Cannabis Client Alert - August 2022

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In this week’s edition:

  • State Lawmakers Across the US Call for Federal Cannabis Legalization and Banking Reform in Revised Resolution
  • Illinois Approves Additional Conditional Adult-Use Dispensary Licenses
  • Oklahoma Implements Two-Year Moratorium on Issuing Certain Medical Cannabis Licenses
  • Switzerland Legalizes Cannabis for Medical Use
  • Study Finds Cannabis Reduces Anxiety in Young People

Federal

Time for Change: Federal Ban on Cannabis Use Causes More Harm Than GoodUSA TODAY published an advocacy piece endorsing federal cannabis legalization. Among other things, the editorial cites to Gallup polling showing more than two-thirds of the US favors legalization and discusses disproportionate enforcement harms and disparities affecting people of color. In prior years, including editorials in 20122016 and 2018, USA TODAY had called for caution, warning that a rush to legalization “could carry consequences both unintended and unwelcome.” The article concludes that “decriminalization alone is not enough,” calling for a shift in federal efforts away from prohibition toward regulation.

Sen. Cory Booker Signals Compromise on Cannabis Banking Bill – In an interview, Sen. Cory Booker (D-NJ) stated he is open to compromise on cannabis and endorsed the passage of a "SAFE Banking plus" bill targeting federal reform by the end of the year. Booker caveated that in order to seal his support, such a bill would have to incorporate significant changes addressing Small Business Administration funding for small cannabis businesses and expungement of criminal records.

Q&A with 2022 Alaska US Senate Candidate Lisa Murkowski – In a survey of her positions on various political issues, Sen. Lisa Murkowski (R-AK) indicated she believes that cannabis should be legalized federally.

State Lawmakers Across the US Call for Federal Cannabis Legalization and Banking Reform in Revised Resolution – At its 2022 summit, the National Conference of State Legislatures (NCSL), a non-partisan association of currently sitting legislators from US states, territories and commonwealths, voted to adopt a revised policy directive expressing support for federal cannabis descheduling and banking reform. Revisions to the directive include a statement that, “until cannabis is federally descheduled,” enforcement actions against criminal enterprises involved in “illicit” cannabis production and sale should be prioritized, as opposed to targeting individuals acting in compliance with state laws. The directive further states that the “NCSL urges Congress to pass legislation allowing financial institutions to provide banking services to legitimate state authorized cannabis-related businesses.”

Bipartisan ‘DANK Cannabis Research’ Bill Filed in Congress (Yes, Really) – US congressional representatives Scott Peters (D-CA) and Dave Joyce (R-OH) filed the “Developing and Nationalizing Key Cannabis Research Act,” or “DANK,” which proposes requiring the National Institutes of Health (NIH) to collaborate with other federal agencies, including the Centers for Disease Control and Prevention (CDC) and Substance Abuse and Mental Health Services Administration (SAMHSA) to develop “a national cannabis research agenda that addresses key questions and gaps in evidence.” Among other things, the proposed bill includes a mandate that the federal agencies coordinate to “carry out surveillance activities to collect population-wide data on cannabis use.”

Senate Confirms Key VA Official Who Expanded New Jersey’s Medical Cannabis Program and Backs Federal Legalization – The Senate voted to confirm Shereef Elnahal, President Joe Biden’s nominee for Veterans Affairs Under Secretary of Health. Elnahal is an advocate for federal legalization and is known for his role in overseeing the expansion of New Jersey’s medical cannabis program. As Under Secretary of Health, Elnahal will have the opportunity to address prior agency policy blocking VA doctors from issuing medical cannabis recommendations to veterans.

States

Status of Cannabis Legalization Efforts Across the CountryPolitico published a survey of cannabis legalization, decriminalization and other legislative efforts across the various US states.

AR – An Arkansas cannabis legalization ballot initiative was struck down from appearing in the upcoming November state elections, despite securing more than double the required number of valid signatures in July. The State Board of Election Commissioners declined to certify the measure on the grounds that the ballot title was not clear enough in conveying the impact of the amendment, specifically with respect to the level of THC allowed in edible cannabis products.

