Cannabis Client Alert - July 2022

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[co-author: Sarah Park - summer associate]

In this week’s edition:

  • Under Proposed CLIMB Act, Cannabis Businesses May Access Financial Services and List on Stock Exchanges
  • New York’s Cannabis Control Board Now Accepting Applications for Adult-Use Conditional Processor Licenses
  • Congress Urges USDA to Resolve 'Hot' Hemp Difficulties
  • Colorado Sees Significant Drop in Teen Cannabis Use
  • And more . . .

Federal

Cannabis Banking Reform Not Included in Manufacturing Bill – Congressional leaders from both parties, including House Speaker Nancy Pelosi (D-CA) and Minority Senate Leader Mitch McConnell (R-KY), agreed to exclude the Secure and Fair Enforcement (SAFE) Banking Act, a cannabis banking reform measure, from the large-scale manufacturing bill, the COMPETES Act, that is currently being negotiated in a bicameral conference committee. Rep. Ed Perlmutter (D-CO), a SAFE Banking Act sponsor, criticized the pair for “ignor[ing] the public safety risk of forcing cannabis businesses to deal in all cash,” which leads to deaths and robberies. The legislation could still be introduced through the latest version of the National Defense Authorization Act.

Under Proposed CLIMB Act, Cannabis Businesses May Access Financial Services and List on Stock Exchanges – The Capital Lending and Investment for Marijuana Businesses (CLIMB) Act, introduced into Congress in June, not only protects private financial institutions and government agencies that provide financial lending and investment opportunities to state-legal cannabis businesses, but also allows national securities exchanges and market participants to trade securities of a cannabis-related legitimate business. The Act is sponsored by Reps. Troy Carter (D-LA) and Guy Reschenthaler (R-PA).

States

CA – Governor Gavin Newsom and California state lawmakers have reached an agreement on a bill that would introduce various changes to the cannabis tax structure in California: eliminating a weight-based tax on cannabis growers; maintaining the existing 15 percent excise tax on retail weed sales for at least the next 3 years; creating new tax incentives for qualifying businesses; and imposing stiffer penalties on illegal pot operations.

CT – More than 37,000 applications have been entered into lotteries for an initial round of 56 cannabis licenses in Connecticut. The licenses will be split evenly between general and social-equity businesses. Future lottery rounds are expected later in the summer or early fall.

IL – In its second year of funding, Illinois’ Restore, Reinvest, and Renew (R3) program awarded $45 million in grants in support of socioeconomically disadvantaged communities damaged by the war on drugs. The funds are generated from taxes on adult-use cannabis sales. Organizations that received grants through the first R3 round last year will have their funding renewed for another year.

LA – Louisiana’s governor, John Edwards, signed a multitude of cannabis reform bills last month, including one key measure that expands the number of medical dispensaries within the state and another that prevents the police from searching people’s homes over the smell of cannabis. There are also two bills concerning out-of-state reciprocity for medical cannabis patients: one allows out-of-state residents to become registered cannabis patients who can purchase and possess cannabis from licensed dispensaries in Louisiana while the other protects out-of-state patients that participate in Louisiana’s cannabis market from prosecution under the state’s drug laws. The Governor has previously said that Louisiana will inevitably legalize cannabis for adult use at some point, but doesn’t believe it will happen before his term expires in 2024.

MN – Minnesota’s new law permitting hemp-derived THC edibles went into effect last week and, as NPR reports, certain state legislators are now claiming they did not understand the bill they were passing. Although cannabis-derived THC is still illegal in the state, the new law allows customers to buy food and beverages with no more than five milligrams of hemp-derived THC per serving and no more than 50 milligrams of hemp-derived THC per package.

NC – Medical cannabis legalization will not happen this year in North Carolina. An existing bill to legalize medical cannabis, which passed the State Senate has a very low likelihood of passing the house due to a lack of Republican support.

NC – North Carolina Governor Roy Cooper signed legislation last week exempting hemp products, including CBD products for personal use, from the state’s controlled substances laws. The legislation was necessary for the state’s hemp industry to continue functioning. Indeed, without the legislation, local farmers could not continue participating in the state’s industrial hemp program that is run by the US Department of Agriculture.

NY – New York’s Cannabis Control Board is now open for applications for adult-use conditional processor licenses. The license is restricted to processors who hold a cannabinoid hemp processor license from the Office of Cannabis Management. The application period runs through August 31.

OH – Ohio enacted HB 515 last month, which will provide preferential tax treatment for the state’s residents on certain sales of equity or ownership interest in an Ohio business. Qualifying taxpayers will be able to deduct the first $250,000 from their sale of equity or ownership interest with the remaining equity or interest incurring the state's flat tax rate of 3 percent on business income. The law becomes effective on September 21, 2022.

