Marijuana Law, Policy & Reform

Editor: Douglas A. Berman
Moritz College of Law

Friday, February 23, 2018

"E.U. Regulation Will Revolutionize Global Data Privacy. How Will This Affect The Regulated Cannabis Sector?"

In prior posts here and here, I spotlighted articles published at the Cannabis Law Report discussing federal tax treatment of cannabis businesses authored by Chris Nani, a student in my Marijuana Law & Policy seminar last semester. I am now pleased and proud to spotlight that Chris Nani has branched out by authoring this new piece with the title that serves as the title of this post. Here is how it starts and ends:

A European Union regulation may soon shape the way U.S. cannabis companies create their privacy policies and standards. The European Union will fully implement the General Data Protection Regulation (GDPR) by May 25, 2018....

Data security is tantamount to consumers and companies that comply with the GDPR will have an advantage over others and their clients will appreciate the additional security.

February 23, 2018 in Business laws and regulatory issues, Medical Marijuana Commentary and Debate, Recreational Marijuana Commentary and Debate | Permalink | Comments (0)

Sunday, February 18, 2018

"Insuring the Product Liability Risks of Cannabis"

The title of this post is the title of this short paper recently posted to SSRN authored by Ian Stewart and Francis Joseph Mootz. Here is its abstract:

Legal adult-use marijuana is associated with risks that may cause bodily injury and property damage.  Many of these risks have been well documented and widely discussed in the media, including theft, fire, motor vehicle accidents and consumption-related injuries. T he potential for an increase in the number and value of cannabis-related product liability claims and lawsuits, however, is of particular concern to the cannabis and insurance industries.  The production, distribution and sale of an ingestible product that has psychoactive effects – accompanied by a wide range of anticipated labeling and marketing representations – will certainly result in robust product liability litigation.

February 18, 2018 in Business laws and regulatory issues, Medical Marijuana Commentary and Debate, Recreational Marijuana Commentary and Debate | Permalink | Comments (0)

Thursday, February 15, 2018

SAM releases report asserting Connecticut would face cost from marijuana legalization double projected tax revenues

Download (10)The leading national group opposed to modern marijuana reform, Smart Approaches to Marijuana (SAM), today released this big new report titled "The Projected Costs of Marijuana Legalization in Connecticut."  Here is how its "Introduction/Summary" gets started:

Much has been said about the revenue that marijuana legalization might bring to Connecticut. Few, however, discuss the costs of such a policy. Omitting costs is a critical oversight: no policy or business plan would be complete without discussing both sides of the balance sheet.

Although a full cost accounting of marijuana legalization would be impossible at present, enough data exists to make rough-and-ready estimates of certain likely direct and short-term costs, such as:

1. Administrative and enforcement costs for regulators

2. Increased drugged-driving fatalities

3. Increased drugged-driving injuries

4. Increased property damage to vehicles related to drugged driving

5. Short-term health costs

a. More emergency room visits for marijuana poisonings

b. Injuries from marijuana-concentrate extraction lab explosions/fires

6. Increased rates of homelessness

7. Workplace costs

a. Increased absenteeism

b. More workplace accidents among full-time employees

Initial approximations of these preliminary costs indicate that it is unlikely that revenues from legalization would ever exceed its costs. This report concludes that even a conservative cost estimate limited to only the issues above would cost Connecticut approximately $216 million in 2020, which would be the third year of legalization if the policy was implemented in 2018. (According to data from the Connecticut General Assembly’s Office of Fiscal Analysis, the legalization program will only be fully operational in its third year of operation.)

Such costs exceed, by more than 90 percent, the maximum projected official revenue estimate of $113.6 million for the third year of the proposed legalization program. (These costs are almost 300 percent of the minimum revenue estimate of $54.4 million, but to be conservative, this report uses the maximum estimate.)

February 15, 2018 in Business laws and regulatory issues, Recreational Marijuana Commentary and Debate, Recreational Marijuana Data and Research, Recreational Marijuana State Laws and Reforms | Permalink | Comments (1)

Saturday, January 27, 2018

Imagining a productive tax break for marijuana businesses to provide drug education

Images-22Last week I spotlighted this article published at the Cannabis Law Report titled "An Introduction To The Internal Revenue Code For Cannabis Businesses." The piece was authored by Chris Nani, a student in my Marijuana Law & Policy seminar last semester, and now available here via the Cannabis Law Report is another part of his taxing treatment.  The piece is titled simply "Part II: My Proposed Tax Break," and here is an excerpt:

While there is still federal prohibition, Congress should incentivize current marijuana businesses to perform desirable social policy goals in exchange for tax deductions. Because taxes are so astronomically high for marijuana businesses such as dispensaries, by adding an amendment to § 280E Congress could specifically tailor it to marijuana businesses or include all scheduled I and II drugs. I elected to make it about all scheduled I and II drugs.

Under § 280E, the proposed amendment would read:

“Any scheduled I or II drug business that pays federal income taxes, regardless of its legality, is applicable to deduct from its expenses any activities that meet the following: (i) educational programs that demonstrate health risks and safety procedures for the drug(s) the business is involved with (ii) informational programs that display the short and long-term risks of the drug(s) the business is involved with and (iii) informational programs that educate on how to identify the signs of an overdose and how to properly treat it for the drug(s) the business is involved with.”

