Should We or Shouldn’t We? – That Is the Question

Over the past few years the number of states that have legalized marijuana in some form has grown substantially to the point where, as of this writing, 29 states and the District of Columbia have legalized marijuana for either medical or recreational use. This recent acceptance of marijuana by a significant number of states has created a brand new industry, which is estimated to generate approximately $7.0 billion in 2017 and $24.5 billion by 2025. This industry is clamoring for acceptance into a financial system that allows participants to bring the cash generated into the secure environment afforded by our banking system. This will not only provide security to the marijuana related businesses (“MRBs”), but will also permit better accounting, monitoring, and taxing of funds generated by those businesses.

To read the full text of this article, please visit the Duane Morris LLP website.

David Feldman

China Quietly Dominates Hemp Market

A fascinating piece in the South China Morning Post last week reports that a number of Chinese provinces have legalized the production of cannabis, and more particularly hemp, to make fabric, pharmaceuticals and food and drinks. Hemp production in China apparently dates back over 3,000 years and seems to have been the source of the first paper produced there.

According to the article, China now controls over half of the farmland worldwide being used to harvest hemp. China also holds more than half of the over 600 worldwide patents relating to cannabis because of research begun in the 1970s to develop better, more breathable military uniforms during the Vietnam War. The People’s Republic still imposes severe penalties for production of THC-laden cannabis, although it also has been used for centuries in Chinese medicine.

While exact information is not easily obtainable, one apparently can obtain a license to produce hemp in Heilongjiang and Yunnan provinces. The major cannabis growers elsewhere mostly are met with a blind eye by the Government. Farmers love it because hemp is much more profitable than other crops. One company apparently also is working with the Chinese military to develop a cannabis-based treatment for post-traumatic stress disorder (PTSD).

As the global reach of the cannabis movement grows, we should all keep a very close eye on these very important developments in China.

David Feldman

Netflix Launches Cannabis Products to Promote Shows

Netflix found an interesting way to promote their new show Disjointed, which will star Kathy Bates as the operator of a California cannabis dispensary. They partnered with a California medical cannabis seller to operate a pop-up shop selling 12 different cannabis strains named and developed based on 10 of Netflix’s shows.

According to MJBizDaily, the 3-day pop up shop sold 27 pounds of medical marijuana. But Netflix went out of its way to make clear that none of their employees “touched the plant,” that was handled by their dispensary partner. The shows inspiring the strains, in addition to the new one, included Chelsea, Orange is the New Black and Arrested Development.

More and more “mainstream” companies are involved in cannabis-related projects, including Microsoft, Arrow Electronics, and Philips, though most still are concerned about the continuing federal criminal restrictions on cannabis.

David Feldman

New Hampshire Latest to Decriminalize Cannabis

Last month New Hampshire became the 22nd US state to eliminate jail sentences for marijuana possession. The states that have decriminalized now are: Connecticut, Delaware, Illinois, Maryland, Minnesota, Mississippi, Missouri, Nebraska, New Hampshire, New York, North Carolina, Ohio, Rhode Island and Vermont, in addition to the 8 states (plus DC) that have legalized adult use of cannabis (Alaska, California, Colorado, Maine, Massachusetts, Nevada, Oregon and Washington).

Decriminalizing is important as it begins to dismantle the war on drugs to the extent it applies to marijuana. New Hampshire previously imposed both a fine and up to a one year prison sentence for possession of even small amounts. Now it’s a $100 “traffic ticket” for possession of up to 3/4 of an ounce of cannabis flowers or five grams of hashish. Marijuana convictions have burdened casual users, preventing them from obtaining student loans or even employment.

Of course marijuana possession remains a federal crime which can subject you to serious jail time. Here’s an idea: instead of pushing a big rock uphill in the Congress to fully legalize marijuana on a federal level, maybe we should start with a federal decriminalization bill. Might that have a better chance of passage than the multiple bills currently pending to legalize? Maybe.

