All posts by David N. Feldman

David Feldman

Trump Will “Probably” Support Gardner Cannabis Bill

On the White House lawn this morning, getting ready to leave for the G-7 summit in Canada, Pres. Trump made positive comments about the cannabis bill introduced yesterday by Sen. Cory Gardner (R-CO) and Elizabeth Warren (D-MA). The STATES Act would allow states the freedom to legalize cannabis within their borders with no federal enforcement action permitted. The text of the Senate bill, just released, removes state legal cannabis from enforcement under the Controlled Substances Act.

On the lawn, the President said of the bill, “I probably will end up supporting that, yes.” He said, “We’re looking at it,” but also noted that he “really” supports Sen. Gardner. Of course the bill has to be passed by Congress before being sent to the President. The question is whether the process can be completed before the “silly season” of midterm elections brings most legislative activity to a stop. Trump promised to support a bill like this in exchange for Sen. Gardner resuming approval of judicial nominations, which he had stopped after Attorney General Jeff Sessions rescinded an Obama-era memo de-emphasizing federal enforcement against actors in cannabis legal states.

The House version of the bill was introduced this morning but text is not yet available. The initial sponsors will be Rep. Jared Polis (D-CO), David Joyce (R-OH) and Earl Blumenauer (D-OR). The bill also appears to effectively repeal IRS Code Section 280E which prevents cannabis companies from deducting ordinary business expenses. It also removes activity by cannabis companies being assumed to be money laundering, which will hopefully help more banks to take cannabis companies as customers. Certainly a dramatic potential development.

David Feldman

New Bill Would End Most Federal Enforcement of Cannabis

Senators Cory Gardner (R-CO) and Elizabeth Warren (D-MA) today introduced the Strengthening the Tenth Amendment Through Entrusting States (STATES) Act. While we have not seen the text yet, Sen. Warren has published a summary. The bill would amend the Controlled Substances Act (CSA) saying it no longer applies to anyone acting in compliance with state (or tribal) laws relating to the manufacture, production, possession, distribution, dispensation, administration or delivery of cannabis. It also legalizes industrial hemp and removes it from the CSA. In addition to other provisions, the bill prohibits the distribution or sale of cannabis to anyone under 21 other than for medical purposes.

There are a number of pending bills promising various levels of cannabis legalization or decriminalization. This bill is important because it is the result of conversations between Sen. Gardner and the President. When Attorney General Jeff Sessions rescinded the 2014 Cole Memo which de-emphasized cannabis enforcement against legal state actors, Sen. Gardner angrily stopped approving new judicial nominations. That led to Trump’s commitment to Gardner to support “states rights” legislation if brought to him. Advocates hope this bill has a chance to move quickly as a result.

While not listed in the summary, according to MJBizDaily, the bill also would repeal tax code Section 280E which prohibits cannabis companies from deducting their ordinary business expenses, and also would allow federally insured banks greater ease in accepting cannabis customers. Stay tuned!

David Feldman

Schumer Calls for Cannabis Decriminalization

Senate Minority Leader Chuck Schumer has officially joined a rapidly growing number of US legislators calling for the federal decriminalization of cannabis. Last Friday, he tweeted: “THREAD: It’s official. Today, I am formally announcing my plan to decriminalize marijuana at the federal level. It’s time we allow states, once and for all, to have the power to decide what works best for them.” Then later in the day he tweeted, “The time has come to decriminalize marijuana. My thinking – as well as the general population’s views – on the issue has evolved, and so I believe there’s no better time than the present to get this done.”

To be clear, Schumer is not suggesting full legalization, merely decriminalization. This could mean that while cannabis would still be illegal under federal law, possession would bring only a fine or the like, rather than jail. In a video attached to his tweet, he talked about how people of color have been disproportionately affected by incarceration for possession of small amounts of cannabis.

This follows an apparent historic agreement a week ago between President Trump and Sen. Cory Gardner (R-CO) to move forward with legislation that would protect states’ rights with regard to cannabis. This could mean a permanent ban on federal enforcement of those complying with state cannabis laws. Many hope such a bill could address the challenges with banking in the industry, as well as IRS Code Section 280E, which prohibits the deductibility of business expenses of those in cannabis.

In addition, Senate Majority Leader Mitch McConnell has introduced a bill to legalize industrial hemp. Finally, there are three pending bills in Congress which would fully deschedule and legalize cannabis nationwide, much like Canada appears to be on the verge of doing. It does indeed appear that things are moving rather quickly in the direction of dramatically improved federally legal status of cannabis.

David Feldman

Republicans Boehner and Weld Join Cannabis Board

As more and more politicians of all stripes move towards support of federal legalization of cannabis, two senior Republicans have joined the advisory board of a major cannabis company.  According to The Hill, the former Speaker of the House John Boehner and former Massachusetts Governor William Weld became advisers to a New York-based grower and distributor of cannabis.

