Marijuana Law, Policy & Reform

Editor: Douglas A. Berman
Moritz College of Law

Friday, January 4, 2019

Spotlighting enduring challenges making marijuana social equity programs work

Oakland-cannabis-licensing-social-equity-program-attorney-advertisingStateline has this new piece, headlined "‘Cannabis Equity’ Runs Into Roadblocks," which highlights that good implementation, and not just good intentions, must be part of modern marijuana social equity programs.  Here are excerpts:

Now, as more states legalize recreational marijuana and the federal government moves away from incarcerating nonviolent drug offenders, several cities in California are trying to atone for decades of drug enforcement that fell disproportionately upon minorities.

They’ve created what are known as cannabis equity programs, meant to welcome more minority and low-income entrepreneurs into the now-legal industry. The programs provide business development, loan assistance and mentorships to eligible owners. Hundreds have applied in the past year. But “pot equity” has struggled with growing waitlists, and some participants allege that the programs aren’t fair to the people they’re meant to be helping....

The goal of “cannabis equity” is to lower the barriers to entry into the legal cannabis industry for people who were disproportionately impacted by the criminalization of marijuana. The programs base eligibility on a variety of factors, including marijuana convictions, residency in a heavily policed district and income.

Today, several city partnership programs require that established, non-equity businesses provide an equity business with space for several years rent-free. In exchange, the non-equity company receives faster processing for city approvals. Cities such as Sacramento plan to waive up to tens of thousands of dollars in application and permit fees for eligible cannabis businesses.

But pot equity has struggled to get going. Understaffing in San Francisco’s cannabis office has left a growing waitlist of applicants, and the city doesn’t expect to begin approving businesses until sometime in 2019, said Nicole Elliott, director of San Francisco’s Office of Cannabis. She could not be more specific on timing.

Some applicants argue that the waiting period has allowed other businesses to get an unfair head start. In Oakland, some pot equity businesses claim their incubator partners never followed through on the requirement to provide them with business development assistance or a space to operate....

Creating a program to atone for decades of unjust policing — on top of building the framework for a newly legal cannabis industry — is no easy task. Oakland is setting up a $3 million fund to provide additional capital assistance to pot equity businesses, Brooks said, but it remains unclear when the fund will become available.

San Francisco applicants have raised the same issue, said Elliott, the director of San Francisco’s Office of Cannabis. The office set up an investment fund to provide financial assistance to cannabis businesses, such as low-interest loans. But the city has yet to allocate money to the fund, Elliott said.

She said San Francisco will likely receive part of the $10 million that the state set aside for local cannabis equity programs in September, which could go toward the city’s cannabis investment fund. “There are equity applicants that need money now,” Elliott said. “We will advocate aggressively for that state funding.”

As of mid-December, San Francisco had 227 applicants that qualify for the equity program. Of those, about 110 want to join the city’s incubator partnership program and receive waived permit fees. Elliott said the city will begin approving applicants next year, but she could not say when. Applicants have criticized the lengthy timeline.

San Francisco’s Office of Cannabis, which just added two new staff members to bring the total to five, is tasked with reviewing permit applications and facilitating the equity program. Elliott said adding even more staff would speed things up. In the meantime, the city has established a partnership with the Bar Association of San Francisco to provide pro bono legal assistance to equity program participants.

Malcolm Mirage, an equity applicant in San Francisco, said the long wait has caused him to burn through capital at an alarming rate.  He partnered with MedMen, a household name in the cannabis industry that is publicly traded on the Canadian Securities Exchange.

MedMen agreed to provide business development aid and an incubation space for one of Mirage’s businesses. The company also helped him negotiate leases on two other spaces, and he struck a deal that gave him six months of free rent to obtain his permits and become operational.

Mirage figured that was plenty of time. But those six months came and went, and he’s now paying expensive leases on spaces that sit empty.  “I got out of jail for selling weed and now I’m trying to do this legally,” Mirage told Stateline.  “But I’m drowning right now. My businesses are going to be in a tremendous amount of debt if the city can’t get these licenses out in the next six months.”

January 4, 2019 in Business laws and regulatory issues, Race, Gender and Class Issues, Recreational Marijuana Commentary and Debate, Recreational Marijuana State Laws and Reforms, Who decides | Permalink | Comments (0)

Thursday, December 20, 2018

Prez Trump signs Farm Bill, officially legalizing hemp, which means a notable statement from the FDA Commissioner

Fda-gottlieb-1600b-e1503939617409a whole lot, but there are lots of complications as to what this means for the development of products using parts of the cannabis plant.  Right after the Farm Bill was signed into law, FDA Commissioner Scott Gottlieb released this lengthy statement highlighting some of these complications.  Here are excerpts:

Today, the Agriculture Improvement Act of 2018 was signed into law. Among other things, this new law changes certain federal authorities relating to the production and marketing of hemp, defined as cannabis (Cannabis sativa L.), and derivatives of cannabis with extremely low (less than 0.3 percent on a dry weight basis) concentrations of the psychoactive compound delta-9-tetrahydrocannabinol (THC). These changes include removing hemp from the Controlled Substances Act, which means that it will no longer be an illegal substance under federal law.

Just as important for the FDA and our commitment to protect and promote the public health is what the law didn’t change: Congress explicitly preserved the agency’s current authority to regulate products containing cannabis or cannabis-derived compounds under the Federal Food, Drug, and Cosmetic Act (FD&C Act) and section 351 of the Public Health Service Act. In doing so, Congress recognized the agency’s important public health role with respect to all the products it regulates. This allows the FDA to continue enforcing the law to protect patients and the public while also providing potential regulatory pathways for products containing cannabis and cannabis-derived compounds.

We’re aware of the growing public interest in cannabis and cannabis-derived products, including cannabidiol (CBD). This increasing public interest in these products makes it even more important with the passage of this law for the FDA to clarify its regulatory authority over these products. In short, we treat products containing cannabis or cannabis-derived compounds as we do any other FDA-regulated products — meaning they’re subject to the same authorities and requirements as FDA-regulated products containing any other substance. This is true regardless of the source of the substance, including whether the substance is derived from a plant that is classified as hemp under the Agriculture Improvement Act. To help members of the public understand how the FDA’s requirements apply to these products, the FDA has maintained a webpage with answers to frequently asked questions, which we intend to update moving forward to address questions regarding the Agriculture Improvement Act and regulation of these products generally.

In view of the proliferation of products containing cannabis or cannabis-derived substances, the FDA will advance new steps to better define our public health obligations in this area. We’ll also continue to closely scrutinize products that could pose risks to consumers. Where we believe consumers are being put at risk, the FDA will warn consumers and take enforcement actions.

In particular, we continue to be concerned at the number of drug claims being made about products not approved by the FDA that claim to contain CBD or other cannabis-derived compounds. Among other things, the FDA requires a cannabis product (hemp-derived or otherwise) that is marketed with a claim of therapeutic benefit, or with any other disease claim, to be approved by the FDA for its intended use before it may be introduced into interstate commerce. This is the same standard to which we hold any product marketed as a drug for human or animal use. Cannabis and cannabis-derived products claiming in their marketing and promotional materials that they’re intended for use in the diagnosis, cure, mitigation, treatment, or prevention of diseases (such as cancer, Alzheimer’s disease, psychiatric disorders and diabetes) are considered new drugs or new animal drugs and must go through the FDA drug approval process for human or animal use before they are marketed in the U.S. Selling unapproved products with unsubstantiated therapeutic claims is not only a violation of the law, but also can put patients at risk, as these products have not been proven to be safe or effective. This deceptive marketing of unproven treatments raises significant public health concerns, as it may keep some patients from accessing appropriate, recognized therapies to treat serious and even fatal diseases.

Additionally, it’s unlawful under the FD&C Act to introduce food containing added CBD or THC into interstate commerce, or to market CBD or THC products as, or in, dietary supplements, regardless of whether the substances are hemp-derived. This is because both CBD and THC are active ingredients in FDA-approved drugs and were the subject of substantial clinical investigations before they were marketed as foods or dietary supplements. Under the FD&C Act, it’s illegal to introduce drug ingredients like these into the food supply, or to market them as dietary supplements. This is a requirement that we apply across the board to food products that contain substances that are active ingredients in any drug.

