Pennsylvania Almost Surrounded With Adult-Use Cannabis

Cannabis had a decent day at the polls yesterday, with voters in Maryland and Missouri legalizing adult-use, bringing the number of adult-use states to 21, but voters in Arkansas and the Dakotas voted against adult-use. With Maryland legalizing adult-use, Pennsylvania, which has a medical marijuana program, is getting closer to being surrounded by states where adult-use is legal. Across it’s northern, eastern, and southern borders Pennsylvania is now adjacent to adult-use states – New York, New Jersey, and Maryland. All three states are predicted to generate billions each in cannabis sales.

The election of Josh Shapiro as Pennsylvania Governor would guarantee the passage of adult-use legislation should it pass in the Pennsylvania senate. However, notwithstanding the tax revenues, job growth, and overall economic boost expanding from medical marijuana to adult-use would create in Pennsylvania, most believe state legislators are not there. Perhaps revenues lost from Pennsylvanians crossing the border to buy cannabis in New York, New Jersey, and Maryland will make the difference.

 

Cannabis Industry Sees Rise in Consumer Fraud Class Actions, With More To Come With Interstate Sales

Consumer Protection

Cannabis products – such as vapes, pre-rolled joints, tinctures, gummies, and beverages – are consumer packaged goods that are required under state law to be marketed with packaging and labeling that demonstrates their safety to consumers. Although the U.S. state-licensed cannabis industry has been one of the fastest-growing industries in the U.S. over the past decade, consumer fraud lawsuits arising out of alleged packaging and labeling problems, which are a common risk for CPG manufacturers in other industries, have, until now, not been a major consideration for the cannabis supply chain.  However, that is changing. As three recent lawsuits suggest, consumer fraud class actions may be on the rise in the industry. Given the media attention cases like these attract, and the potential for damages for thousands or millions of potential consumers, the cannabis supply chain should take notice. As we discuss in the full text of this post, this is going to be especially true once cannabis products are permitted to be sold interstate.

To read the full text of this post by Duane Morris partners Seth GoldbergGerald L. Maatman, Jr., and Jennifer A. Riley, please visit the Duane Morris Class Action Defense Blog.

President Biden’s Pardon for Simple Marijuana Convictions

Seth Goldberg
Seth A. Goldberg

Today, President Biden took executive action and pardoned those convicted of simple possession of marijuana under the federal Controlled Substances Act, and encouraged state governors to issue similar pardons to those convicted of simple marijuana possession under their state’s laws.  In issuing the pardon, President Biden explained: “Criminal records for marijuana possession have also imposed needless barriers to employment, housing, and educational opportunities. And while white and Black and brown people use marijuana at similar rates, Black and brown people have been arrested, prosecuted, and convicted at disproportionate rates.”  He also asks the Secretary of Health “to initiate the administrative process to review expeditiously how marijuana is scheduled under federal law,” noting that marijuana is scheduled higher than fentanyl and methamphetamine.  The executive action could mark the real beginning of the ending of the federal prohibition on marijuana.  As President Biden stated, “Too many lives have been upended because of our failed approach to marijuana.  It’s time that we right these wrongs.”
 

 

 

Why Cannabis Beverages are a Good Bet

Constellation Brands, Boston Beer, Molson Coors, PepsiCo, Jones are some of the beverage companies betting on drinks with THC or CBD, adding them to their beverage product lines, as are cannabis drink makers like CANN Social Tonics, Keef, and Artet.  Here’s why:

Just about everyone enjoys socializing with a drink in their hand. Wherever people are gathering, from couples to small groups to large events, whether at a bar, cocktail party, friends/family get together, a game or other outing, most people have a drink in their hand.  Years ago cigarettes were as ubiquitous in social settings, but those days are long gone – smoking, because of its health effects and smell, has become obsolete if not shunned.   The same stigmas seem even more pronounced when it comes to smoking or vaping cannabis, plus there is the added stigma of “getting high,” which, for some reason, as a general matter, seems less socially acceptable than “getting drunk.”  Cannabis drinks are not burdened by these stigmas.

Moreover, just like alcoholic beverages, cannabis drinks allow the consumer more control over their psychoactive experience.  Just as consumers use beer, wine, and spirits for a range of intoxication, cannabis drinks can be consumed in the same way.  A few sips of a cannabis beverage with 10 mgs of THC may be enough for some to get a slight euphoric buzz that does not interfere with their socializing like a beer or two might give someone a slight buzz that does not interfere with their socializing.  In this way, cannabis beverages stand in contrast to high-THC products like vapes, butter, and shatter, just as shots of tequilla, vodka, and jager stand in contrast to beer and wine.

Cannabis drinks are a good bet because they largely avoid the stigmas of smoking and getting high, and, in so doing, make THC and CBD accessible to consumers who have withheld from using cannabis because of them.  Add to that the flexibility and control of micro-dosing, and cannabis drinks become more appealing to more people in more social situations.  This is why beverage companies and cannabis companies are betting on cannabis drinks.

 

Cannabis Beverages are On Fire! – Ingredients and Labeling

Here’s another installment in this blog series on Cannabis beverages, which are on fire!  As an example,  as reported in Cannabis Business Executive, just the other day, Curaleaf, a major hemp product manufacturer, announced that it signed an agreement with Southern Glazer’s Wine & Spirits – the world’s largest distributor of beverage alcohol.  This blog entry provides a quick snapshot of cannabis beverage ingredients and labeling.