Just like any statute, my proposed § 280E amendment is vulnerable to abuse, but hopefully the legislative history would be able to give guidance to the IRS and courts if litigation arose. The social goal aimed at this amendment is public health. By increasing awareness and knowledge of a drug, the user will be able to make better judgment calls and more accurately understand the consequences of their actions.

Now, to fully dissect the language of my proposed amendment.  The first sentence applies to any scheduled I or II drug regardless of its legality. This includes drugs such as heroin, LSD, and marijuana along with prescribed drugs such as Adderall, Fentanyl, and OxyContin.  All of the drugs listed have side effects and can damage the human body. By educating the public on the health risks and safety procedures for the drug, heroin dealers and marijuana dispensaries both could reduce their federal income taxes. I believe it’s better for a heroin addict to understand the deadliness of the drug and how to properly use it beforehand to help minimize the chance of death. Similarly, for marijuana, dispensaries could receive a deduction while showing consumers how to properly use a bong or smoke a blunt while discussing the health consequences of smoking. It would allow dispensaries to showcase their products and demonstrate any new innovative ways to use marijuana while additionally educating the public on how to properly use a device.

Prior related Post:

"An Introduction To The Internal Revenue Code For Cannabis Businesses"

 

January 27, 2018 in Business laws and regulatory issues, Federal Marijuana Laws, Policies and Practices, Medical Marijuana Commentary and Debate, Recreational Marijuana Commentary and Debate, Taxation information and issues | Permalink | Comments (0)

Saturday, January 20, 2018

"An Introduction To The Internal Revenue Code For Cannabis Businesses"

The title of this post is the title of this new article published at the Cannabis Law Report.  I am distinctly proud of this article because it was authored by Chris Nani, a student in my Marijuana Law & Policy seminar last semester.   Here is a portion of this piece: 

Marijuana-related businesses face an additional hurdle other businesses do not. Congress specifically implemented § 280E to prevent any business trafficking illegal drugs from receiving deductions. 26 U.S.C. §280E. The provision prohibits any deductions or credits to businesses trafficking schedule I or II illegal drugs within the meaning of the Controlled Substances Act of 1970. Marijuana is currently classified as a schedule I drug. Because marijuana-related businesses such as dispensaries or farmers traffic marijuana they either are not applicable for any tax deductions under § 162 or are extremely limited on what they can deduct.

The IRS’ current stance on what marijuana-related businesses can deduct is summarized in Chief Counsel Advice 201504011. It allows for marijuana businesses to deduct some of their cost of goods sold (COGS). The memo allows for deductions under § 471 as long as they comply with § 280E. § 471 allows for the inventoriable cost of any good that can be capitalized to be deductible. 26 U.S.C. § 471. Meaning, raw materials or labor costs are deductible because they are used within a year to create a product. Although the IRS updated the tax code with § 263A to permit additional expenses included under inventoriable cost, the IRS memo prohibits marijuana-related businesses from using § 263A in their calculation of COGS.

January 20, 2018 in Business laws and regulatory issues, Taxation information and issues | Permalink | Comments (0)

Friday, January 12, 2018

US Attorney for Oregon, expressing "significant concerns about the state's current regulatory framework," plans summit in response to new AG enforcement policy

BillBilly J. Williams, the United States Attorney for the District of Oregon, has this fascinating new newspaper commentary under the headlined "U.S. Attorney: A call for transparency and action on marijuana." Here is most of what it says:

Earlier this month, Attorney General Jeff Sessions issued a memorandum rescinding existing Justice Department guidance on marijuana enforcement. The move gives U.S. Attorneys wide latitude to develop district-specific strategies and deploy department resources without Washington, D.C. artificially declaring some cases off limits. Before developing a strategy for Oregon, however, we need more information from the state.

Here's what we know right now. Oregon has a massive marijuana overproduction problem. In 2017 alone, postal agents in Oregon seized 2,644 pounds of marijuana in outbound parcels and over $1.2 million in cash. For comparison, postal agents in Colorado seized just 984 pounds of marijuana during a four-year period beginning in 2013.

Overproduction creates a powerful profit incentive, driving product from both state-licensed and unlicensed marijuana producers into black and gray markets across the country. This lucrative supply attracts cartels and other criminal networks into Oregon and in turn brings money laundering, violence, and environmental degradation.

A survey of recent federal cases in Oregon illustrates alarming trends: in the last six months, federal agents and port police have seized over $1 million in cash linked to marijuana transactions passing through Portland International Airport; law enforcement partners from 16 states have reported marijuana seizures from Oregon. In the first half of 2017, in-state production of butane hash oil resulted in six separate lab explosions. And police and sheriff deputies regularly encounter vehicles with hundreds of pounds of marijuana on highways heading out of state.

We also know that even recreational marijuana permitted under state law carries ill-effects on public health and safety, as Colorado's experience shows. Since 2013, marijuana-related traffic deaths have doubled in Colorado. Marijuana-related emergency and hospital admissions have increased 35 percent. And youth marijuana use is up 12 percent, 55 percent higher than the national average. We must do everything in our power to avoid similar trends here in Oregon.

