Cannabis Client Alert - Week of July 5, 2021

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In this week’s edition:

  • Apple updates policies to allow cannabis businesses on App Store
  • Nike continues support for sprinter Sha’Carri Richardson after positive cannabis test
  • Several cannabis bills move through US House committees and subcommittees
  • North Carolina Senate committee approves bill to legalize medical cannabis use
  • Mexico Supreme Court clears path for legalization after legislature fails to meet deadline
  • And more…

Federal

House Committees Take Action on Cannabis Bills - The Financial Services and General Government Subcommittee of the US House of Representatives approved a funding bill for FY 2022 that includes provisions protecting banks from penalties when conducting business with a manufacturer, producer or business involved with hemp, cannabidiol or cannabis products. The Homeland Security Appropriations Subcommittee approved legislation that attempts to address current immigration policy that deems immigrants morally unfit for citizenship if they admit to using cannabis, even if their conduct was in compliance with state law. Finally, the Appropriations Committee approved two cannabis-related spending bills. The first includes a report clarifying “that veterans are eligible for home loan benefits even if they work in a state-legal marijuana industry.” The second requires the US Department of Agriculture and the US Food & Drug Administration to study several issues relating to hemp products.

House Passes Bill Allowing Researchers to Access Cannabis From State-Legal Dispensaries - The House approved a comprehensive transportation bill that would allow researchers to access cannabis from state-legal dispensaries to study impaired driving. The access granted to researchers would be consistent with a federal report to be published within two years of enactment containing recommendations on access to retail-level cannabis and establishing a national clearinghouse with cannabis samples that can be used for studies. The bill also requires states that have legalized cannabis to consider ways to educate people about and discourage driving while cannabis-impaired.

Justice Clarence Thomas Suggests Federal Cannabis Laws May Be Unnecessary - In connection with a Supreme Court decision declining to hear an appeal from a medical marijuana dispensary that was denied federal tax breaks, Justice Clarence Thomas wrote that “[a] prohibition on interstate use or cultivation of marijuana may no longer be necessary or proper to support the federal government's piecemeal approach.” According to Justice Thomas, federal policy in recent years, which “simultaneously tolerates and forbids local use of marijuana,” has undermined the Supreme Court’s 2005 decision upholding federal laws that prohibit marijuana possession.

States

AL - Police in Alabama placed a Michigan couple’s child in foster care after finding marijuana in the couple’s car while they were driving through the state of Alabama. Though adult-use cannabis is legal in Michigan, it remains illegal to possess cannabis in Alabama. The couple was arrested and later charged with felony chemical endangerment, which was intended to target parents whose children were near meth labs.

CA – The California State Legislature approved a $100 million dollar budget to boost the state’s cannabis industry by helping businesses navigate the required environmental impact studies and transition from provisional to annual licenses. The funding, which includes $22 million dollars for Los Angeles alone, would enable cities to hire experts and staff to help cannabis businesses comply with the regulations.

CO - Gov. Jared Polis (D) signed an expansive bill that adds restrictions to Colorado’s medical cannabis program and funds research on the impact of cannabis on mental health. The bill includes requirements to label THC dosage as well as additional medical and mental health reviews for patients.

IL - Illinois Gov. J. B. Pritzker (D) issued an executive order reissuing a number of COVID-19 executive orders, including several addressing cannabis sales, licensing and identification cards.

IL - Despite ambiguous laws on conducting public consumption cannabis events, cannabis professionals and enthusiasts convened in Chicago for a large cannabis consumption event. Event organizers required age and identification verification twice upon entry and ensured that consumption activities were shielded from the public by installing a high fence around the event. According to the event organizer, “[i]f cannabis is legal in the state and we can operate within the compliance that we know . . . there is no reason why we can’t have events.”

MN - Adults ages 21 and older who are enrolled in Minnesota’s medical cannabis program can now purchase and smoke the raw cannabis flower. The CEO of Vireo Health, one of the state’s two medical cannabis companies, estimates that adding the raw flower could cut costs in half for patients and manufacturers, who were previously limited to cannabis liquid, oil and pills.