David Feldman

Cannabis Company Buys Entire Town for Tourism

Phoenix based American Green Inc. is buying the entire town of Nipton, CA, all 120 acres of it. They want to turn the town into a cannabis tourism destination. Nipton, population 20, is a mere 60 miles from Las Vegas and about 3 hours from Los Angeles or, as the current owner described it as noted in the London Evening Standard, “conveniently located in the middle of nowhere.”

The company is paying $5 million for the town and plans on another $2.5 million to fix it up. Nipton started life in 1905 when the gold rush hit, and now ironically it is poised to capitalize on the “green rush” of cannabis. American Green President David Gwyther thinks cannabis legalization could change and revitalize communities.

Will this rival the cannabis tourism seen in Colorado and soon to hit places like Las Vegas? If they build a nice spa…

David Feldman

Senate Committee Bucks Sessions, Passes Renewal of Block on Federal Cannabis Enforcement

Last week the US Senate Appropriations Committee voted to renew the Rohrabacher-Blumenauer amendment when it expires September 30. That amendment, renewed annually since 2014, blocks the US Department of Justice from using federal funds to interfere with the implementation of state medical cannabis laws. The passage included 16 Republicans, showing this as a bipartisan issue in the Congress.

This early vote is important because US Attorney General Jeff Sessions has asked the Congress not to renew the amendment. Sessions also commissioned a task force on drugs and violent crime whose final report is expected soon. He says in the meantime he has been “on a rolling basis” implementing some of the as yet unrevealed recommendations. Many believe the task force will link cannabis to violent crime and push for stronger sentences for people who grow or sell marijuana.

It appears, however, that there remains strong bipartisan support in Congress to retain the restriction on federal spending for now, and that the amendment will be renewed as part of the final Congressional appropriations in September. Stay tuned.

David Feldman

Massachusetts Approves Cannabis Adult Use Legislation

Eight months after Massachusetts voters approved legal adult use of cannabis,on July 28, 2017, reluctant Republican Gov. Charlie Barker signed legislation to start a year long phase-in of permitting adults to buy and use cannabis. The expectation is that the first stores will be open by next July.

The legislation imposes a 20% tax on adult use cannabis, of which 3% will go to local municipalities. Also, in a unique feature, local governments will have the option to prohibit cannabis stores in their area, unless voters approved the measure in their municipality, in which case voter approval would be required to ban stores. Estimates are that as much as $300 million in taxes might be collected in the state just in the first two years after implementation.

A Cannabis Control Commission has to be appointed by August 1 and the commission will issue regulations by March. As the most populous Eastern state to approve adult use, will Boston and other Massachusetts destinations such as Martha’s Vineyard and Cape Cod see a surge in “cannabis tourism” as Colorado has? Only time will tell.

David Feldman

Lawsuit: Cannabis Criminalization is Unconstitutional

Former NFL star Marvin Washington and others yesterday filed a lawsuit in New York against the US Government and Attorney General Jeff Sessions. The suit is seeking to declare the Controlled Substances Act (CSA), which makes cannabis illegal under federal law, unconstitutional as to its classification of cannabis as a Schedule I drug, deeming it as dangerous as heroin. If successful, the suit could result in the immediate national federal legalization of cannabis. Many don’t realize that the CSA replaced another law, the Marihuana Tax Act of 1937, which also was declared unconstitutional in the late 1960s after activist Timothy Leary was arrested for marijuana possession and successfully challenged the law’s validity.

The lawyers behind the suit are well-known in NY cannabis circles and believe they have a legitimate case. Quoted in MJBizDaily, Michael Hiller says bluntly that the CSA “doesn’t make any rational sense, and the federal government knows it.” In addition to Washington, the plaintiffs include two young children, a US veteran and a cannabis industry association all claiming harm by the CSA.

The suit argues that the CSA, or how it was adopted, violated the Due Process Clause, the First Amendment and the Commerce Clause of the Constitution. They claim, among other things, that the main purpose the Nixon Administration pushed for marijuana as a Schedule I drug was to incarcerate African Americans and war protesters, believing they were heavy users of cannabis. In the past the US Supreme Court has upheld the right of the federal government to criminalize cannabis, so there is no way to determine whether their efforts will pay off. Interesting stuff.