We’ll take enforcement action needed to protect public health against companies illegally selling cannabis and cannabis-derived products that can put consumers at risk and are being marketed in violation of the FDA’s authorities. The FDA has sent warning letters in the past to companies illegally selling CBD products that claimed to prevent, diagnose, treat, or cure serious diseases, such as cancer. Some of these products were in further violation of the FD&C Act because they were marketed as dietary supplements or because they involved the addition of CBD to food.

While products containing cannabis and cannabis-derived compounds remain subject to the FDA’s authorities and requirements, there are pathways available for those who seek to lawfully introduce these products into interstate commerce. The FDA will continue to take steps to make the pathways for the lawful marketing of these products more efficient....

It should also be noted that some foods are derived from parts of the hemp plant that may not contain CBD or THC, meaning that their addition to foods might not raise the same issues as the addition of drug ingredients like CBD and THC. We are able to advance the lawful marketing of three such ingredients today. We are announcing that the agency has completed our evaluation of three Generally Recognized as Safe (GRAS) notices related to hulled hemp seeds, hemp seed protein and hemp seed oil and that the agency had no questions regarding the company’s conclusion that the use of such products as described in the notices is safe. Therefore, these products can be legally marketed in human foods for these uses without food additive approval, provided they comply with all other requirements and do not make disease treatment claims.

Given the substantial public interest in this topic and the clear interest of Congress in fostering the development of appropriate hemp products, we intend to hold a public meeting in the near future for stakeholders to share their experiences and challenges with these products, including information and views related to the safety of such products.

December 20, 2018 in Business laws and regulatory issues, Federal Marijuana Laws, Policies and Practices, History of Marijuana Laws in the United States, Who decides | Permalink | Comments (0)

Democrat wing of congressional Joint Economic Committee releases report on "The National Cannabis Economy"

Download (30)This week the Democrats of the US Congress' Joint Economic Committee released this interesting short report titled simply "The National Cannabis Economy." Here is how it gets started and its final passages:

The National Cannabis Economy

Cannabis, or marijuana, is the most commonly used illicit drug in the United States.  Though illegal at the federal level, states are taking action to legalize cannabis — from recreational use in states like Colorado and Maine to medical use in New Mexico and Florida.  A record 66 percent of Americans now support legalizing cannabis, a dramatic increase from just 12 percent in 1969.

The legalization of cannabis has significant implications for state economies, as well as the national economy.  The industry totaled more than $8 billion in sales in 2017, with sales estimated to reach $11 billion this year and $23 billion by 2022.  There were more than 9,000 active licenses for cannabis businesses in the U.S. in 2017, with the industry employing more than 120,000 people.

As more states move to legalize cannabis, these numbers will only continue to rise, potentially providing a new stream of revenue and jobs to local economies.  But to realize these benefits, policymakers must address conflicts between state and federal regulations that impede the growth of the cannabis economy....

Going Forward

There are a variety of proposals to fix the conflicts between state and federal cannabis laws.  Of these proposals, the bipartisan STATES Act has drawn support from President Trump and the cannabis industry.  The STATES Act would amend the Controlled Substances Act so that its provisions no longer apply to individuals acting in accordance with state laws. Importantly, the bill would also clarify that financial transactions with state-legal cannabis businesses are not drug-trafficking, creating a solution for financial institutions and the cannabis industry.  Several states could be next to legalize cannabis.  A bill to legalize cannabis is progressing through the New Jersey legislature, while New York lawmakers are preparing to consider similar legislation this year.  Similarly, newly elected governors in New Mexico, Minnesota, Illinois, and Connecticut have all voiced support for legal cannabis, positioning their states to consider the issue.

Conclusion

The growth of the cannabis economy presents opportunities for greater job creation, more tax revenue, and better patient care.  But current conflicts between state and federal law threaten to impede social and economic growth.  Going forward, lawmakers and regulators should prioritize solutions that promote greater research into the health effects of cannabis and reduce regulations that restrict the industry’s ability to conduct business.

December 20, 2018 in Business laws and regulatory issues, Campaigns, elections and public officials concerning reforms, Employment and labor law issues, Federal Marijuana Laws, Policies and Practices, Recreational Marijuana Commentary and Debate | Permalink | Comments (1)

Tuesday, December 11, 2018

Federal farm bill officially includes provisions to legalize "hemp" defined as the cannabis sativa plant with THC levels under 0.3%

65c04791337f8e561d0e508b808657a0One of many reasons I typically use the work "marijuana" on this blog and in other discussions of marijuana reform is because I think it is the word most directly and commonly associated with the version of the cannabis plant (or the parts of the plant) containing the chemical ingredient (delta-9 tetrahydrocannabinol or THC) that gets humans high from consumption. But for various sound reasons, other researchers and many advocates like to talk only about "cannabis" because this is the scientific name for the plant often called marijuana and because there are so many possible uses for and derivatives from that plant that have nothing to do with getting high. Of course, regular readers surely know all this, and yet it is worth reviewing given this notable news as reported by this Marijuana Moment piece: "The Final 2018 Farm Bill ... Will Legalize Hemp." Here are the basics:

The final text of the 2018 Farm Bill was released on Monday, and industrial hemp legalization made the cut. Votes to send the legislation to President Trump’s desk are expected this week.

The bipartisan provision, championed by Senate Majority Leader Mitch McConnell (R-KY), will enable U.S. farmers to cultivate, process and sell hemp, the market for which is now a multi-billion dollar industry.

Following the announcement last month that lawmakers in the Senate and House Agriculture Committees had reconciled their respective versions of the agriculture legislation — with hemp legalization in the mix — questions remained about a controversial provision in the Senate version that would ban people with felony drug convictions from participating in the hemp industry. But a compromise was reached and the final version will allow such individuals to work for hemp businesses after 10 years....

“While this Farm Bill is a missed opportunity, there are some good provisions,” Rep. Earl Blumenauer (D-OR) said in a press release. “One of those provisions is to roll back our senseless hemp prohibition.”

“Our forefathers would be rolling in their graves if they saw us putting restraints on a versatile product that they grew themselves. We have farmers growing thousands of acres of hemp in dozens of states across the U.S. already. You can have hemp products shipped to your doorstep. This is a mainstream, billion-dollar industry that we have made difficult for farmers. It’s past time Congress gets out of their way.”

Under the legislation, hemp would no longer be in the jurisdiction of the Justice Department. Rather, the U.S. Department of Agriculture will lightly regulate the crop. If the bill passes and President Trump signs it, hemp legalization will go into effect on January 1, according to VoteHemp.

Here is the definition of "HEMP" as set forth in this draft legislation: "The term ‘hemp’ means the plant Cannabis sativa L. and any part of that plant, including the seeds thereof and all derivatives, extracts, cannabinoids, isomers, acids, salts, and salts of isomers, whether growing or not, with a delta-9 tetrahydrocannabinol concentration of not more than 0.3 percent on a dry weight basis." In other words, if and when this bill becomes law, it will be possible to produce and sell, without violating federal law, "certain version of the "plant Cannabis sativa L. and any part of that plant, including the seeds thereof and all derivatives, extracts, cannabinoids" etc. This seems to me a very big deal, though one that also seems certain to create even more confusion about what is and is not allowed under federal law with respect to so-called "medical marijuana."

This recent lengthy CNBC artice, headlined "Hemp legalization included in new farm bill could 'open the floodgates' on nascent industry," provide a review of what enactment of this legislation could mean and how we got here. Here is a snippet:

Hemp is a cannabis cousin of marijuana but it contains low levels of THC, the chemical that produces a "high" for pot users. Industrial hemp is used to make everything from apparel, foods and pharmaceuticals to personal care products, car dashboards and building materials.

"The vast majority of the market right now is going for CBD products," said Brightfield Group's [Bethany] Gomez. "You can find some hemp seed-based beauty products or hemp in some cereals and things like that, and there's such usage on the fibers for like clothes and other industrial purposes, but that's really minimal right now."

Brightfield Group estimates the domestic hemp market could reach $22 billion in the next four years. The estimate factors in the hemp amendment in the farm bill becoming law....

