Monday, June 13, 2022
"Capital Expenditure and Acquisition in Conventional Agriculture and Cannabis: A Comparative Analysis"
I am pleased to report that I am almost fully caught up on posting a lot of recently produced papers that are part of the on-going series of student papers supported by the Drug Enforcement and Policy Center. I continue to relish the he chance to highlight great work by OSU law students and recent graduates, and the title of this post is the title of this paper authored by Steve Nosco who recently graduated from The Ohio State University Moritz College of Law. Here is its abstract:
Federal laws prohibiting the possession, production, and use of Cannabis create significant operational challenges for state-compliant Cannabis companies. One of the largest challenges is acquiring the initial capital required for any new business to become self-sustaining and profitable. Without traditional sources of capital, namely credit from commercial institutions or government lenders, only individuals with access to significant private funds can become entrepreneurs in this burgeoning industry. In the face of Federal inaction to solve this well-documented problem, States can, and should, take on a leading role. This Paper explores existing federal programs for traditional agricultural lending and suggests how states can emulate these programs for Cannabis businesses within their jurisdictions.
The question in the title of this post is prompted by this interesting Marijuana Moment article headlined "New Details On Congressional Marijuana Omnibus Bill Emerge As Lawmakers Work For 60 Senate Votes." Here are some of the intriguing particulars from an extended piece worth reading in full:
Two key congressmen made waves in the marijuana community on Thursday by disclosing that there are high-level talks underway about putting together a wide-ranging package of incremental marijuana proposals that House and Senate lawmakers believe could be enacted into law this year. But multiple sources tell Marijuana Moment that issues under consideration go further than the banking and expungements reforms that were at the center of the public discussion that has emerged.
The dueling pushes for comprehensive legalization and incremental reform — a source of tension among advocates, lawmakers and industry insiders over many months — may actually result in something actionable and bipartisan by the end of the current Congress, those familiar with the bicameral negotiations say. That said, no deal is set in stone and talks are ongoing.
In addition to the banking and expungements proposals that made waves when discussed publicly at a conference on Thursday by two key House lawmakers, there are also talks about attaching language from other standalone bills dealing with issues such as veterans’ medical cannabis access, research expansion, marijuana industry access to Small Business Administration (SBA) programs and broader drug sentencing reform....
Reps. Ed Perlmutter (D-CO) and Dave Joyce (R-OH) first publicly disclosed that there were discussions about crafting a bipartisan cannabis package at an International Cannabis Bar Association conference on Thursday, with Joyce revealing a recent meeting he had about the idea with Schumer.
Perlmutter, sponsor of the Secure and Fair Enforcement (SAFE) Banking Act, said that his legislation to safeguard financial institutions that work with state-legal marijuana businesses would be part of the package under consideration, but he also said at the time that members are interested in including Joyce’s Harnessing Opportunities by Pursuing Expungement (HOPE) Act to incentive state and local governments to expunge prior marijuana records, as well as proposals to provide veterans with access to medical cannabis and expand marijuana research.
But those four issues — banking, expungements, research and veterans — noted earlier by Law360, are only part of what’s on the table, sources who have been involved in the negotiations but requested anonymity, told Marijuana Moment on Friday. They stressed, however, that a deal has not yet been reached and talks are tentative at this point.
Another possible component that lawmakers have discussed including in the omnibus legislation would be a proposal to give cannabis businesses access to SBA loans and services that are available to every other industry. It’s a reform that Sen. Jacky Rosen (D-NV) in particular has consistently advocated for, including in a recent letter to the head of SBA.
While it’s not clear what stage the negotiations over the prospective marijuana package is at, a congressional source said that Rosen has spoken with Schumer about her interest in advancing the issue as he’s worked to navigate the congressional cannabis waters.
“These talks are very serious,” a source involved in criminal justice reform said. “I would say this is one of the most serious bipartisan, bicameral conversations that we’ve seen occur in our time in this space.”
To be clear, Senate leadership isn’t giving up the push for the broader CAOA legalization bill at this point. Nor is Perlmutter fully conceding passing the SAFE Banking Act on a sooner timetable, either as standalone legislation or as part of a large-scale manufacturing bill called the America COMPETES Act that’s currently in a bicameral conference committee....
Other sources told Marijuana Moment that they’ve been involved in conversations about potentially adding to the in-progress cannabis package language that would provide for record sealing of federal misdemeanor convictions, as would be prescribed under the standalone Clean Slate Act from Rep. Lisa Blunt Rochester (D-DE). It’s the type of reform that presumably would not compromise GOP support given the widespread recognition that offenses like simple possession should not lead to long-term consequences like the loss of access to housing and job opportunities.
June 13, 2022 in Business laws and regulatory issues, Federal Marijuana Laws, Policies and Practices, History of Marijuana Laws in the United States, Political perspective on reforms, Who decides | Permalink | Comments (0)
Monday, May 23, 2022
I am continuing to catch up on posting a lot of recently produced papers that are part of the on-going series of student papers supported by the Drug Enforcement and Policy Center. The title of this post is the title of this paper authored by Cam Wade, a rising 3L at The Ohio State University Moritz College of Law. Here is its abstract:
Demanding state regulatory schemes render the operation of cannabis businesses an expensive endeavor and create an urgent need for reliable sources of cash. Historically, the federal ban on cannabis has hindered the industry’s fundraising efforts, but larger cannabis companies have begun to make inroads toward friendlier deals with manageable interest rates. This progress has not extended to smaller cannabis businesses, which has prevented many from effectively competing and contributed to a wave of intense industry consolidation around the largest companies in 2021. This paper explores this fundraising disparity and its policy implications. Proposed solutions at the state and federal level are also evaluated along with an overview of the limited fundraising options which are currently available to small cannabis businesses.