As U.S. Attorney, I have traveled throughout the state to meet with community leaders and citizens to discuss distinctive issues facing rural Oregonians.  Many of these conversations quickly turn to marijuana.  Landowners throughout central and southwestern Oregon have legitimate concerns that marijuana cultivation has had a detrimental effect on water rights, public lands and livability.

Rural communities simply do not have the resources to fund the additional police and sheriff deputies needed to address these issues. While state officials have allocated a portion of marijuana tax revenues to public safety organizations including the Oregon State Police, the net effect on enforcement remains an open question. Moreover, can 20 Oregon Liquor Control Commission marijuana enforcement specialists adequately police thousands of recreational licensees?

We don't know the answer to these questions, in part, because the state has yet to release a final version of its report evaluating out-of-state diversion, distribution to minors, cultivation on public land and violent crime associated with marijuana in Oregon.  We need this information to move forward smartly, effectively, and transparently.

In sum, I have significant concerns about the state's current regulatory framework and the resources allocated to policing marijuana in Oregon.

Congress's judgment on marijuana activity is reflected in the Controlled Substances Act.  Before charting a path forward for the enforcement of marijuana in Oregon, we must see how the state mitigates the public safety and health issues raised here.  The time for informed action is now.

In the coming days, I will send invitations to federal, state, local and tribal law enforcement, public health organizations, Oregon marijuana interests and concerned citizen groups to attend a summit to address and remedy these and other concerns.

This summit and the state's response will inform our federal enforcement strategy.  How we move forward will depend in large measure on how the state responds to the gaps we have identified.  Until then it would be an inappropriate abdication of my duties to issue any blanket proclamations on our marijuana enforcement strategy in light of federal law.

This commentary and its coming echoes confirms what has been one of my thoughts since Attorney General Sessions' recent decision to rescind the Cole Memo (basics here and here): each US Attorney in each US district is now able to be (and perhaps inevitably will become) the chief regulatory officer for marijuana reform in that jurisdiction.  This commentary is a clear statement that this US Attorney is concerned that Oregon's state reforms and regulations are not working, and he is going to have a quasi-regulatory hearing with interested parties, and then (perhaps) he will issue some "regulations" in the form of some explanation of the types of federal marijuana crimes and criminals he will be eager to prosecute in the near future.

January 12, 2018 in Business laws and regulatory issues, Criminal justice developments and reforms, Federal Marijuana Laws, Policies and Practices, Recreational Marijuana Commentary and Debate, Recreational Marijuana State Laws and Reforms, Who decides | Permalink | Comments (0)

Saturday, January 6, 2018

Two notable new reviews of efforts to enhance racial equity in modern marijuana markets

Two major news sources have run two major recent pieces about efforts in California to enhance minority participation in the marijuana industry:

From the Washington Post here, "California cities try to atone for war on drugs with help for minority marijuana entrepreneurs." An excerpt:

At least four California cities — Los Angeles, Oakland, Sacramento and San Francisco — have created “equity programs” to help people personally affected by the war on drugs or who come from communities that bore the brunt of it get an early stake in the legal cannabis business.

The goal is to attempt to atone for past policies that perpetuated generational poverty and to diversify an industry whose profile is overwhelmingly young, white, male and wealthy. “The folks who are profiting don’t look anything like the people bearing the brunt of the war on drugs,” said Greg Minor, who runs Oakland’s cannabis program.

From the Los Angeles Times here, "Despite helping hand from L.A., drug offenders would face obstacles in cannabis industry." An excerpt:

As California’s legal cannabis industry heats up, officials in Los Angeles and other cities say they want to make sure early players in the pot business who were selling it when it was still illegal aren’t pushed out of the market. In Los Angeles and Oakland, city cannabis rules provide for so-called social-equity programs, which provide a leg up to marijuana business license applicants who either have been convicted of a marijuana crime or live in neighborhoods disproportionately affected by marijuana arrests.

But many of the entrepreneurs who might benefit from those programs would face a huge obstacle: Most banks won’t open accounts for marijuana businesses, and the few institutions that are willing to do so are likely to refuse to serve businesses whose owners or managers have criminal records, even if those records are for selling marijuana.

January 6, 2018 in Business laws and regulatory issues, Race, Gender and Class Issues, Recreational Marijuana Commentary and Debate, Recreational Marijuana State Laws and Reforms | Permalink | Comments (0)

Sunday, December 24, 2017

"At 'pot churches,' marijuana is the sacrament" ... and creating legal issues

Images (4)This prior post discussed holiday gifting of marijuana, and this article (which has a headline serving as part of the title of this post) provides another distinctive seasonable perspective on how modern marijuana reform echoes through various parts of modern life.  Here are highlights:

Services at the Coachella Valley Church begin and end with the Lord’s Prayer.  In between, there is the sacrament.  “Breathe deep and blow harder,” intoned Pastor Grant Atwell after distributing marijuana joints to 20 worshipers on a recent Sunday.  “Nail the insight down, whether you get it from marijuana or prayer. Consider what in your own life you are thankful for.”

A man wearing a “Jesus Loves You” baseball cap and toting a shofar, piped up. “Thank you, God, for the weed,” he called out. “I’m thankful for the spirit of cannabis,” a woman echoed from the back.  “I am grateful to be alive,” said another young woman, adding that she had recently overdosed — on what, she did not say — for the third time.   The small room, painted black and gold and decorated with crosses and Rastafarian symbols, filled with pungent smoke after an hour-long service of Christian prayers, self-help slogans and inspirational quotes led by Atwell, a Campbell, Calif., massage therapist and photographer.