AR – Hours before the rejection of the proposed November ballot measure legalizing cannabis for recreational use, Arkansas Governor Asa Hutchinson (R) publicly encouraged law enforcement to “stand firm” against cannabis legalization during his speech at the state’s Municipal Police Association Convention. “I believe that marijuana is a harmful drug. It is as simple as that.”

CO – Last month, Denver removed its US residency requirement for cannabis business owners in the city. This follows a change in state law last year that removed the requirement for cannabis business owners to provide proof of legal US residency status.

CO – Denver city officials have proposed to permanently limit cannabis delivery services to social equity companies. The proposal, supported by the city’s Department of Excise and Licenses, would also reduce licensing fees for social equity delivery companies and their related retail partners. Last year, Denver temporarily required dispensaries to deliver through social equity companies through July 2024.

IL – On July 29, 2022, the Illinois Department of Financial and Professional Regulation issued 28 additional Conditional Adult Use Dispensing Organization Licenses. These 28 licenses join 149 conditional licenses issued on July 22, bringing the total number of dispensary licenses to 177. Licensees now have 180 days to select a storefront location and obtain their full licenses.

IL – Illinois’ cannabis tax revenues are reportedly $600 million below the state’s projected potential. Cannabis industry observers blame high tax rates for the lost revenue. In comparison with all adult-use cannabis states, Illinois brings in the second-lowest revenue per capita.

IL – The four-day Lollapalooza music festival, at Grant Park in Chicago, saw cannabis dispensaries prepare for a hoped-for weekend of blowout sales. Among other things, dispensaries set up outdoor tents to process customers and provided shuttle bus services in preparation for an expected influx of festivalgoers. Dispensaries have seen significant traffic increases during the festival in previous years.

ME – Maine’s recreational cannabis market has seen cannabis prices drop as cannabis product floods the market. The average cost of flower or bud has reportedly decreased more than 41 percent over the past two years (from $15.83 in October 2020 to $9.26 in June 2022 per gram of flower). According to industry observers, price drops are to be expected over time as markets mature.

MA – State legislators recently passed a compromise bill aimed at growing the state’s cannabis industry and making it more equitable. Among other things, the bill, S 3096, increases the Massachusetts Cannabis Control Commission’s (CCC) oversight of controversial “host community agreements,” and provides a framework for certain municipalities to greenlight cannabis “social consumption” establishments where patrons would partake in cannabis products on-site. Massachusetts Governor Charlie Baker (R) is expected to sign the bill.

MN – Minnesota’s Department of Revenue (DOR) released guidance stating that all cannabinoid products containing CBD or THC are subject to the state’s sales tax as a dietary supplement. In addition, the DOR reminded businesses that any item “required by the FDA to be labeled with ‘Supplement Facts’ is taxable.”

OK – The Oklahoma Medical Marijuana Authority (OMMA) has publicly stated its intention to implement a two-year moratorium on issuing certain medical cannabis business licenses in accordance with a recently passed bill, HB 3208. State lawmakers passed the bill during the last legislative session. Applications for growers, processor and dispensaries will not be accepted beyond August 26, 2022. The licensing pause will end on August 1, 2024, or earlier if OMMA so decides. Since legalizing cannabis for medical use in 2018, Oklahoma has witnessed explosive growth in its medical cannabis market. As of July 2022, OMMA reports more than 11,000 cannabis business licensees supporting approximately 400,000 registered patients and caregivers.

WI – All three Republican candidates for governor (Rebecca Kleefisch, Tim Michels and Tim Ramthun) have vowed, if elected, to veto any bill that legalizes cannabis for any use, including medical. While state Democrats have long supported the legalization movement, more and more Republicans are reportedly joining Democrats in supporting the creation of a state medical program. Wisconsin is one of the few remaining states to not permit the sale of medicinal cannabis.

