Cannabis Client Alert - Week of March 29, 2021

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In this week’s edition:

  • Cannabis Banking Bill has bipartisan support
  • Congressional Research Service clarifies 280E
  • New York comes to recreational cannabis agreement
  • Medical cannabis laws have no impact on adolescent recreational use, research finds

Federal

Cannabis Banking Bill Reintroduced in the Senate -  US Sens. Jeff Merkley (D-OR) and Steve Daines (R-MT), along with 27 other cosponsors, have reintroduced the Secure and Fair Enforcement (SAFE) Banking Act. If enacted, SAFE would ensure that financial institutions could service cannabis business clients without facing federal penalties. At present, the threat of federal penalty has shut out many cannabis companies from working with  many banks and credit unions. Now that Democrats control the Senate and the White House, many in the industry are optimistic about passage.

Many Members of Congress Object to Biden Cannabis Terminations - Thirty members of the House of Representatives, led by Rep. Earl Blumenauer, co-chair of the Congressional Cannabis Caucus, sent a letter to President Joe Biden expressing dismay with the fact that multiple White House staffers have been terminated or punished for past cannabis use. The lawmakers are asking for clarification on the policy and urging the White House to no longer consider past use as a justification for disqualifying or removing employees.

Live Life Federal Credit Union Cease-and-Desist Order - The Nature Credit Union Administration Board (NCAU) issued an opinion that grounds exist to initiate an administrated cease-and-desist action against Live Life Federal Credit Union. NCUA ordered the company to immediately stop opening new accounts for cannabis business members, discontinue operating a money services business program and file suspicious activity reports.

Congressional Research Service Issues Section 280E Review - Legislative Attorney Milan N. Ball issued a review of legal questions related to Section 280E and its application to cannabis businesses. The report addresses how cannabis businesses are taxed, application of 280E in states where recreational cannabis is legal and how current legislative proposals would alter the tax status of cannabis businesses.

States

CT - The House Committee on Labor and Public Employees voted 9-4 to approve a bill that would legalize recreational cannabis. Many are advocating for the language in the bill sponsored by state Rep. Robyn Porter (D) to be incorporated in Gov. Ned Lamont’s cannabis legalization proposal. The Governor, a Democrat, has said he believes the chances of his legislation passing are at around 60 percent.

CT - US District Court Judge Stefan Underhill dismissed a suit against Waterbury, CT, brought by a firefighter who was terminated after screening for cannabis use. The firefighter claimed he was medically permitted to use cannabis to treat PTSD, but Judge Underhill noted he did not alert the city to his stress disorder. The suit was brought under the Americans with Disabilities Act.

IL - The Illinois House Criminal Judiciary Committee voted 10-8 in favor of House Bill 3085, which would remove all criminal penalties for possession of any amount of cannabis and expunge any criminal records of those convicted of a similar offense. The bill now will now be sent to the House floor for consideration.
IL - House Bill 3431, which “amends the Compassionate Use of Medical Cannabis Program Act, provides that employers are not prohibited from adopting specified policies concerning medical cannabis by registered qualifying patients, including drug testing policies for such patients working in safety sensitive positions.” The bill has been assigned to the Labor and Commerce Committee.

KS - Kansas lawmakers are considering a bill to legalize medical cannabis, albeit with incredibly strict rules. The House is debating on provisions like restricting access to patients who have been with specifically certified doctors for at least an entire year. Democratic Governor Laura Kelly is in favor of legalizing medical marijuana but there is staunch opposition from Republicans to anything that is not highly restrictive.

MD - Adult-use cannabis legalization will not happen in Maryland this year after several bills failed to “crossover” from one legislative chamber to anything before the state legislative deadline. While Maryland has a large medical cannabis industry, the recreational bills got stuck in Committee and will have to be revisited next legislative session.

NM - Governor Michelle Lujan Grisham announced she is calling a special session of the state Legislature in part to take up adult-use recreational cannabis legalization. A bipartisan, compromise bill was agreed to during the final hours of the legislative session and the Governor intends to complete the effort during special session. 

NY -New York Governor Andrew Cuomo (D) signed legislation this week to make New York the latest state to  legalize adult use recreational cannabis in the state. The new law allows adults 21 and older to possess and purchase cannabis from licensed retailers, which are planning to launch in December 2022. It would also create a five-member New York State Cannabis Control Board to regulate the industry.

ND - North Dakota’s state Senate voted 37-10 to reject a recreational cannabis legalization bill that passed the state House in February. The vote was expected, but several Republicans still believe that the Legislative Assembly should act rather than wait for legalization to be passed by citizen referendum. 

UT - Governor Spencer Cox (R) vetoed a hemp and CBD regulation bill, Senate Bill 39. The bill would have streamlined the hemp and CBD industry in Utah by providing a set of regulations defining security measures that must be put in place and illegal activities to avoid. 

Hemp/CBD

US Food and Drug Administration - The FDA has sent two more warning letters to CBD companies for selling pain relief products over the counter, which is a violation of federal law. The FDA stated that “No CBD-containing drug has met applicable FDA requirements to be legally marketed for nonprescription use.” One warning was sent to BioLyte Laboratories located in Grand Rapids, MI, and the other was sent to Honest Globe, located in Santa Ana, CA.

Delta-8 THC - The boom of Delta-8 marketing by a handful of producers as a legal psychoactive, is continuing amid regulatory uncertainty. The industry is asking the federal government to weigh on Delta-8, a close cousin of Delta-9 THC, the compound credited with cannabis intoxication. The DEA has thus far declined to comment on the legality of Delta-8 until it finalizes its hemp interim final rule. Meanwhile, the Oregon Liquor Control Commission has initiated a rulemaking for Delta-8 and other compounds that fall outside the adult-use tasting and labeling system.

International

IND - Himachal Pradesh, a small state in northern India, is aiming to generate $2.5 billion through the cultivation of cannabis. India’s Narcotic Drugs and Psychotropic Substance Act bans cannabis cultivation but includes a provision to allow individual states to permit and regulate cultivation as they see fit.

SCT - The Sapphire Medical Clinic, Scotland’s first medical cannabis clinic to be approved, is now offering its first appointments. They will be virtual for the foreseeable future due to the COVID-19 pandemic. Dr. Mikael Sodergren, managing director of Sapphire Medical, said its “robust clinical governance frameworks” deserve credit for their first in the nation status.

Business

Eaze Technologies - Hamid Akhaven and Ruben Weigand were found guilty on Friday of bank-fraud conspiracy after disguising the purchase of cannabis products through shell companies. Both men were working as consultants to Eaze Technologies Inc. They are set to be sentenced in June.

Harborside - California based cannabis company Harborside announced it will receive a $12 million credit facility from a commercial bank. This deal is the first of its kind for the unnamed bank and will allow Harborside to build its 47-acre cultivation site in Salinas, CA. This type of transaction is rare for cannabis companies. Banks are usually scared off of lending to the industry due to the extensive paperwork and risk of legal liability.

Medical/Health

National Institute on Drug Abuse - A study funded by the NIDA found no evidence of increased cannabis use associated with the passage and enactment of medical cannabis laws. The study used state Youth Risk Behavior Survey data collected from participants in grades 9-12 from 1991 to 2015 in 46 states.

Dentons Speaks

On March 24, 2021, Dentons’ US Cannabis group Co-chairs Katie Ashton and Eric Berlin, held a webinar with Scott Greiper, president of  Viridian Capital Advisors (a leading financial and strategic advisory firm in the cannabis industry), to discuss how the new Biden administration and Congress will impact capital markets for the US cannabis industry. Recording of the webinar can be found 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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