TX – At the Texas State Republican Convention held last month, the state party made clear its opposition to cannabis legalization. However, the “Report of the Permanent 2022 Platform & Resolutions Committee” also made clear that federally, Congress should reschedule cannabis from Schedule 1 to Schedule 2, and that the hemp industry should be minimally regulated. This comes despite the fact that, according to a recent poll, 74 percent of Texas Republicans support medical cannabis legalization.

VT – In an effort to advance sustainability and prevent accidental cannabis consumption, Vermont’s Cannabis Control Board last month released guidance on packaging. Among other things, the guidance dictates that packaging for cannabis products must be reusable, non-plastic, child-resistant and opaque.

VT – Last week, Vermont’s Cannabis Control Board opened up the application window for all three tiers of product manufacturers and wholesalers. Meanwhile, as of June 2022, the CCB has already granted 52 cultivation licenses and pre-qualified 215 “social equity” applicants.

Hemp/CBD

Congress Urges USDA to Resolve 'Hot' Hemp Difficulties – In an explanatory report accompanying its proposed 2023 appropriations bill for “Agriculture, Rural Development, Food and Drug Administrations, and Related Agencies,” the House Appropriations Committee noted the problem of “hot” hemp (i.e., that in-process hemp extract may temporarily exceed a delta-9 THC concentration of 0.3 percent) and expressly called for the US Department of Agriculture to coordinate directly with the Drug Enforcement Administration to provide the hemp industry with needed guidance. The report also recognized the Food and Drug Administration’s efforts to combat the dangers of misleading, unsubstantiated and false claims in CBD marketing.

Texas Supreme Court Affirms State Agency Ban on Manufacture and Processing of Smokable Hemp – In a 5-4 decision, the Court held that “the manufacture and processing of smokable hemp products is neither a liberty interest nor a vested property interest” the Texas constitution protects and may therefore be prohibited by state statute and regulation. The Texas Department of State Health Services (DSHS) had banned the manufacture and sale of smokable hemp products but was subsequently enjoined permanently from enforcing its ban by a district court in Travis County. Importantly, the decision only overturns that part of the lower court’s permanent injunction against the manufacturing ban; thus, the DSHS remains prevented by court order from enforcing its ban on the sale of smokable hemp products.

International

Albania – The country, well-known for its history of illicit cannabis trafficking, intends to legalize the cultivation of cannabis for medical and industrial use. A draft law published last week states that, starting in 2023, the government aims to license up to 150 hectares (around 370 acres) of land for cannabis cultivation.

Poland – The Supreme Administrative Court reversed a state agency’s ban on the use of hemp in food that was based, in part, on plant’s claimed “novel” status. In its ruling, the Court expressly recognized that hemp “has a history of use and does not constitute a novel food.”

Columbia – Last month, Columbia reportedly witnessed its first commercial shipment of dried cannabis to the international market. In a press release, Allied Corp. praised its accomplishment of being the first company to export dried cannabis produced in Columbia in accordance with legislation enacted last April. The press release noted that Allied has also applied for export approval for recurring monthly orders to Australia, Switzerland and an unspecified multi-state operator based in the United States.

Business

DC Circuit Issues Administrative Stay on FDA’s Ban of Juul Vape Products – The circuit court granted Juul Labs Inc.’s request for a stay in order to fully consider the company’s expected motions regarding the FDA’s recent denial of its premarket application to sell e-cigarettes. In that decision, the FDA said that Juul’s application failed to demonstrate that its products would not harm public health.

Major League Baseball Commissioner Finds Team Sponsorships of CBD Permissible – Baseball teams may now sell CBD sponsorships as long as the CBD sponsor is certified by NSF, a global health and safety organization, ensuring that the CBD products do not contain THC.

Medical/Health

Colorado Sees Significant Drop in Teen Cannabis Use – Study finds that young people in the state were 35 percent less likely to use cannabis in 2021 than in prior years, continuing a trend that contradicts widespread arguments that legalized cannabis for adults would increase illegal youth consumption.

Auto Insurance Premiums Decline in States that Legalize Medical Cannabis – In a report looking at the effects of cannabis legalization on automobile safety, researchers discover that premiums declined, on average, by $22 per year following a state’s medical cannabis legalization. The study estimates that legalization reduced health expenditures related to auto accidents by almost $820 million per year and predicts a further $350 million reduction if federal legalization ever passes.

Dentons Speaks

Maine Cannabis Webinar – On July 28, 2022, Dentons will be hosting a cannabis webinar regarding Maine’s adult-use cannabis statute and regulations. Maine partner Hannah King and managing associate Malina Dumas will be covering recent and upcoming key developments in the state’s cannabis regulations, including rules on licensure, packaging and labeling, delivery and curbside pickup, and testing.

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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