Cannabis Group Weekly Alert - May 2019 #2

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Illinois Governor J.B. Pritzker and lawmakers released the text of cannabis legislation they intend to pass this month. Arkansas regulators gave final operational approval to the state's first two medical cannabis dispensaries. The prospects for New Jersey cannabis legalization legislation are reportedly stalled. Meanwhile, hemp legislation progresses in Connecticut and Florida.  In international news, the government of New Zealand announced the details of a 2020 marijuana legalization referendum.

Read more about these and other cannabis-related stories below.

Federal

  • Senate Minority Leader Chuck Schumer (D-NY) and Rep. Hakeem Jeffries (D-NY) announced they are filing cannabis de-scheduling legislation. Known as the Marijuana Freedom and Opportunity Act, the legislation would de-schedule cannabis at the federal level (while still allowing for prohibition on the state level), provide grants to help with the expungement of certain cannabis crimes and even provide funding for women and minority cannabis business owners. This is yet another example of the zeitgeist and how it’s moved on the federal level.
  • The US Court of Appeals for the Ninth Circuit, over the objections of the US Department of Justice, allowed a bankruptcy plan for a company that leased property to a cannabis grower to proceed. The US trustee in Garvin v. Cook Investments appealed confirmation of the reorganization plan because it was proposed by a means forbidden by law since the lease to the grower violated federal drug law. The panel held that section 1129(a)(3) directs bankruptcy courts to police the means of a reorganization plan’s proposal, not its substantive provisions. The panel affirmed confirmation of the plan because it was not proposed by any means forbidden by law.

    However, in another decision, Prado v. Barr, the Ninth Circuit also denied Claudia Prado’s (a legal permanent resident facing deportation) petition for review of a decision of the Board of Immigration Appeals, on the basis that her felony conviction for possession of marijuana for sale under California Health & Safety Code section 11359 in 2014 made her removable even though the conviction had been recalled and reclassified as a misdemeanor under California’s Proposition 64.

  • The federal Alcohol and Tobacco Tax and Trade Bureau weighed in on an industry circular on the legality of adding CBD to alcoholic beverages. The TTB stated it was revising its guidelines, but as of now it will defer to the FDA’s position and not allow any hemp derived ingredients, except for ingredients derived from hemp seeds or hemp seed oil, into alcoholic beverages. While this is consistent with the TTB’s pre-Farm Bill position, the TTB did add that it is closely monitoring the FDA’s actions in this space.

    The USPTO updated its rules to permit trademarks for hemp and CBD products. The agency will only accept applications submitted after December 20, 2018, and will defer to the FDA when hemp/CBD is added to food.

States

  • Arkansas regulators gave final operational approval to the state's first and second medical cannabis dispensary. The two dispensaries opened for business on Sunday May 12th and Monday, May 13th.
  • Illinois Gov. J.B. Pritzker (D) and lawmakers released the text of cannabis legislation they intend to pass this month. If passed, legalization is set to take effect on January 1, 2020, with current medical cannabis businesses getting a head start on applying for licenses in the new recreational market. Pritzker tweeted he expects lawmakers to pass a marijuana legalization bill by the end of this month, but the House speaker Michael Madigan (D) said its passage is “not guaranteed.” Chief among his concerns is the expungement provisions, which do not currently differentiate between users and dealers. We have been analyzing the bill and welcome questions.
  • Maine regulators released updated draft cannabis rules for adult use. The rules are available online and public comment on the proposed rules will be accepted until June 2nd. Voters approved legalization of recreational marijuana in November 2016. While limited home grow was allowed within two months, the state has struggled to launch a commercial market.
  • The prospects for New Jersey cannabis legalization legislation are reportedly stalled, with lawmakers considering putting a referendum on the issue before voters in 2020.
  • New York City has adopted a law prohibiting pre-employment testing for cannabis, with limited exceptions for certain jobs related to safety. The law characterizes these drug tests as “an unlawful discriminatory practice” and will become effective in one year. This is the first such law of its kind.
  • North Dakota Gov. Doug Burgum (R) signed a cannabis decriminalization bill into law, making the state the 25th in the US to remove the threat of jail time for low-level cannabis possession. The bill also calls on legislative management to “consider studying the implications of the potential adoption of an initiated measure allowing the use of recreational marijuana” and specifies that the study “must consider the potential benefits and detriments of legalizing recreational marijuana.” (North Dakota voters rejected a far-reaching cannabis legalization ballot measure last year).
  • An Ohio state medical board committee recommended that the state add anxiety and autism to the list of qualifying conditions for medical marijuana, but the panel rejected the proposed addition of depression, insomnia and opioid addiction, The Cincinnati Enquirer reported. A final vote to recommend adding anxiety and autism spectrum disorder as qualifying conditions will occur on June 12, 2019. The decision to reject opioid addiction as a qualifying condition runs counter to the increasing trend of other states, including Illinois and Colorado.
  • Oklahoma Gov. Kevin Stitt (R) signed a bill broadening the pool of physicians that can recommend medical cannabis. Previously, only “state board-certified” physicians could recommend, but the new bill allows all physicians “licensed by and in good standing” with the state medical or osteopathic oversight agencies to issue recommendations to patients.

Hemp and CBD

  • Connecticut Gov. Ned Lamont (D) signed a bill creating an industrial hemp pilot program. The bill allows commercial hemp farming and calls on the state agriculture department to make and submit regulations to the federal government for regulating hemp. It also defines hemp products and consumables, allows for their sale, and grants authorities to certain agencies to make rules regarding advertising and labeling of such products.
  • Florida lawmakers sent a bill creating an industrial hemp program to the desk of Gov. Ron DeSantis (R). Senators voted 39-0 to pass the bill, after the House approved it in a 112-1 vote Wednesday.

Business

  • Cronos Group Inc. (CRON.TO) announced on Thursday that its adjusted earnings are set to decline in 2019, which sent shares tumbling. Shares of the Canadian cannabis producer have fallen about 33% since Altria Group gave the company CA$2.4 billion just a couple of months ago.
  • Lifestyle expert Martha Stewart will be this year’s keynote speaker at Civilized’s annual World Cannabis Congress. Stewart stated: “As I begin to collaborate on products for the CBD market, and as the demand for these types of products grows, I’m very interested in the conversations and connections at this event.”

International

  • According to Statistics Canada's National Cannabis Survey, which covers the first quarter of 2019, 38 percent of Canadian pot consumers are still buying cannabis on the black market. Legal cannabis is about 57% more expensive than reported black market estimates per gram.
  • New Zealand's government announced the details of a 2020 marijuana legalization referendum, including that it will set the minimum legal age at 20, allow home cultivation, license social use areas and ban advertising. A poll released in January found that 60 percent of New Zealand residents would approve a referendum to legalize cannabis.

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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