Cannabis Law Prof Blog

Canada's Cannabis College

Niagara College in Ontario, Canada will begin offering post-secondary certificates in commercial marijuana production starting in the fall of 2018. Niagara College claims to be the first to launch this type of graduate program. Global News reported that:

It will be open to those with a diploma or degree in agribusiness, agricultural science, environmental science/resource studies, horticulture or natural sciences, or an acceptable combination of education and experience.

The college’s president, Dan Patterson, says the program is meant to address a growing labour market need in the wake of legislative changes in Canada and abroad.

The one-year program will be run by Niagara College's School of Environment and Horticulture and students will learn about the biological, regulatory, and operational aspects of licensed commercial marijuana production. In deciding to implement the program, Patterson cited an emerging need in the market and Niagara College's ability to respond to that need, while at the same time equipping its skilled agricultural students with valuable experience that will benefit the students in a rapidly evolving market. 

Niagara College's new program may serve as an example for schools in the US, which may be missing the boat to pioneer programs in marijuana at the college and university level. Although schools like the University of California San Diego, the University of Mississippi, the University of Colorado, and Louisiana State University are involved with the research of marijuana, it doesn't appear that any universities in the US have programs that teach how to successfully and legally (under state law) produce or distribute the drug. 

 

--Taylor Wood

Boston potentially breaking into the marijuana scene with a 'Puff Bus'

   
    Marijuana advocates continue to develop new and exciting ways to partake in the booming business of marijuana consumption. Loopr, a Denver-based marijuana party bus company, plans to create another "green line" in Massachusetts' transit economy. But instead of a green line focusing on transporting passengers via the subway, Denver's 'Puff Bus' will provide passengers a fun transportation experience largely revolved around marijuana consumption. Alban Murtishi of MassLive.com reports: 

 

Loopr allows patrons to consume various forms of marijuana while riding on a bus through downtown Denver. The bus route stops at restaurants, hotels, nightspots and marijuana dispensaries.

 

According to the company, the Loopr vehicles, called Puff Buses, offer dazzling multimedia experiences with curated music and light shows.

 

Riders are allowed to smoke or consume marijuana in the back partition of the bus. The bus comes equipped with several different smoking implements, such as water pipes, vaporizers and hookahs.

 

The company doesn't sell marijuana, but partners with different dispensaries to get riders discounts.

 

While at first glance the 'Puff Bus' sounds like a fun experience, the potential legal hurdles will likely hinder its operation. Although party buses involving alcohol consumption are quite common in America, there are many differences concerning marijuana and alcohol, especially pertaining to their legal statuses and effects on third persons.

 

The obvious concern is how the federal government will react to such a company. Loopr supporters will point to the federal government's lack of enforcing its marijuana ban on Loopr's current business model in Denver, Colorado. Supporters will argue that the states should retain their autonomy and decide for themselves if they want to enact the appropriate legislation to permit such a mobile-marijuana-consumption company.

 

Opponents of legalization will face a tough battle if they depend on federal enforcement. It has been 5 years since Colorado first legalized marijuana, and the federal government has not shown an intent to fully enforce its ban, instead requesting legalized states to follow certain priorities.

 

However, a strong argument against Loopr involves public safety. Unlike alcohol, marijuana use has a noted effect on those around it, even if they don't personally consume the drug. Opponents can argue that the bus driver will be affected by the rampant marijuana consumption in a small and enclosed bus, thus impairing the driver and creating an unsafe environment for fellow commuters on the road.

 

Opponents can bolster this argument by referring to one of the federal government's listed priorities from the 2013 Cole II memo: To prevent drugged driving and exacerbation of other adverse public health consequences. 

 

Ultimately, until the federal government clarifies the national law or decides to enforce the current ban, legalized adult-use states like Massachusetts will issue the final decision on whether to legalize businesses such as Loopr.

 

--Zachary Ford

Jeff Sessions Slams Marijuana Legalization . . . Again

The nation’s top law enforcer continues to speak out against marijuana legalization. In Tom Angell’s September 20 article for Forbes, Sessions is quoted as saying:

“It doesn’t strike me that the country would be better if it’s being sold on every street corner. We do know that legalization results in greater use.”

But his opinion may be the result of misinformation. Sessions must not have read Angell’s September 14 article titled Study: Rise in Marijuana use not Caused by Legalization, in which Angell discusses the conclusion of a recently published study in the journal Addiction. The study found that:

“Medical and recreational marijuana policies did not have any significant association with increased marijuana use. Marijuana policy liberalization over the past 20 years has certainly been associated with increased marijuana use; however, policy changes appear to have occurred in response to changing attitudes within states and to have effects on attitudes and behaviors more generally in the U.S.”

So, contrary to Sessions’ assertion, the study shows that an increased use of marijuana has resulted in legalization, rather than that marijuana legalization has resulted in increased use. Which makes perfect sense, being that the United States is a democracy comprised of state governments that are beholden to their citizenry.

The federal government may not be able to justify its anti-marijuana position for much longer. But at this point it doesn’t seem like the Attorney General will have much of a hand in effecting change at that level.

--Buds of Steel

Are Texans Ready for Marijuana Legalization?

