Cannabis Client Alert – Week of December 4, 2023

Cannabis Client Alert – Week of December 4, 2023

In this week’s edition:

  • Congressional Democrats Press Treasury to Update 2014 FinCEN Guidance
  • House Blocks Appropriations Bill Rider Designed to Protect Adult-Use Cannabis Programs From Feds
  • Virginia’s New Democratic Legislative Majorities Aim to Revive Legalizing Recreational Cannabis Sales
  • Ohio Working to Amend Voter-Approved Cannabis Law
  • Medical Experts From Johns Hopkins Advise: Avoid Diet Weed
  • Congressional Hearing Held on Psychedelic Therapy for Veterans

Federal

Ninth Circuit Signals District Court Should Rule on Constitutionality of Residency Requirements – The Ninth Circuit Court of Appeals held oral arguments on Peridot Tree v. Sacramento on November 15. The panel appeared to be moving toward a decision that the district court cannot abstain from deciding the question of whether residency requirements in the City of Sacramento’s social equity program violate the dormant Commerce Clause of the US Constitution.

House Rules Committee Blocks Appropriations Bill Rider Designed to Protect State-Legal Cannabis Programs From Feds – The Republican-controlled Rules Committee declined for floor consideration an amendment that would have prevented the Department of Justice (DOJ) from interfering with any state-legal adult-use program. Past attempts at passing such legislation have consistently failed to garner adequate congressional support. The proposed annual spending bill still includes a provision that precludes DOJ interference in medical cannabis programs. The provision (known as the Rohrbacher-Farr amendment or Joyce amendment) has been renewed annually since 2014. The committee also blocked an amendment proposed by Representative Pete Sessions (R-TX) that would have prevented the Drug Enforcement Administration (DEA) from using federal funds to reschedule or deschedule cannabis under the Controlled Substances Act.

HHS Secretary Becerra Reiterates Agency’s Science-Centered Role in Drug Scheduling Process – Regarding the rescheduling or descheduling of substances generally, Health and Human Services Secretary Xavier Becerra reminded the Senate Appropriations Committee of the agency’s unique responsibility to provide the DEA with a substance’s most up-to-date science to facilitate a proper scheduling decision. “We want to make sure that if we’re scheduling a particular substance or drug, it’s properly scheduled.”

CRS Posts Memo on Hemp Industry – In the wake of the 2018 Farm Bill’s extension for an additional year, the Congressional Research Service published a report, Farm Bill Primer: Selected Hemp Industry Issues, outlining a number of issues confronting the hemp market. These include, for example, industry concerns regarding the Department of Agriculture’s testing requirement for “total THC.”

Federal District Judge Rules Medical Cannabis Use Not Protected Under ADA – District Judge Sara L. Ellis of the Northern District of Illinois dismissed a suit alleging that Dayton Freight Lines Inc. violated the Americans With Disabilities Act (ADA) when firing a tractor mechanic for off-job use of medical cannabis. Courts have generally found that ADA protections do not apply to medical cannabis since it is federally illegal.

Congressional Democrats Press Treasury to Update 2014 FinCEN Guidance – Twenty Democrats from the House and Senate—led by Sens. Elizabeth Warren (D-MA), Raphael Warnock (D-GA) and Jeff Merkley (D-OR) and Rep. Earl Blumenauer (D-OR)—addressed a letter to the Department of the Treasury and the Financial Crimes Enforcement Network (FinCEN) urging federal officials to update “out-of-date” banking guidance, specifically with regard to the provision of banking to cannabis business owners convicted of past cannabis-related crimes.

Federal Agency Reminds Holiday Season Travelers Not to Cross Federal Border With Cannabis – In a recent press release targeted at holiday travelers, US Customs and Border Protection warned travelers, among other things, not to “cross the border with any marijuana or marijuana products” given the continuing federal illegality of cannabis.