International

Canada – The Science Advisory Committee on Health Products Containing Cannabis—an independent scientific committee established by Health Canada—issued its recommendations for “develop[ing] a potential pathway for non-prescription health products containing cannabis.” The Committee “took a cautious and conscientious approach,” trying to “strike a balance between the desire of Canadians to access health products containing cannabis without practitioner oversight” and public health concerns. Consistent with this approach, many of the Committee’s recommendations focused on labeling, packaging, warnings and public education.

British Columbia, Canada – A new study shows a decrease in cannabis sales from unlicensed stores and dealers in British Columbia. Only 17 percent of participants reported purchasing cannabis from an unlicensed store in 2021, down from 56 percent in 2018. The rate of participants who purchased from a dealer similarly dropped from 16 percent in 2018 to 9 percent in 2021.

Switzerland – New legislation legalized medical cannabis in Switzerland and allows the export of medical cannabis for commercial purposes. Prior to the new law, patients had to submit a request to the Federal Office of Public Health for medical cannabis.

Thailand – After Thailand became the first country in Southeast Asia to legalize products containing THC, businesses have begun selling cannabis-infused products ranging from toothpaste to snacks. Thai Health Minister Anutin Charnvirakul estimates that the country’s cannabis industry could be worth more than US$3 billion within the next 5 years.

Ghana – Ghana’s Supreme Court found unconstitutional a section of the Narcotic Control Commission Act of 2020 that allowed licenses for cultivating small quantities of cannabis for industrial and medicinal purposes. According to the court, the Act failed to follow the constitutional requirements for passing legislation.

Kenya – Although not a competitive candidate in Kenya’s recent presidential election, George Wajackoyah made waves in the country by pushing for legalization of industrial hemp and medical cannabis. The country is still seen as too conservative to move forward with legalization, but Professor Macharia Munene of the United States International University in Nairobi credits Wajackoyah for “bring[ing] this discussion about marijuana legalization to the forefront” and opening up the possibility “that the region might also start talking about it seriously.”

Business

California Cannabis Company Reaches Deal with IRS Over Federal Taxes – Following a years-long dispute, StateHouse Holdings (fka Harborside) announced a settlement with the IRS over the company’s $22 million in unpaid taxes under Section 280E of the federal tax code. Pursuant to the settlement, StateHouse will pay the IRS at least $5.8 million over the next nine years.

Cookies CEO on Cover of Forbes Magazine – The CEO of cannabis brand Cookies has become the first cannabis executive to land the cover of Forbes magazine. According to the article’s author, the “story is about how the federal government continues to botch opportunities to legalize the cannabis industry and lift a $72 billion economy out of the shadows.”

Federal Employees Union Calls for End to Cannabis Testing – The American Federation of Government Employees (AFGE), which represents more than 700,000 federal workers, adopted a resolution supporting cannabis legalization and calling for an end to policies that punish federal employees who legally use cannabis outside of work.

Medical/Health

Study Finds Cannabis Reduces Anxiety in Young People – A new study published in the Journal of Clinical Psychiatry found that CBD may reduce the severity of treatment-resistant anxiety in people ages 12 to 25 by around 50 percent. Once CBD use was halted, the anxiety levels of study participants largely returned to baseline, suggesting that the improvement was likely caused by the CBD rather than other factors. 

Scientists Identify ‘Hacks’ Cannabis Cells Use to Make Cannabinoids – Plant biologists have identified for the first time high-efficiency “hacks” that cannabis cells use to make cannabinoids. According to the lead researchers, “this new model can inform synthetic biology approaches for cannabinoid production in yeast, which is used routinely in biotechnology. Without these ‘tricks’ they'll never get efficient production.”

Dentons Speaks 

Workplace Protections for Cannabis Use – For a published article on workplace protections (or the lack thereof) for cannabis use, Bloomberg Law recently spoke with Dentons partners Eric Berlin and Erin Bass for their insight into the intricacies of employment and cannabis law.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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