Despite its mainstream Christian trappings, the Coachella Valley Church describes itself as a Rastafarian church, which is tough to define.  Originating in Jamaica and combining elements of Christianity, pan-Africanism and mysticism, Rastafari is a political and religious movement with no central authority.  Adherents use marijuana in their rituals.  The church’s leaders claim that religious freedom laws give them the right to offer marijuana to visitors without a doctor’s recommendation or abiding by regulations.  Some authorities beg to differ.

As more states ease access to marijuana, churches that offer pot as a sacrament are proliferating, competing with medical marijuana dispensaries and pot shops in the few states that have legalized recreational weed. While some claim Rastafari affiliation, others link themselves to Native American religious traditions.

The churches are vexing local officials, who say they’re simply dispensaries in disguise, skirting the rules that govern other marijuana providers, such as requirements to pay taxes.

In California, which legalized medical marijuana in 1996 and is preparing for sales of recreational marijuana to begin Jan. 1, churches tied to marijuana use have recently popped up in Oakland, Roseville, Modesto and San Diego, Orange and Los Angeles counties. A few have been shut down by law enforcement.  “I’m not going to say they’re not churches, but to the extent that they’re distributing marijuana, they’re an illegal dispensary, in my view,” said San Jose City Attorney Rick Doyle....

Nationally, such churches have opened in Indiana, where marijuana remains illegal, and Michigan, where medical marijuana is allowed.  Even in Colorado, which legalized pot in 2012, the “International Church of Cannabis” is testing the limits of state and city rules on consuming marijuana in public.  Marijuana churches typically require people to purchase a membership, then give or sell them marijuana and related products.  They may ask for ID such as a driver’s license but don’t require a doctor’s recommendation or medical marijuana identification card.

The churches rely on court rulings that made it possible for some groups, including Native Americans, to use federally banned drugs like peyote in religious ceremonies. Despite these rulings, courts have thus far rejected religious groups’ right to use marijuana, still illegal at the federal level, said Douglas Laycock, a University of Virginia Law School professor specializing in religious liberty issues.  Yet, he said, as more states legalize marijuana, courts may regard marijuana churches’ rights more favorably.

“Legalization changes everything,” Laycock said. “Religious use may not violate state law in some of these states. And if it does, legalizing recreational use but not religious use clearly discriminates against religion.”

December 24, 2017 in Business laws and regulatory issues, History of Marijuana Laws in the United States, Recreational Marijuana Commentary and Debate, Religion, Who decides | Permalink | Comments (0)

Wednesday, December 20, 2017

Interesting review of big market growth in a small medical marijuana state

Rhode-island-medical-marijuanaAs hinted by this recent post, which asks "Are there 1.9 millions or 2.35 million or some other big number of medical marijuana patients?," I fear that states and the nation as a whole are doing insufficient data collection and analysis of medical marijuana regimes.  This view is indirectly enhanced by this recent article from Rhode Island, headlined "Medical marijuana cultivators, patients on rise in R.I.," reporting on some interesting data concerning its medical marijuana program. Here are excerpts:

More than 8,430 pounds of marijuana have been produced and sold through the state’s medical marijuana dispensaries and cultivators this year, translating into some $27 million in retail sales.  Nearly one-quarter of that marijuana was grown by the state’s new cultivators — licensed businesses only allowed to sell the drug to the state’s three dispensaries.  To date, 18 such businesses have been approved to operate in the the state, according to data from the state Department of Business Regulation.

Dozens more are waiting in the wings for their chance to get into the burgeoning industry. Forty applicants have passed the first stage of the process but are still awaiting a license, and another 53 applicants are behind them in the pipeline. The state has collected nearly $1 million in licensing and application fees from these new marijuana-growing businesses.

“It seems a large number of cultivators.  That’s always been my concern ... we’re setting up these cultivators for failure,” Rep. Scott Slater, D-Providence, said at a meeting of the state’s medical marijuana oversight commission Tuesday....  Greenleaf Compassionate Care Center in Portsmouth and Summit Medical Compassion Center in Warwick together have purchased roughly half of the medical marijuana sold this year from cultivators. The state’s largest dispensary, the Thomas C. Slater Center in Providence, has not purchased any marijuana from cultivators.

Norman Birenbaum, the state’s top medical marijuana regulator, said the state hopes that for safety and quality-control reasons eventually more patients will shift from growing marijuana in their homes to buying it from dispensaries.   There are currently more than 61,500 marijuana plants being grown in the state by medical marijuana patients and caregivers.

Meanwhile, the state now has 19,161 medical marijuana patients, a 17-percent increase from one year ago.  The number of patients in the program typically grows between 20 percent and 30 percent each year. Roughly 65 percent of patients qualify with severe, debilitating or chronic pain.

But Birenbaum agreed that many cultivators will potentially fail.  The state chose not to cap the number of cultivators, in part because doing so would require a competitive evaluation process for applications that almost inevitably would end up in court and could have resulted in shortages in the supply of medical marijuana.