The article reminds us that Boehner was formerly opposed to legalization, though Weld, a moderate, has been a long-time supporter. They issued a joint statement saying, “we both believe the time has come for serious consideration of a shift in federal marijuana policy.” They focused particularly on the view of a large majority of Americans that cannabis should be legalized on a federal level.

As we know, President Trump said during the campaign that he is “100%” in favor of medical cannabis and that adult use should be decided by the states. Of course he is famous for changing his mind and frankly does not appear focused on the issue. And Attorney General Jeff Sessions remains strongly opposed to legalization and rescinded a series of advisory memos designed to protect those complying with state cannabis laws. But we have not yet seen any increase in federal enforcement efforts, though a number of states recently have been cracking down on unlicensed operators.

While it seems unlikely for the time being that the Trump Administration would unilaterally deschedule cannabis and legalize it (which they could), there is growing belief among DC-watchers that Congress might yet consider some action. For example, Republican Senate Majority Leader Mitch McConnell said he intends to introduce legislation to legalize hemp. The legislators are paying attention to the massive taxes coming into legal states, reduction in opioid use and deaths in those states, and many new jobs being created.

David Feldman

McConnell Supports Industrial Hemp Legalization

Senate Majority Leader Mitch McConnell (R-KY) announced a plan on Monday to introduce federal legislation to remove industrial hemp as a Schedule I drug under the Controlled Substances Act (CSA). Citing hemp as important to Kentucky’s farming history, he voiced his most positive support to date for this action. McConnell remains opposed to other legalization of cannabis.

Hemp is used to make clothing, paper and other products, is not ingested and contains virtually no THC, which is the psychoactive part of the cannabis plant. In colonial days, hemp was grown throughout the US, and in fact was required to be grown in states like Virginia where it was needed to make rope for boats. George Washington and Thomas Jefferson both grew hemp on their farms. China is now reported to be the largest producer of hemp, having geared up in the 1970s to make more breathable uniforms for their soldiers in steamy Vietnam.

In the 1930s, timber and nylon scions like DuPont and William Randolph Hearst saw hemp as a potential competitor and reportedly worked with the federal government to make all cannabis byproducts illegal in the US. Nixon doubled down in 1970 with the CSA simply continuing the prior prohibition on everything coming from the plant.

While it’s not clear when a bill will actually be presented to Congress, the AP says McConnell said about hemp, “It’s now time to take the final step and make this a legal crop.” Many think the next move could be to legalize CBD (cannabidiol), which contains many of the medical benefits of cannabis with negligible amounts of THC.

David Feldman

Study: Cannabis Improves Cancer Patients’ Condition

An Israeli peer-reviewed study, just published in the European Journal of Internal Medicine, reports that pain and nausea of cancer patients can be lessened through the use of medical cannabis. The study included thousands of cancer patients using medical cannabis between 2015 and 2017. Over 95% of the patients reported an improvement in their condition after using cannabis. The conclusion of the study: “Cannabis as a palliative treatment for cancer patients seems to be well tolerated, effective and safe option to help patients cope with the malignancy related symptoms.”

As we know, the US Government continues to defend the status of cannabis as a Schedule I drug, deemed as dangerous as heroin and LSD. Their previous claims suggested that no research shows that cannabis is safe or has medical benefit. At the same time, the Government severely limits the amount of research on cannabis that can be conducted in the US. According to the DEA website, Schedule I drugs are “drugs with no currently accepted medical use and a high potential for abuse.” This study, with others also underway, appear to now counter the belief that cannabis has no accepted medical use.

With the recent dismissal of a constitutional challenge to the Controlled Substances Act as it relates to cannabis (which may be appealed), more eyes are turning to Congress and the various bills pending to deschedule cannabis at the federal level.

David Feldman

Court Dismisses Suit Challenging Controlled Substances Act

A potentially groundbreaking federal lawsuit brought last summer was dismissed by New York judge Alvin Hellerstein today. The case, brought by five plaintiffs including two children, two veterans and former NFL player Marvin Washington, all of whom use state legal medical cannabis, claimed that the Controlled Substances Act is unconstitutional as it relates to the plant.

The judge ruled that the plaintiffs should have first complied with administrative processes by filing a petition with the Drug Enforcement Administration, and that the case was not appropriate to bring to court. He was sympathetic to the plaintiffs, however, noting that “this decision should not be understood as a factual finding that marijuana lacks any medical use in the United States, for the authority to make that determination is vested in the administrative process.”