State

AL – Last week, the Alabama Medical Cannabis Commission (AMCC) voted to ratify a proposed settlement agreement with license applicants intended to resolve a number of lawsuits that have prevented the state from moving forward on licensing cannabis businesses. The AMCC had reached the settlement agreement with license application over most issues after closed-door mediation earlier in November. The AMCC initially awarded licenses to 21 businesses (out of a total of 90 applicants) in early June 2023.

GA – The Georgia Access to Medical Cannabis Commission granted provisional Class 2 licenses to four businesses for the production of low-THC oil for medical patients. The license allows each company to cultivate 50,000 square feet of indoor canopy. The commission previously approved two Class 1 licenses that permit double the amount of canopy space. The licenses are considered provisional due to ongoing, years-long litigation by applicants over the license award process.

HI – Hawai`i Attorney General Anne Lopez (D) recently introduced a draft cannabis legalization bill to the state legislature. Although prior legislative sessions have seen a number of failed legalization bills, lawmakers are openly optimistic that adult-use legalization will pass in 2024. Meanwhile, legalization proponents are concerned that the legislation is missing common equity-focused provisions, including, for example, the lack of expungement for those convicted of certain cannabis-related offenses. The bill instead requires experts to issue a report on the “advisability” of such relief.

IN – Stating that he is a “law-and-order kinda guy,” Indiana Governor Eric Holcomb (R) said that so long as federal prohibition remains, he was unwilling to consider legalizing cannabis in the state.

NH – A New Hampshire commission tasked with proposing cannabis legalization legislation formally ended its work last month without putting forth any recommendations. Rather, the commission, which has been studying state-controlled cannabis sales for months, voted to send only its summary activity report to the state legislature—detailing its meetings and testimony from experts and community members. Though admittedly “not a huge believer” in legalization, Gov. Chris Sununu (R) has stated that legalization is “inevitable.”

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MD – Maryland has begun a new round of cannabis business licenses, accepting applications for 179 available licenses across various cannabis categories until December 12. The state witnessed robust sales in October, hitting $90 million in combined medical and adult-use cannabis, with retail sales surpassing medical transactions.

MO – The Missouri Division of Cannabis Regulation is revoking Delta Extraction’s cannabis manufacturing license due to allegations of illegally importing out-of-state cannabis product and adding it to Missouri-grown cannabis. While Delta contests these claims, citing the use of a legal hemp product, the state asserts various violations beyond the import issue, leading to an impending hearing regarding the license revocation and a cannabis recall in the state. The case underscores a dispute over regulations, with Delta contesting the state’s authority while emphasizing the potential industry-wide implications surrounding the use of hemp-derived products in cannabis.

NY – New York’s legislature sent a bill to Governor Kathy Hochul (D), aiming to grant tax deductions to New York City cannabis businesses under IRS code 280E. This mirrors a variety of state-level efforts amidst federal inaction. At the federal level, Rep. Blumenauer reintroduced a bill to allow federal tax deductions for state-legal cannabis businesses, addressing industry challenges while waiting for IRS guidance amid federal prohibition. Also in New York, regulators have tentatively settled with disabled military veterans over a legal dispute regarding the state’s adult-use cannabis licensing process, potentially ending an injunction that had halted more than 400 conditional dispensary licenses, challenged for allegedly prioritizing certain applicants based on their connections to cannabis-related offenses.

OH – Ohio Governor Mike DeWine (R) is working with GOP leaders to amend a voter-approved cannabis law, focusing on changes to prevent youth access, reallocate taxes and tackle impaired driving. Democratic lawmakers criticized the delayed legislative response to voter demands, amid discussions to revise the law before possession and cultivation legalization goes into effect next month.

OK – Oklahoma lawmakers have extended the moratorium on granting new medical cannabis business licenses for an additional four years, aiming to regulate the surging cannabis industry and address concerns of oversaturation. The moratorium, initially set to end in summer 2024, now extends to August 2026, affecting the number of licensed growers, dispensaries and processors. Although there has been a decrease in licensed growers, the number of dispensaries and processors has risen, reflecting challenges faced by Oklahoma’s burgeoning cannabis market, which has nearly 10,000 licensed businesses.

