Several Indian tribes are strongly contemplating adding marijuana cultivation to the gaming portfolios, urged on by the fact that the federal government is reluctant to challenge tribal sovereignty on the issue.
The increase of laws loosening both medical marijuana and recreational pot laws, most notably in the most populous state, California, is catching the eye of several tribes who see their tax-free status as a way of boosting an infant industry.
In 1987 the case of California v. Cabazon Band of Mission Indians established the principal that if states permit gaming, tribes can offer it free of state regulation. This ruling by the Supreme Court led to Congress approving the Indian Gaming Regulatory Act of 1988 that created the framework on which all subsequent Indian gaming has been hung.
Currently 29 states have medical marijuana laws and seven states allow recreational use, regardless of federal laws forbidding its use.
The first tribe to tentatively dip its toe into pot cultivation was the Pinoleville Pomo Nation, whose activities prompted the Department of Justice to issue a memorandum that suggested that tribes could operate a pot resort whether or not the state’s laws were welcoming.
The most recent entry into the market is Electrum Partners and a Seminole Indian-owned company: MCW. Electrum, which specializes in cannabis, is providing finance, investment and advisory services to help the tribe avoid taxes and liability.
According to Electrum founder Leslie Bocskor, “To achieve our mission of creating and owning winners in the market, this game changing, innovative and disruptive model provides new markets for licensed and regulated businesses as well as being the foundation for other business advantages created by attaching tribal government sovereignty to the cannabis industry. This will provide widespread solutions for the tax and liability burdens that most cannabis businesses face, and much more.”
He added, “We believe in tribal sovereignty and its advantages for tribal economic development, thus by adding tribal sovereignty as an economic advantage, we simply decrease the cost and increase the profits for every business partner who takes advantage of the structure we’ve set up.”
This business model takes advantage of the fact that tribes and their businesses are not subject to federal income taxes on their earnings, or to state taxes for that matter. On the other hand, tribal members ARE subject to federal taxes.