Friday, May 20, 2022
Ninth Circuit panel holds (in trademark dispute) that "delta-8 THC products are lawful under the plain text of the Farm Act"
In this post a few month ago, I noted the growth of so-called delta-8 THC products and all the legal uncertainty around them. Yesterday, in an important ruling, a Ninth Circuit panel directly address question about the legality of delta-8 products under federal law. In AK Futures LLC v. Boyd Street Distro, LLC, No. 21-56133 (9th Cir. May 19, 2022) (available here), a trademark dispute prompted the panel to fully engage the arguments surrounding whether the 2018 Farm Bill served to legalize cannabis products without the standard delta-9 THC, and the opinion ultimately embraces the claim that delta-8 THC products derived from hemp CBD are legal products under federal law. Here are some key passages from the opinion:
[T]he parties dispute whether the possession and sale of delta-8 THC is permitted under federal law and, consequently, whether a brand used in connection with delta-8 THC products may receive trademark protection. AK Futures argues that delta-8 THC falls under the definition of hemp, which was legalized by the 2018 Farm Act. Boyd Street argues a contrary interpretation of the Act based on agency documents and congressional intent....
AK Futures argues the Farm Act’s definition of hemp encompasses its delta-8 THC products so long as they contain no more than 0.3 percent delta-9 THC. Plain meaning supports this interpretation.... Importantly, the only statutory metric for distinguishing controlled marijuana from legal hemp is the delta-9 THC concentration level....
The Farm Act’s definition of hemp does not limit its application according to the manner by which “derivatives, extracts, [and] cannabinoids” are produced. Rather, it expressly applies to “all” such downstream products so long as they do not cross the 0.3 percent delta-9 THC threshold....
Regardless of the wisdom of legalizing delta-8 THC products, this Court will not substitute its own policy judgment for that of Congress. If Boyd Street is correct, and Congress inadvertently created a loophole legalizing vaping products containing delta-8 THC, then it is for Congress to fix its mistake. Boyd Street’s intent-based argument is thus unsuccessful. With that, neither of Boyd Street’s counterarguments dissuade us from the conclusion that AK Futures is likely to succeed on the merits of its trademark claim.
Thursday, May 19, 2022
I am so happy to be able to continue catching up on posting a lot of recently produced papers that are part of the on-going series of student papers supported by the Drug Enforcement and Policy Center. To that end, the title of this post is the title of this paper authored by Caroline Rice, a rising 3L at The Ohio State University Moritz College of Law. Here is its abstract:
Although most professional sport leagues amongst the Big Four (National Football League, National Basketball Association, Major League Baseball, and National Hockey League) have restrictions on athletes’ use of cannabis, many professional athletes have spoken out about turning to cannabis as relief for the chronic pain caused by playing professional sports. This paper explores how as a result of cannabis being wrongly classified as a Schedule I drug on the Controlled Substances Act, professional leagues followed suit restricting cannabis use and leaving athletes with rigid marijuana testing policies and an overuse of prescription painkillers. This paper then analyzes the medicinal benefits of marijuana use for professional athletes, and subsequently argues for further use of cannabis in professional sports in the United States.
Tuesday, May 17, 2022
As mentioned in a prior post, the tail end of a busy semester means I can now catch up on posting a lot of recently produced papers that are part of the on-going series of student papers supported by the Drug Enforcement and Policy Center. So, the title of this post is the title of this paper authored by Jake Avetisian, a rising 3L at The Ohio State University Moritz College of Law. Here is its abstract:
The relationship between cannabis and federal law has never been an amicable one. However, the recent slew of state legislation legalizing cannabis (whether medical or adult-use) across the country has made things even messier at the federal level. Although the federal government has attempted over the years (somewhat) to take up a policy of non-enforcement relative to states where cannabis is legalized, it is still a Schedule I drug in the United States under the Federal Comprehensive Drug Abuse Prevention and Control Act of 1970 (the “CSA”). This has various implications for legal cannabis businesses nationwide, but they aren’t the only ones effected by this classification – although they may be taking the brunt of those effects. Retaining this classification for a drug that is legal at the state level has caused unintended issues in the context of its intersection with other federal legislation and codes, and the financial services that cannabis businesses need to survive. Many entities who do business with legal cannabis enterprises are putting the well-being of their own business on the line, creating a chilling effect on financial institutions transacting with state legal cannabis businesses. This paper will examine cannabis’s continued classification as a Schedule 1 drug, and how this classification adversely affects financial advisory industries that are essential to any successful business – not just a cannabis business. Specifically, this paper will scrutinize the effects of the liabilities indirectly created by the Schedule 1 classification of cannabis on financial institutions participating in the industry, as well as the secondary consequences of these effects on cannabis businesses themselves and their consumers. Additionally, this paper will look forward to potential solutions, including one that is already in motion, that could rectify some of these major issues for a quickly growing (no pun intended) industry in the United States.
Monday, April 18, 2022
Student presentation: "Prohibition & the U.S. Economy: How Cannabis Legalization Can Help the United States Economy Recover in a Similar Fashion as the 21st Amendment"
The homestretch of students in my Marijuana Law, Policy & Reform seminar presenting on the research topics of their choice includes a focus on economic development issues. Here is how the student describes the topic and some background readings:
Warning lights are now flashing for the U.S. economy as a potential recession appears on the horizon. At 8.5%, the U.S. is seeing the highest inflation rate since 1981. It seems that causes for inflation are plentiful. COVID-19’s impact on the world’s supply chain, surging demand, production costs, relief funds, the Russian war, and an increase in wages to keep up with worker shortages are all reasons economists point to as inflation catalysts. Recently, it was reported that Americans need to budget an extra $5,200 this year to cover inflation prices. But the reality is many Americans simply cannot afford to keep up. Not everyone’s wages have increased, and many Americans are still left without jobs. Budgeting extra money when so many Americans live paycheck to paycheck or use government assistance to survive is not feasible nor sustainable.