"There are three words why we have hemp now, and those words are tobacco state Republicans," said Kristin Nichols, editor at Denver-based Hemp Industry Daily, a publication owned by MJBizDaily. "There's been strong support from lawmakers and politicians up and down in former tobacco states looking for a replacement crop."

The hemp provisions in the 2018 Farm Bill were in the Senate version of the legislation sponsored by Senate Majority Leader McConnell. The Kentucky Republican put himself on the joint Senate-House conference committee formed to hammer out the details of the final farm bill. "I know there are farming communities all over the country who are interested in this," McConnell said in June when discussing the hemp legalization legislation before the Senate Agriculture Committee. "Mine are particularly interested in it, and the reason for that is — as all of you know — our No. 1 cash crop used to be something that's really not good for you: tobacco. And that has declined significantly, as it should, given the public health concerns."

December 11, 2018 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, Political perspective on reforms, Who decides | Permalink | Comments (0)

Thursday, December 6, 2018

NYC Comptroller advocates for New York to pursue an "Equitable Cannabis Industry"

Hqdefault (1)New York City Comptroller Scott M. Stringer first caught my attention six months ago when he produced this notable  report titled "Estimated Tax Revenues from Marijuana Legalization in New York." Today, Comptroller Stringer has my attention again with this notable new 15-page report titled "Addressing the Harms of Prohibition: What NYC Can do to Support an Equitable Cannabis Industry." I recommend the document in full, and here is part of its introductory section:

Over the last several decades, the prohibition of cannabis has had devastating impacts on communities in New York City, extending beyond incarceration to often long-lasting economic insecurity: damaged credit, loss of employment, housing, student loans, and more.  Today, thousands of New Yorkers, overwhelmingly Black and Latinx, continue to endure the untold financial and social costs of marijuana-related enforcement, despite steps to decriminalize.

As New York joins neighboring jurisdictions in moving closer to legalizing cannabis for adult use, the State and the City must take action to ensure that the communities who have been most harmed by policies of the past are able to access the revenue, jobs, and opportunities that a regulated adultuse marijuana program would inevitably generate.

While the creation of a legal market brings the promise of new wealth, the uneven enforcement of marijuana policies in New York specifically and the lack of diversity in the cannabis industry generally foreshadow potential inequities in who will benefit — and, indeed, who will profit — from a legal adult-use cannabis industry. In anticipation of future legalization, this report, by New York City Comptroller Scott M. Stringer, offers a new neighborhood-by-neighborhood look at cannabis enforcement and charts a roadmap for building equity into the industry....

Together, the report findings show that the neighborhoods most impacted by prohibition are among the most economically insecure and disenfranchised in the city.  It is precisely these New Yorkers then — those to whom the benefits of legalization should be targeted — who are most likely to face barriers to accessing opportunities in the industry, in particular financing. In addition to reinvesting tax revenue from legalization in these disproportionally impacted communities, steps should therefore be taken to equip those impacted by prohibition to secure the funding and other resources needed to become cannabis licensees.  This report recommends that the City, in partnership with the State, develop a robust cannabis equity program to direct capital and technical assistance to impacted communities interested in participating in the adult-use industry.

December 6, 2018 in Business laws and regulatory issues, Campaigns, elections and public officials concerning reforms, Criminal justice developments and reforms, History of Marijuana Laws in the United States, Race, Gender and Class Issues, Recreational Marijuana Commentary and Debate, Recreational Marijuana State Laws and Reforms, Taxation information and issues | Permalink | Comments (0)

Wednesday, December 5, 2018

"Navigating cannabis legalization 2.0"

The title of this post is the title of this new Hill commentary authored by Beau Kilmer and Mark A.R. Kleiman. Here are excerpts:

With Michigan legalizing marijuana earlier this month, nearly 25 percent of the U.S. population now lives in states that passed ballot initiatives to allow businesses to produce and sell cannabis. And with a new Gallup poll showing that two in three Americans support legalizing cannabis use, other states are sure to follow, likely building pressure to change federal laws.

What’s harder to predict is what legalization will look like. Legalization is not a simple yes-or-no decision, and its consequences for health, public safety and social equity will be shaped by choices about production, prices and the enforcement of regulations.

As the next round of states debate legalization, they would do well to contemplate allowing state governments to control the wholesale prices and linking the price of cannabis to its potency....

High-potency illicit cannabis typically costs more than $10 per gram. The average legal-market prices in Washington and Colorado (after taxes) are now well below that, with highly potent but less fancy “bargain bud” available, with quantity discounts, for less than $3 per gram. Since even a bargain gram of cannabis flower in legalization states contains about 150 milligrams of THC—where 20 milligrams is an intoxicating dose for an occasional user—the cost of getting stoned in those states is less than a couple of dollars. That’s lower than the cost of getting drunk.

Lower prices won’t matter much to casual users, who don’t spend all that much on cannabis. But they can matter to the millions of daily or near-daily users, who account for about 80 percent of total consumption. For some of these individuals, cannabis has become a problem in their lives. The Substance Abuse and Mental Health Services Administration estimates 4 million Americans met clinical criteria for a cannabis use disorder in 2017. Access to cheaper, more potent products probably won’t help them.

Of course, lower prices also matter to producers of cannabis. Low prices mean low wages for workers and potential bankruptcy for all but the most efficient producers, with craft-scale production driven out by industrial farming and “mom and pop” retailing driven out by sellers with big budgets for marketing. This price drop is a problem for those who want the legal cannabis market to provide economic opportunities for the individuals and communities that have been disproportionately affected by cannabis prohibition.

One approach for preventing this steep decline in prices—and making it easier to control the price—is for the government to set minimum prices. (Many states already set minimum prices for tobacco and some jurisdictions also set them for alcohol). Those minimum prices, and the taxes collected by the state, could be based on THC content, just as federal taxation of distilled spirits is based on the level of alcohol....

As long as cannabis legalization is driven by voter initiatives, these rather complicated ideas are likely to be non-starters. If you’re running an initiative drive, anything that can’t be explained to a voter in 30 seconds is usually a problem. However, some states have begun to contemplate legalization through the traditional legislative process, which might give subtlety a chance.

National-level legalization, when and if it happens, would require an act of Congress. But if state-level legalization following the current model leads to the growth of large-scale economically powerful cannabis enterprises, that new industry might have the political muscle to freeze the existing model in place. For most commodities, good policy means bringing consumers the lowest possible price. That’s not true when it comes to “cannabusiness.”

December 5, 2018 in Business laws and regulatory issues, Recreational Marijuana Commentary and Debate, Recreational Marijuana State Laws and Reforms | Permalink | Comments (0)

Sunday, November 18, 2018

"Economic Impact of the Passage of the Medical Marijuana Law in the State of Florida"

The title of this post is the title of this new paper I just saw posted to SSRN coming from multiple authors from the University of Florida and Regional Economic Models, Inc. (REMI). Here is its abstract:

In 2016, Florida Governor signed House Bill 307 that expanded the State's Right to Try Act to include medical marijuana.  However, two years after this initiative, little is known about the economic impact of legal medical marijuana use (MMU) on the State of Florida.  The goal of this research is to forecast the total economic impact arising from MMU on Florida, from 2017 to 2025, using a dynamic input-output model.  Input data for the model were obtained from the Florida Office of Medical Marijuana Use.

The economic impact of MMU was measured in terms of gross state product, disposable personal income, migration, labor force, employment, and salaries and wages.  The legalization of medical marijuana in Florida is associated with an increase in all the economic indicators in 2017.  A positive trend for these indicators is observed from 2017 to 2025 except for migration with a negative trend starting in 2019.

November 18, 2018 in Business laws and regulatory issues, Medical Marijuana Commentary and Debate, Medical Marijuana Data and Research | Permalink | Comments (0)

Spotlighting the still-challenging politics that surround the intersection of marijuana reform, criminal justice reform and racial inequities

Today's must-read for both marijuana reform and criminal justice reform fans is this lengthy new Politico article fully headlined "Racial Justice and Legal Pot Are Colliding in Congress: The latest fight over criminal justice reform is over allowing felons access to newly legal aspects of the cannabis industry. Lawmakers are getting woke — slowly." I recommend this piece is full, and here are some extended excerpts:

Thanks to Senate Majority Leader Mitch McConnell, the [Farm] bill includes an amendment that would permanently remove hemp from the list of federally banned drugs like heroin and cocaine, freeing hemp from the crippling legal stigma that has made it economically unviable for the past four decades.  But that amendment also includes a little-noticed ban on people convicted of drug felonies from participating in the soon-to-be-federally-legal hemp industry.