Dr. Todd Handel, a physician who sits on the oversight panel, questioned what the state is doing to control the profit margins of the state’s dispensaries, which are state-registered nonprofits.  Birenbaum cautioned against making generalizations about the dispensaries’ profits.  He noted that the dispensaries cannot take many normal business deductions on their taxes because the federal government still considers selling marijuana to be illegal.  He also noted the significant costs of growing marijuana.

The average wholesale price of medical marijuana produced by the licensed cultivators is $4.16 a gram, according to state data.  An average retail price was not available because some marijuana flower is turned into other products such as edibles and oils that are not sold in a form measurable by grams.  Still, it’s clear there is a markup. On Tuesday, Greenleaf was offering three strains grown by cultivators for $15 a gram.

As this article reveals, Rhode Island has a lot of cultivators/growers but only three dispensary/sellers servicing its medical marijuana program.  That is distinct from some other states that have limited both growers and sellers and others that have no limits on growers or sellers. In addition, Rhode Island's medical marijuana regime allows for home grow, while other states do not (and, of course, nearly every state has at least slight variations on who qualifies to be a medical marijuana patient and/or caregiver). 

Though there are plenty of resources highlighting formal legal differences in different medical marijuana states, I am not aware of many objective analysis of whether and how different medical marijuana regulatory structures in different states impact the development and functionality of medical marijuana access and efficacy for patients.  In other words, while states are conducting a wide array of "laboratories of democracy" experiments  in this medical marijuana area, we need a lot more analysis of early lab results. 

December 20, 2017 in Business laws and regulatory issues, Medical Marijuana Commentary and Debate, Medical Marijuana Data and Research, Medical Marijuana State Laws and Reforms, Who decides | Permalink | Comments (0)

Thursday, December 7, 2017

Intriguing review of latest banking realities for marijuana businesses

MarijuanaBanks_FStateline has this interesting new piece on banking in the marijuana sector under the headline "Why It’s Getting Easier for Marijuana Companies to Open Bank Accounts." Here are excerpts:

State and local officials in places that recently legalized marijuana are bracing for the arrival of a sector that largely runs on cash. They’re anxiously envisioning burglars targeting dispensaries and business owners showing up at tax offices with duffel bags full of money. But the marijuana industry’s banking problems may be more manageable than many officials realize.

Just ask Washington state, which last year successfully pushed almost all legal marijuana businesses to open bank accounts and pay their taxes with a check or other non-cash method. Or Hawaii, which earlier this year announced a “cashless” system for buying medical marijuana, reliant on a technology analogous to PayPal.

“We’re definitely seeing more businesses in the industry getting banked every day,” said Aaron Smith, executive director of the National Cannabis Industry Association, a trade group. Despite the legal risk involved in serving the cannabis industry, almost 400 banks and credit unions now do, according to the U.S. Treasury — a number that has more than tripled since 2014.

That’s reassuring news for California, where sales of recreational pot start next month, as well as for Nevada, Maine and Massachusetts, where voters approved recreational marijuana sales last year, and Arkansas, Florida, Montana and North Dakota, where voters approved medicinal sales.

But the progress that has occurred in some legal markets remains fragile. The federal government still considers marijuana to be a dangerous, illegal drug. States can only permit marijuana sales — and financial institutions can only serve marijuana-related businesses — thanks to Obama-era guidelines that create wiggle room in federal law....

Local institutions that are chartered at the state level have been particularly willing to work with the industry. In Oregon, where sales of recreational marijuana began in 2015, Salem-based Maps Credit Union decided to serve marijuana businesses after audits revealed some of its members were already in the industry. “It didn’t really square with our philosophy to kick members out,” said Shane Saunders, chief experience officer.

Taking on the new line of business required investments in staff, anti-money laundering software, and extra security at bank branches, said Rachel Pross, the credit union’s chief risk officer. Under the current federal guidance, Maps has to send a report on each marijuana-related account to the U.S. Treasury every 90 days, plus a report each time an account experiences a cash transaction of over $10,000.

Maps staff run background checks on marijuana-related business owners who want to open an account. They conduct regular, in-person inspections of the businesses whose accounts they manage, and they require business owners to share their quarterly financial statements. Dispensaries that bank with Maps make most of their sales in cash, because credit- and debit-card processors typically won’t touch marijuana money. As of October, the credit union had handled $140 million in cash deposits from 375 marijuana-related accounts in 2017, Pross said. Some companies hold multiple accounts.

In neighboring Washington, where recreational marijuana sales began in 2014, several financial institutions are openly working with the industry. Washington has helped banks and credit unions monitor marijuana-related customers by collecting and publishing extensive data on monthly sales and legal violations to the liquor and cannabis control board’s website. State regulators last year nudged marijuana licensees to open deposit accounts, aware that banking services were available and worried that cash-based businesses threatened public safety....

In some states, such as Alaska and Hawaii, regulators say they’re not aware of any credit unions or banks that currently serve the industry. Recreational marijuana sales began in Alaska in 2015, and medical marijuana dispensaries opened in Hawaii in 2017. But Hawaii is pioneering a workaround. Regulators have given a Colorado-based credit union permission to serve the state’s medical marijuana dispensaries. The credit union, in turn, has partnered with CanPay, an app that allows patients to transfer money from their bank accounts directly to the dispensary’s account....