We saw a similar crisis 100 years ago as well. From 1920 to 1933, Americans suffered through the Prohibition Era, the Stock Market Crash of 1929, and the Great Depression. During this time, Americans saw a huge downturn in the economy with hundreds of thousands of people out of the job market. Many businesses shut down. The U.S. government was spending an absurd amount of money to enforce Prohibition all while financially suffering from the loss of alcohol and excise taxes. Once Prohibition was repealed, Americans saw a boom in economy. More jobs and legal alcohol sales meant the government was simultaneously reaping the benefits of increased sales tax revenue and newly created income taxes which helped fund the New Deal and, in turn, further helped restore prosperity to the United States.
In this paper, I argue that cannabis can serve a similar purpose to the U.S. economy now as the repeal of alcohol prohibition did in 1933. Much like the Prohibition Era, the U.S. government spends an obscene amount of money enforcing cannabis prohibition. There is also a large opportunity cost in delaying federal legalization. States that have legalized cannabis recreationally have seen a huge boost in economic growth due to job creation, sales tax revenue, and property values. These dollars are then used to fund social programs, public schools, research, and public safety. Federal legalization can do the same on a much larger scale. The economy is becoming more fragile every day, public perception of cannabis has changed, and various proposed reforms have hit Capitol Hill. I argue that now, more than ever, is the time to federally legalize cannabis because it could be the saving grace that stimulates the economy in the way Americans need.
ACLU blog post from 2012: "Hundreds of Economists: Marijuana Prohibition Costs Billions, Legalization Would Earn Billions"
Blog post by university professor: "How marijuana legalization would benefit the criminal justice system"
Leafly report from 2020: "2020 Cannabis Jobs Report: Legal cannabis now supports 243,700 full-time American jobs"
Friday, April 15, 2022
Notable federal marijuana reform news with an interesting new bill while we further wait for an old one
The long-anticipated Senate bill to federally legalize marijuana will not be introduced this month, with Democratic leadership saying on Thursday that the timeline is being extended as they continue to work out various provisions “with the assistance of nearly a dozen Senate committees and input from numerous federal agencies.”
Senate Majority Leader Chuck Schumer (D-NY) has said on several occasions that the bill he’s been working on with Senate Finance Committee Chairman Ron Wyden (D-OR) and Sen. Cory Booker (D-NJ) for many months would be formally filed by the end of April. That’s no longer the case, with the leader now saying the “official introduction” will take place sometime “before the August recess.”
A discussion draft of the Cannabis Administration & Opportunity Act (CAOA) was first unveiled last year, and advocates and stakeholders have been hanging on the leader’s words as they continue to push for an end to federal prohibition. Most recently, Schumer said last week that he and colleagues were in the process of reaching out to Republican senators to “see what they want” included in the legislation.
The timeline that Schumer previewed has apparently proved too ambitious — but the hope is that by taking extra time to finalize the measure, it will help the senators overcome what are currently significant odds stacked against them to reach a high vote threshold in the chamber, where Democrats hold just a slim majority and several members of the party have indicated that they’re not supportive of legalization.
A bipartisan group of congressional lawmakers filed a bill on Thursday that would direct the attorney general to create a commission charged with making recommendations on a regulatory system for marijuana that models what’s currently in place for alcohol.
Reps. Dave Joyce (R-OH), Hakeem Jeffries (D-NY) and Brian Mast (R-FL) are teaming up on what’s titled the Preparing Regulators Effectively for a Post-Prohibition Adult-Use Regulated Environment Act (PREPARE) Act — an incremental reform meant to inform comprehensive cannabis policy changes in the future.
The measure will “provide lawmakers across the ideological spectrum the opportunity to engage on cannabis reform by creating a fair, honest and publicly transparent process for the federal government to establish effective regulation to be enacted upon the termination of its 85-year prohibition of cannabis,” according to a summary from the sponsors....
Here’s what the new bill would accomplish:
Require the attorney general to establish a “Commission on the Federal Regulation of Cannabis” within 30 days of the bill’s enactment. The commission would be responsible for studying federal and state regulatory models for alcohol and make recommendations about how they could inform marijuana regulations. Among other things, the commission’s report must look at the impact of marijuana criminalization, particularly as it concerns minority, low-income and veteran communities.
The panel would also examine the “lack of consistent regulations for cannabis product safety, use and labeling requirements” as well as the “lack of guidance for cannabis crop production, sale, intrastate, interstate, and international trade.“ It would also need to make recommendations on how to remedy cannabis-related banking and research barriers as well as address measures to ensure the “successful coexistence of individual hemp and cannabis industries, including prevention of cross pollination of cannabis and hemp products.”
Members would further be mandated to study and make recommendations on “efficient cannabis revenue reporting and collecting, including efficient and tenable federal revenue frameworks.” The panel would be required to issue a report to Congress within 12 months.
I have come to believe that Senator Shumer's CAOA is essentially DOA in a Senate that may not now have even 50 votes in support of full marijuana legalization, let alone the 60 needed to get past a filibuster. But the new PREPARE Act already has bipartisan support, and it seems to only call upon the federal government to take a serious and sustained look at what kind of federal regulatory rules and structures would be preferable as marijuana reform in the states continues apace. In a well-functioning Congress, I think some version of the PREPARE Act could and should be a no-brainer and likely should have been enacted a number of years ago. In the current dysfunctional Congress, I fear that we need not seriously prepare for the passage of the PREPARE Act. But one can still dream.
Wednesday, April 13, 2022
The third of this week's presentations put on by my Marijuana Law, Policy & Reform seminar students will be focused on how Ohio might approach how setting up a licensing scheme for the marijuana industry. Here is how the student describes this topic and some background readings:
In a regulated industry, licensing is the key that unlocks the door for (legal) opportunity. The ever-expanding cannabis industry is no exception. Those who hold licenses in this industry enjoy the benefit of legally-sanctioned conduct, while others assume the risks of operating in the black market.
