Cannabis Group Weekly Alert - Week of June 29, 2020

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In this week’s edition:

  • Department of Justice official alleges US AG Barr improperly directed antitrust investigations into cannabis company mergers due to personal bias
  • Illinois is again delaying the issuance of adult use licenses
  • LA City Council overhauling its legal cannabis market regulations
  • US Supreme Court rejects request to ease Ohio signature-gathering requirement for cannabis decriminalization referendum
  • Israel advances two bills that would legalize cannabis
  • And more…

Federal

Attorney General Wasted DOJ Resources to Investigate Marijuana Mergers Due to Personal Bias, Official Alleges - According to written testimony from a Justice Department official, Attorney General William Barr improperly directed antitrust investigations into multiple cannabis company mergers “because he did not like the nature of their underlying business.” Cannabis company mergers accounted for nearly one-third of the Justice Department’s Antitrust Division’s cases in 2019. Under Barr’s stewardship, the Antitrust Division undertook 10 full-scale reviews of cannabis industry mergers. According to the official, Barr ordered the division to issue Second Request subpoenas even though career staff determined the transactions as unlikely to raise any significant competitive concerns. The US House Committee on the Judiciary is holding a hearing on DOJ interference into prosecutorial independence where the official is scheduled to testify.

Justice Department Memo Says Marijuana Investigations were Appropriate, but Another Probe is Ongoing - The Justice Department’s Office of Professional Responsibility concluded, in a June 11, 2020, memorandum, that allegations about US AG William Barr directing improper antitrust investigations into cannabis company mergers due to personal bias were unfounded. The OPR concluded that the cannabis industry presented a “unique challenge” to regulators and it was reasonable to seek additional information through the Antitrust Division’s Second Request process. The allegations are being separately reviewed by the Justice Department’s inspector general.

Nation vs. Trump, No. 19-16443 (9th Cir. June 22, 2020) - The Ninth Circuit Court of Appeals held that a lower court did not err in dismissing a medical cannabis patient’s lawsuit against the US Department of Housing and Urban Development over claims that she was evicted from federally-subsidized housing for “illegally” using a “controlled substance.” The court found that woman did not exhaust her remedies under the Controlled Substances Act, noting that the Act allows people to petition the US Drug Enforcement Administration to reclassify drugs.

Pentagon Quietly Moves to Make CBD Use a Criminal Offense for Troops - According to a Defense Department memorandum recently made public, US troops can now be punished for using products that contain hemp or CBD. Previously, two of the four Department of Defense services issued guidance restricting the use of any form of CBD (including supplements, creams, ointments and tinctures). The new orders make use of hemp or CBD punitive across all Department of Defense active duty and reserve component personnel.

States

CA - The Rules Committee of the Los Angeles City Council approved changes to overhaul the city’s legal cannabis market. The proposed changes include limiting, until 2025, delivery licenses to businesses that meet certain social equity benchmarks. Other proposed changes would permit businesses to relocate while being licensed, clarify which employees are required to have background checks, and streamline the application process.

IA - Iowa Gov. Kim Reynolds (R) signed a bill into law that changes the cap on THC in the state’s medical cannabis program, following recommendations of the state’s Medical Cannabidiol Board. The new law replaces Iowa’s 3 percent limit with a cap of 4.5 grams per patient every 90 days, with exceptions. The state’s largest medical cannabis provider has warned that the lower limit will prevent some patients currently in the program from effectively treating their conditions. The new law also allows patients with more conditions to access the program, adding post-traumatic stress disorder and severe, intractable autism with self-injurious or aggressive behaviors to the list of medical conditions treatable through the program.

IL - Illinois Gov. J. B. Pritzker (D) signed an executive order delaying indefinitely the issuance of 80-plus cannabis business permits (40 craft grow, 40 infuser, and an uncapped number of transporter licenses), that were scheduled to be awarded on July 1, 2020. This change will be painful to all applicants, but especially social equity applicants, as the applications required that they secure property to qualify for a permit.

MI - Michigan regulators removed a requirement from the final version of the Marijuana Regulatory Agency rules that cannabis businesses enter into “labor peace agreements.” The proposed rule would have required every cannabis business to sign a peace agreement with a union before being granted a license.

NJ - New Jersey’s Department of Health announced a waiver to allow medical cannabis dispensaries to make home deliveries to patients. The policy change implements a broader delivery provision of a cannabis bill that Gov. Phil Murphy (D) signed last year and also serves as a social distancing measure. You can read the release here.

NM - New Mexico regulators adopted new rules for several areas of the state’s medical cannabis program. The new rules repeal and replace provisions regarding home health agencies and licensing requirements for producers, couriers, manufacturers and laboratories and amend rules regarding registration ID cards and advisory board responsibilities. You can read the new rules here.

OH - The US Supreme Court rejected a request from Ohio cannabis activists seeking to ease signature-gathering requirements to qualify local decriminalization ballot measures.

OK - The Oklahoma Supreme Court cleared a proposed cannabis legalization ballot measure for signature-gathering. In a separate case, a lower court judge is being asked to block residency and location regulations that could force some existing medical cannabis businesses to close.

Hemp/CBD

The Center for Science in the Public Interest, Consumer Reports, the Consumer Federation of America and the Public Health Institute are urging Congress to reject any attempts to force federal regulators to immediately legalize CBD for use in dietary supplements and food products. The groups are concerned that Congress is not the “right evaluator” of the safety of consumer products. For foods, cosmetics and medical uses, the groups urge that this job remains in the hands of the Food and Drug Administration.

International

Israel - The Knesset, Israel’s national legislature. voted to advance two bills that would legalize cannabis. The bills are expected to be combined in committee and will then be brought back through the legislative process as a government-sponsored bill. The bill would then have to pass three more times each in the committee and the plenum to become law.

Switzerland - Switzerland’s seven-member Federal Council submitted to parliament for deliberation revisions to the country’s narcotics law that would enable physicians to prescribe cannabis for medical purposes without an authorization from the Federal Office of Public Health. The ban on recreational cannabis would remain in place, and physicians would be required to share certain treatment data.

Business/Technology

Canopy Growth Corporation and Acreage Holdings, Inc. - The companies agreed to amend the terms of their plan of arrangement. The amended arrangement gives Acreage shareholders (i) an initial up-front cash payment in connection with the modification of Canopy Growth’s rights, including the extension of the term, and (ii) the ability to participate in upside potential that is not tied to fixed exchange ratio.

Curaleaf Holdings Inc. - The company announced it has revised its acquisition agreement with Grassroots from a cash-and-stock sale to an all-stock deal. The announcement comes one year after the deal was first announced. The transaction is expected to expand Curaleaf’s presence in the Midwest by adding close to 50 dispensary licenses to the company’s portfolio.

Cresco Labs - Workers at a Cresco Labs dispensary in Chicago voted to join the United Food and Commercial Workers Union. Only the dispensary’s wellness advisors, or “budtenders,” will be represented by the union. They will elect a union representative and the union will survey workers before contract negotiations between the two parties.

Aurora Cannabis - Edmonton, Alberta-based Aurora Cannabis announced a new round of staff reductions and plans to close five facilities over the next two quarters in response to the COVID-19 pandemic. Aurora cut its selling, general and administrative workforce by 25 percent and plans to lay off 30 percent of its production staff over the next two quarters.

Medical

United Nations - The World Drug Report 2020 expresses concerns about states and countries that have legalized cannabis, noting that the psychoactive plant’s use is on the rise in most jurisdictions where non-medical use has been legalized.

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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