Added late in the process, apparently to placate a stakeholder close to McConnell, the exception has angered a broad and bipartisan coalition of lawmakers, hemp industry insiders and religious groups who see it as a continuing punishment of minorities who were targeted disproportionately during the War on Drugs and now are being denied the chance to profit economically from a product that promises to make millions of dollars for mostly white investors on Wall Street....

[L]awmakers like McConnell, who have discovered the economic benefits of relaxing prohibitions on products such as hemp, have nevertheless quietly found ways, like the Farm Bill felon ban, to satisfy the demands of their anti-legalization constituents, to the chagrin of pro-cannabis lawmakers and activists. After POLITICO Magazine reported on the drug-crime felon ban in August, three senators — Cory Booker (D-New Jersey), Rand Paul (R-Kentucky), and Jeff Merkley (D-Oregon) — wrote to Senate leadership demanding the removal of the ban, citing its “disparate impact on minorities,” among other concerns.

“I think there’s a growing recognition of the hypocrisy and unfairness of our nation’s drug laws, when hundreds of thousands of Americans are behind bars for something that is now legal in nine states and something that two of the last three Presidents have admitted to doing,” Booker told POLITICO Magazine. “If we truly want to be a just and fair nation, marijuana legalization must be accompanied by record expungement and a focus on restorative justice.”...

[The] once-radical notion that felons ought to gain priority for entry into a newly legal industry — instead of being shut out — has quietly gained bipartisan support on Capitol Hill, albeit not among Republican leadership.  In the House, this mounting opposition to the continuing punishment of felons first cropped up in September when the Judiciary Committee passed its first pro-marijuana bill.  It would expand access to scientific study of the cannabis plant, a notion agreed-upon by marijuana’s supporters and detractors alike.  However, Democrats almost killed the bill because it included language that barred felons (and even people convicted of misdemeanors) from receiving licenses to produce the marijuana.

Felon bans are commonplace in legal marijuana programs.  Every state has some version of it, but most of them have a five- or 10-year limit.  But the felon bans in both the Senate’s Farm Bill and the House’s marijuana research bill are lifetime bans, and the House bill includes misdemeanors, too. “Any restriction on misdemeanors goes in the exact contrary direction of the Second Chance Act,” said Rep. Jerry Nadler (D-New York), who will become chairman of the Judiciary Committee in January.  His criticism was echoed by Steve Cohen (D-Tennessee), who sought to have the misdemeanor language struck from the bill until its sponsor, Matt Gaetz (R-Florida), promised to address that language when it comes to the House floor.

In the Senate, the movement to protect the legal marijuana trade has taken the form of the proposed bipartisan Gardner-Warren STATES Act, which would maintain the status quo of federal non-interference of state-legal programs that was upended when then-Attorney General Jeff Sessions repealed the Cole Memo, an Obama-era document that outlined a hands-off approach to state-legal programs.  Booker’s Marijuana Justice Act would adopt California-style principles and apply them federally, going far beyond the STATES Act, removing marijuana from Schedule I (defined as having no medical value and a high risk of abuse) and eliminating criminal penalties for marijuana.  But unlike other pro-marijuana bills, it would also deny federal law-enforcement grants to states that don’t legalize marijuana; direct federal courts to expunge marijuana convictions; and establish a grant-making fund through the Department of Housing and Urban Development for communities most affected by the War on Drugs.

Booker’s bill has become popular among Senate Democrats.  Ron Wyden, Kirsten Gillibrand, Bernie Sanders, Kamala Harris, Jeff Merkley and Elizabeth Warren have signed on as co-sponsors — a list that looks a lot like a lineup of presumed candidates for the 2020 Democratic presidential primary.  “For too long, the federal government has propped up failed and outdated drug policies that destroy lives,” Wyden told POLITICO Magazine.  “The War on Drugs is deeply rooted in racism.  We desperately need to not only correct course, but to also ensure equal justice for those who have been disproportionately impacted. People across America understand and want change. Now, Congress must act.”

Recent polling shows that Americans agree with Wyden — to a point.  There is a widespread acceptance of legalizing marijuana.  Gallup has been tracking this number since 1969, when only 12 percent of Americans believed in legalizing it; in October, Gallup put the number at 64 percent, the highest ever number recorded.  Pew says it is 62 percent, also its highest number ever. 

But there is far less acceptance of the idea that the War on Drugs has had an adverse impact on poorer, minority communities, or that there should be some form of compensation in terms of prioritized access to the new industry. A  poll conducted by Lake Research Partners, a progressive DC-based polling firm, earlier this year on the “Politics of Marijuana Legalization in 2018 Battleground Districts” found that 62 percent of the 800 likely voters surveyed agreed with the idea “we need legalization to repair the financial and moral damage of the failed War on Drugs.”  However, when the pollsters added a racial component to this message — whether the respondents felt that the marijuana prohibition “unfairly target[s] and destroy[s] minority communities” — only 40 percent found that message to be “very convincing.”...

[M]any members of the Congressional Black Caucus have been slow to support marijuana legalization. But the CBC finally made its position on this issue clear in June when its 48-member caucus voted in an “overwhelming majority” to support policies beyond mere decriminalization: “Some of the same folks who told African Americans ‘three strikes and you’re out’ when it came to marijuana use and distribution, are now in support of decriminalizing the drug and making a profit off of it,” CBC Chairman Cedric L. Richmond, Democrat from Louisiana said at the time. “The Congressional Black Caucus supports decriminalizing marijuana and investing in communities that were destroyed by the War on Drugs…” 

Arguments for legalizing marijuana haven’t been entirely persuasive to sway many in the conservative black community, but re-framing it in the context of civil rights has brought many around to this new way of thinking. “What is moving conservative black and brown folks is this idea that we’re on the horizon of marijuana legalization,” according to Queen Adesuyi of the Drug Policy Alliance. “So the idea is in order to do this in a way that is equitable and fair, you have to start on the front end of alleviating racially biased consequences of prohibition while we’re legalizing — and that means expungement, re-sentencing, community re-investment, and looking at where marijuana tax revenue can go, and getting rid of barriers to the industry.”

Now that Democrats have won control of the House, co-founder of the Cannabis Caucus, Rep. Earl Blumenauer (D-Oregon), is poised to implement his blueprint for how the House under Democratic leadership would legalize marijuana at the federal level.  Racial justice is front-and-center in that plan.  The memo he sent to Democratic leadership reads in part, “committees should start marking up bills in their jurisdiction that would responsibly narrow the marijuana policy gap — the gap between federal and state marijuana laws — before the end of the year. These policy issues… should include: Restorative justice measures that address the racial injustices that resulted from the unequal application of federal marijuana laws.”

Cross-posted at Sentencing Law & Policy

November 18, 2018 in Business laws and regulatory issues, Campaigns, elections and public officials concerning reforms, Criminal justice developments and reforms, Federal Marijuana Laws, Policies and Practices, Polling data and results, Race, Gender and Class Issues, Who decides | Permalink | Comments (0)

Sunday, November 11, 2018

"Owning Marijuana"

The title of this post is the title of this new article authored by John G. Sprankling now available via SSRN. Here is its abstract:

Legal marijuana is the fastest-growing industry in the United States.  Tens of thousands of new businesses have arisen to meet the demand created by over 34 million Americans who use marijuana.  And the millions of pounds of marijuana grown, processed, and sold this year will generate more than $11 billion in revenue.  This industry is premised on the assumption that marijuana ownership will be protected by law.  But can marijuana be owned?  This Article is the first scholarship to explore the issue.

Federal law classifies marijuana as contraband per se in which property rights cannot exist.  Yet the Article demonstrates that marijuana can now be owned under the law of most states, even though no state statute or decision expressly addresses the issue.  This conflict presents a fundamental question of federalism: Can property rights exist under state law if they are forbidden by federal law?  The Article explains why federal law does not preempt state law on marijuana ownership.