Marijuana legalization seemed like a pipe dream for its Texas proponents until passage of the Texas Compassionate Use Act in 2015. And in June 2017, Texas issued the first licenses to retailers for the sale of marijuana-based products. DPS awarded three companies licenses to produce, process, and dispense cannabidiol oil. CBD, unlike THC, is a nonpsychoactive molecule approved in Texas for the treatment of seizures associated with intractable epilepsy. Until recently, only the licensed dispensaries could legally cultivate small quantities of marijuana solely for the purpose of procuring CBD.

But according to Star-Telegram author Anna Tinsley, any day now medical marijuana will legally start to grow on a much larger scale in Texas. The state’s first license went to Cansortium Texas, which owns the only 10-acre parcel of land currently approved for marijuana cultivation.

Braden Maccke—an author with the Austin Chronicle—also thinks that Texas’ marijuana policy may be progressing quicker than expected. In his May 12 article, Maccke discussed the circumstances surrounding HB 2107, which died before it could hit the full House floor. The bill was written to remove THC restrictions, turn "low THC" marijuana into "medicinal marijuana," and expand the list of conditions for which cannabis can be used legally with a doctor's recommendation, removing language requiring it to be "prescribed.” The bill had tons of bipartisan driven momentum on its way to the House, with 77 sponsors and co-sponsors, including 29 Republicans. Despite the unfortunate result of HB 2107, Maccke believes that future similar legislation is destined to pass congressional muster. 

A recent poll shows that over 80% of Texans support medical cannabis. And 53% of Texans support full adult legalization, while only 17% oppose possession of any kind.

Texas seems to be trending in the right direction. When state legislation begins to diverge from the ideology of those subject to it, change is inevitable. Governor Abbott has been adamant that low-THC, high-CBD marijuana for the treatment of epilepsy is as far as Texas will take it….”at this stage.” So even the Republican former state attorney general realizes the potential for Texas to eventually follow the lead of 29 other states and Washington DC. Texas’ early reluctance might even prove to be beneficial, giving legislators time to analyze market data from the “marijuana states” and learn from both their mistakes and accomplishments.

--Buds of Steel

GOP Senator Hatch "rolls out" new bill addressing potential medicinal benefits of marijuana

 

GOP Senator Orrin Hatch addressed the members of the Senate on Wednesday, urging them to recognize the potential
medicinal benefits of marijuana. Hatch's bill, the Marijuana Effective Drug Study (MEDS) Act of 2017 aims to remove the
regulatory barriers that have significantly impeded scientific research on the possible benefits of marijuana. Marijuana, currently classified as a Schedule I controlled substance with no current accepted medical value, has not yet been given proper attention by the medical and scientific communities due to the enormous hurdles researchers must clear in order to comply with federal regulations associated with studying the drug. In order to conduct clinical research on marijuana, researchers must obtain a DEA license and FDA approval. However, what has proved to be most difficult to obtain is research-grade marijuana that can only be sought from the National Institute on Drug Abuse (NIDA). 

In his speech to the Senate, Hatch, a devout Mormon from Utah, maintained his opposition to the legalization of recreational marijuana while emphasizing the need for legitimate medical and scientific research of the drug, recognizing that what little research available has provided evidence of its potential benefits. If passed, Hatch's MEDS bill would require the National Institute on Drug Abuse (NIDA) to develop and publish recommendations for good manufacturing practices for growing and producing marijuana for research. Fortune contributor Kirsten Korosec, provides excerpts of the Senator's remarks in her article. 

It’s high time to address research into medical marijuana. Our country has experimented with a variety of state solutions without properly delving into the weeds on the effectiveness, safety, dosing, administration, and quality of medical marijuana. All the while, the federal government strains to enforce regulations that sometimes do more harm than good. To be blunt, we need to remove the administrative barriers preventing legitimate research into medical marijuana, which is why I’ve decided to roll out the MEDS Act.

It will surprise no one that I am strongly against the use of recreational marijuana. I worry, however, that in our zeal to enforce the law, we too often blind ourselves to the medicinal benefits of natural substances like cannabis. While I certainly do not support the use of marijuana for recreational purposes, the evidence shows that cannabis possesses medicinal properties that can truly change people’s lives for the better. And I believe, Mr. President, that we would be remiss if we threw out the baby with the bathwater.

We lack the science to support use of medical marijuana products like CBD oils not because researchers are unwilling to do the work, but because of bureaucratic red tape and over-regulation. Under current law, those who want to complete research on the benefits of medical marijuana must engage in a complex application process and interact with several federal agencies. These regulatory acrobatics can take researchers over a year, if not more, to complete. And the longer researchers have to wait, the longer patients have to suffer.

Certainly, as Senator Hatch points out, allowing easier access to research the medical and scientific benefits of marijuana could potentially help many patients suffering from epileptic seizures, muscular dystrophy, multiple sclerosis, and many other life altering illnesses. Additionally, Korosec also mentions in her article that this legislation comes in the midst of a nationwide opioid epidemic. Of the 52,000 recorded drug overdoses in the United States in 2015, nearly two-thirds were opioid related deaths. Moreover, in January 2017, the Veterans Health Administration reported that approximately 68,000 veterans suffered from opioid addiction. Hopefully, opening the doors to scientific and medical research of marijuana as an alternative to opioids could reduce these numbers in the future. 

