Lawsuits could easily arise out of health risks and for several other reasons, lawyers say
Like stoners, cannabis investors seem euphorically oblivious to marijuana risks. Weed smokers face health risks. Investors in companies including TilrayTLRY, +3.67% Canopy Growth CGC, +3.55% Cronos CRON, +3.87% and Green Thumb Industries GTBIF, +0.13% are taking on serious litigation risk.
Marijuana-stock investors could see their investments tank if lawyers launch legal assaults based on product-liability claims. Lawsuits could easily arise out of the health risks and for several other reasons.
But how is that possible? After all, we know that selling risky products doesn’t necessarily get a company in trouble. Cigarette companies like Philip Morris International PM, +1.40% and Altria MO, +2.68% sell “cancer sticks.” Anheuser-Busch InBev BUD, +1.08% and Constellation Brands STZ, +0.00% sell beer and booze, which have obvious health risks. Kraft Heinz KHC, +1.66% and Coca-ColaKO, +0.88% sell sugar-packed foods, contributing to diabetes and obesity.
Cannabis-product liability law is unclear because there is no body of case law, making it harder for weed companies to know how to operate within the law.
The catch is that those companies have some inherent protections against legal claims. Cigarette companies get a pass because they disclose health risks, and federal law guides them on how to do this to stay out of trouble. Next, wherever risks are widely known, as with alcohol and sugar, companies get off the hook because of the “assumed risk” doctrine in law. Consumers assume the risk when they use the products.
So, any downside is their fault.
- Confusion about health risks
- There are no clear guidelines on how to warn
- Warnings won’t be enough
- It’ll be tempting for weed companies to cross the line
- Cannabis-liability law is uncharted territory
- The black-swan risk for weed investors