PA – Pennsylvania’s Office of Medical Marijuana is seeking a new software provider that will be responsible for seed-to-sale tracking in the state’s medical cannabis program as well as a registry for providers, medical professionals, patients and caregivers. MJ Freeway Acquisition Co. has been the contract holder since April, when the company purchased Akerna Corp.’s cannabis software platforms.

SD – A new ballot initiative in South Dakota seeking to legalize adult-use cannabis is gathering signatures for the 2024 election cycle. If passed, it should allow medical dispensaries to sell recreational cannabis. This follows prior setbacks, including the judicial overturning of the state’s 2020 voter approval of adult-use cannabis; at that time, the state also approved a medical cannabis market, with sales starting in July 2022.

VA – Virginia’s new Democratic majorities in the House and Senate aim to revive plans for legalizing recreational cannabis sales after experiencing recent setbacks under Governor Glenn Youngkin (R). State Senator Adam Ebbin (D) is hopeful for legislative approval, despite indications that the governor may not favor recreational cannabis sales during his tenure.

Hemp

FL – Florida lawmakers recently discussed concerns about hemp-derived THC products like delta-8, at a hearing of the Florida Senate Agriculture Committee, citing cases of children accidentally consuming high-potency THC. Experts warned of potential risks and urged stricter regulations, advocating for clearer labeling and origin standards. Lawmakers are considering actions for the upcoming legislative session, though no new legislation has been filed yet.

LA – Louisiana hemp regulators filed revised rules this month regarding registration of consumable hemp products and product labeling requirements. Among other things, product registrations will now require an “attestation that the product was produced from hemp.”

MN – The Minnesota Department of Public Health released a fact sheet that outlines the guidelines for selling hemp-derived cannabinoid products in Minnesota, including permitted products, packaging, labeling and sale regulations. It covers various aspects like THC limits, packaging requirements, labeling instructions, sale age restrictions, destruction methods if needed and mandatory testing for compliance with legal requirements.

NY – New York regulators have promulgated final regulations reasserting that hemp-derived delta-8 THC (as well as THC-A and THC-O) are banned in the state. The new regulations also limit THC levels generally, with legal challenges anticipated in light of ongoing litigation regarding similar emergency rules issued this past summer. Additionally, the Cannabis Control Board approved new fees for testing labs and renewed registrations for nine of the state’s 11 medical cannabis companies, revealing significant sales of nearly $109 million overall and $23 million in the fourth quarter of 2023.

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WY – A bill to ban intoxicating hemp products passed the Wyoming Legislature’s Joint Judiciary Committee and may be considered by the full legislative body in 2024. The bill would prohibit the addition of “any synthetic THC, synthetic cannabinoid or any other drug or psychoactive substance” to hemp and ban hemp products from containing more than 0.3 percent of any type of THC on a dry weight basis, including delta-8 THC and delta-10 THC. Although lawmakers anticipate revisions to the bill’s text, representatives from the state’s hemp industry are concerned with how the bill defines “synthetic” and its ambiguity regarding what constitutes a “psychoactive” substance.

International

Canada – Data from 2023 shows that approximately one-third of Canada’s licensed indoor and greenhouse cultivation square footage has closed in recent years. In mid-2020, a frenzy of investment into indoor and greenhouse capacity resulted in more than 23.9 million square feet of licensed indoor and greenhouse growing space. As of March 2023, that space had decreased to 16.3 million square feet. The reasons behind the closures include over-production, decreasing prices for low- to mid-quality products, a lack of cost efficiencies and company insolvency. While outdoor production has been slower to decrease, Canada has seen an 18 percent decrease in outdoor area licensed for cannabis production since late 2021.