Hawaii Dispensaries to Go Cashless

Although Hawaii has struggled to legalize marijuana for adult use, it is ahead of the game when it comes to paying for medical marijuana. According to KATU, this week Hawaii announced that its dispensaries would start using the mobile debit app, CanPay, as a payment method for purchasing marijuana. 

In an effort to prevent robberies and other crimes targeting dispensaries, state leaders announced Tuesday that a cashless payment system will be implemented in October.

"This cash-free solution makes sense," said Hawaii Gov. David Ige. "It makes dispensaries' finances transparent."

The implementation of this method of payment will address a persistent concern coming from those opposed to marijuana legalization: safety. 

A cashless system would reduce, if not eliminate, the desirability of robbing marijuana dispensaries. The app is one method of payment, which can help to reduce the amount of cash on site at any given time. It should be noted, however, that although opponents of legalizing marijuana claim the presence of dispensaries increases crime, several other studies, like those reported in Civilized, The Cannifornian, and NY Daily News, have actually found the opposite.

While Hawaii has not gone completely cashless, it is unclear whether they will do so in the future. However, it may be preferable to use both payment methods in conjunction with one another. A mixed payment system could serve the needs of those who prefer to use cash due to information safety and privacy concerns, while also reducing the overall amount of cash kept in the retail shop throughout the day.

Furthermore, the CanPay payment app ensures that only legally compliant transactions are made using the app. According to CanPay, because it uses a Closed-Banking Feedback Loop, "only cannabis retailers working with financial institutions operating compliance programs built around the Cole Memo and FinCEN Guidance will be allowed to participate in the CanPay network." This compliance guarantee feature gives retailers a sense of financial security when deciding whether to accept the app as a payment method at their stores. 

CanPay is also currently available in Oregon, Washington, California, Colorado, Florida, and Maine.

 

--Taylor Wood

What came first: the stoner or the law?

 Ever since the state-scale referendums in 2014 began legalizing adult use of marijuana, a
common concern amongst opponents of marijuana legalization is the overall uptick in marijuana use that will stem from said legalization. Although marijuana use has increased since 2015, a new study from the Addiction journal rejects that the increase was caused by the increased legalization of marijuana and marijuana derivatives. Rather, an Addiction study found that a change in public opinion has led to a change in legislation, not the other way around. According to Tom Angell’s Study: Rise in Marijuana Use Not Caused by Legalization: 

Researchers at the Public Health Institute's Alcohol Research Group analyzed data from periodic National Alcohol Surveys and stacked its results on marijuana use against changes in state laws.

Twenty-nine states and Washington, D.C. have comprehensive legal medical cannabis programs, and eight states and D.C. have legalized marijuana for adults over 21 years of age.

They found that instead of being caused by policy changes, the rise in cannabis use was "primarily explained by period 

effects," meaning societal factors that affect populations across age and generational groups. The authors identify a decreasing disapproval of marijuana use as one such factor potentially at play.

But they are clear that the rise in use was not caused by changes to marijuana laws.

"The steep rise in marijuana use in the United States since 2005 occurred across the population and is attributable to general period effects not specifically linked to the liberalization of marijuana policies in some states," the paper's abstract says.

    Angell furthers his "chicken or the egg" argument by pointing to similar factors. For example: due to the growing acceptance of marijuana use by the public at large, coupled with the changes in regulation that reflect this acceptance, Angell believes that more people are simply willing to admit to using marijuana or marijuana derivatives. This logic leads Angell to believe that increased use and acceptance of marijuana has influenced recent legalization, rather than the other way around.

The absence of medical marijuana in medical school

 

    Although medical marijuana is more accepted than ever before, that acceptance has not carried over to medical schools. Jim Dryden notes

  [ Researchers at Washington University School of Medicine in St. Louis , led by first author Anastasia B. Evanoff, sent surveys to medical school curriculum deans at 172 medical schools in North America, including 31 that specialize in osteopathic medicine, and received 101 replies. Two-thirds (66.7 percent) reported that their graduates were not prepared to prescribe medical marijuana. A quarter of deans said their trainees weren’t even equipped to answer questions about medical marijuana.

The researchers also surveyed 258 residents and fellows who earned their medical degrees from schools around the country before coming to Washington University School of Medicine and Barnes-Jewish Hospital in St. Louis to complete their training. Nearly 90 percent felt they weren’t prepared to prescribe medical marijuana, and 85 percent said they had not received any education about medical marijuana during their time at medical schools or in residency programs throughout the country.

    This research is particularly startling and shows a need for education. The number of states that have allowed medical marijuana allows their citizens freedom of choice. However, this choice is qualified if doctors do not have the necessary education and information to give their patients in order for them to make an informed decision. Moreover, a doctor may not know that marijuana is a viable solution to a patient's qualifying condition, thus limiting their access to a potentially life altering benefit. 

Read the entire article here. 