Seattle dispensary owner [John] Branch notes that stores with ATMs make money when they dispense cash, and store owners may not embrace an electronic payment system that instead will cost them 2 percent of each transaction, as CanPay’s service does.

A change in federal law would solve the cannabis industry’s banking problem and wipe away the need for services tailored to the industry, such as CanPay. But Congress has so far failed to pass — or even seriously consider — a law that would reclassify marijuana as a less dangerous substance or allow banks and credit unions to work with businesses without risking their charters. U.S. Rep. Ed Perlmutter, a Colorado Democrat who proposed a bill on the issue this year, says no action is expected anytime soon.

December 7, 2017 in Business laws and regulatory issues, Federal Marijuana Laws, Policies and Practices, Medical Marijuana State Laws and Reforms, Recreational Marijuana State Laws and Reforms | Permalink | Comments (0)

Tuesday, December 5, 2017

"Did Ohio hire a drug felon to score medical marijuana applications?"

The title of this post is the somewhat amusing headline of this somewhat amusing article in the Columbus Dispatch.  Here are excerpts:

A company that failed to win a state license to cultivate medical marijuana is criticizing the state for apparently hiring a man with a felony drug conviction to score the applications.  “The state of Ohio has a lot of explaining to do ... they hired a convicted drug dealer for $150,000 to score applications for the Ohio medical marijuana industry,” said Jimmy Gould, chairman of CannAscend Ohio, the rejected would-be cultivator.

Applicants to grow medical marijuana were required to undergo criminal background checks, Gould noted.  “Did the Department of Commerce not think it important to check and report the fact that at least one of the scorers of the medical marijuana control program had a criminal record for dealing drugs ... did they require a background check to get a license, but not to give a license?”  Gould asked in a statement.

Court records verified by The Dispatch show a Trevor C. Bozeman was convicted of manufacturing, delivering and possessing drugs, with intent to manufacture or deliver, in Middleburg, Pennsylvania, in 2005.   The records do not provide details of the offense.  They also show misdemeanor charges of use and possession of drug paraphernalia and possession of a small amount of marijuana for personal use, that were dismissed.

Bozeman, now age 33, of Brunswick, Maine, paid $2,131 in fines and costs and was placed on probation for three years, which court records show he successfully completed.  Ohio incorporation papers show a Trevor Bozeman formed ICANN Consulting, with a Dublin address, in late 2016, The Dispatch confirmed....  The company was one of three to receive a $150,000 state contract in June to score applications submitted by those seeking licenses to grow medical marijuana. Messages seeking comment from Bozeman were left Tuesday morning at two telephone numbers listed in his name.

Stephanie Gostomski, a spokeswoman for the Department of Commerce, said the agency is checking the allegation made by CannAscend. ICANN Consulting appeared to meet all the requirements to receive the state contract and its scoring appeared to be done professionally, she said.

CannAscend’s bid to win a medical marijuana cultivation contract was rejected after it scored poorly in evaluations and failed to meet requirements, Gostomski said. Gould said the situation reflected “significant irregularities” that should be investigated.  “This is the start of a billion dollar industry and the fact that the start is marred by arbitrary and capricious irregularities is troubling and deserves a thorough and deep review,” he said.

December 5, 2017 in Business laws and regulatory issues, Medical Marijuana State Laws and Reforms, Who decides | Permalink | Comments (0)

Monday, December 4, 2017

"Lawyers walk fine line to navigate state, federal pot laws"

As regular readers know, my status as both a lawyer and as a law professor training lawyer, I am always distinctly interesting in stories about the intersection of marijuana reforms and the legal profession.  Thus, unsurprisingly, I was intrigued this morning by this lengthy new AP article with the headline that serves as the title of this post.  Here are snippets:

Lawyers specializing in the business see themselves at the frontier. That leaves a fascinating opportunity to shape laws and regulations and the daunting prospect of the unknown. “Lawyers like things to be settled,” Davis said. “It’s hard to get a lawyer to give you a yes or no answer. In the cannabis industry, there really is no yes or no answer.”

Just as entrepreneurs getting into the retail pot industry need a good lawyer, some of those lawyers might be wise to consult an attorney of their own. Lawyers in the burgeoning business are entering a legal gray zone where the drug is permitted for some purpose in most states but illegal under federal law — in the same controlled substances category as heroin. Missteps could lead to prosecution for conspiracy, money laundering or aiding and abetting drug dealers.

“Any lawyer that goes into this should be aware that a literal reading of federal law permits such a prosecution,” said Sam Kamin, a University of Denver marijuana policy law professor, whose research five years ago found lawyers more susceptible to being disbarred than criminally charged for cannabis-related work. “It probably makes sense for a lawyer to at least talk to a legal ethicist or get an opinion from a legal ethicist.”...

Despite a few instances of lawyers being prosecuted in federal and state court — including a pending San Diego County case — more attorneys are jumping into cannabis law. Legal needs range from financing to permits, real estate, water law, intellectual property, contracts and banking....

There has been a tipping point for many lawyers setting up boutique pot law firms and jumping from old-school law firms as demand for their services trumps fear of legal repercussions and the stoner stigma fades as more states legalize marijuana use. Attorney Chris Davis, who grew up in Berkeley around friends and family who use the drug, found people operating in the shadows who wanted to go legit when he returned to California from New York two years ago. “So many people were asking how to go legal and how to worry less,” said Davis, executive director of the National Cannabis Bar Association, which has about 300 members in the U.S. and Canada and is growing rapidly. “It became impossible to turn people away.”

