CURRENT MONTH (April 2025)
Business Crimes & Corporate Compliance
Prudence Is the New Corporate Transparency Act Watchword
By William E. H. Quick, Polsinelli PC
Visit Business Law Today’s April 2025 in Brief: Corporations, LLCs & Partnerships to read the full update on the Corporate Transparency Act.
Cannabis Law
Congress Divided on How to Regulate Cannabis
By Perry N Salzhauer, Salzhauer & Shortt, P.C.
With the proposal to reschedule marijuana from Schedule I to Schedule III of the United States Controlled Substances Act (“CSA”) on hold pending an interlocutory appeal in the proceeding, members of Congress have stepped up efforts to provide similar results, one way or the other, through legislation. As with most matters before this current Congress, the legislative proposals vary greatly in both purpose and impact.
First, on February 6, 2025, Senator James Lankford, Republican from Oklahoma, introduced S. 471, called the “No Deductions for Marijuana Businesses Act.” This proposed bill would amend Section 280E of the Internal Revenue Code (“IRC”) to maintain the section’s applicability to marijuana businesses, irrespective of the CSA Schedule on which it appears. For those who have not been involved in or following the state-legal marijuana industry, Section 280E of the IRC prohibits any person or entity carrying on a trade or business that consists of trafficking in a controlled substance listed on Schedule I or Schedule II of the CSA from taking deductions or credits to its net receipts to determine taxable income. The application of IRC 280E generally results in a marijuana business paying far more in federal income taxes than a comparably situated non-marijuana business. Next, on February 21, 2025, seven members of the House of Representatives, led by Jodey Arrington, Republican from Texas, introduced H.R. 1447, also titled as the “No Deductions for Marijuana Businesses Act.” H.R. 1447 is identical to the Senate version and would have the same effect of maintaining the tax effects of IRC 280E on marijuana businesses in the event that the substance is rescheduled to Schedule III as proposed. Both bills may also maintain the applicability of IRC 280E to marijuana businesses if marijuana is deregulated in any way short of removing marijuana altogether from the CSA.
Most recently, on April 17, 2025, Representatives Dave Joyce (R-OH), Max Miller (R-OH), and Dina Titus (D-NV) reintroduced the Strengthening the Tenth Amendment Through Entrusting States (“STATES 2.0”) Act. STATES 2.0, last introduced into Congress as H.R. 6673, would, among other things, remove the applicability of the CSA to marijuana produced and sold pursuant to state law, while preserving the ability of the states to continue regulating (or not regulating) marijuana under the provisions of their own state laws. In addition, STATES 2.0 would require the federal Food and Drug Administration (“FDA”) to promulgate rules related to the marketing and safety of products containing marijuana. An interesting nuance of this provision of STATES 2.0 is that because it tracks back to the definition of marihuana in the CSA, it does not appear to require the FDA to promulgate regulations related to the marketing and safety of products containing cannabis that is classified federally as “hemp.” As a result, the FDA would be under no obligation to regulate hemp-derived cannabinoid products like the CBD products that have become ubiquitous at convenience stores and gas stations throughout the United States. Moreover, despite requiring the federal government to take a step back from being the primary criminal regulator of state-legal marijuana, STATES 2.0 continues to apply CSA criminal provisions to the distribution of marijuana to persons under twenty-one and the employment of minors in the industry. Finally, because it does not in any way change the definition of marijuana set forth in the CSA, STATES 2.0 would not affect the applicability of IRC 280E to marijuana businesses if the No Deductions for Marijuana Businesses Act becomes law.
While none of the recently introduced legislation described in this article has been moved forward since introduction, the recent flurry of activity does indicate that there is at least some chance that this Congress will take some action with respect to the status of marijuana under federal law. For now, it is too early for anyone to guess what direction or form that action will take.
Consumer Finance Law
Fourth Circuits Determines Scope of a Furnisher’s “Reasonable Investigation” Under FCRA
By Nathaniel Spilman, Pilgrim Christakis LLP
On March 14, 2025, the Fourth Circuit vacated the dismissal of a consumer’s Fair Credit Reporting Act (“FCRA”) 15 U.S.C. § 1681s-2(b) claim against debt collection agency and FCRA furnisher, Carter-Young, Inc. (“Carter-Young”). In analyzing the scope of a furnisher’s FCRA investigations, the Court held that for a consumer to state a claim that a furnisher violated its duty to investigate the accuracy of information in a consumer’s credit report, the consumer must allege objectively and readily verifiable facts that indicate an inaccuracy or incompleteness in the credit report.
Plaintiff Shelby Roberts had a month-to-month lease with “Ansley at Roberts Lake Apartments” (“Ansley”) that could be terminated with thirty days’ written notice. Ansley tried to lease the apartment to another tenant without providing Roberts with the thirty days’ notice, and when Roberts pushed back, it forced Ansley to break its lease with the other tenant. After Roberts moved out at the end of those thirty days, Ansley sent her an invoice for damages not covered by her security deposit. Roberts alleged this was fraudulent and done in retribution. When she didn’t pay the invoice, it went into collections with Carter-Young.