Iowa Attorney General tells agency to halt part of Iowa's medical marijuana law

In Iowa, elected executives are advising the State's Department of Public Health to refrain from corroborating with its neighboring states to obtain cannabis oil. Barbara Rodriguez reports on how the lack of federal enforcement is causing confusion among states concerning how to implement medical marijuana legislation, according to an article in The Des Moines Register:

 

An unusual attempt by Iowa to work with another state to transport medical marijuana oil across state lines is on hold amid legal concerns it could invite scrutiny from the federal government.

 

The Iowa Attorney General's office advised the Iowa Department of Public Health this month that it should not implement a small section in Iowa's new medical marijuana law that requires the state, before the end of the year, to license up to two "out-of-state" dispensaries from a bordering state. Those entities would have been expected to bring cannabis oil into Iowa in order to sell it.

 

That's considered illegal under federal law, which categorizes marijuana as a type of controlled substance that is prohibited from being moved across state lines. But during the final hours of the legislative session in April, some Republicans in the GOP-controlled Legislature suggested adding the language to open the door for a partnership with a neighboring state like Minnesota.

 

The development is not expected to impact other provisions in the law that call for establishing an in-state production system for cannabis oil by the end of 2018. Still, some GOP lawmakers expressed frustration with the news because the provision was also aimed at creating more immediate access to cannabis oil. Currently, Iowans have no way of getting the product within the state.

 

House Speaker Linda Upmeyer, R-Clear Lake, noted in a statement that no matter what the Legislature had decided, the state still would have been in violation of federal law.

 

"As I've said before, the federal government needs to act on this issue or let the states do their work," she said, adding, "The out-of-state distributors are the quickest way to supply sick Iowans with a product that doctors say could be beneficial. If that provision doesn't work out, then people will have to wait another year, and that's disappointing."

 

Possessing, manufacturing and selling marijuana remains illegal under federal law. In 2013, the Department of Justice issued a memorandum offering assurance that states could proceed with medical marijuana programs without fear of federal prosecution, in part by avoiding agreements that would move marijuana from one state to another.

 

Geoff Greenwood, a spokesman for the attorney general's office, said in an email that if a state program authorizes or encourages diversion from one state to another, "it is possible that state's program may come under increased scrutiny from the federal government." He said the halt on implementation should remain "until the federal government provides further guidance regarding state medical marijuana programs."

 

The out-of-state dispensaries provision is tucked into the second-to-last page of a 20-page law, and is separate from requirements that Iowa license up to two cannabis oil manufacturers in Iowa and up to five dispensaries to sell it in-state. The oil would be supplied in Iowa by the end of 2018. Smoking marijuana remains prohibited.

 

 

Fear of federal enforcement against states who have legalized marijuana in some form is not new, but rather has steadily increased since the Trump administration assumed office in 2016. Although the Obama administration issued memorandums assuring states with medical marijuana regimes that they would be free from scrutiny if they followed certain standards, that may not be the case much longer. The United States Attorney General, Jeff Sessions, firmly believes marijuana is a dangerous drug and claims he will reconsider existing marijuana policies. 

 

Assuming nothing changes in President Trump's federal enforcement of marijuana, Iowa's proposal to work with neighboring states presents a potential problem, even under the Obama administration's prosecutorial guidelines. The Cole II Memo stated that states could avoid federal intervention of its medical marijuana regime if they followed eight federal priorities. The pertinent priority here being to prevent the diversion of marijuana from legal states to illegal ones.

 

While Iowa's proposal only includes corroborating with its direct neighbors who have also legalized medical marijuana, the transportation of marijuana products across state lines is considered interstate commerce, thus invoking Congress' authority under the Constitution's Commerce Clause.

 

Therefore, Iowa's proposal not only clearly contradicts Congress' Controlled Substance Act, but may also trigger judicial review because Congress has clearly preempted the transfer of interstate marijuana. By proposing such a law, Iowa's legislature is inviting scrutiny from all three branches of government, something marijuana advocates attempt to avoid whenever possible. 

 

--Zachary Ford

Veterans are fighting the VA for pot instead of pills

Veterans who have served in war zones and suffer with PTSD are one step closer to getting marijuana to treat it with.  This February the government approved the first study of marijuana's affects  on veterans with PTSD.

The government funded study has struggled to find eligible participants. The Department of  Veterans Affairs has not cooperated. The VA is refusing to refer eligible veterans for the study. So researchers are having to seek participants out on their own. This process has been slow with over 3000 veterans interviewed and less than 30 being accepted. The requirements are strict and confidential. Most veterans are ineligible to participate because they live too far from the study or do not meet the requirements. 

The VA has remained firm in its policy against medical marijuana. VA employees are prohibited from discussing medical marijuana  with veterans. Regardless that the study is government funded, the VA refuses to assist the study with referring eligible veterans. Researchers feel access to the VA system would boost recruitment and speed up the process by screening out veterans faster.

    "To be eligible for the study veterans must be diagnosed with chronic PTSD caused by military service. Men and women of     all ages are encouraged to apply. 26 Veterans are currently participating in the study."

