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Is Your Security Clearance at Risk? The Truth About Marijuana Investments

Posted by Anthony Kuhn
marijuana investments

With the economy beginning to recover to its pre-pandemic levels, financial wellness has been at the top of mind for many working Americans. This is echoed by recent Gallup poll data, showing that around 61%—or 158 million Americans—own stocks or comparable investments. This all-time high is a 3% increase from the last stock craze in 2021, when the pandemic, cryptocurrency craze, and the power of the investor were consistent topics in mainstream media.

While a sizeable majority of these individuals are probably invested in blue chip companies or the S&P 500, some investors with a higher risk appetite prefer to pick individual stocks or emerging industries in the hopes of securing higher returns than what most would expect from those “safer” investments.

One industry that has recently been put on the map is the cannabis industry, as many states have decriminalized marijuana use under state laws in recent years. Currently, 24 states and the District of Columbia have approved the recreational or adult-use of cannabis, with the medical use of cannabis having been legalized in 40 states. These legalizations have led to a flood of marijuana businesses being opened and seeing tremendous business, and many keen investors have smelled the opportunity.

However, an important caveat to keep in mind is that marijuana still remains illegal under federal law, and may leave clearance holders, service members, or federal employees victim to increased scrutiny should they—knowingly—invest in marijuana businesses.

So, what should a current investor in marijuana or marijuana-related businesses do about their current investments? Will your clearance really “go up in smoke” all because of one bad investment decision?

How Your Investment Decisions Can Impact Your Clearance

To understand how your investments can impact your clearance, we first need to go over Guideline H (Drug Involvement and Substance Misuse) of the National Security Adjudication Guidelines.

Guideline H states that the illegal possession of a controlled substance (in this case marijuana) or the cultivation, possession, manufacture, purchase, sale, or distribution of that controlled substance could raise a security concern and may be disqualifying for security clearance applicants. You will see this same language the next time you fill out an SF-86, when it asks you these questions directly.

You need to acknowledge the reality of how the federal government views marijuana since for your security clearance, your personal views are irrelevant. Even though some states are beginning to legalize and normalize marijuana use, the federal government still considers it very much illegal

With that being said, investing in a business that is built around the distribution of a Schedule 1 controlled substance will most likely cause issues and could put your security clearance in jeopardy. By investing in these companies, you are essentially cultivating, buying and selling illegal drugs.

Beyond Guideline H, ties to a marijuana-related business could also raise concerns under separate guidelines for personal and criminal conduct, even if you are not personally using the product or involved in the cultivation, sale, or storage.

What Should You Do About Your Marijuana-Related Investments?

Fortunately, if you are invested in marijuana-related businesses, not all hope is lost; however, the fight to mitigate the government’s concerns will not be easy as indicated by their feelings about illegal substances prior.

There are degrees of involvement and risk when investing in this sector. The person who never checks a mutual fund that may have a CBD company is less at risk than the person who is heavily invested in the next hot cannabis stock; however, both are technically involved in the production, sale, or distribution of marijuana.

If you do find yourself in question over your investments or are worried about any future portfolio activity, it is important to note that your involvement with these companies is not dispositive. There are many different strategies you can use to mitigate the government’s concerns—one of which I hinted at above.

Before you start investing, or if you are already invested in marijuana stock—including ETFs, mutual funds, and index funds—you need to be careful and review your company or command’s policies. Some agencies require financial disclosures, so be careful to avoid any federally illegal investments. Think about how your investments would look if they were being evaluated by someone who doesn’t know you.

Saving for Your Future Smartly

Marijuana involvement is slowly becoming one of the most common pitfalls for clearance holders and applicants due to it being legal at the state level but not the federal level. Many clearance holders are unaware of this distinction and engage in use that puts their clearance in jeopardy. Remember, even if you aren’t smoking, a trip to a dispensary or investing in marijuana stocks could unknowingly jeopardize your security clearance.

In any event, it is important that you understand that while times may be changing in certain states—if you are a security clearance holder, military member, or federal employee—the rules regarding drug involvement remain the same. Knowing how to advocate for yourself should the government question you about your investments can be the difference between maintaining your security clearance and losing your career. Considering the stakes, it is important to remain cognizant of your involvement with any sort of drug, usage or not, as it could end up significantly damaging your career.

Find more articles about your security clearance here.

As a Managing Partner at Tully Rinckey PLLC and a 27-year Army veteran, Anthony Kuhn focuses much of his time on the representation of military personnel and members of the intelligence community. He has extensive experience assisting clients in navigating matters involving security clearance applications, suspensions, revocations and appeals. Additional experience includes military review board matters, UCMJ violations and non-judicial punishment, appeals for service-connection before the Department of Veterans Affairs, and GOMOR rebuttals. He also serves as the Chair of the National Security Lawyers Association. He can be reached at [email protected] or at (888) 229-5019.

This entry was posted on Monday, March 11, 2024 9:00 am

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