Cannabis Group Weekly Alert - Week of June 15, 2020

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In this week’s edition:

  • United Cannabis Asks Federal Bankruptcy Judge to Approve Termination of Licensing Agreements, US Trustee’s Office Objects
  • California Anticipates Significant Drop in Cannabis Revenue
  • BeLeaf Medical to Become Missouri’s First Medical Marijuana Company
  • Israel Announces Plans to Decriminalize and Legalize Recreational Cannabis Use
  • The NBA Will Not Test Players for Cannabis when League Resumes Play

Federal

  • US Trustee’s Office Objects to Bankruptcy Court Intervention: The US Trustee's Office has objected to a petition filed by Colorado-based United Cannabis (UCANN) asking a bankruptcy judge to approve the termination of patent-licensing agreements covering cannabinoid formulations, including THC, arguing that it would involve the court in business that violates the Controlled Substances Act.  UCANN has been attempting to use the bankruptcy process since filing for Chapter 11 in April.  UCANN told the court all of its revenue is from legal hemp products, and that the patent covering THC generates no revenue because the companies that licensed the patent have yet to pay any royalties.

States

  • CA: California's proposed budget for FY 2020-21, S.B. 74, has been approved and it anticipates a significant drop in cannabis excise tax revenue based on a decline in tourism and other assumptions, including “an economically fragile consumer base, a persistent illicit market and the continuing challenge the industry faces in accessing traditional banking liquidity solutions,” according to Nicole Elliott, Gov. Newsom’s senior advisor on cannabis.  To help cannabis businesses during this challenging time, the state has deferred renewal fees, offered payment plans for sales-and-use taxes, and relaxed a number of rules, such as allowing curbside pickup and waiving a requirement that customers sign for deliveries.
  • CA: On June 5, a California state appeals court rejected a petition for early release from a state prisoner who was convicted of cannabis possession while in prison.  The court ruled that possession of cannabis is still illegal in prisons despite its legalization on the outside.  The decision is at odds with another California state appeals court decision in which the appeals court overturned the convictions of five men found with cannabis in their cells.  An appeal from that decision is pending before the state Supreme Court.
  • IL: In May recreational cannabis sales reached a new monthly record in Illinois of $44.3 million, based on nearly a million individual products sold—despite restrictions on operations imposed to contain the spread of COVID-19.  While the allocation of 75 additional dispensary licenses remains on hold, an increase in supply, the addition of retail sites by existing license holders, and allowing curbside pickup have combined to help meet strong demand. 
  • KS: A bill to legalize medical cannabis Kansas backed by several lawmakers in the lower house of the Republican-led State Legislature died in committee during the last special session.  HB 2017 would have established medical cannabis programs allowing patients to possess, cultivate and purchase at least four ounces of cannabis from licensed dispensaries.  The bill also contained a variety of employment, housing and education protections for registered patients.  The bill was backed by Democratic Gov. Laura Kelly.
  • MO: BeLeaf Medical will be the first medical cannabis company in Missouri when it opens this week after passing all required inspections by the state Department of Health and Senior Services. The vertical company has been awarded three cultivation licenses, two manufacturing licenses and five dispensary licenses, all in the St. Louis area.
  • MO: A lawsuit filed by four would-be applicants for medical cannabis licenses challenging the state’s cap on such licenses is heading toward a potential trial after a county circuit judge rejected a motion to dismiss brought by the defendant, the Missouri Department of Health and Senior Services. The plaintiffs claim the cap conflicts with an amendment to the state constitution amendment passed by voters in 2018 legalizing medical cannabis.  The plaintiffs are also challenging the scoring process for licensure, which grants extra points for applications from economically disadvantaged areas.
  • MT: Despite setbacks caused by the Coronavirus pandemic, two ballot initiatives seeking to legalize cannabis in the state of Montana are close to gathering the requisite number of signatures before the June 19 deadline.
  • NV: Nevada Gov. Steve Sisolak (D) announced a plan to pardon tens of thousands of state residents convicted on charges of possessing less than an ounce of cannabis.  The pardons would restore their right to vote, own a firearm, serve on a jury and other rights of citizenship.
  • OH: Ohio regulators have recommended adding cachexia—a condition that causes severe weight loss and can be associated with chronic conditions, such as cancer or HIV—to the list of conditions that qualify for medical cannabis recommendations.  As of April, more than 100,000 Ohio residents had enrolled in the state’s medical cannabis program.
  • OR: On June 5, Oregon regulators released an updated list of pesticides approved for use on cannabis.  The list takes the place of a previous list of more than 250 pesticides that cannabis growers may use to defeat mites, mold, mildew and other common pests and problems.
  • SD: Cannabis advocates in South Dakota are campaigning for legalization of both medical and recreational cannabis, which will be on the state’s general election ballots this November.  If voters say yes to both ballot measures,  South Dakota would be the first state to pass medical and recreational cannabis at the same time.  Both measures are opposed by the state’s Republican Governor, Kristi Noem.