Some veterans are seeing marijuana as an alternative to addictive medications. One veteran organization is wanting to fight suicide and chronic pain with marijuana. The organization claims that the medicines proscribed by the VA and doctors are addictive. When those medicines no longer work because the person has become tolerant or addicted to the medicine, veterans must find help some other way. 20% of the nations suicides are the men and women who have worn the nation's uniform.

 

Insurance Company Seeks to Avoid Liability Concerning Medical Marijuana

A Maine insurance company has pushed a case concerning the reimbursement of one of their client's medical marijuana expenses up to the Maine Supreme Court. Although the state legalized medical use of marijuana in late 1999, Maine's Supreme Court has yet to consider the issue of an insurance company's liability under federal law when it is forced to reimburse one of its policyholders for his or her medical marijuana purchase. Many states are divided on this issue. As The Associated Press states:

Five states — Connecticut, Maine, Minnesota, New Jersey and New Mexico — have found medical marijuana treatment is reimbursable under their workers compensation laws, according to the National Council for Compensation Insurance. Florida and North Dakota, meanwhile, passed laws this year excluding medical marijuana treatment from workers’ compensation reimbursement.

The final decision in this case has the potential to be very beneficial or detrimental to the medical marijuana business in Maine. If Maine's Supreme Court ends up ruling that medical marijuana should be covered under insurance policies, it will likely open the door to many more people being able to use medical marijuana as a treatment for their ailments because the out-of-pocket cost of medical marijuana would no longer be an issue. However, if the verdict states that insurance companies do not have to reimburse their clients when dealing with medical marijuana, it is likely that many people will shy away from medical marijuana as a treatment because of cheaper treatment alternatives that would be covered under their insurance policies. 

US POT Meets the USPTO: Can Marijuana Strains Be Patented?

USPTO or US POT? Protecting a marijuana brand is likely one of the first things a startup thinks about early on in the business process. But what startup marijuana companies may want to consider is the possibility of patenting their cannabis strains. While it's unclear whether the United States Patent and Trademark Office ("USPTO") will issue a patent for marijuana, some companies have submitted applications with the hope that it meets the standard patent requirements for issuance.

The USPTO allows for plants to be patented, such as strawberries, peanuts, and roses. Under the Plant Patent Act of 1930, the USPTO grants patents to "those that have invented or discovered and asexually reproduced a distinct and new variety of plant." These patents last for twenty years from filing the application, which is enough time for the inventor to profit from their plant invention before being undersold by an imitation. For this reason, startups may want to consider looking into the patent application procedure.

Before I mentioned how a startup might concern itself with branding. Well, unfortunately, marijuana-related trademark applications are likely to be denied registration by the USPTO. Thus, often the only protection a marijuana business can attain for their brand is a state trademark, which doesn't do anything for protecting their company brand across state lines. However, if a company were to acquire a patent for their strain, it would have rights in all fifty states. One commentator compares and explains these rights:

But even if these patents issued, what could the prosecuting party actually stop someone else from doing? The names of the plants themselves are not patented, but the genetics are. If I create a new strain and call it "Pagan Feast" and got a patent for it, I would not be able to stop someone in a state where I did not have any trademark rights to Pagan Feast from using the Pagan Feast name for a different marijuana strain. However, I would be able to use my patent to stop someone in all fifty states from selling my specific genetic product under any name. If I wanted to have exclusionary rights regarding the name itself, I would need to obtain trademark protection in as many states as possible, which, unlike patents, requires that I actually be doing business with that name in each state in which I want protection.

It seems that it's at least possible (while still a little unclear) to get a patent on a marijuana strain. For example, Patent No. 9095554 was granted in August of 2015 to weed growers in California; this was the first patent issued for a marijuana strain that contained "significant amounts" of THC.

The legalization of marijuana may be on its cusp, and plant-growers have been fast to submit their patent applications with the hope that legalization is near. Startups would be wise to follow their lead.

Move Over Amsterdam

Sin City may soon have a new vice. Nevada is looking to be the first legalized state with cannabis lounges and many hope this will create a new avenue of tourism. Lounges, otherwise known as coffee shops in Amsterdam, are regulated areas in public where cannabis users can smoke. They are essentially cannabis bars. Reid Nelson with The Hill reports that the Legislative Counsel Bureau in Nevada has given the green light to cities and counties to adopt rules that will allow lounges to go into place. According to the Counsel, Nevada's state law does not prohibit the creation of lounges by local governments. The idea of legal smoking lounges are facing both support and opposition from multiple sides. As reported: 

The Nevada legislator who spearheaded much of the legalization movement, state Sen. Tick Segerblom (D), has said he thinks marijuana will attract new tourists to the state.

“We’re going to really market this thing around the world,” Segerblom told The Hill in a recent interview...

But legalization skeptics say the growing prevalence of marijuana stores, and lounges where those products can be consumed, increase the risk of crime associated with the nascent industry.

“The people of Nevada wanted folks not to go to jail for using marijuana,” said Kevin Sabet, who heads the anti-legalization group Smart Approaches to Marijuana. “I don’t think they envisioned pot clubs in their neighborhood.”

The difference in opinions between advocates and skeptics will surely create some interesting debate within local communities. However, there is an additional player who should not be forgotten: Casinos.