This creates a paradox: state courts and other state authorities will protect property rights in marijuana, but their federal counterparts will not.  The Article analyzes the challenges that this hybrid approach to marijuana ownership poses for businesses and individuals.  It also examines the fragmented status of marijuana ownership in the interstate context, where business transactions involve states with conflicting approaches to the issue.

November 11, 2018 in Business laws and regulatory issues, Federal Marijuana Laws, Policies and Practices, Who decides | Permalink | Comments (0)

Friday, November 2, 2018

New Hampshire commission produces massive study report on marijuana legalization

Download (25)As reported in this local article, a "commission studying marijuana legalization in New Hampshire released its 264-page report with 54 recommendations that form a potential blueprint should state legislators pursue bills to legalize cannabis for adult, recreational use."  Here is a partial summary of the massive report from the press piece:

Though it takes no position on legalization, the commission produced a framework for marijuana legalization, starting with recommending lawmakers refer to it as cannabis.

Recommendations mirror some practices in the eight states that have legalized recreational pot. They include limiting possession to 1 ounce for adults (21+) and up to 5 grams of concentrate, prohibiting public indoor or outdoor consumption, allowing towns and cities an "opt-in" provision, and banning marijuana smoking lounges or in a similar restaurant or business.

Marijuana legalization could generate up to $58 million for the state. But that is the high end, notes Rep. Patrick Abrami, the commission chairman. The report cites low end range being $15.2 million to $26.9 million, and the high range being $32.7 million to $57.7 million.

It recommends creation of a “pathway” for existing therapeautic cannabis centers, which are now non-profit by law, to become for-profit organizations -- with the intent that they may enter the “adult use” market. Any proposed home cultivation should limit six plants (three mature) per person, with that limit going to 12 plans (six mature) per household.

The full report is available at this link, and here is a portion of its extended executive summary:

Despite a number of states legalizing cannabis, many important issues remain unresolved as New Hampshire contemplates legalization.  New Hampshire banks may still be reluctant to have banking relationships with marijuana businesses because of the federal position, potentially making any commercialization a cash-only industry. Many companies are working on a roadside marijuana sobriety test similar to the breathalyzer, but there is still no certified device to detect marijuana impairment. Workplace issues surrounding marijuana use and impairment are impacting businesses in states that have legalized and states that have not.  Revenue is necessary to fund public education campaigns key to safe use and to fund substance misuse prevention and treatment.  There is a need to fund and conduct research and data collection to monitor effects on health, driving while impaired, workplace safety, crime rates, usage rates, school performance, and impacts on quality of life and the NH state brand.  Vaping marijuana products has become wide-spread among our middle school, high school, and college students and needs to be addressed.  All of these facts are indisputable and viewed as such by all Commission members....

Finally, speakers from every legalized state warned that for every positive claim about marijuana, there is a negative claim that can be made.  We found this to be true and decided to carefully select high quality peer reviewed studies to present in this report rather than draw conclusions.  The studies are grouped into four categories; health, relationship to opioid misuse, youth and young adult use, and public safety. For each topic, multiple studies with abstracts are presented.  The Commission thought it important that the executive and legislative branch of NH government as well as all the citizens of NH hear both sides of the marijuana legalization argument. Therefore, the studies are further classified as those in support of legalization and those opposed to legalization.

November 2, 2018 in Business laws and regulatory issues, Recreational Marijuana Commentary and Debate, Recreational Marijuana State Laws and Reforms, Who decides | Permalink | Comments (0)

Thursday, September 27, 2018

"Criminal Conviction Restrictions for Marijuana Licensing"

Download (21)The title of this post is the title of this interesting "policy brief" authored by Allie Howell at the Reason Foundation.  This web discussion provides this summary of the document's coverage: 

Criminal conviction restrictions are justified as one way to ensure that the legal marijuana market will not be used to divert drugs out of state, to minors, or to fund criminal enterprises.  But using past behavior as a predictor for future actions is an imperfect measure.  It is impossible to determine how exactly these restrictions contribute to public safety since they are always coupled with other regulations.  We do know, however, that there are other ways to facilitate a functioning legal market using regulations that are not subject to prediction error.  Security requirements, marijuana tracking systems, and bookkeeping requirements deter criminal behavior without using an applicant’s past to make assumptions.

In addition to uncertainties that criminal conviction restrictions are the best way to ensure a functioning legal market, it is also important to consider the costs of these restrictions.  Criminal conviction restrictions reduce entry into the legal marijuana industry.  By excluding drug criminals, conviction restrictions may fundamentally undermine the goals of marijuana legalization by forcing some to stay in the black market.  Having a safe legal market is useless if the black market is still the primary supplier of marijuana.

Given the hypocrisy of these criminal conviction regulations, it is not surprising that some states and localities have adopted policies to help those negatively impacted by previous drug policies enter the marijuana industry.  Equity programs, however, will only help a chosen few priority applicants.  Fundamentally opening up employment opportunities in the marijuana industry by reducing conviction restrictions has the potential to help many people who have been impacted by the drug war.

September 27, 2018 in Business laws and regulatory issues, Criminal justice developments and reforms, Race, Gender and Class Issues, Recreational Marijuana Commentary and Debate | Permalink | Comments (0)

Notable groups set forth notable set of principles for marijuana reform as New Jersey debates legalization

Nj-potThe on-going debate over potential marijuana reform in New Jersey is continuing to generate lots of interesting and thoughtful discussion concerning just how states ought to approach legalizing and regulating marijuana.   In that vein, I was interested to see this recent press release from Americans for Prosperity – New Jersey titled "AFP-NJ Supports Principles for Safe and Responsible Marijuana Reform" in conjunction with this document titled "Seven Principles To Guide A Successful And Well-Regulated Marijuana Market." Here are parts of the press release:

Americans for Prosperity – New Jersey (AFP-NJ) ... announced that it has co-signed a set of principles with the Reason Foundation’s Drug Policy Project regarding the state’s effort to legalize marijuana. If passed, S- 2703, the New Jersey Marijuana Legalization Act would legalize possession and personal use of marijuana for New Jerseyans over the age of 21 and would create the Division of Marijuana Enforcement and licensing structure.

Erica Jedynak, State Director of Americans for Prosperity – New Jersey issued the following statement in support of components of S- 2703:

“For too long, New Jerseyans have had their lives upended due to non-violent offenses like the recreational use of marijuana.  In partnership with the Reason Foundation’s Drug Policy Project, we encourage lawmakers to follow the policy principles outlined for a successful and well-regulated marijuana market.  These principles will help our state exercise its constitutional right to create a safely regulated marijuana market that spares generations of New Jerseyans from getting trapped in an endless and senseless cycle of incarceration.  While S-2703 is not perfect in its current form, it makes good strides toward reshaping our criminal justice system and bringing it into the 21st century.  Eventually, AFP-NJ hopes that a fully-realized effort to legalize recreational marijuana enhances public safety, provides second chances, and is free of cronyism and overregulation.”

Dr. Adrian Moore of Reason issued the following statement in support of components of S- 2703:

“As states move to legalize medical and adult use marijuana, it is vital that sensibly regulated free and competitive legal markets emerge to entirely replace black markets and all their ills.  We are focused on helping to learn and adopt best practices and informed understanding of how markets work to the legislative and regulatory process of legalizing marijuana.” 

The articulation of "Seven Principles To Guide A Successful And Well-Regulated Marijuana Market" makes for an interesting short read, and here are the listed "principles" without the accompanying paragraph of explanation:

1.  Recognize There Is A Limit To The Tax Burden The Industry Can Bear.

2.  Do Not Place Unnecessary Limits On The Number Of Licenses.

3.  Award Licenses Based On Competency And Business Acumen.

4.  Allow Business Owners To Operate Within A Scale And Structure They Can Manage.

5.  Establish Parameters For Local Governments.

6.  Regulations Based On Evidence And Allowing Alternative Approaches.

7.  Do Not Penalize People For Acts That Are No Longer Crimes.

September 27, 2018 in Business laws and regulatory issues, Political perspective on reforms, Recreational Marijuana Commentary and Debate, Recreational Marijuana State Laws and Reforms, Taxation information and issues | Permalink | Comments (0)

Friday, September 7, 2018

In Ohio, "cannabis is basically regulated like plutonium"

I could not resist spotlighting this new local article about the slow roll-out of Ohio's medical marijuana program due to its use of a great quote in its headline, "'Cannabis regulated like plutonium': Security measures causing delays in marijuana launch date." Here is some context for the quote:

Ohio's Medical Marijuana program was originally supposed to launch on Sept. 8. For months, it's been clear that delays with licensing and construction for the new facilities meant patients wouldn't be able to get medical products produced in Ohio until months after the initial start date, potentially as late as early 2019.