Hemp/CBD

  • Portuguese Hemp Regulation:  The cultivation of EU-certified industrial hemp could soon be a regulated industry in Portugal, overseen by four state agencies. The country’s hemp farmers have been in limbo for more than a year due to ambiguity in the country’s medical cannabis law about which authorities were responsible for regulating hemp cultivation.  Under the draft regulation, cannabis growers would apply for a license from phytosanitory authorities in Portugal’s General Directorate of Food and Veterinary Affairs.

International

  • Israel: The Israeli government announced plans to advance legislation to decriminalize and legalize recreational cannabis use. The proposed law would permit those aged 21 and older to use cannabis, while placing restrictions on cannabis advertising and sales.  Israel partially decriminalized cannabis use in 2017, establishing a system of fines and treatment for initial offenders rather than criminal charges.  The legislation is co-sponsored by Blue-and-White MK Ram Shefa and Likud MK Sharren Haskel. 
  • Netherlands: The Dutch government announced that, from July 1 through July 28, it is accepting applications from potential cannabis cultivators to supply “coffee shops” in 10 municipalities.  The coffee shops will be required to source exclusively from the licensed cultivators, which are expected to be announced in early 2021. Up till now, all coffee shops have sourced their product from the illicit market.  The pilot cultivation program will last at least four years.

Business

  • NBA:  The National Basketball Association (NBA) announced that it will not test players for cannabis when the league resumes in Orlando next month.  Recreational use of cannabis is banned under the NBA’s drug-use policy, but testing has been suspended during the league’s pandemic-related hiatus.
  • Cresco Labs:  Chicago-based Cresco Labs appointed Michele Roberts to its board.  The first woman and person of color to join the board, Ms. Roberts has served as executive director of the National Basketball Players Association since 2014.
  • St. Louis Fed:  The Federal Reserve Bank of St. Louis recently published a short analysis outlining the potential pros and cons of state cannabis legalization.  One of the points made by the Fed’s post is that consumers are likely to spend a greater share of their income on cannabis and less on other taxable goods, such as alcohol.  The analysis focused on various state medical and recreational programs in the Midwest.

Medical/Health

  • THC Levels and Intoxication:  According to a new study published in JAMA Psychiatry, high-potency cannabis concentrates do not correlate to higher intoxication when compared to flower.  The study involved Colorado adults who were regular cannabis consumers, who were assigned to consume either relatively low-THC cannabis flower, or higher-potency concentrates.  The participants were subjected to an array of neurobehavioral tasks as well as blood plasma testing.  The study found that most neurobehavioral measures were not altered by short-term cannabis use, but delayed verbal memory and decreased balance function were observed.  One possible reason for the results can be attributed to the body’s finite number of cannabinoid receptors, which THC molecules bind to, becoming saturated regardless of whether higher- or lower-THC products are used. 
  • Study of Cannabinoid Receptor CB1 and Obesity:  A study published by the Multidisciplinary Digital Publishing Institute suggests that targeting the cannabinoid receptor CB1 is a potential effective treatment of obesity.  The endocannabinoid system has been linked to homeostatic processes, including metabolism, food intake and the regulation of body weight.  The study recommends clinical trials for validation.
  • FDA and CBD:  Charlotte's Web Holdings Inc. and six other CBD brands, will address the Food and Drug Administration’s public questions about CBD products.  The companies will back ValidCare’s human trial study to ascertain whether daily use of full spectrum hemp-derived CBD or CBD isolate has any impact on the human liver.  This past March, Congress asked the FDA to request additional scientific data from the industry regarding the use of CBD.

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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