Cannabis Client Alert - Week of February 22, 2021

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In this week’s edition:

  • 37 lawmakers issue letter to President Biden urging him to grant executive clemency for non-violent cannabis offenders
  • Senate Majority Leader Schumer tweets that he is working on comprehensive cannabis reform legislation
  • AG nominee Merrick Garland’s comments during confirmation hearing signal support for friendlier stance on cannabis enforcement
  • Minnesota, Nebraska, New Mexico and Wisconsin considering legalizing cannabis
  • New Jersey Governor signs bills legalizing cannabis
  • NFL and NFL Players Association issue RFI to pain management researchers seeking alternatives to opioids, including CBD
  • And more…

Federal

37 Members of Congress Ask Biden to Issue Mass Marijuana Pardons Ahead of Legalization - In a February 18 letter, 35 House members joined Reps. Earl Blumenauer (D) and Barbara Lee (D) in urging President Biden to grant executive clemency for non-violent cannabis offenders. The lawmakers cited the growing number of states that have legalized medicinal cannabis and adult-use policies, as well as the House’s vote in favor of the Marijuana Opportunity, Reinvestment, and Expungement (MORE) Act late last year to decriminalize cannabis at the federal level.

On February 18, Senate Majority Leader Chuck Schumer (D) tweeted that he is working with Senators Cory Booker (D) and Ron Wyden (D) on comprehensive cannabis reform legislation, stating “We must end the federal prohibition on marijuana, make criminal justice reforms, and ensure equity for communities—especially those of color—impacted by the War on Drugs.”

Attorney General Nominee Garland Signals Friendlier Marijuana Stance - During his February 22 confirmation hearing, Merrick Garland, President Biden’s nominee for US attorney general, indicated that he would deprioritize enforcement of low-level cannabis offenses, including possession, and suggested that federal reforms are tied to larger issues of social justice. “This is a question of prioritization of our resources and prosecutorial discretion,” Garland said.

Pot Company Faces $4.2M Tax Bill After Breaks Barred by Tax Court - On February 17, the US Tax Court determined that San Jose Wellness, a subsidiary of California-based cannabis retailer Harborside Inc., is liable for nearly $4.2 million in taxes after the court determined that the company cannot claim depreciation and charitable contribution deductions under Section 280E of the Internal Revenue Code. Section 280E prohibits deductions for entities that buy or sell federally controlled substances (including cannabis as specified in Schedule I of the Controlled Substances Act). In a press release, Harborside stated that the accrued liabilities in connection with San Jose Wellness will now be less than the provision previously set aside.

Biden’s DOJ Lawyers Take IRS Side in Marijuana Firm’s 280E Fight - In a brief filed on February 12, President Biden’s acting solicitor general urged the Supreme Court to uphold a ruling allowing the IRS to obtain records from state regulators for potential violations of section 280E of the Internal Revenue Code. Colorado-based cannabis business Standing Akimbo sought to quash a third-party summons that the IRS issued to the Marijuana Enforcement Division of the Colorado Department of Revenue. A US district court rejected Standing Akimbo’s arguments that the summons lacked a legitimate purpose, a decision that was upheld on appeal. Standing Akimbo filed a petition for a writ of certiorari to the Federal Court of Appeals for the Tenth Circuit.

States

CANNRA - In a February 18 letter to Congress, the Cannabis Regulators Association (CANNRA) outlined policy priorities and offered its expertise as lawmakers contemplate changes to federal cannabis policies this session. CANNRA represents medical and adult-use cannabis regulators in 26 states and the District of Columbia. Included among the organization’s policy priorities are protecting states that have legalized cannabis, providing banking access to state-legal cannabis businesses, promoting research, ensuring social and economic equity, and supporting public health proposals.

CA - In a unanimous 5-0 vote by its Board of Supervisors, Humboldt County, CA, permanently banned outdoor cultivation of low-THC hemp varieties. Other counties in the state ban or limit hemp cultivation to reduce cross-pollination conflicts between cannabis and hemp growers, but Humboldt is the first to issue a permanent ban.

FL - The Florida Legislature is considering caps on THC. This is not the first legislative session to consider THC caps, but Senate President Wilton Simpson (R) suggested there is more of a sustained interest this year.

MN - On February 17, a Minnesota House committee, by a vote of 10-7, approved a bill to legalize cannabis in the state. The committee was the first of what could be as many as 12 panels that are expected to consider the legislation before it heads to the floor for a vote. Under the proposal, adults 21 and older would be allowed to purchase and possess up to 1.5 ounces of cannabis and to cultivate up to 8 plants, half of which could be mature.

NE - Nebraska lawmakers are debating legislation to decriminalize cannabis. Legalization of medical cannabis was set to be on the ballot in 2020, but the Nebraska Supreme Court removed the measure from the ballot, citing the state’s “one subject” rule. State Senator Justin Wayne (D) has stated he wants to place a recreational cannabis measure on the 2022 midterm election ballot.

NJ - During a press conference on February 22, New Jersey Governor Phil Murphy (D) announced that he signed legislation to create a recreational cannabis marketplace, decriminalize cannabis, limit the use of previous cannabis convictions, and loosen penalties for underage possession of cannabis. The announcement comes just over three months after voters approved a ballot question to legalize adult use.