December 4, 2017 in Business laws and regulatory issues, Who decides | Permalink | Comments (0)

Sunday, December 3, 2017

Looking into challenges facing communities of color in the marijuana industry

The final student presentation this year in my Marijuana Law, Policy & Reform seminar is looking at how communities of color are participating in the marijuana industry. Specifically, as the student has put it, the topic involves "an exploration of the hurdles communities of colors face when trying to break into the marijuana industry, and a discussion of the policy considerations we ought to engage when developing a framework for this new and emerging industry." Here are links for background reading on this topic:

Drug Policy Alliance, "Race and the Drug War"

"Rigged game: inequality on the rise in legal pot industry; How people of color are blocked from Washington’s legal pot marketplace"

"Minorities, punished most by war on drugs, underrepresented in legal pot"

"Pioneering women in cannabis industry losing ground, author says"

"Battling the racial roadblocks to joining the legalized marijuana trade"

"In politically charged D.C., cannabis is a cottage industry"

December 3, 2017 in Assembled readings on specific topics, Business laws and regulatory issues, History of Marijuana Laws in the United States, Medical Marijuana Commentary and Debate, Race, Gender and Class Issues, Recreational Marijuana Commentary and Debate, Who decides | Permalink | Comments (0)

Looking into labor employment law issues in an era of marijuana reform

An important and enduring issue, and one being covered by a student presentation this week in my Marijuana Law, Policy & Reform seminar, concerns labor and employment law in the era of state marijuana reforms.  Here are an array of materials assembled by this student as background on this topic:

The Essentials:

ACLU, "State-by-State Workplace Drug Testing"

Joseph Yastrow, A Survey of Medical Marijuana Laws Impacting the Workplace

What types of drug tests do employers use? How are they different?:

"Drug Tests - Methods of Detecting Cannabis Use"

Overview of federal employment drug testing:

Executive Order 12564: Drug-free Federal workplace

Omnibus Transportation Employee testing Act of 1991

 Case Law about employment discrimination and medical marijuana:

James v. City of Costa Mesa, 700 F.3d 394 (9th Cir. 2012) 

Coats v. Dish Network, LLC, 350 P.3d 849 (Colorado 2015)

Noffsinger v. SSC Niantic Operating Company LLC, --- F.Supp.3d ----, 2017 WL 3401260 (D. Conn. August 8, 2017). 

Ohio's law and challenges: not much protection to employees, while employers who struggle to fill positions due to high drug test failure rates:

Ohio Revised Code Section 3796.28: Rights of employer

"Failed drug tests keep Ohio jobs unfilled"

"Opioid Crisis Looms Over Job Market, Worrying Employers And Economists"

"Economy Needs Workers, but Drug Tests Take a Toll"

"National Unemployment Rate at 4.1 Percent through October 2017"

December 3, 2017 in Business laws and regulatory issues, Employment and labor law issues | Permalink | Comments (0)

Saturday, December 2, 2017

Looking at the environmental impact of illegal marijuana cultivation and import of legalization

As my Marijuana Law, Policy & Reform seminar is approaching its final class, a final set of students are scheduled to deliver presentations on the marijuana-related topics of their choosing.  One such student has decided to "focus on the environmental impact of illegal marijuana cultivation, and how/why legalization can mitigate these effects." 

Here are readings she has suggested as background on this topic:

5 Reasons Legalizing Pot Is Good for the Planet

Everything you need to know about pot's environmental impact on the planet

December 2, 2017 in Assembled readings on specific topics, Business laws and regulatory issues, History of Marijuana Laws in the United States, Recreational Marijuana Commentary and Debate | Permalink | Comments (0)

Friday, December 1, 2017

Examining banking challenges in the marijuana industry

Sunday, November 26, 2017

Taking a close look at "Big Pharma's Anti-Marijuana Campaign"

As mentioned in a prior post, my Marijuana Law, Policy & Reform seminar is hitting its homestretch and the last group of students are delivering presentations on a marijuana-related topic of their choosing. One student for the next class will be looking at what she is calling "Big Pharma's Anti-Marijuana Campaign."  Here is how she has explained her plans, following by links to background information regarding the topic:

My presentation will reveal how Big Pharma contributes to the Opioid Epidemic, how marijuana can be used as a substitute for opioids, how the legalization of medical marijuana threatens the bottom lines of pharmaceutical giants, and how these corporations have subsequently opposed pro-pot legislation.

NIH data on "Overdose Death Rates"

"Can Medical Marijuana Help End the Opioid Epidemic?"

"Patients Are Ditching Opioid Pills for Weed: Can marijuana help solve the opioid epidemic?"

"Is Big Pharma Out to Stop — Or Take Over — Marijuana Legalization?"

"The Real Reason Pot Is Still Illegal: Opponents of marijuana-law reform insist that legalization is dangerous — but the biggest threat is to their own bottom line."