For an industry that's planning to be the business of the future, required security measures sound like they're from an old-fashioned action movie. Some of the basic procedures medical marijuana companies will have to follow include "unmarked cars, travel point A to point B, randomized routes, manifests before and after delivery," explained Frantz Ward LLP Attorney Tom Haren....

"I think that cannabis is basically regulated like plutonium," said Cleveland School of Cannabis Dean of Instruction and Student Success Jacob Wagner.  He says plants are tracked "from seed to sale," making sure nothing gets diverted to the black market.  When his school's students graduate and become medical marijuana industry employees, they'll wear state-required badges, and their facilities will be watched around the clock through redundant security systems, accessible to regulators in Columbus.

"It's designed to also make sure that every product is tested, every product is properly packaged and properly labeled before it reaches the end consumer, the patient," said Wagner. 

"The worst thing for the program would be some type of criminal activity of some kind of adulterated product making its way into the market and into the hands of the patient," said Haren.

September 7, 2018 in Business laws and regulatory issues, Medical Marijuana Commentary and Debate, Medical Marijuana State Laws and Reforms | Permalink | Comments (0)

Wednesday, July 11, 2018

"Guns N’ Ganja: How Federalism Criminalizes the Lawful Use of Marijuana"

Guns-and-mmjThe title of this post is the title of this notable new article authored by Ira Robbins now available via SSRN.  Here is its abstract:

Federalism is a vital tenet of our Republic.  Although federal law is the supreme law of the land, our Constitution recognizes the integral role that state law plays in the national scheme.  Like any pharmaceutical drug that withstands rounds of clinical testing, state law functions as a laboratory in which Congress can evaluate and potentially adopt novel policies on a nation-wide basis.  Most of the time, federal and state law exist harmoniously, complementing one another; other times, however, the two systems clash, striking a dissonant chord.

In the United States, state marijuana laws are currently on a crash course with federal marijuana law, exemplifying the discordant consequences our dual-system of laws sometimes generates.  Eight states and the District of Columbia have legalized recreational marijuana use, yet under the Controlled Substances Act (“CSA”) marijuana remains illegal in the eyes of federal law. Mere confusion concerning the legality of marijuana is not the only consequence, however.  One notable casualty ensuing from the battle of the mutually exclusive federal and state marijuana laws is the deprivation of rights belonging to the unsuspecting, average citizen.

The CSA establishes a schedule of drugs, and various federal regimes — such as entitlement programs and welfare benefits — impose compliance with the CSA as a necessary antecedent for conferral of those benefits.  For example, although possessing a firearm is a fundamental right under the Second Amendment, citizens who wish to lawfully smoke marijuana can no longer avail themselves of this fundamental right. Section 922(g)(3) of the Gun Control Act prevents users of Schedule I drugs pursuant to the CSA — irrespective of state law — from possessing or owning a firearm. Marijuana, despite its lack of potential for addiction, plethora of medical benefits, and disconnect from violence, has always been a Schedule I drug — essentially deemed more addictive and dangerous than methamphetamine, a Schedule II drug. Unknowing, ordinary citizens are consequently caught in this legal black hole, contemplating how conduct can be both lawful and unlawful.

This Article proposes a simple solution to a complex problem: deschedule marijuana.  The Article first surveys the past, observing that the Nixon Administration’s placement of marijuana in Schedule I rang of racial undertones, and then examines the present, noting the majority of states that have legalized medicinal marijuana and the numerous anecdotal reports of its alleviating properties.  Further, enforcing § 922(g)(3) against individuals who consume marijuana lawfully pursuant to state law simultaneously overreaches and under-reaches, failing to target the violent criminals that Congress initially sought to apprehend.  Thus, the federal government’s insistence on maintaining marijuana in Schedule I undermines principles of federalism and prevents law-abiding citizens from fully exercising their constitutional right to own a firearm.

July 11, 2018 in Business laws and regulatory issues, Federal Marijuana Laws, Policies and Practices, Medical Marijuana Commentary and Debate, Recreational Marijuana Commentary and Debate | Permalink | Comments (0)

Monday, July 9, 2018

Comparing financial impact of cannabis boom in Canada to "the dot-com mania of the late 1990s"

I have long thought that the economic development potential of marijuana reform could be one big reason the movement has staying power.  Against that backdrop, this new New York Times article about economic (over?)excitement in Canada really struck me because of the comparison to the dot-com boom. The piece is headlined, "Legal Marijuana Is Coming to Canada. Investors Catch the Buzz."  Here is an excerpt:

A financial boom not seen since the dot-com mania of the late 1990s has overtaken Canada. The legalization of recreational marijuana, scheduled for this autumn, is not only a momentous social change and public health challenge, but also a rare opportunity for entrepreneurs like Mr. Asi to be in on the birth of what they hope will become a multibillion-dollar industry.

Early signs of a boom abound: Marijuana growers have plowed millions into investments that, without having recorded profits yet, have stock-market values measured in billions. Down-on-their-luck towns like Chesterville, Ontario, hope that marijuana will reverse economic decline. Former politicians and law-enforcement officials who once opposed legalizing recreational marijuana have now joined or formed companies to cash in on it.

Some provincial governments forecast that tax revenue from marijuana sales will help balance their budgets. And companies offering every kind of service or product — from real estate to packaging — are all out for a piece of the action....

Mr. Trudeau’s government portrayed the legalization of recreational marijuana — Canada has had a medical marijuana system since 2001 — as a way to wipe out the black market, not as a potential job creator or moneymaker for either the government or investors. In effect, he promised a system in which marijuana would be available, but not promoted.

As a result, the federal government will license growers in Canada, and provinces will decide how it is sold to consumers. In some provinces, notably Alberta, the government went with privately operated shops. Others, like Ontario and Quebec, will essentially adopt a variation of the system of government-owned stores that has been used for alcohol sales since Prohibition ended.

Under regulations recently released, marijuana will generally be treated more like cigarettes than alcohol. Advertising will be severely restricted — as will the ability of Canada’s marijuana makers to turn themselves into household brand names. Packages must be uniform and plain, aside from vivid, yellow health warnings and tiny logos. Even baseball caps, T-shirts and all other logo-laden giveaways promoting marijuana brands will not be permitted....

Cam Battley, who once worked in the pharmaceutical industry and who is now the chief corporate officer of Aurora Cannabis (market value: 5.6 billion Canadian dollars; losses in the first part of this year: 20 million dollars), acknowledged that the soaring values of marijuana companies may not be justified in every case. But he also rejected suggestions that the dreams surrounding the industry may, well, go up in smoke. “People should be cautious and do their homework on the cannabis sector,” Mr. Battley said. “We’ve become a mainstream industry in Canada. On this, we’re not seen as a wild and crazy country. I think the world trusts Canada to get cannabis right.”

July 9, 2018 in Business laws and regulatory issues, International Marijuana Laws and Policies | Permalink | Comments (0)

Monday, July 2, 2018

"Mitch McConnell: Drug Warrior, CBD Champion?"

McConnell-bill-would-legalize-hemp-944x531The title of this post is the headline of this effective Rolling Stone article which does a nice job explaining the intricacies of the connections between hemp and CBD product and marijuana and why Senate Majority Leader Mitch McConnell may be greasing the path toward a CBD-friendly world.  I recommend the piece in full, and here are some key excerpts:

CBD’s legality is complicated, to say the least. Without getting into the mind-numbing specifics, let’s just say that reasonable people disagree about whether it is possible for any CBD to be legal, and shops selling CBD products in states like Indiana and Tennessee have been raided by local law enforcement. So in order for mainstream retailers to feel comfortable carrying CBD products and Kentucky’s farmers to subsequently cash in on the CBD craze, McConnell put together legislation making it official. Though he’s focused his hemp legalization rhetoric on helping farmers and bland-sounding industrial products, his true intentions became abundantly clear about two weeks ago, when Sen. Chuck Grassley (R-IA) proposed an amendment that would exclude CBD and other major compounds (called cannabinoids) from the definition of legal hemp.