He did, however, rule that it was “not irrational” that the Government deemed cannabis dangerous enough to be listed as a Schedule I drug, as it did for heroin and LSD. Statements by former Nixon Administration officials in the 1990s that they knew they were lying about the drugs at the time of the CSA were not considered dispositive, since Congress passed the law.

News reports indicate that the plaintiffs’ attorneys, Mike Hiller, Joe Bondy and Lauren Rudick, may appeal the decision or ask the judge to reconsider. They claim that the petition process would be futile and that there is substantial evidence that the US government has taken actions supporting the notion that there is medical benefit to cannabis.

David Feldman

Vermont Legalizes Adult Use of Cannabis

Vermont’s Republican Governor, Phil Scott, reluctantly signed legislation today fully legalizing the adult use of cannabis in the Green Mountain State. This makes Vermont the ninth state (plus the District of Columbia) to have fully legalized cannabis. It is the third northeast state to legalize, along with Maine and Massachusetts.

The Governor had vetoed a previous bill but apparently had his issues addressed in the newly passed legislation. Commercial and private sales of cannabis will not be allowed, but individuals will be permitted to possess up to an ounce of cannabis and grow two mature plants in their home. Public use is not permitted, and no taxes will be collected by the state. Penalties for possession of larger amounts also will be adjusted.

Vermont’s action also represents the first state to legalize cannabis through legislation rather than voter referendum. It is expected that New Jersey soon will do the same under new Gov. Phil Murphy. Several other states are considering a similar path.

David Feldman

New York to Study Full Cannabis Legalization

In his annual budget address yesterday, NY Democratic Governor Andrew Cuomo announced his plan to form a task force to study possible legalization of the adult use of cannabis in the Empire State. Currently the state permits the sale of cannabis only for medical reasons.

Less than a year ago, Cuomo referred to cannabis as a gateway drug and was widely perceived not to be supportive of legalization. Observers believe, however, that politics may be forcing his hand. Neighboring New Jersey’s new Governor Murphy has announced his intention to legalize adult use of cannabis there. In addition, a potential Republican opponent to Cuomo’s reelection this year has announced his support of legalization in New York.

Currently, while cannabis remains illegal under US federal law, eight states and the District of Columbia have legalized adult use. More states are expected to approve legal sales later this year in the November elections. Others, like New Jersey, are considering legalization through legislation as opposed to voter referendum. As we know, California’s adult use program was launched to great fanfare on January 1 of this year.

New York, with nearly 20 million people, is the fourth largest US state. This creates the potential for a significant market for legal cannabis sales, state tax and tourism revenues and job creation. Legalization could be particularly helpful for New York’s struggling upstate region, which has not seen major job growth in the current economic recovery.

Forming a task force is a long way from legalization and the opening of cannabis stores in Times Square. Cuomo will center the proposed study within the NY Department of Health, which currently oversees the medical marijuana program. He is asking that the task force look at the economic and health impact of legalization.

Cannabis Banking Guidance Unclear After Sessions Action

On January 4, US Attorney General Jeff Sessions rescinded all prior advisory memos on prosecutorial priorities relating to cannabis, including the 2014 Cole Memo which many relied on in entering the space. One consequence of rescinding the Cole Memo is its effect on US Treasury Department guidelines for banks and financial institutions that seek to take cannabis customers. Those 2014 guidelines, issued by the Treasury’s Financial Crimes Enforcement Network (FinCEN), outline processes and filings to be undertaken when a cannabis customer is signed up. The main focus of the process is on due diligence the bank must do on the proposed customer, including ongoing monitoring while the company is a customer. The guidelines also require filing of a “suspicious activity report” (SAR) with FinCEN for each such potential customer.

The banking guidelines focus heavily on the now-rescinded Cole Memo, which suggested the low prioritization of enforcement against people complying with state cannabis laws. The Memo contained a list of exceptions, and if one of the exceptions was present, then enforcement could be pursued. The exceptions included things like providing cannabis to minors, the involvement of organized crime or firearms, and the like. The FinCEN guidelines require a bank to conduct an analysis of whether the potential customer is complying with the Cole Memo priorities. Indeed the type of SAR that the bank must file varies depending on whether or not the potential customer appears to be in compliance with the Cole Memo.

story in Politico quoted a FinCEN spokesman who was asked if they are looking to bring their policies into line with the Justice Department. He said, “FinCEN works closely with law enforcement and the financial sector to combat illicit finance and provide relevant information that allows law enforcement to pursue their priorities. We will continue to work with DOJ and other stakeholders on this issue.” It does appear that confusion and uncertainty on this issue will continue until FinCEN provides further clarification or interpretive guidance. In the meantime, this might mean that some financial institutions will stop servicing cannabis customers and others that were considering it may suspend their efforts.

This post was the combined effort of David Feldman and Neeraj Kumar.