MS - Mississippi Secretary of State Michael Watson called on Gov. Tate Reeves (R) to hold a special legislative session to amend the state constitution in response to a state Supreme Court decision that voided a ballot initiative approving a medical cannabis program. After Mississippi lost a congressional seat in the 2000s, the state did not amend its constitution to require that, to place an issue on the ballot, signatures needed to be gathered equally from four, rather than five, congressional districts.

MO - Judge Nanette Laughrey of the US District Court for the Western District of Missouri has preliminarily enjoined the state from enforcing a durational residency requirement for medical cannabis facility licenses. Under current law, medical cannabis facilities have to prove they are majority-owned by persons who have been Missouri residents for at least one year in order to apply for and receive a license.

NJ - Gov. Phil Murphy (D) signed legislation that allows healthcare practitioners to authorize medical cannabis use through telemedicine, as long as the use of telemedicine is consistent with the standard of care required for in-person assessment and treatment.

NM - Despite current federal laws restricting financial institutions from doing business with cannabis companies, Southwest Capital Bank in New Mexico has been serving clients connected to the state’s medical cannabis industry since 2014. The bank expects its client base to double with the state’s expansion into adult-use cannabis.

NC - A North Carolina Senate committee approved Senate Bill 711, which would legalize medical cannabis use in the state. The bill’s sponsor, Senator Bill Rabon (R), maintained it would create the strictest medical cannabis rules in the country, with advertising restrictions, additional requirements for doctors, and limitations on the types of medical conditions that qualify for a prescription. The bill still faces three additional panels before being considered on the Senate floor.

PA - Pennsylvania Gov. Tom Wolf (D) signed a bill extending certain policies for medical cannabis that had been temporarily enacted in response to the COVID-19 pandemic. In addition to incorporating hemp growers into the medical cannabis supply chain, the bill will allow cannabis curbside deliveries to continue and permit patients to obtain a 90-day (rather than 30-day) cannabis supply. While advocates are encouraged that these provisions are now codified as law, many are disappointed that the legislation does not include a provision allowing patients to cultivate up to five plants for personal use.

RI - House Speaker Joseph Shekarchi (D) said the state chamber would not rush through “divergent” House, Senate and Governor-backed proposals to legalize cannabis. Before moving forward, Shekarchi believes the state needs to address how much revenue each proposal would generate, along with “social equity, licensing fees, labor agreements and home grow provisions.”

SD - South Dakota’s Department of Health released a 105-page draft of administrative rules for the state’s medical cannabis program. Highlights include a requirement for 24-hour surveillance available for live viewing by the DOH at all cannabis facilities, as well as approval fees for cannabis facilities that will start at $5,000 dollars and increase annually based on an index.

Hemp/CBD

Delta-8 THC - Ohio’s Medical Marijuana Control Program provided guidance to licensees regarding the production, distribution and sale of medical cannabis products containing Delta-8 THC. Cultivators and processors using Delta-8 THC are subject to additional notification requirements and approval by the Ohio Department of Commerce.

Congressional Report Gives Overview of Hemp Market and Policy Issues - The Congressional Research Service released a report, titled “Production, Marketing, and Regulation of Hemp Products,” that describes for lawmakers the current hemp market and policy barriers. While the report discusses CBD food products and products marketed for health purposes, it does not delve into Delta-8 THC.

State Department of Consumer Protection Warns Non-Licensed Businesses that THC-Containing Hemp Products Are Illegal - In response to the state’s recent adult-use cannabis legalization bill, Connecticut’s Department of Consumer Protection (DCP) warned that, as of July 1, 2021, non-licensed businesses may no longer sell products made using hemp or hemp-derived products that contain THC. These products may only be sold by licensed cannabis retailers or medical cannabis dispensaries. According to DCP Commissioner Michelle H. Seagull, “[t]his change will ensure that hemp products that contain any type of THC that exceeds 0.3 percent on dry weight basis will now be regulated.”