McConnell shot the proposal down, saying, “I’ve declined to include suggestions that would undercut the essential premise of the bill, namely that hemp and its derivatives should be a legal agricultural commodity.” At no point did he refer directly to the “derivative” that was up for discussion. But anyone paying close attention understood what he was talking about.

“McConnell’s omission of CBD is not a denial of it. It’s simply a tactical political move,” says Carl Cameron, a former Fox News commentator who now works for New Frontier Data, a D.C.-based firm that provides information on the cannabis industry to investors. “He’s trying to help potential supporters avoid criticism in places where opposition to marijuana might be misconstrued and then undermine support for hemp.”

Leslie Bocksor, who runs the cannabis consulting firm Electrum Partners, agrees that McConnell has downplayed the fact that CBD is a primary motivation for legalizing hemp so as to fly below the radar of anti-pot donors and voters. “This is just a way for McConnell to be able to move this forward without taking the political risk in talking about what’s going on, which is, yes, CBD is in so much demand that the supply can’t possibly equal the demand any time in the foreseeable future,” Bocksor says. “This is part of the Kabuki theater of the political environment we’re in today.”

Bocksor himself has embraced this kind of winking reference – hemp as a euphemism for CBD – as a business strategy. For the past few years, he’s been advising the companies he works with to avoid mentioning CBD directly or making any medical claims about what the product can do in order to avoid interference from law enforcement or warning letters from the federal government. Label everything as “hemp extract,” Bocksor says, and the consumer will know you mean CBD, as well as what kinds of health benefits can be expected.

Culturally, hemp has long been seen as a taller and more fibrous cannabis plant than marijuana, but the legal distinction is based only on THC content. Once CBD started to enter the mainstream consciousness about five years ago, pot farmers in states like Colorado and California began to breed strains of cannabis that were high in CBD but contained so little THC that they could be reclassified as “hemp.” Around the same time, the 2014 Farm Bill created a pilot program where state departments of agriculture and universities could register farmers to grow “hemp” — meaning, cannabis that was less than 0.3 percent THC. McConnell’s home state of Kentucky is the second biggest producer of hemp under this program – behind only Colorado. And while most people believe that the hemp pilot program in the 2014 Farm Bill was not created with the intention of causing a boom in CBD products, that is exactly what happened....

For now, the legal status of CBD is still murky. But with McConnell’s support, there is a good chance that the House’s version of the Farm Bill will include a provision to legalize hemp-derived CBD, and potentially open the door a world where you can find CBD soaps and CBD tinctures on the shelves at Target and CVS.

July 2, 2018 in Business laws and regulatory issues, Federal Marijuana Laws, Policies and Practices, History of Marijuana Laws in the United States, Who decides | Permalink | Comments (0)

Monday, June 25, 2018

Formal FDA approval for Epidiolex means some part of the federal government finds some part of cannabis plant has "accepted medical use"

Download (1)This new CNN piece, headlined "FDA approves first cannabis-based drug," reports on the big news from the federal government concerning a very specific form of medical marijuana. Here are the details:

The US Food and Drug Administration approved a cannabis-based drug for the first time, the agency said Monday. Epidiolex was recommended for approval by an advisory committee in April, and the agency had until this week to make a decision.

The twice-daily oral solution is approved for use in patients 2 and older to treat two types of epileptic syndromes: Dravet syndrome, a rare genetic dysfunction of the brain that begins in the first year of life, and Lennox-Gastaut syndrome, a form of epilepsy with multiple types of seizures that begin in early childhood, usually between 3 and 5.

"This is an important medical advance," FDA Commissioner Dr. Scott Gottlieb said in a statement Monday. "Because of the adequate and well-controlled clinical studies that supported this approval, prescribers can have confidence in the drug's uniform strength and consistent delivery."

The drug is the "first pharmaceutical formulation of highly-purified, plant-based cannabidiol (CBD), a cannabinoid lacking the high associated with marijuana, and the first in a new category of anti-epileptic drugs," according to a statement Monday from GW Pharmaceuticals, the UK-based biopharmaceutical company that makes Epidiolex....

The FDA has approved synthetic versions of some cannabinoid chemicals found in the marijuana plant for other purposes, including cancer pain relief. Justin Gover, chief executive officer of GW Pharmaceuticals, described the approval in the statement as "a historic milestone." He added that the drug offers families "the first and only FDA-approved cannabidiol medicine to treat two severe, childhood-onset epilepsies."

"These patients deserve and will soon have access to a cannabinoid medicine that has been thoroughly studied in clinical trials, manufactured to assure quality and consistency, and available by prescription under a physician's care," Gover said. Epidiolex will become available in the fall, Gover told CNN.  He would not give any information on cost, saying only that it will be discussed with insurance companies and announced later....

It's an option for those patients who have not responded to other treatments to control seizures.  According to the Epilepsy Foundation, up to one-third of Americans who have epilepsy have found no therapies that will control their seizures. Shauna Garris, a pharmacist, pharmacy clinical specialist and adjunct assistant professor at the University of North Carolina's Eshelman School of Pharmacy, said the drug is effective and works somewhere between "fairly" and "very well." She has not used Epidiolex in her own clinical practice and was not involved in the development of the drug but said she's not sure it will live up to "all of the hype" that has surrounded it....

As part of the FDA's review of the medication, the potential for abuse was assessed and found to be low to negative, according to Gover. Still, this approval comes as the White House is said to be reconsidering federal prohibition of marijuana and as more and more states approve it for recreational and medicinal use. Gover said the approval signals "validation of the science of cannabinoid medication."

As the title of this post highlights, this news serves as still further proof of the misguided placement of marijuana as a Schedule I drug under the Controlled Substances Act defined as having "no currently accepted medical use in treatment in the United States." But, it should also be realize that this news serves as proof that the federal government, even without any reform to the CSA, can and will approve a cannabis-based medicine which has been "thoroughly studied in clinical trials [and] manufactured to assure quality and consistency."  Thus, the catch-22 comes from the fact that marijuana's placement on Schedule I precludes US-based companies from doing the types of clinical trials that the FDA demands.  (If we had a well-functioning federal government, marijuana surely would have been at least re-scheduled to Schedule II or III under the CSA many years ago.  But I digress....)

June 25, 2018 in Business laws and regulatory issues, Federal Marijuana Laws, Policies and Practices, History of Marijuana Laws in the United States, Medical community perspectives, Medical Marijuana Commentary and Debate, Who decides | Permalink | Comments (0)

"IRS cracks down with §280E": Reviewing the latest major US Tax Court court ruling highlighting burdens for marijuana businesses

Download (16)Chris Nani, a student in my Marijuana Law & Policy seminar last year, has already had articles published at the Cannabis Law Report discussing federal tax treatment of cannabis businesses (see prior posts here and here).  Thus I was not surprised to hear from Chris in the wake of a significant US Tax Court ruling earlier this month, and I imposed upon him to author a review of the decision for the blog.  He titled his review ""IRS cracks down with §280E," and here is the account:

Altermeds, LLC, a medical marijuana dispensary near Boulder, Colorado, recently experienced the effects of § 280E after a tax audit found they had under-reported their taxes.  The ruling from the US Tax Court in Alterman v. Commisioner, TC Memo 2018-83, is already being widely discussed in the marijuana industry.

 In 2010 and 2011, Altermeds filed its taxes and applied normal tax deductions to its business.  The IRS audited Altermeds and found a deficiency of $157,821 in 2010 and $233,421 in 2011 holding Altermeds was not eligible for business expense deductions.  Additionally, the Internal Revenue Code (IRC) provides for a tax penalty of 20% the portion of the underpayment for under-reporting taxes. 

280E states:  "No deduction or credit shall be allowed for any amount paid or incurred during the taxable year in carrying on any trade or business if such trade or business (or the activities which comprise such trade or business) consists of trafficking in controlled substances (within the meaning of schedule I and II of the Controlled Substances Act) which is prohibited by Federal law or the law of any State in which such trade or business is conducted."