NM - On February 15, a New Mexico House committee, in a 7-4 vote, approved a bill to legalize cannabis in the state. Additional committees will consider the bill in advance of a floor vote. Under the proposal, adults 21 and older would be allowed to possess at least 2 ounces of cannabis and grow up to 6 mature and 6 immature plants for personal use.

UT - State Senate Minority Whip Luz Escamilla (D) and State Representative Ray Ward (R) introduced a bill to address access concerns with the Utah’s medical cannabis program. The bill would allow health care providers to recommend cannabis for up to 15 patients, after which they would be required to undergo specialized training and licensing. The Utah Senate passed the bill, which is now pending in the House.

VA - Virginia lawmakers passed legislation with bipartisan support to allow medical cannabis producers to sell the plant’s unprocessed flower. Industry leaders proposed the measure in an effort to make products more affordable to patients.

WI - On February 16, Governor Tony Evers (D) proposed legalizing medical and recreational cannabis as part of his 2021-23 biennial budget, estimating that legal cannabis would generate more than $165 million annually beginning in fiscal year 2022-23. Under the Governor’s proposal, adult residents 21 and older could purchase and possess up to 2 ounces of cannabis and grow up to six plants for themselves. Out-of-state visitors could buy and possess up to a quarter ounce.

Hemp/CBD

State Ag Regulators Consider Push for Higher THC Hemp - Members of the National Association of State Departments of Agriculture (NASDA) will vote whether to support an amendment to the federal definition of hemp to increase the total THC concentration to 1 percent or less, up from 0.3 percent or less.

International

Barbados - Officials in Barbados are considering ways of raising funds through the Barbados Stock Exchange to fund development of its medical cannabis industry. In an online media conference, the chief executive officer of the Barbados Municipal Cannabis Licensing Authority stated that efforts are underway to ensure that locals have a major stake in the industry.

Malta - On February 18, Malta Prime Minister Robert Abela pledged to present draft legislation to increase the limits of possession to “reasonable levels” and eliminate arrests for personal use of cannabis. According to Abela, the government is also considering allowing the cultivation of a limited number of plants for personal use. Malta has already legalized cannabis for medicinal use.

Norway - On February 19, Norway’s health policy agency, the Ministry of Health and Care Services, sent proposals to legislators to decriminalize both possession of small amounts of all recreational drugs, including cannabis, as well as their use.

Pakistan - Pakistan’s Federal Minister for Science and Technology announced that farms for cannabis are being established in four major cities, touting cannabis as an alternative to cotton.

Business

NFL Seeks Information on CBD and Other Alternatives to Opioids - On February 16, the National Football League and the NFL Players Association published a request for information on alternatives to opioids for pain management, including CBD. The joint NFL-NFLPA committee also requested information regarding the impact of cannabis on athletic performance.

How a Chicago Pot Firm Turned Into a $3B Behemoth in Just 3 Years - Chicago-based Verano Holdings has become the latest cannabis firm to begin trading publicly on the Canadian Securities Exchange. Verano’s operations include 8 cultivation sites and 54 stores across 12 states. By the close of trading on February 19, its stock was valued at CA$31.99 per share or a total (in US currency) of US$3.2 billion.

Hexo Strikes Deal to Acquire Zenabis for CA$235M; Eyes European, Canadian Cannabis Markets - On February 16, Ottawa, Ontario-based cannabis producer Hexo entered into a definitive agreement to acquire Vancouver, BC-based Zenabis Global for CA$235 million in stock (or, approximately US$185 million). If the acquisition is consummated, Hexo would be one of the top producers in Canada’s recreational market.

Cannabis Potency Patent Granted by USPTO - On February 18, Panacea Plant Sciences announced that the USPTO granted its patent application for methods to manipulate the yield and growth of cannabis. The patent involves the use of phytohormone mixtures to induce higher and altered levels of cannabinoids, such as THC and CBD, and terpenes in the cannabis plant.

Medical

Cannabis is Associated with Clinical but not Endoscopic Remission in Ulcerative Colitis: A Randomized Controlled Trial - In an Israeli study of 32 patients to assess the effects of cannabis in improving outcomes in patients with ulcerative colitis, researchers found that short-term treatment with THC-dominant cannabis induced clinical remission and improved the quality of life of patients with mild to moderate ulcerative colitis. However, the study found that such effects were not associated with significant anti-inflammatory improvement.

Dentons speaks

Eric Berlin, Dentons’ US Cannabis group co-chair, was quoted in The Chicago Tribune on the prospects of trading on US exchanges.

Katie Ashton and Eric Berlin, Dentons’ US Cannabis group co-chairs, were quoted in The Fresh Toast discussing cannabis sales taxes.

Dentons ranked among Juristat’s Top Patent Firms for 2020 and secured the top spot for Technology Center 1600, home to patent applications relating to the biotechnology and organic fields.

On February 24, Dentons’ Global Cannabis Practice, along with co-hosts, Simply Pure and Spur Bridges, hosted a two-part discussion as part of its Defining “Social Equity” & Providing Solutions in the Cannabis Industry” webinar. The first panel consisted of business owners sharing their experiences, challenges and insights on how they built their business in an industry marked by constant change. The second panel covered how to go about addressing the social equity issues raised in the first panel, now and going forward.

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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