Carter-Young reported the unpaid invoice to the credit reporting agencies (“CRAs”). When Roberts disputed the accuracy of this reporting with the CRAs (on the basis that she did not actually owe Ansley for the fraudulent charges in the invoice), Carter-Young investigated the dispute by simply asking Ansley to recertify that the debt was valid, which it did. Carter-Young then recertified the claim to the CRAs, who continued to report the delinquent invoice. Roberts then sued Carter-Young in federal court, alleging it had willfully and negligently violated its obligations under the FCRA to conduct a reasonable investigation of her disputes of the Ansley debt by simply recertifying the debt with its client Ansley.
The district court granted Carter-Young’s motion to dismiss, finding that Roberts’ dispute was legal rather than factual—that is, asking the court to find that Ansley’s invoice was retaliatory and fraudulent. It reasoned that the FCRA required a reasonable investigation of facts and not a resolution of legal questions, so Roberts failed to state a claim under the FCRA. Roberts appealed.
On appeal, the Fourth Circuit, quoting the district court, delineated the three elements of an FCRA failure to reasonably investigate claim for the first time: “(1) the plaintiff submitted a dispute over the accuracy of information on a credit report to a [consumer reporting agency]; (2) the [agency] notified the furnisher of that dispute; [and] (3) the furnisher failed to conduct a reasonable investigation to determine whether the disputed information can be verified.” Further, it stated the FCRA provides that a furnisher must conduct an investigation of the disputed information when it receives notice of a dispute regarding the accuracy of information provided to the CRAs.
The Court’s holding turned on whether Roberts alleged facts, if true, that show her credit report contained inaccurate or incomplete information. Since the FCRA does not define “accuracy,” the Court looked to the Eleventh and Second Circuits—specifically, the Second Circuit’s holding that “reported information is actionably ‘inaccurate’ only if that information is objectively and readily verifiable” as mistake- or error-free. The Court reasoned that furnishers are not tribunals with resources to investigate complex or subjective tortious conduct but do have the capacity to investigate objective and readily available information. The Court further explained that the scope of an investigation into objectively and readily verifiable information “is not limited to confirming accurate transcription of a debt’s amount or the name of the debtor.” Also, it clarified that legal as well as factual disputes regarding accuracy could involve objectively and readily available information, overruling the district court’s ruling on the motion.
Overall, Roberts creates bright line rules in the Fourth Circuit regarding the elements of an FCRA failure to reasonably investigate a dispute claim and the scope of a furnisher’s investigation. Particularly, to state a claim under the FCRA that a furnisher violated its duty to investigate indirect disputes, the information in question must have been inaccurate or incomplete. Furthermore, a consumer must allege facts that, if true, indicate an objectively and readily verifiable inaccuracy or incompleteness in their credit report. In other words, in the Fourth Circuit, under Roberts, FCRA claims against furnishers for failure to reasonably investigate should be dismissed if the consumer’s alleged facts indicate a subjective or difficult-to-verify inaccuracy. The Fourth Circuit vacated and remanded to the district court to determine whether Roberts’s claims allege an objectively and readily verifiable inaccuracy in her credit report.
Gaming Law and Sports Law
Tribal Joinder in the Age of Sports Betting
By Megan Carrasco, Snell & Wilmer LLP
Sports betting is big business, and it’s sweeping the nation. In some states, Indian Tribes are the only entities that can provide sports betting services. In other states, both Tribes and major sportsbooks (e.g., Draft Kings) can provide sports betting services. For example, in Arizona, the state designates some betting licenses for major sportsbooks and others for Tribal entities. See generally A.R.S. § 5-1304. Having multiple entities with betting licenses creates competition, but it also creates disputes that the law needs to resolve. A recent dispute occurred because a sportsbook that competes with Tribal entities wanted to penalize the Tribes for allegedly violating sports betting laws. For now, it seems that sportsbooks are prohibited from taking action against the Tribes.
A district court in Minnesota recently had occasion to wrestle with this issue as it relates to casinos. In North Metro Harness Initiative v. Beattie, No. 24-CV-1369 (Mar. 11, 2025), Running Aces, an organization that competed against casinos, sued current and former employees of Tribal casinos for allegedly violating the federal Racketeer Influenced and Corrupt Organizations Act (“RICO”).
Federally recognized Indian Tribes are sovereign nations—this means that they cannot be sued without consent, i.e., a waiver of sovereign immunity. Municipal entities, cities, states, and the federal government typically invoke similar immunities and enact laws with limited sovereign immunity carve-outs for certain types of claims. In this case, the Tribes that Running Aces was suing did not waive their sovereign immunity.
Therefore, Running Aces sought to circumvent Tribal sovereign immunity by suing individuals—current and former officers and employees associated with the casino entities. Running Aces did not actually sue the Tribes that own and operate the casinos.
Given this, the defendants filed a motion to dismiss under Rule 12(b)(7) for failure to join an indispensable entity—that indispensable party being the Tribes.
The court granted the motion to dismiss on these grounds. The court found that given the critical economic importance of Tribal gaming, a suit without the Tribes at issue could not proceed “in equity and good conscience” as required by Rule 19, the rule of civil procedure that sets the standards for joinder of indispensable parties. In other words, the Tribes, whose conduct is at issue, are a required and indispensable party, such that the litigation cannot proceed without them.
Similar arguments follow for Tribal sports betting. To the extent that a competitor seeks to laterally regulate Tribes’ sports betting enterprises without a waiver of sovereign immunity, it’s highly likely the suit will fail. As of this writing, Running Aces has not appealed the decision, but it has sought leave to file a second amended complaint.