November 26, 2017 in Business laws and regulatory issues, Medical community perspectives, Medical Marijuana Commentary and Debate, Recreational Marijuana Commentary and Debate, Who decides | Permalink | Comments (0)

Tuesday, November 7, 2017

A look at marketing and advertising in the marijuana industry

A pair of students in my Marijuana Law, Policy & Reform seminar are this coming week to be discussing marketing and advertising in the marijuana industry. In preparation for the discussion, they suggested review of Leafy's "State-by-State Guide to Cannabis Advertising Regulations," which gets started this way:

As the cannabis industry continues to grow at a rapid pace, it can feel overwhelming to keep up-to-date with the constantly-changing federal and state regulations.  Advertising regulations are especially strict, as many marketing platforms restrict or outright ban cannabis advertisements due to the substance’s federal status.

We put together a state-by-state guide to cannabis advertising regulations that should help cannabis businesses adhere to the guidelines set forth by both the state they’re operating in as well as any states in which they want to advertise.  

November 7, 2017 in Assembled readings on specific topics, Business laws and regulatory issues | Permalink | Comments (0)

Considering the pros and cons of starting a cannabis-related businesses

As mentioned repeatedly in recent posts, students in my Marijuana Law, Policy & Reform seminar are every week delivering presentations on a marijuana-related topic of their choosing. I am professorially giddy about the large number of presentations planned for the next few weeks, and the first student presentation planned for this coming week aspires to "give insight into the pros and cons of starting a cannabis-related business." And here are links the student provided as background for the discussion:

"US Patent Office Issuing Cannabis Patents To A Growing Market"

"Here Are The Top 5 Financial Leaders In The Cannabis Industry"

"Colorado marijuana shops make $28,000 each on the FIRST DAY of legalized pot"

Ohio Medical Marijuana Control Program information on dispensaries

November 7, 2017 in Assembled readings on specific topics, Business laws and regulatory issues | Permalink | Comments (0)

Saturday, November 4, 2017

"Can Los Angeles repair the damage done by the war on marijuana?"

The title of this post is the headline of this notable new Los Angeles Times editorial.  Here are excerpts:

Make no mistake, the war on marijuana has not been colorblind. Despite national surveys showing that white people and black people use marijuana at approximately the same rates, blacks have over the years been nearly four times more likely to be arrested for marijuana possession than whites.

That disparity is as true in Los Angeles as it is elsewhere in the country. African Americans comprise less than 10% of the population in L.A. Yet between 2000 and 2017, blacks represented 40% of marijuana-related arrests.  Latinos made up 44% of arrests.  Whites made up only 16% of arrests, according to a city consultant’s analysis of Los Angeles Police Department data.  And even as Los Angeles and other cities allowed the growth of a quasi-legal, hugely profitable medical marijuana industry run mostly by white entrepreneurs, police arrests for marijuana possession and sales continued to target African Americans and Latinos overwhelmingly.

A drug arrest — especially if followed by a conviction — can have terrible consequences.  Even after a person has completed his or her sentence, it remains harder to get a job, get into college, rent an apartment or get a loan.  A drug conviction is a barrier to economic opportunity.

Now that California has voted to legalize marijuana for adults, a crucial question is whether there a way to repair the damage created by decades of unequal enforcement practices.  The answer being considered by the Los Angeles City Council is to make it easier for people who were arrested or otherwise affected by the disparate enforcement of marijuana laws to get in on the ground floor of the emerging multibillion-dollar cannabis industry.

The idea behind the proposed “social equity” program is that the people most affected should now be helped to partake in the profits and benefits of legalization.  The challenges of opening a marijuana business are so great — there are huge upfront costs, serious impediments to getting bank loans and extremely intricate regulations — that many would-be entrepreneurs would be locked out without government assistance.

Without question, Los Angeles ought to use a portion of future marijuana tax revenue to help communities that have been disproportionately targeted for marijuana enforcement. Tax money could fund drug education and treatment, legal clinics to help people expunge their marijuana conviction records, and reentry programs for individuals leaving prison.

The city could also help encourage entrepreneurs from communities that have had disproportionate numbers of marijuana arrests to enter the business by offering training, compliance assistance and priority licensing. Priority licensing is important because, due to zoning restrictions, only a limited number of applicants will ultimately be granted the right to host a marijuana business.  The first batch of licenses will be offered to medical marijuana shops that have operated since 2013 in L.A. with limited immunity under Proposition D.  Under the city’s proposed rules, the second batch of licenses would be divided equally between general applicants and social equity applicants — giving the latter a better shot at snapping up those opportunities. The third batch of licenses would be open to all applicants.

But here’s where the social equity program raises concern: The current proposal gives special advantages, waives fees and offers the most assistance to low-income people who themselves have marijuana-related convictions.  It’s one thing to target assistance broadly to communities that have felt the impacts of unequal enforcement. It’s another thing to reward people who broke the law and got caught by giving them priority over people who did not break the law.  That doesn’t seem fair.  Nor does it seem like a great idea to incentivize people with convictions for selling or possessing marijuana to return to the drug trade — why not help them enter other businesses instead?

To be sure, people with nonviolent drug convictions shouldn’t be barred from owning marijuana businesses or from working in them.  But they shouldn’t be pushed to the front of the line either.

November 4, 2017 in Business laws and regulatory issues, History of Marijuana Laws in the United States, Race, Gender and Class Issues, Recreational Marijuana Commentary and Debate, Recreational Marijuana State Laws and Reforms | Permalink | Comments (0)