Ohio is currently faced with the question of whether an adult-use cannabis market should be established within the state. As a part of answering this question, policymakers need to consider how to set up a licensing scheme for any potential industry. There are several different considerations that need to be made in approaching such a scheme. First, there is the issue of responding to different operators within the market and establishing different licenses for these various operators. Next, there is the debate over whether to establish a limited license market, and how to respond to concerns over monopolization and social equity. Lastly, policymakers must decide what qualifications will be necessary in order to obtain a license, and which actors will be excluded from such a privilege.
An Act to Control and Regulate Adult-Use Cannabis is a ballot initiative which seeks to introduce an adult-use market in Ohio, and it proposes a detailed framework for licensing this market. This project analyzes the licensing scheme that would be established in the state, should this initiative eventually be signed into law, and evaluates how this proposed scheme responds to the policy concerns that are inherent in licensing.
Monday, April 4, 2022
My Marijuana Law, Policy & Reform seminar continues with student presentations on the research topics of their choice. The second of this coming week's presentations is focused on patent protection for marijuana plants. Here is how the student describes the topic and the provided readings:
Intellectual property (IP) refers to creations of the mind, such as inventions; literary and artistic works; designs; and symbols, names and images used in commerce. Intellectual properties are one of the most valuable assets for the companies and there are multiples ways one can protects this asset. And how would businesses in Cannabis go about protecting it’s IP rights under current law, and how much would it effect federal reforms and how would reforms effect IP industries?
Different IP requires different protections, like trademark, copyright, and patent. And the one I will be focusing on will be patent protection. Patent protection is most desired of all IP protections as it grants 20 years of monopoly from date of filing. However, for marijuana related IP to be protected under patent, there are multiple hoops to overcome. As a plant, it is very difficult to claim a patent. Furthermore, patents are exclusively governed by federal law, and under federal law marijuana is still illegal, as a Schedule 1 drug under the Controlled Substances Act. With patent, could provide incentives for researching marijuana and to be able to have enough scientific data to remove it form schedule 1 drug.
This does not mean that getting patent for marijuana is impossible. There are multiple ways to get over the barriers. And there are some successful examples of marijuana patent. This include government owned marijuana patent. And this patents not only provide economic benefits to patentees but also to the public as it will provide incentive to have more research done on the marijuana.
Background information about marijuana patent law: “Basics of Marijuana Patent law”
Examples and introduction to obstacles of marijuana patent and examples of marijuana patent: “Twelve Cannabis Plant Patents and Counting”
Information about plant patents in general: “General information about 35 U.S.C. 161 plant patents”
News report of government owned marijuana patent: “Feds patented medical pot…while fighting it”
Tuesday, March 22, 2022
The second student presentation this week in my Marijuana Law, Policy & Reform seminar is focused on labor issues in the marijuana industry. Here is how the student describes the topic and provided readings:
On Thursday, February 3, 2022, cannabis workers employed at the Herbology dispensary in Newark voted 8-2 to become the first unionized dispensary in Ohio. The Sunnyside dispensary in Cincinnati followed soon after, voting to unionize on February 9, 2022. Not only is there new interest in unionization in the Ohio cannabis industry, but recreational marijuana legalization is gaining momentum and the national cannabis market is growing rapidly. The legal cannabis industry currently supports 428,059 workers nationally, and it is predicted that a mature cannabis market would support 1.5 million to 1.75 million workers.
The right for workers to unionize is protected by the National Labor Relations Act (“NLRA”). However, the NLRA does not protect agricultural workers. In addition, it is unclear whether the National Labor Relations Board will consistently exert jurisdiction over retail workers in a federally prohibited recreational marijuana industry.
To cover this gray area, six states have laws that encourage or require licensed cannabis businesses to adopt labor peace agreements (“LPA’s”) with their employees, and Ohio is considering implementing a similar requirement. However, the effectiveness of LPA’s is contested, as they may impose too many restrictions upon business owners while not providing the full scope of protection that employees would enjoy under the NLRA. The validity of these LPA’s has not yet been contested in court, but in the interim, they may provide some level of union protection for otherwise unprotected workers. This paper will evaluate the policy concerns surrounding the use of LPA’s in the cannabis industry, as well as what widespread unionization could mean for a quickly growing sector of the economy.
Economic Policy Institute, "The Cannabis Industry Could be a Model of Good Jobs — if Policymakers Strengthen Works’ Right to Unionize"
Leafly, "Jobs Report 2022"
Friday, March 4, 2022
As long-time readers know, students in my Marijuana Law, Policy & Reform seminar "take over" the second half of my class through presentations on the research topics of their choice. Before their presentations, students are expected to provide in this space some background on their topic and links to some readings or relevant materials. The first of our presentations taking place this week will focus on professional sports and advertising, and here is how my student has described her topic along with background readings she has provided for her classmates (and the rest of us):
For decades, the NFL and other leagues amongst the Big Four professional sport leagues have embraced alcohol, specifically beer, in league and team sponsorships and advertisements. The NFL even has Bud Light as its “Official Beer of the NFL.” Before that, it was tobacco companies who provided the professional sport leagues with millions of dollars in advertising revenue. While tobacco faded out of the sport scene, alcohol emerged and has since held a strong presence despite policymakers’ concerns about promoting and connecting a harmful substance to athletic achievement, on a national stage reaching children.
The professional sport leagues have shied away from letting players use marijuana for any purpose despite its legality in state marketplaces. This has long been a fight for the leagues’ athletes, who want and should be able to have access to cannabis for pain management. But it then comes as no surprise that the leagues have also prevented cannabis advertising from infiltrating the leagues, their teams, and players.
It is with this background, as well as prior research in players’ use of cannabis (stay tuned for its posting to the DEPC Student Paper Series), that I turned to explore another potential connection between marijuana and professional sports — this time through advertising.
