On August 15, 2018, Constellation Brands, which owns popular beer, wine and spirits products, such as Corona, Robert Mondavi and High West, announced it is investing $4 billion in Canopy Growth, which is one of the leading investors in the global legal cannabis market. The announcement boosted Cannabis market stocks in the US and Canada, and is likely to catch the eye of big alcohol, big tobacco, big pharma and larger consumer products companies that have been interested in entering the growing legal marijuana markets. More and more companies once-hesitant about doing so are finding that good counsel can help them navigate the regulatory hurdles that might otherwise stand in the way of profiting from this exciting market.
In a rather symbolic moment in the march to the legalization of industrial hemp, the caretakers at George Washington’s Mount Vernon farm announced in May (although it has only recently received news attention) that they have planted a small crop of industrial hemp. They are doing so under Virginia law and say they are going to use the plant “as an interpretative tool to help better tell the story of Washington’s role as a farmer.”
As many know, hemp was a critical crop in Colonial times and some states, including Virginia, actually required farmers to grow it. Hemp was used particularly to make rope, thread, canvas and sailing cloth. Washington’s primary crop actually was hemp. Thomas Jefferson grew hemp as well.
The Mount Vernon farmers intend to use the hemp they grow to give fiber-making demonstrations at the site, which is owned by the Mount Vernon Ladies Association of the Union. They bought the site from Washington’s descendants in 1858 for $200,000 and now about a million visitors each year tour the facility. Many do not realize that Mount Vernon is not owned by the Federal government and is not a national park.
Hemp, while derived from the cannabis plant, contains no THC and has no psychoactive effects. In June, the Senate passed a farm bill that included language effectively legalizing industrial hemp. However, the House version of the bill is silent on hemp, and a conference to deal with the differences is being arranged. Senate Majority Leader Mitch McConnell (R-KY) is a strong supporter of legalizing hemp, which many believe will help sway some skeptical House Republicans to support those provisions.
Say you want to start a cannabis business. There’s likely a law requiring you to register with the government.
But can you refuse to comply with that law?
Arguably, you can. You have a Fifth Amendment right not to be forced to incriminate yourself. And registration requirements force you to identify as a person involved in activities illegal under federal law.
Duane Morris partner David Feldman writes a monthly column for Honeysuckle Magazine. His latest column, “UK Goes for Medical: The Changing Status of Worldwide Weed,” is now available.
The United Kingdom this week approved the legalization of medical cannabis. The decision was made by the Home Secretary, Sajid Javid, who said, “Recent cases involving sick children made it clear to me that our position on cannabis-related medicinal products was not satisfactory.” As a result, medical cannabis will become available to children and adults with a prescription. The specifics of how this will be implemented have not yet been determined.
Javid did add, however, that this was “in no way a first step to the legalization of cannabis for recreational use.” This follows a widely watched story involving a 12-year old boy with a rare form of epilepsy who had received a special emergency license to be treated with medical marijuana in Northern Ireland.
Over 30 countries have legalized medical cannabis at this point, including a number of European countries. Press reports on the UK decision included enthusiastic quotes, especially from parents of children facing difficult illnesses. With over 65 million people, the UK represents a big increase in those now able to access medical cannabis worldwide.
A video replay of the webinar “Cannabis 107: The U.S. and Canadian Cannabis Markets: 2018 Mid-Year Review” is available to view.
The clash between state and federal law regarding the use of medical marijuana continues to present an ongoing dilemma for courts around the country, as illustrated by a recent decision by the Eighth Circuit. In the United States v. Schostag, the Eighth Circuit affirmed a decision by the District Court of Minnesota barring a felon from using state-legal medical marijuana while he is on supervised release. Continue reading Courts Confront Clash Between Federal and State Marijuana Laws
The US Senate, by an overwhelming 86-11 vote, last week approved the sweeping Farm Bill containing language which fully legalizes industrial hemp. As we know, hemp, which is derived from cannabis plants, is used to make products from rope to clothing and does not contain THC, the psychoactive part of the plant. In colonial days hemp was so crucial that farmers, like George Washington, were legally required to grow it.