International

Mexico - After the legislature failed to pass a law legalizing cannabis by the court-imposed deadline, Minister Norma Lucía Piña Hernández of Mexico’s Supreme Court filed a general declaration of unconstitutionality regarding Mexico’s national cannabis prohibition. Lawmakers had drafted and advanced legalization prior to the deadline but failed to resolve critical conflicts between the original and amended measure. In an 8-3 decision, the Supreme Court declared the prohibition of recreational cannabis unconstitutional, clearing a path to legalization. Until legislation is enacted, individuals seeking to cultivate or consume cannabis for personal use may seek a permit from the government.

Germany - Germany’s Free Democratic Party called for the legalization of limited amounts of cannabis for adults. Four of the six political parties in the German federal parliament support ending the nation’s current prohibition policy.

Uruguay - The Institution for the Regulation and Control of Cannabis in Uruguay approved a new type of recreational cannabis that can be sold in pharmacies beginning in 2022. The new variant will contain 10 percent THC, a significant increase from current levels, which range from 1 to 2 percent THC.

Business/Technology

Nike Continues Support for Sha’Carri Richardson After Positive Cannabis Test - Nike announced that it will continue to support track and field star Sha’Carri Richardson after the US Anti-Doping Agency announced that the Olympic hopeful had tested positive for cannabis use. Richardson, who won the 100-meter race at the US Olympic Trials last month, accepted a one-month suspension.

Apple Allows Cannabis Businesses on its App Store - Apple updated its App Store policy to remove a ban on cannabis delivery service apps. Under the new policy, “[a]pps that provide services in highly-regulated fields,” including “legal cannabis use” must be “submitted by a legal entity that provides the services,” rather than individual developers. Further, “[a]pps that facilitate the legal sale of cannabis must be geo-restricted to the corresponding legal jurisdiction.” Though Google still bans such apps on its app store, Google Play, many in the industry believe Google will “follow quickly” to update its policies.

Corruption in Cannabis Labs - A new article highlights untoward and illegal practices occurring at cannabis laboratories throughout the country. In recent years, a number of labs have faced suspensions or fines for manipulating THC potency testing results, having insufficient procedures for detecting contaminants in the products, or making up the results of contaminant tests. According to experts, corruption in the labs is commonplace, as the “incentives to cheat are too high and enforcement is mostly ineffective.” To respond to these issues, some experts urge greater data transparency that allows for more oversight of lab data.

Medical

Cannabis Use and Suicide – In a survey study conducted by the National Institute on Drug Abuse (NIDA) that analyzed cannabis use and suicides, research data suggested that cannabis use disorder, daily cannabis use and non-daily cannabis use may be associated with risks of suicidal ideation and attempt in young adults, with higher risks for women. NIDA Director Nora Volkow, MD, senior author of the study, stated that “[w]hile we cannot establish that cannabis use caused the increased suicidality we observed in this study, these associations warrant further research, especially given the great burden of suicide on young adults.”

Study Finds Link Between Cannabinoid Pathway and Psychiatric Disorders - A recent study out of Northwestern University found a surprising connection between the endocannabinoid pathway and a protein linked to several psychiatric disorders, including bipolar disorder and schizophrenia. According to the study’s senior author, the study shows that “[t]he endocannabinoid system could be disrupted in patients with bipolar disease, or it could be the opposite: medical marijuana could have therapeutic potential for these patients.” Future research is needed to determine the exact connection.

Dentons speaks

On July 8, Dentons’ Cannabis practice Co-Chair Eric Berlin participated in a webinar hosted by Expert Webcast to discuss IP protection strategies in cannabis, the interplay of state and federal law, the importance of branding, and the impact of IP and brand recognition on the valuation, M&A and business prospects of an enterprise. A recording of the webinar is available here.

Dentons will host a webinar on July 14 at 2 p.m. CT, titled “Lessons from the Heartland: Cannabis in the Midwest.” The event will be moderated by Patrick Lane, senior vice president of corporate partnerships at Benzinga. Speakers include Eric Berlin, Sarah McGuire (MGO) and Jessica Lukas (BDSA). Register for the webinar here.

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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