This paper and presentation starts out by discussing the long history of alcohol and tobacco advertising in professional sports. It then turns to current federal and state restrictions on marijuana advertising, looking to the legal limitations that leagues must abide by. To make it easier to digest, this section makes connections to existing alcohol and tobacco advertising laws. Subsequently, this paper looks to the current league policies for marijuana advertising, highlighting the NFL’s approach. Finally, this paper looks to the future of marijuana advertising, it’s implications on the sport industry, and makes recommendations for cannabis advertising in professional sports.
For the most part, there are still a lot of unanswered questions that sport industry professionals will have to deal with. While the law provides some guidelines and can help predict league behavior, there are a lot of opportunities available for both leagues, teams, and athletes in this space. Those options are explored in this paper and presentation.
Tobacco and Alcohol
- "Sponsorship of Sport by Tobacco and Alcohol Companies: A Review of the Issues"
- "Alcohol Sponsorships And Athlete Endorsements In Sports"
Cannabis and Sport Leagues
- "Is Now the Time for Sports Leagues to Embrace Sponsorship from Cannabis Brands?"
- "The Super Bowl won’t be lit: no cannabis ads allowed"
Thursday, February 3, 2022
I was very pleased to have received this morning following terrific guest post content from Professor Scott Bloomberg of the University of Maine School of Law about a notable recent federal circuit court ruling:
Since December 2014, Congress has included a rider in its annual appropriations acts that prohibits the Department of Justice (“DOJ”) from expending funds to prevent states from “implementing their own State laws that authorize the use, distribution, possession, or cultivation of medical marijuana.” Consolidated Appropriations Act, 2019, Pub. L. No. 116-6, § 537, 133 Stat. 13, 138 (2019). The rider — most commonly known as the Rohrabacher-Farr Amendment — is an important source of protection from federal prosecution for medical marijuana businesses and users.
Until recently, the only federal circuit court to interpret the Rohrabacher-Farr Amendment was the Ninth Circuit. In 2016 in United States v. McIntosh, the court held that the amendment only prohibited the DOJ from prosecuting marijuana businesses that strictly complied with their states medical marijuana rules. This strict compliance standard meant that if a business stepped out of line — including, in theory, if it only extended a toe over the line — the DOJ could prosecute the business for federal drug crimes.
I have never been a fan of the McIntosh court’s strict compliance standard. I don’t think it is workable in practice and I find it to be a rather unsound interpretation of the Rohrabacher-Farr Amendment. So, when the First Circuit had an opportunity to interpret the Amendment in United States v. Bilodeau, I decided to submit an amicus brief arguing as much.
The brief explains that the strict compliance standard offers little real protection for marijuana businesses given the complex state regulatory codes with which they must comply. What’s more, even if the compliance standard were loosened (say, companies only had to remain in “material compliance” rather than “strict compliance” to avoid the risk of prosecution) tethering the DOJ’s ability to prosecute medical marijuana businesses to a business’s non-compliance with state law creates an inherent problem. Under a standard that bases the DOJ’s authority to prosecute businesses on whether that business has complied with state medical marijuana rules, the best way for a state to shield its medical marijuana businesses from federal prosecution is to not have any medical marijuana rules. The more carefully a state regulates medical marijuana, the more likely its businesses are to be subject to federal prosecution. That incentive structure may not only prevent states from “implementing their own State laws that authorize” medical marijuana, it also flies in the face of the DOJ’s Cole Memo, which instructs states to regulate marijuana closely.
The McIntosh court’s strict compliance standard also relies on an artificial distinction between a state’s “laws that authorize” medical marijuana and a state’s enforcement of such laws. According to the court, when the DOJ prosecutes medical marijuana businesses that fail to comply with a state’s medical marijuana rules, the DOJ does not prevent the state from implementing the “laws that authorize” medical marijuana because the business’s conduct was not authorized by those laws. But laws authorizing states to enforce violations of their “laws that authorize” medical marijuana cannot be so easily divorced from the underlying laws. Enforcement rules are intertwined with the underlying laws for many reasons. Most significantly, a looming threat of federal prosecution would deter many businesses from ever entering the state’s marketplace. The threat would also undermine the state’s enforcement authority over those businesses that do—after all, what rational business would admit to even the most menial of regulatory violations if doing so would open a risk of federal prosecution?
In light of these problems with the strict compliance standard, my amicus brief urged the First Circuit to adopt a more expansive interpretation of the Rohrabacher-Farr Amendment. I argued that the Amendment creates a blanket prohibition on the DOJ’s authority to prosecute state-licensed medical marijuana businesses for marijuana-related offenses (with some limited exceptions).
The First Circuit last week handed down its opinion in Bilodeau, which departed from the McIntosh court’s strict compliance standard but did not go quite as far as I urged. As Judge Kayatta explained, the Ninth Circuit’s strict compliance standard affords the DOJ more power to undermine states’ medical marijuana laws than Congress could have intended.
With federal prosecution hanging as a sword of Damocles, ready to drop on account of any noncompliance with Maine law, many potential participants in Maine's medical marijuana market would fasten fearful attention on that threat. The predictable result would be fewer market entrants and higher costs flowing from the expansive efforts required to avoid even tiny, unintentional violations. Maine, in turn, would feel pressure to water down its regulatory requirements to avoid increasing the risk of noncompliance by legitimate market participants.
[Moreover, Maine’s medical marijuana] rules were not drafted to mark the line between lawful activity and cause for imprisonment. Rather, as with most every regulated market, Maine declined to mandate severe punishments (such as, for example, the loss of a license) on participants in the market for each and every infraction, no matter how small or unwitting…. To turn each and every infraction into a basis for federal criminal prosecution would upend that decision in a manner likely to deter the degree of participation in Maine's market that the state seeks to achieve.