Japan – Japan’s Lower House passed a bill to legalize medical products made from cannabis and to clarify the country’s prohibition on recreational use. The bill would allow for the clinical use of Epidiolex, which has been approved already in the United States and Europe to treat epilepsy. According to one government official, the bill should open a path “for patients with intractable epilepsy to use medicines derived from the cannabis plant, helping to improve their quality of life,” while also “help[ing][the government] crack down on the illicit use and possession (of cannabis) and prevent its abuse.” The bill now heads to the Upper House for consideration.

Germany – German legislators in the Bundestag agreed to amend a cannabis legalization bill to strengthen penalties for underage sales and loosen certain other restrictions that faced opposition from cannabis reform supporters. For example, under the amended legislation, possession of slightly more cannabis than the permissible amount will be treated as an administrative violation, rather than a criminal offense. Other amendments include increasing the amount of cannabis permitted to be grown at home and changes to the public consumption rules. The bill is expected to be voted in by the Bundestag next week, but will still require consideration by the Bundesrat, a separate legislative body that represents German states.

South Africa – South Africa’s National Assembly passed a bill that would legalize recreational cannabis possession and cultivation if passed by the National Council of Provinces. The bill comes more than three years after the deadline set by a Constitutional Court ruling, which deemed unlawful the prohibition on simple possession and cultivation and mandated legislative change by 2020. The bill—which does not include specific possession or cultivation limits—would not allow for the lawful sale of cannabis, only personal cultivation and consumption in a private residence.

Thailand – Under the new Prime Minister Srettha Thavisin, Thailand’s health ministry is expected to submit draft cannabis legislation to close loopholes on permissible uses of cannabis and to provide new protocols for cultivation and criminal penalties. The revised legislation follows Prime Minister Thavisin’s campaign promise to restrict cannabis to medical purposes.

Ireland – In January, Irish lawmakers are expected to take up debate of a bill to legalize the personal use of cannabis. If passed, the bill would make it legal for individuals to possess up to seven grams of cannabis. The bill does not currently address cannabis cultivation. However, cultivation is likely be added to the bill at the committee stage.

United Kingdom – Several members of Parliament signed a letter sent to Prime Minister Rishi Sunak urging him to “finish what was started” and allow medical cannabis to be prescribed by the National Health Services (NHS) for children with incurable epilepsy. Currently, certain medications containing cannabis (like Bedrolite) are only available through private prescriptions—which are not paid for by the NHS—requiring families to pay out-of-pocket.

Business

Snoop Dogg Admits “Giving Up Smoke” Announcement Part of Ad Campaign – Last month, well-known cannabis proponent Snoop Dogg caused pandemonium on social media after stating that he had “decided to give up smoke” while also asking for privacy and including an image of him with clasped hands in prayer. It eventually turned out that the commotion was all part of an new ad campaign for a smokeless stove/fire pit company, Solo Stove; the celebrity is now an official spokesperson.

Cruise Line Imposes Lifetime Ban on Passenger Boarding with CBD Gummies – Carnival Cruise Line imposed a lifetime ban on a passenger who tried to board a Carnival cruise ship with CBD gummies. The gummies, which contained less than 0.01 percent THC—well under the federal limit of 0.3 percent THC—were purchased legally. Carnival, along with all other major cruise lines, however, continues to ban CBD and claims it was “following federal law under which CBD is defined as a controlled substance.”

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Marijuana Policy Project Raising Money to Launch Cannabis Justice Fund – The Marijuana Policy Project is raising $20,000 to launch a Cannabis Justice Fund to address the “failed approach of [cannabis] prohibition” that “continues to inflict harm and injustice on a massive scale across the country.” The new Cannabis Justice Fund will help advocate for policies that expunge convictions, reduce police encounters and arrests, invest in jobs and education, and provide more equitable access to opportunities from cannabis legalization.

Trulieve Redeems $130M in Debt – Multistate operator Trulieve Cannabis Corp. announced that it completed the redemption of all of its outstanding 9.75 percent senior secured notes with a principal amount of $130 million. Cash used for the redemption was approximately $136 million.