Essentially, § 280E provides no cannabis business (because cannabis is a Schedule I drug) will receive deductions or credits for any of their business related activates. Normally, businesses can deduct their ordinary business expenses under § 162 of the IRC.  However, § 280E limits § 162 and theoretically was meant to deter drug dealers from writing off their business expenses.  (The opposite may have occurred by giving drug dealers even less incentive to report their income.)

The origins of § 280E are slightly comical.  In 1982, Jeffrey Edmondson, a drug dealer, was able to write off his business expenses under § 162.  Edmondson wrote off traveling, his scale he used to measure drugs, and his rent.  When Congress found out Edmondson was writing off his drug dealing expenses, they enacted § 280E.

The majority of businesses know when entering into the state legalized cannabis market they will still pay federal taxes without being able to deduce business expenses.    Non-cannabis related expenses such as the sale of t-shirts are eligible for § 162 tax deductions even while selling cannabis, cannabis-infused edibles, or pipes are not deductible because of their relation with cannabis.  The tax court is more likely to permit deductions the clearer the line is between a cannabis and non-cannabis business.

When Altermeds was audited, they claimed they had multiple businesses.  One of their businesses sold their non-cannabis merchandise, but the tax court did not find the business to be distinct enough from their cannabis dispensary.  To prove a business is distinct, Altermeds would have to show there is a separate bank account and business.  The tax court held that the non-cannabis products sold by Altermeds (pipes and other cannabis paraphernalia) were sold to complement selling cannabis and were not eligible for any deductions.  Lastly, the court was willing to deduct the amount for the non-cannabis business as well, but Altermeds’ brief failed to follow the court rules and the court was precluded from even contemplating the deductions.

The tax court did allow for the cost-of-goods-sold allowances that the IRS had stipulated prior in the litigation, but Altermeds was still forced to pay its overdue taxes along with the 20% penalty.  With this most recent tax decision taking a hard line approach to deductions associated with cannabis businesses, participants in the industry need to be careful about, and cognizant of the tax consequences that can result from, intermingling cannabis and non-cannabis products.

UPDATE: I just noticed that Bryan Camp over at TaxProf Blog has this long posting on the Altermeds decision under the heading "Lesson From The Tax Court: Into The Weeds on COGS."  Here is his concluding "Lesson" concerning the case: "Get your accounting straight and be sure to hire tax counsel who have the specialized knowledge needed for the job of representing you before both the IRS and Tax Court." 

June 25, 2018 in Business laws and regulatory issues, Taxation information and issues , Who decides | Permalink | Comments (0)

Thursday, May 24, 2018

Noting the gray that surrounds the "enforceability of marijuana-related agreements"

This new article by Joshua Horn and Jesse M. Harris in the Legal Intelligencer provides a useful reminder of how much law (and well as policy) is unpredictable in the modern marijuana universe. The piece is headlined " Cannabis and Banks: What Qualifies as Illegal Activity? Many legal issues arise out of financing cannabis activities, not the least of which is whether a target property for a cannabis venture is mortgaged by a bank."  Here is how the piece starts and ends:

Many legal issues arise out of financing cannabis activities, not the least of which is whether a target property for a cannabis venture is mortgaged by a bank.  The standard institutional mortgage contains language that allows the mortgagee to “call” the loan if the property is being used to conduct “illegal activity.”  This language relates to federal lending guidelines and is usually nonnegotiable.  The question thus becomes: what qualifies as “illegal activity”?

As a general matter, a contract for an illegal purpose is unenforceable.  And while 29 states have passed some form of marijuana legislation, marijuana remains a controlled substance under federal law.  The interplay between state and federal law has left the status of the marijuana industry — and the rights of involved lenders and borrowers — unclear.  Several recent cases highlight this ambiguity....

At bottom, there are no black and white answers when it comes to the enforceability of marijuana-related agreements — only gray.  For this reason, most lenders outright refuse to enter into such agreements.  This is particularly true for mortgage loan originators who underwrite a new loan with the intention of immediately selling it to investors like FHA, Fannie Mae or Freddie Mac.  As government entities, such investors will not accept marijuana-related contracts.

Other lenders, often called “portfolio lenders,” keep a certain number of loans in their portfolio instead of selling to investors.  Portfolio lenders thus assume the risks associated with lending to marijuana-related business. And, because portfolio lenders assume the risk, they have greater discretion in deciding whether to extend credit to a cannabis-related entity.  Depending on the jurisdiction, sophisticated borrowers may have better luck in persuading these lenders to do just that.

May 24, 2018 in Business laws and regulatory issues, Court Rulings, Federal Marijuana Laws, Policies and Practices, Who decides | Permalink | Comments (0)

"Cannabis supporters brace for lackadaisical launch of marijuana in Ohio"

Images (12)The title of this post is the headline of this local article providing a partial update on the roll-out of medical marijuana in the Buckeye State.  I like the headline because it has a nice alliteration, "lackadaisical launch," which I am now inclined to steal when talking about what is afoot in Ohio.  Here are just some of the reasons reasons why this label is so fitting:

Kim Rupp is anxiously awaiting the day she can buy and consume medical marijuana in Ohio. "You're hoping that when this opens that it will change your life," Rupp said, referring to dispensaries where legal cannabis will be sold in the Buckeye State. Rupp said she's battled a debilitating bone disease for years, consuming countless pharmaceutical drugs along the way.

A big proponent of medical marijuana, Rupp is pessimistic that Ohio's new pot program will be fully up and running by Sept. 8th, as required by law. "We would be fortunate if we see anything happening by spring," Rupp said. "I mean, anything where people have access." Instead, Rupp thinks only a few dispensaries will be open by fall.

Ohio's Board of Pharmacy delayed Wednesday's scheduled announcement of who will get to operate the stores. That means nobody's started building what have to be fortified sites, because buying cannabis is typically an all-cash transaction. "I don't think you'll see everybody open on the same day," said Greg May. May is with Ohio Releaf III, a company that hopes to build a dispensary in Forest Park.

Missing only a few stores will likely have a major impact. The pharmacy board can award up to 60 dispensary licenses statewide, with just three dispensaries for all of Hamilton County. "My advice is get your recommendation now or as soon as possible," said Rob Ryan, executive director of the Ohio Patient Network. Even though he anticipates a slow rollout, Ryan urges anyone with a qualifying medical condition to talk to their doctor about marijuana now.

UPDATE The new AP article, headlined "Medical marijuana ramp-up in Ohio sees progress, questions," provides more details on Ohio's struggles to get is medical marijuana regime up and running.  Here is how it gets started:

The medical marijuana program Ohio's set to launch later this year has been beset by questions.

Will growing operations be able to ramp up in time to meet initial demand? Will legal and administrative challenges tangle the rollout in red tape? Will enough doctors obtain certificates to serve needy patients?

Still, much progress has been made since Ohio became the 25th state to legalize medical marijuana in 2016 and set Sept. 8 of this year as the launch date.

Mark Hamlin, the Ohio Department of Commerce's policy adviser on medical marijuana, acknowledges the process has been "bumpy." But he said he hopes the public recognizes this is not just a short-term project.

ANOTHER UPDATE: This new Columbus Dispatch article provides yet another account of these stories under the headline "Ohio in danger of missing Sept. 8 deadline for medical marijuana," which includes these excerpts:

The program must be “fully operational” by early September, according to the state’s Medical Marijuana Control Program website. But state officials say that means only that a minimal amount of some form of medical marijuana must be available by then. “I don’t think there is a lot of confidence in that Sept. 8 date. If there is not a seed in the ground right now, you can speed up the permit process and build 24 hours a day, but the only thing you can’t speed up is Mother Nature,” said Bob Bridges, the patient advocate on the state’s Medical Marijuana Advisory Committee.

For cultivators, the only way to speed up the process is to plant a cutting from an existing cannabis plant rather than starting with a seed. That short-cuts the germination process, but it still takes eight to 12 weeks to mature.

Bridges is one of 14 members of the committee, tasked with advising the three state agencies involved with the program, appointed with approval by Gov. John Kasich. “Patients are very, very concerned product won’t be ready,” Bridges said. “Overwhelming, the concern has been: ‘Is medicine going to be available Sept. 8?’”

May 24, 2018 in Business laws and regulatory issues, Medical Marijuana State Laws and Reforms, Who decides | Permalink | Comments (1)