After departing from the strict compliance standard, the court declined to clearly demarcate when the DOJ can (and cannot) prosecute medical marijuana businesses. Instead, the court reasoned that, under the facts of this case, the DOJ could subject the defendants to federal criminal punishment because their alleged conduct also constitute a crime under Maine’s marijuana laws.
The First Circuit’s interpretation of the Rohrabacher-Farr Amendment in Bilodeau should bring some comfort to medical marijuana businesses in the First Circuit. The interpretation gives the DOJ less discretion to prosecute medical marijuana businesses than does the Ninth Circuit’s strict compliance standard. This increased protection could become all the more important if a Presidential administration less friendly to marijuana takes power. (And, for marijuana law professors, Bilodeau and McIntosh present an excellent opportunity for a class exercise on statutory interpretation!)
February 3, 2022 in Business laws and regulatory issues, Criminal justice developments and reforms, Federal court rulings, Federal Marijuana Laws, Policies and Practices, Medical Marijuana State Laws and Reforms, Who decides | Permalink | Comments (0)
Tuesday, February 1, 2022
The title of this post is the title of this notable new paper available via SSRN and authored by Shaleen Title. (Shaleen Title served as one of five inaugural commissioners of the Massachusetts Cannabis Control Commission from 2017 to 2020, and has been serving as the Distinguished Cannabis Policy Practitioner in Residence at the Drug Enforcement and Policy Center.) Here is the abstract for this paper:
It is a crucial and vulnerable moment for the future of the cannabis market. While states are making historic progress creating paths for small businesses and disenfranchised groups, larger companies are expanding, consolidating, and lobbying for licensing rules to create or maintain oligopolies. Federal legalization will only accelerate the power grab already happening with new, larger conglomerates openly expressing interest. Left unchecked, this scramble for market share threatens to undermine public health and safety and undo bold state-level efforts to build an equitable cannabis marketplace. This paper argues for intentionally applying well-developed antitrust principles to federal cannabis reform now, before monopolization of the market takes place, and offers eight concrete policy recommendations.
Sunday, January 30, 2022
"The Oxymoron of Ethical Cannabis Lawyering: Advising Clients on Breaking the Law Without Violating Ethical Rules"
The title of this post is the title of this new paper recently posted to SSRN and authored by Courtney Pratt, a recent graduate of The Ohio State University Moritz College of Law. (This paper is yet another in the on-going series of student papers supported by the Drug Enforcement and Policy Center.) Here is this latest paper's abstract:
Cannabis companies in the United States operate in a shadowed area of the law where state and federal laws frequently change and often conflict. Cannabis attorneys, who advise cannabis companies in ways similar to other corporate attorneys, must also traverse this grey space. For cannabis attorneys, it is critical to discern whether an action taken by the attorney in furtherance of the cannabis company’s business runs afoul of the rules of professional conduct, which govern attorneys in the United States.
Until cannabis is reclassified under the Controlled Substances Act or Congress passes legislation immunizing cannabis attorneys, there will always be some level of risk inherent in an attorney’s representation of cannabis clients. Until this time comes, attorneys should protect themselves by adopting procedures to define the scope of representation, monitoring clients’ business affairs, reevaluating the nature of representation as laws change, and informing clients about conflicts, risks, and implications of operating a cannabis company, and carefully documenting these warnings.
Wednesday, January 26, 2022
The question in the title of this post is prompted by all the press buzz about the decision by Amazon to formally endorse Rep Nancy Mace's States Reform Act. This New York Post piece, headlined "Amazon endorses GOP bill that would legalize marijuana on federal level," provides some context:
Amazon has endorsed a Republican-backed bill in Congress on Tuesday that would legalize marijuana on a federal level, leaving states to decide whether to prohibit or regulate it. Rep. Nancy Mace’s (R-SC) States Reform Act would remove cannabis as a federal Schedule I substance and introduce a new 3% federal tax on the substance.... “Every state is different and every state should be able to dictate their cannabis laws,” Mace told The Post in an interview. “This bill would get the federal government out of the way.”...
Mace, a freshman Congresswoman who previously worked for Donald Trump’s 2016 presidential campaign, told The Post that she was approached by Amazon representatives after she introduced the bill. She said the company was motivated to endorse her bill because legal issues around marijuana can make hiring difficult. “They’re looking at it from a workers perspective,” Mace said in an interview. “The prohibitions at the federal level really do affect their workforce.”
Amazon told Mace that it is not interested in selling marijuana on its website, according to the Congresswoman. “That is not their goal, not their intention,” Mace said of the prospect of Amazon pushing pot. “They said that right off the bat.” In June, Amazon stopped testing many job applicants for marijuana and said that it would support efforts to legalize the drug....
Mace expects Democrats, many of whom have supported weed legalization for years, to come out in support of her bill. She argued that Republicans are also likely to support her bill because it gives more power to states — and because weed legalization is extremely popular nationwide. “Even in my very red state of South Carolina, statewide, medical cannabis is at an approval rating of 70%,” she said. “If we’re going to do cannabis reform at the federal level, Republicans need to have a seat at the table.”
This lengthy new Forbes article, headlined "Republican Congresswoman Nancy Mace Is On A Mission To Legalize Cannabis — And Amazon Just Got Behind Her," discusses further Rep Mace, the States Reform Act, and some of the current political realities as of early 2022. I recommend the full piece, and here are some excerpts:
The cannabis industry also adores Mace and her bill, which is pro-business. (She proposes a 3% federal excise tax—compared to Schumer’s 10% tax—which would generate an estimated $3 billion in annual tax revenue by 2030.) Still, her bill is unlikely to become law, and Mace is under no pot-addled delusion that its passage is a sure thing. Her broader goal is to get as many Republicans as possible on board with cannabis reform and show the GOP that legalization is a good campaign issue in 2022 and beyond....