Thomas Moore with the Las Vegas Sun wrote about the difficulty Casinos are having with legal cannabis. The Nevada Gaming Commission is trying to address these issues and give guidance to Casinos. Specifically, Casinos must balance the conflict between federal and state laws. If now Las Vegas wants to become a worldwide destination for cannabis tourists, Casinos are unlikely to welcome this competition.  It seems Casinos have an incentive to oppose cannabis lounges. 

Traditionally, Amsterdam has been known as the most popular destination for cannabis tourism. Some people in Nevada are hoping to change that. Local communities will soon debate the pros and cons of allowing lounges in their cities and casinos are unlikely to sit by quietly. 

Marijuana Industry Miraculously Weathers Hurricane Irma

If you have paid any attention in the last few weeks to the news and social media outlets, you would know that many have faced the wraths of numerous hurricanes wreaking havoc in Houston, Southwest Asia, and various islands in the gulf. Irma swept through causing a path of destruction, leveling the British Virgin Islands, Barbuda, St. Martin. Along its path, Irma hit Florida causing severe flooding and prompting Governor Rick Scott to declare a state of emergency. Surprisingly, despite Irma's destruction, Florida's multimillion supply of medicinal marijuana remained untouched, reports say–

“We were thankfully spared the worst of the storm and have fared well considering the plight of others,” said Flor Santiesteban, a spokesman for Modern Health Concepts, based in Redland in Southwest Miami-Dade. “Our cultivation and processing facilities are up and running with backup power at the moment, and we resumed filling patient orders yesterday.”

Other distributors, including The Green Solution and Liberty Health Sciences in Alachua, made out fine, according to the companies. Bill Monroe, director of dispensary management for 3 Boys Farm, one of the newest license-holders in the state, said, “We got a little bit of damage to some top elements of the greenhouse from some things blown around,” but otherwise emerged intact.

Shockingly, all growing facilities were impacted by the hurricane, yet a majority of all greenhouses, distribution centers, and retail outlets sustained little damage. Unfortunately, gas shortages in the state stalled much of the delivery services to some 36,000 medical marijuana patients. There's good new though as delivery services resumed in Miami on Thursday and other distributors in South Florida hope to be making deliveries as early as next week. 

Legal Marijuana Is Almost Here. If Only Pot Farmers Were on Board.

In November 2016, Californians voted to legalize marijuana for adult use by passing Proposition 64, potentially laying the ground work for the state to open the largest legalized marijuana market in the country. Although licenses to grow the crop will not be handed out until January 2018, the state has been encouraging potential licensees to apply for months. Conveniently, the state also happens to be the l argest producer of marijuana in the United States. In fact, the counties of Mendocino, Humboldt, and Trinity make up the famed Northern Californian region known as The Emerald Triangle, named due to its reputation as being the largest cannabis producing region in the United States.

Then how is it that Californians are facing the very real possibility that there may not be enough regulated marijuana to serve the new legalized market?

Writing for the New York Times, Thomas Fuller reports that marijuana farmers in the Emerald Triangle are simply having a hard time seeing the benefits of entering the legal marketplace:

“I know that the numbers don’t look great; there are a lot of folks that aren’t coming in,” said Hezekiah Allen, the executive director of the California Growers Association, a marijuana advocacy group. “People are losing faith in this process.”

Based on data from various state and county agencies, Mr. Allen, of the growers association, estimates that about 11 percent of growers — about 3,500 of 32,000 farmers in the Emerald Triangle, which covers Mendocino, Humboldt and Trinity counties — have applied for permits. Most have been deterred by the voluminous paperwork to obtain a permit, the fees and the taxes, he said.

Proposition 64 decriminalized the possession of small amounts of marijuana, allowed individuals to grow six plants at home and set rules for the sale and cultivation of regulated plants, seeking to end what had been two decades of a freewheeling and largely unregulated medical cannabis system. The punishment for growing or possessing large amounts of unregulated marijuana was downgraded to a misdemeanor from a felony (emphasis added).

And therein lies the rub. By reducing potential penalties for large scale growers, Proposition 64 could be severely curtailing the legalized market it hoped to create.

“You could have 1,000 pounds in your hotel room right now and you might be charged with just a misdemeanor,” Thomas D. Allman, the sheriff of Mendocino County, said. In a small number of cases, traffickers can be charged with conspiracy, which is a felony.

California took a different path from Colorado, the first state to legalize marijuana, where possession of large amounts of unregulated cannabis remains a felony and where the black market is significantly smaller, according to Sean McAllister, a lawyer who specializes in cannabis cases in both states.

In addition, Fuller writes that growers view the new legalization process as much more burdensome than what they are accustomed to:

For the last two decades growers operated under a lightly regulated system of medical cannabis collectives. Legalization now brings a deluge of rules passed by towns, counties and the state.

While increased regulation has predictably deterred some growers from applying for a state license, another hurdle remains in that California growers can simply make more money by selling their crop -illegally- across states lines.

California, which by one estimate produces seven times more marijuana than it consumes, will probably continue to be a major exporter — illegally — to other states. In part, that is because of the huge incentive to stay in the black market: marijuana on the East Coast sells for several times more than in California.

