossary/controlled-substances-act)
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Authoritative Sources
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