Mace’s bill also attempts to heal some of the inequities of America’s war on drugs, which disproportionately affects people of color. She estimates that if her bill were to pass, and some 2,800 federal prisoners incarcerated for non-violent cannabis crimes were released and another 1,100 or so people who get put in prison for similar crimes each year are not incarcerated, the government would save nearly $600 million over five years....
Cannabis legalization has historically been a progressive issue, but Mace wants to make it a Republican talking point. Kim Rivers, the CEO of Florida-based Trulieve, which has 160 dispensaries across eight states, welcomes Mace’s approach. “Cannabis is not a red or blue issue,” says Rivers. “And cannabis reform has done well consistently in conservative states. It sends a significant message that cannabis is not partisan.”...
Despite all of this momentum, Mace knows the States Reform Act is unlikely to go forward before the midterm elections, but her goal is to show a “proof of concept” that there are enough votes on the Republican side to get meaningful reform across the finish line in Congress.
When asked what it means that cannabis is now more popular than President Trump in red states—74% of Mississippians, for example, voted for the state’s medical marijuana ballot initiative while nearly 58% of Mississippians voted for Trump—she says it’s a signal to Republicans that they need to get on board with legalization.
“It means that if you don't do it, you're full of shit,” Mace says. “There's no reason not to do this. And if you are anti-marijuana, this is not forcing you to do it. It's not forcing your state to legalize it. But if it is legal in your state, then we're going to tax it and regulate it.”
January 26, 2022 in Business laws and regulatory issues, Campaigns, elections and public officials concerning reforms, Federal Marijuana Laws, Policies and Practices, History of Marijuana Laws in the United States, Recreational Marijuana Commentary and Debate, Who decides | Permalink | Comments (0)
Monday, January 24, 2022
I have recently seen two good new press reviews of the essential politics of federal marijuana reform as of January 2022 and of a key practical issue that has been a concern since the start of modern state marijuana reforms. Here are full headlines, links and excerpts from these pieces:
From Politico, "Big Weed is on the brink of scoring big political wins. So where are they?: Competing agendas have stifled the effectiveness of the burgeoning industry on Capitol Hill."
Marijuana advocates are stuck in the weeds. Cannabis policy has never had a rosier outlook on Capitol Hill: Democrats control both Congress and the White House, seven new states just legalized recreational marijuana, and the cannabis industry has gained powerful new allies in companies like Amazon and conservative groups like Americans for Prosperity that are backing federal reform. The industry has even lured powerful advocates like former GOP House Speaker John Boehner and former Democratic Senate Majority Leader Tom Daschle to help push its agenda.
But nearly one year into this Congress, not one piece of cannabis legislation has been sent to the president's desk. There is growing fear among advocates that the window to act is closing. Industry lobbyists and legalization advocates say the movement has been stymied by a lack of consensus on the legislative strategy. Liberal advocacy groups are pushing for a comprehensive overhaul of federal cannabis policies with the aim of helping people harmed by criminal enforcement, while industry groups are seeking any piecemeal policy victory that could provide momentum toward more sweeping changes.
“There are certain people who are willing to forgo any of it if they don’t get all of it,” said one marijuana lobbyist, speaking on condition of anonymity in order to candidly discuss the industry’s struggles. The lobbyist noted that such a viewpoint is not universally shared, causing a disagreement “that’s stunting the legalization effort.”
From Bloomberg, "U.S. Grapples With How to Gauge Just How High Cannabis Users Are"
“Everybody wants a cannabis breathalyzer — something like what we have for alcohol where you breathe into a device and it tells a THC level and whether that means you’re impaired or not,” said Jodi Gilman, an associate professor in psychiatry at Harvard Medical School and lead author of the imaging study. “But that’s not how it works for cannabis, we need a new paradigm.”
Companies have been trying to crack the stoned-test for a while. Hound Labs, which makes a marijuana breathalyzer, said in September it had raised $20 million to scale its product. Cannabix Technologies Inc. recently reported it had made headway creating a more portable device, while Lifeloc Technologies Inc. said it was finalizing the platform for a rapid marijuana breathalyzer that could be used for roadside testing.
There are concerns, however, that tests based on THC levels may be unfair to those who have it in their system but aren’t actually impaired. This can be the case for some who consumed cannabis days ago, or with frequent users who’ve built up a tolerance — who may use it for medical reasons. “You wouldn't want to penalize that person,” Gilman told me. “What this technology will do is differentiate impaired from not-impaired, which is different than distinguishing cannabis from no-cannabis.”
January 24, 2022 in Business laws and regulatory issues, Campaigns, elections and public officials concerning reforms, Federal Marijuana Laws, Policies and Practices, History of Marijuana Laws in the United States, Medical community perspectives | Permalink | Comments (0)
Friday, January 14, 2022
Natalie Fertig has this great new (and lengthy) article in Politico Magazine about the persistent challenges posed by illegal marijuana market in a country that for now has only half-legalized the cannabis plant. The full title of this piece highlights its themes: "‘Talk About Clusterf---’: Why Legal Weed Didn’t Kill Oregon’s Black Market. Legalization was supposed to take care of the black market. It hasn’t worked out that way." I recommend the piece in full, and here are excerpts:
People have grown marijuana illegally in southern Oregon for at least half a century. It was easy to conceal illicit activity in private woods and national forests when the nearest human could easily be a few miles away. But there’s nothing hidden about what’s going on now.
The Red Mountain Golf Course, a 24-acre plot of land just outside Grants Pass, the county seat, sold for just over half a million dollars in June 2021. Three months later, Josephine County Sheriffs and Oregon State Troopers raided the former golf course and seized more than 4,000 marijuana plants and arrested two people on charges of felony marijuana manufacture. It wasn’t an isolated incident. Around the same time, law enforcement seized 380 pounds of processed marijuana stuffed in a car abandoned at the scene of a crash. Cops also seized 7,600 marijuana and hemp plants, 5,000 pounds of processed marijuana and $210,000 in cash from two grow operations just outside Cave Junction. Two men were arrested and held for unlawful manufacture of a marijuana item and other charges.