Most believe the House will follow suit. Hemp has not been legal on a federal level since federal criminalization of cannabis in the 1930s. Many believe that occurred in part because of fears of hemp competing with powerful timber interests and DuPont’s then new patent on nylon. After the 1930s bill was declared unconstitutional in 1968, the Nixon Administration helped orchestrate passing the Controlled Substances Act. That law, still in force, declared all parts of the cannabis plant as Schedule I drugs, as dangerous as heroin and LSD. A top Nixon aide later admitted, “Did we know we were lying about the drugs? Of course we did.” Constitutional challenges thus far have been unsuccessful.
Legalization of hemp could yield a variety of products that previously could only be produced with imported hemp. These could include food, building materials, paper products and many others. Currently, it it believed that China is the largest producer of hemp, since it is legal to do so in a number of Chinese provinces. They started farming it during the Vietnam War to make more breathable uniforms for their soldiers in the intense heat. This Senate vote is indeed a significant step towards relaxation of federal cannabis regulation.
The New York State Department of Financial Services (DFS) issued guidance, at Governor Cuomo’s urging, to New York state – chartered banks and credit unions to offer banking services to medical marijuana businesses licensed under the New York State medical marijuana program (Registered Organizations) and to industrial hemp businesses participating in the New York State industrial hemp research program (Research Partners).
The DFS guidance identifies several requirements for banks to consider in providing services to Registered Organizations (ROs), including the following:
- customer due diligence in accordance with established principles and procedures;
- transaction monitoring in accordance with established principles and procedures;
- compliance with New York Compassionate Care Act;
- compliance with applicable regulations and requirement of New York State Department of Health (NYSDOH);
- Cole Memo guidance and priorities (including, among other things, preventing diversion of marijuana to minors and to other states, and the flow of revenue to criminal enterprises);
- FinCEN guidance clarifying Bank Secrecy Act expectations (including, among other things, verifying the business is a licensed RO, reviewing the RO’s application for a license, obtaining information from the NYSDOH on the RO, understanding the ROS’s activities and customers, monitoring public information on the RO, monitoring for red flags based on assessment of revenue, movement of funds, location of ROs, among other indicia); and
- Fling Suspicious Activity Reports (SARs), such as a Marijuana Limited SAR, Marijuana Priority SAR, or a SAR for Termination, depending on the RO’s compliance with NYS law and regulations and Cole Memo, and the bank’s need to maintain effective anti-money laundering compliance program.
With regard to providing banking services to entities that are,or wish to be,engaged as a Research Partner in growing or cultivating industrial hemp under the NYS industrial hemp program, the DFS guidance identifies the following requirements for banks to consider: Continue reading Calling All New York Banks: NYSDFS Issues Guidance for Banks to Service Compliant Medical Marijuana and Industrial Hemp Businesses
Just weeks after Senators Elizabeth Warren (D-Mass) and Cory Gardner (R-Colo) introduced bi-partisan legislation to make marijuana lawful under a state’s marijuana laws also lawful under the Controlled Substances Act (CSA), Senate Minority Leader Chuck Schumer (D-NY) introduced legislation removing marijuana from the CSA altogether on Wednesday, June 27. Schumer’s bill also comes just one day after Oklahoman’s passed legislation legalizing medical marijuana in their traditionally red state, and one day before the U.S. Senate passed legislation legalizing hemp for all purposes, including extracts from hemp, such as cannabidiol.
By removing from the purview of the CSA, state-legal cannabis and proceeds derived therefrom, the Warren/Gardner legislation, if passed, would likely have the effect of nationwide legalization, but state operators and consumers would still need to be concerned about marijuana’s Schedule 1 status under the CSA, whereas the Schumer bill, if passed, would eliminate those concerns by removing marijuana from the CSA.