Medical

Research Shows Decline in Nonmedical Opioid Use After Legalization of Medical Cannabis – A study published in the International Journal of Mental Health and Addiction found that when states implement medical cannabis laws, there is a 0.5 to 1.5 percentage point decrease in regular to frequent (up to or greater than once per week on average) nonmedical prescription opioid use among people who reported using opioids in the prior year. The reductions were concentrated in people who met diagnostic criteria for cannabis addiction. The researchers said future studies should seek to understand whether the reductions in the frequency of nonmedical opioid use are meaningful in relation to the widespread opioid addiction crisis, as well as whether the reductions in opioid use coincide with increases in cannabis use disorder.

Cannabis Use During Pregnancy May Lead to Low Birth Weight and Preterm Birth – A study published in Addiction found that the frequency of preterm birth, low birth weight and neonatal intensive care unit admissions collectively ranged from 1.5 to more than two times as likely in infants exposed to cannabis than in those who were not. According to the study, cannabis use during pregnancy did not lead to higher rates of infant mortality, Sudden Infant Death Syndrome or birth defects, and there was little evidence that prenatal cannabis exposure adversely impacts behavioral or cognitive outcomes in early childhood.

New Study Finds That Cannabis May Not Be Helpful in Curbing Opioid Misuse – Published in the American Journal of Psychiatry, a two-decade study determined that cannabis use “may not be an effective long-term strategy for reducing opioid use,” according to its lead author, Dr. Jack Wilson at the University of Sydney in Australia.

Medical Experts From Johns Hopkins Advise: Avoid Diet Weed – Experts caution against the unregulated use of delta-8 THC, a hemp-derived cannabinoid, highlighting its extraction controversies and differences from delta-9 THC. Despite its popularity, concerns persist regarding its synthesis from CBD, potency and potential adverse effects. The lack of regulation and clarity from government agencies, including the Food and Drug Administration, adds to the confusion, emphasizing the need for consumer awareness and understanding of the distinctions between delta-8 and delta-9 THC.

Psychedelics

Congressional Hearing Held on Psychedelic Therapy for Veterans – This past November, the House Veterans’ Affairs Subcommittee on Health held a hearing titled, “Emerging Therapies: Breakthroughs in the Battle Against Suicide?” The first congressional hearing ever held on psychedelics, it focused on ways substances such as psilocybin and MDMA can help military veterans who face mental health challenges. A number of advocates and scientists testified, as well as three Department of Veterans’ Affairs officials who spoke to the department’s ongoing work on psychedelics research and expectations for future clinical applications.

Massachusetts Governor Files Legislation to Study Medical Benefits of Psychedelics -Governor Maura Healey (D) introduced a bill to increase benefits and modernize services for the state’s military veterans that includes a proposal to study the medical benefits of psychedelic drugs. The bill, known as An Act Honoring, Empowering and Recognizing Our Servicemembers and Veterans (HERO Act), would establish a working group to research the “health benefits of psychedelics as treatment for veterans suffering from physical or mental health disorders related to their service,” according to the governor’s office.

Dentons Speaks

Kentucky’s New Regulations for Hemp-Derived Cannabinoid Products – Dentons partners Arin Aragona, Hannah King and Kristin McCall published an article in Cannabis Business Executive detailing how the hemp industry in Kentucky will be impacted by new regulations for hemp-derived cannabinoid products. Among other changes, entity and product registrations are now required to legally sell both adult-use products (e.g., hemp-derived delta-8 THC and hemp-derived delta-9 THC products) and non-intoxicating hemp-derived products.

Dentons partner Eric Berlin lectured to the cannabis law class at the University of Texas School of Law in November.

Please click here for more information on the Dentons US Cannabis group.

Authored by associates Malina Dumas, Lauren Estevez, Jacob Raver and Margo Wilkinson Smith.