By submitting their growing operations to state inspection, it seems likely that growers would also be cutting into their profits. As of right now, it appears that growers in California are not willing to hurt their bottom line in exchange for the opportunity to come out of the shadows and operate openly. Consequently, the situation cast serious doubt on California’s ability to smoothly transition over to a regulated market with the potential to raise billions in tax revenue.

Strategies to lower canna-business income taxes.

 

You might think that starting a retail marijuana business (in a state where it's legal of course) could be a great way to earn lots of money.  You might be right.  But in a cannabis-related business, a prudent entrepreneur needs to do some extra planning to see whether or not income taxes will eat up the profits. 

See, the Federal government has something of a split personality where marijuana is concerned.  On the one hand, it's still illegal under the Federal Controlled Substances Act.  On the other hand, the Internal Revenue Service doesn't care whether income is derived from legal or illegal activities (James v. United States, 366 U.S. 213, 218 (1961)) - they expect income taxes regardless. 

Of particular interest to canna-businesses is IRS regulation "IRC section 280E", which disallows otherwise legitimate business expenses if the income is generated from the "trafficking", or sales, of certain controlled substances, including marijuana. This means that a state-legal cannabis business cannot deduct normal operating expenses, such as rent, payroll, and utilities. Consequently, the business ends up paying income tax on these expenses.  Unfortunately, without careful planning, one could find that the tax bill to the IRS is greater than the net profits!

In his article “Five Steps for Cannabis Businesses to Minimize Punitive 280E Taxation”, Daniel Rahill outlines some possible strategies to reduce the tax burden caused by section 280E.  Rahill notes that this section does not allow ordinary business deductions, but it does allow a business to deduct its cost of goods sold (COGS) from gross sales:

The history of cannabis taxation leaves us with the important premise that, while IRC Section 280E disallows any deduction for ordinary and necessary business expenses for illegal controlled substance businesses, COGS is not considered an expense, but rather an adjustment taken into account in arriving at gross income. Under Treasury Reg. Sec 1.471-6(a) and -11, taxpayer must include as inventoriable costs all direct (e.g., the cost of inventory and delivery, and the cost of materials and labor for manufactured inventory) and indirect production costs (i.e., rent and utilities related to inventory). While a taxpayer cannot use IRC Section 263A to turn IRC Section 280E non-deductible expenses into ultimately deductible items, taxpayers should nonetheless be diligent in maximizing the proper expenses that should get allocated to inventory, and ultimately, COGS.

Rahill also notes that a typical cultivator would normally allocate most of its expenses to COGS, whereas a typical dispensary would have far more typical business expenses that are disallowed under 280E.  He recommends diversifying the retail business activity to legitimately allocate normal business expenses into business activities (such as counseling services, or retail sales of non-cannabis products) that do not involve "trafficking" a controlled substance.  By doing this, the other business activities can deduct the expenses on their income, reducing the overall income tax burden on the entrepreneur. 

~ Zackery D. Artim

"Cannabis Lounges" May Become Reality in Nevada

Conflict over cannabis law is often framed in terms of the "federal vs. State" paradigm. That is accurate, but there is more to it. The conflict over cannabis arises within governments as much as between them. There is plenty of internal strife at the state level, even between those who support, or at least tolerate, legal cannabis. Consider Nevada, where the push for "cannabis lounges" has raised some differences in perspective. From Leafly.com: 

 

Gov. Brian Sandoval is raising concerns about a new opinion by lawyers for the state legislature that says nothing in state law prohibits local governments from allowing marijuana consumption in businesses such as cannabis lounges and cafes. 

 

“I did not support them previously,” Sandoval told the Las Vegas Review-Journal on Tuesday. “I don’t support them now.” 

 

Sandoval said in an email to the Reno Gazette-Journal he’s concerned that such establishments could pop up “piecemeal throughout the state” with different rules and regulatory structures. 

 

He also questions why Sen. Tick Segerblom proposed legislation this spring to legalize consumption in some public places if the legal authority already existed. 

 

The Nevada Gaming Commission has its own concerns as well. 

We can categorize states as "pro" or "anti" cannabis, but it is a little more nuanced that than. The legislature, the governor, the various agencies, et al. have their own stances on how to approach cannabis. And this is just at the state-level. There is real complexity in mapping out these conflicts across all levels of U.S. government. Eventually it begins to look like three-dimensional chess.  

All of this said, perhaps conflict between branches is a good thing; a sign of a robust and successful tripartite system of government. But for better or for worse, this kind of intrastate conflict has handicapped the legal status of marijuana. Take Nevada for example: cannabis is legal, but it is illegal to use it in public establishments (at least depending on who you ask). This presents a quandary for tourists who wish to consume it legally. A proposed solution is allowing the cannabis lounges. At the state level, it there is no unified vision of marijuana policy. Some support the lounges and some don't—the governor is cautious, the Legislative Counsel Bureau says it's fine, the Gaming Commission just wants to ensure that marijuana and gambling remain far apart. The end result is that for now, the term "legal marijuana" still has plenty of qualifications attached to it. So practically speaking, while marijuana is currently legal in some states, it is really quasi-legal at best.  