While these eye-popping figures draw headlines, the raids are just a cost of doing business for the cartels, according to law enforcement officials. Many buy or lease six or seven properties, knowing that some might get shut down by the police. Like any smart entrepreneurs, the cartels budget for those losses....
The proliferation of unlicensed cannabis farms is scaring local residents and scarring the landscape. Personal wells have run dry and rivers have been illegally diverted. Piles of trash litter abandoned grow sites. Locals report having knives pulled on them, and growers showing up on their porches with guns to make demands about local water use. Multiple women say they’ve been followed long distances by strange vehicles. Locals regularly end conversations with an ominous warning: “Be careful.”...
Earlier in the year, the legislature passed a bill, sponsored by Republican state Rep. Lily Morgan, that increased penalties for growing cannabis illegally and gave state regulators the authority to investigate hemp growers.
Jackson County Sheriff Nate Sickler says the tougher rules for hemp cultivation and the money lawmakers funneled to local enforcement efforts are an excellent start. “If we’re able to get our positions funded, I really think we can make a significant impact [on] illegal marijuana,” said Sickler. “Are they going to go away? It’s probably never going to happen.”...
There are as many suggested solutions to southern Oregon’s weed problem as there are factors creating it. Some say tweaks to federal and state hemp regulations — and more money for law enforcement — will get the illicit grows under control. Others argue that only federal decriminalization will solve the problem, because it would reduce the market for illicit weed. Anti-legalization advocates, meanwhile, point to Oregon’s woes as proof that legalization doesn’t live up to its promise of eliminating the illicit market.
Wednesday, January 12, 2022
The title of this post is the title of this exciting event taking place online two weeks from today put on by the Drug Enforcement and Policy Center and The Center for New Revenue. As detailed at this registration page, the event will take place on Wednesday, Jan. 26, 2022 from Noon - 1:30pm. Here are the basics with the list of confirmed speakers:
States that legalize adult-use cannabis face many decisions as they set up a regulatory structure for the new industry. As all states impose excise taxes on recreational cannabis, the questions of how much to tax and how to tax come into focus.
Join the Drug Enforcement and Policy Center and the Center for New Revenue for a panel that will explore the evolving theory and practice of cannabis tax policy. Panelists will delve into a range of issues including the choice of an effective tax base (weight of flower and trim, THC amount, percentage of price) and the appropriate tax burden.
Ulrik Boesen, senior policy analyst, Tax Foundation
Hilary Bricken, attorney, Harris & Bricken
Benjamin Leff, professor, American University Law School
Pat Oglesby, founder, The Center for New Revenue
Shaleen Title, distinguished cannabis policy practitioner in residence, Drug Enforcement and Policy Center
Tuesday, January 11, 2022
Take a break, Delta 8, Delta 8, take a break ... we can check the laws, but we're still a ways away from legal clarity
I am gearing up to teach my marijuana seminar for the first time in two years, and that necessarily means having to prepare for new discussions about new issues in an arena where legal and marketplace reforms are always fast-moving. One brand new issue, for example, is the emergence of a wide array of Delta-8 THC products and all the legal uncertainty that they engender. (As my post title reveals, at least for hard-core REM fans, I cannot help but hum the great REM song Driver 8 whenever I think about Delta 8 issues.)
Usefully for me (and perhaps for others), I just saw this recent piece providing an overview of state laws and other matters related to Delta 8 THC products. Though industry-delta-friendly, this article still provides a helpful review of various basics under this full headline: "Delta-8 is Available in 28 States While Others Try to Ban It: Several U.S. states preemptively restrict or outright ban delta-8 THC as federal regulators swoop in to clarify its legality." Here are some excerpts from the lengthy piece:
Delta-8 THC has been a sensation in the country. Its popularity soared throughout 2020 and many believed its reign of euphoric bliss would continue into 2021 and beyond. However, the federal government and the DEA are swooping in to ruin all the fun.
In April, alone, several U.S. states either restricted or banned delta-8 THC, sparking outcry from users, companies, manufacturers, and vendors within the cannabis industry. So, why are U.S. states banning delta-8 THC? Which ones have already banned it? What have the federal government and the DEA got to do with this?....
Delta-8 is one of 113 cannabinoids found in varieties of cannabis (hemp or marijuana) and a variant of delta-9-tetrahydrocannabinol (THC). It’s psychoactive and intoxicating, causing a “high” when consumed. However, when compared to delta-9 THC, the effects are far milder and better suited to beginners looking to enjoy the euphoric effects without the side effects commonly associated with delta-9. Delta-8 THC can now be found in several product types such as distillates, vape cartridges, oils, and flower....
In 2018, the federal government under the Trump administration, signed the Agriculture Improvement Act (2018 Farm Bill), legalizing hemp and all hemp-derived cannabinoids.... However, in 2020, the DEA issued a controversial interim final rule that sought to bring the Farm Bill further in line with the Controlled Substances Act (CSA), spelling trouble for not only delta-8 but also for delta-10 THC.
Within this final rule, the DEA stated all “synthetically-derived tetrahydrocannabinols remain schedule I controlled substances”. Why is this significant and how is it related to delta-8? Well, in order for companies to have enough delta-8 THC in their products, it must be converted from cannabidiol (CBD) via a structural isomerization process conducted under laboratory conditions. This isomerization process takes CBD, alters its molecular structure, and turns it into delta-8. Since it’s produced by chemical or biochemical synthesis and not sourced straight from the hemp plant itself, the DEA believes delta-8 is a synthetic substance.....
Is delta-8’s safety in question? Yes. Delta-8’s safety is in question. Why? Because it’s a psychoactive and intoxicating delta-9 THC variant that’s recently exploded into an unregulated market with very little research verifying its effects.