Texas Can-nabis

Texas is moving forward with its medical marijuana program and three dispensaries are ready to begin work. Alex Samuels reports, Compassionate Care dispensary is ready to begin cultivation of medical marijuana pending its approval by the Texas Department of Public Safety. The Texas Compassionate Care Act, requires that the department have its first facility approved by September 1, 2017.

Only three dispensaries will provide the medical grade CBD oil for patient use and will provide a very small number of patients with treatment according to Samuels. Though the numbers are low, as described by Samuels below, it is a start for the Lone Star State. 

Despite the time and effort each dispensary will take to get licensed and begin producing cannabis oil, each will only be serving a select group of individuals.

According to Sindi Rosales, the CEO of the Epilepsy Foundation of Central & South Texas, roughly 160,000 Texans have intractable epilepsy — only 0.57 percent of the state’s total population.

“Even if this ends up only benefiting a small number of people, I think they’re grateful that they have this opportunity,” Rosales said. “Even if it’s a small number, why not provide this medicine if it’s available?”

Other advocates, however, point out that while Texas is making strides in the right direction, an even smaller group — epilepsy patients whose symptoms have not responded to federally approved medication — will be allowed access to the medicine.

“This is kind of a bittersweet time for those of us who are advocating for reform,” said Heather Fazio, a spokesperson for Texans for Responsible Marijuana Policy. “We’re happy the process is moving along, but it’s such a limited program and we know there are so many other people who could benefit from this if the program was more inclusive.”

Despite the small population of Texans who will actually able to use the medicine, advocates agree that the dispensaries could be life-changing for those who benefit from it.

“We’re just asking for another tool in our toolkit that we can offer people who are desperate and that’s what this is,” Rosales said. This may or may not work, but it should definitely be offered.”

This is a major step for the state. Provided all three dispensaries are granted licensing by the department Texas will finally join several other states in the collective movement towards legalization. Read more about the Compassionate Care dispensary here. 

Thinking About the Ill: Who Does This New Regulation Really Affect?

 

In California a new state regulation will require dispensaries to shut down operations by Dec. 15 or risk not being able to get the new license required to operate as a dispensary and distribute "medical marijuana". But what will happen to the patients who depend on dispensaries to get their medically necessary marijuana? The State believes that three months is enough time for patients to get in contact with a caregiver that will meet their needs. Will this new regulation better protect these patients? Aileen Wingblad gives a brief insight to this subject. 

The state’s Medical Marihuana Licensing Board on Tuesday said the December deadline gives ample time for dispensaries to wind down service, and that it will begin that day to accept applications for licenses – required under a new regulatory system aimed at increasing oversight and taxing the industry.

 

The new licensing regulations list “provisioning centers” for the sale of medical marijuana, and the licensing process asks applicants to disclose any marijuana-related business they’ve been involved in, such as a dispensary. Harns said background investigations – paid for with non-refundable application fees – will be conducted before licenses are issued. Falsifying information is cause for being denied a license. Criminal history can also affect eligibility.

 

Until licenses are issued, registered patients will have to grow their own marijuana or obtain it from caregivers, as allowed under existing law.

 

Read the full article. 

Family Law Lags Behind in the Wake of Ending Cannabis Prohibition

     A New York mother possessed amounts of marijuana not even enough to be a misdemeanor.  Prosecutors did not pursue charges, but Child Protective Services (“CPS”) decided it was enough to remove her children.  Click here to read the full story from 2011.  

    A Michigan couple was state-licensed to use and grow medical marijuana for epilepsy and multiple sclerosis; however, CPS removed their six-month-old daughter, sending her to live with a grandmother a few hours away.  The couple got their daughter back, but only under CPS supervision.  Click here to read the full story from 2013. 

    Much more tragic, is the Texas couple whose toddler was removed from her home when CPS learned that the couple was smoking marijuana at night after their daughter went to bed.  In a state-licensed foster home the toddler was beaten to death by her angry foster mother.  Click here to read the full story from 2013. 

    As marijuana laws become more relaxed, the injustices to families at the hand of state agencies are on the rise.  If CPS’s policies were updated to be consistent with state law and societal values, these stories likely would not have happened. 

    The public policy behind custody battles and CPS investigations is the best interest and welfare of the child.  Up until recent years, society has generally viewed marijuana use as bad, and our agencies’ policies and state laws have reflected those societal values, as rules and laws should.  Now, however, things have changed.  Marijuana is decriminalized in over half of the states, and many states are adopting some form of legal marijuana use.  Increasingly, marijuana use is no longer associated with danger or even substandard morals.  As such, keeping the best interest of children in mind, it is time to rethink our standards as to agency rules and state laws to keep up with changing marijuana laws.

    Suggested remedies for the problem include reform to the standard for assessing both recreational and medical marijuana use in the home and including “parent-protective” language in state marijuana laws and policies. (Family Law & Cannabis Alliance).  However, these resolutions will take time to evolve.  In the meantime, families are being affected in very real ways.  If you find yourself in a situation like this, a great resource is the Family Law & Cannabis Alliance website.  The website includes cannabis research related to family issues and a page on how to handle CPS.