Although the most popular, THC and CBD are not the only cannabinoids the cannabis plant produces. Other cannabinoids are well-known for having potential therapeutic benefits, and cannabis consumers are also highly attuned to the different terpenes produced in cannabis that create different flavors and effects, such as bisabol, which some believe can be fruity and may provide anti-inflammatory and antioxidant benefits; linalol, which some believe can be floral and may provide sedation; and myrcene, which some believe can be fruity and may provide relaxation.  Whether and how to include different cannabinoids and terpenes in beverages is going to be important in expanding cannabis product lines.

Likewise, transparency in labeling those ingredients may be necessary to ensure consumers are enjoying cannabis beverages safely and to the greatest effect. Moreover, so that consumers can understand the experience intended with a particular beverage, “claims” about the intended effect, e.g., stimulating, euphoric, relaxing, may be necessary.

Ingredients and labeling are a hot button issue for cannabis products. Those familiar with the FDA’s discretionary enforcement of “claims” in hemp-derived CBD products know this is an area of particular interest for the FDA. State-specific regulation of ingredients in cannabis products is also getting a lot of attention right now.  For example, the Pennsylvania Office of Medical Marijuana recently instituted a state-wide “vaporization product review” purportedly to assess the safety of terpenes, like those above, in vape products.  Given that they occur naturally in cannabis, many in the industry believe terpenes should not be regulated in the same way, if at all, as other ingredients.

Lastly, on this topic, ingredients and labeling are the focal point of a growing number of products liability and consumer fraud class actions and mass actions, where plaintiffs are asserting physical or economic injuries because, they claim, ingredients did not perform as intended or were not consistent with the labeling. Cannabis beverage manufacturers, distributors and retailers need to particularly mindful of the possibility of such claims, which can deplete resources.

 

Cannabis Beverages are on Fire! — THC Limits

In the second edition, and first substantive blog, in my series on Cannabis Beverages, entitled Cannabis Beverages are on Fire!, I am writing about THC limits, which is one of the hot-button issues for cannabis beverage producers and consumers.  Given its psychoactive effect, there is no denying that the amount of THC in a beverage should be measurable and limited so that consumers can safely ingest them and obtain the experience they are seeking. This means that a serving size of a beverage might have a THC limit, and so might there be a total container limit.

Cannabis beverage manufacturers are not starting from scratch in this area, however. Popular THC serving size limits in edibles and similar products include 5mg and 10mg could likely be applied to THC beverages, resulting in a total container limit based on the container size and number of servings. The current offerings of cannabis-infused drinks vary and the markets within states offer a wide variety of different THC levels. For example, Cann, a bestselling THC drink, contains 2mg THC and 4mg CBD per 12 ounce can. Cann is available in over 200 California dispensaries. Similarly, Tomato Jane drinks have 10mg THC per 12 ounce bottle. Comparatively, Matt’s High Soda offers an infused beverage called Uncle Arnie’s Iced Tea Lemonade with 100mg of THC per bottle—although each bottle is considered to be 10 servings.  As the market for cannabis beverages develops, THC limits are certain to be an issue that gets a lot of attention.  In the next installment of this series I’ll touch on cannabis beverage ingredients and labeling.

Cannabis Beverages are on Fire!

Want to know where the cannabis industry is going? How about the beverage industry? The answer is cannabis beverages! The hottest new product segment in both markets. Don’t believe me… just run an internet search for “cannabis beverages” and you’ll see cannabis-infused beverages tied to major beverage companies like Constellation Brands, such as Canopy Growth’s Quatreu water, and Molson Coors, with its Truss brand, and dozens of  smaller cannabis beverage brands, such as Forth, Kikoko, and Recess. 

A cannabis beverage generally contains either THC derived from marijuana grown pursuant to state adult-use marijuana and/or medical marijuana laws, or containing CBD derived from marijuana or derived from hemp grown pursuant to a state’s hemp laws.  Given the federal prohibition on marijuana, the federal legality of hemp, and the FDA’s current restriction of CBD in foods and beverages, the federal and state regulatory framework for producing, distributing, and consuming cannabis beverages is complex, to say the least.  In the coming weeks I will be covering in a series of short blogs some of these issues, including product labeling, THC and CBD percentages, serving size, and social consumption.

Cannabis Products Liability/Consumer Fraud Litigation and CBD Regulation

Seth Goldberg
Seth A. Goldberg

Yesterday, a California court federal court judge did not follow other federal courts in staying a consumer class action brought on behalf of CBD product consumers on the basis of the FDA’s primary jurisdiction over the regulation of CBD products.  The Court in Rodriguez v. Just Brands USA Inc. et al., 2:20-cv-04829, C.D. Cal., determined that claims that CBD product maker Just Brands’ labeling did not accurately state the amount of CBD in its products could give rise to state law claims for breach of warranty  and fraud that should not be stayed because, according to the Court, the FDA’s forthcoming regulations would not alter the expectation that CBD product manufacturers would accurately convey the amount of CBD in their products.  

The decision in Rodriguez should be on the radar of the entire cannabis industry, as it demonstrates how products liability and consumer class action lawsuits may be brought under state statutory and common law to seek damages for improperly labeled cannabis products.  Cannabis – hemp and marijuana – product manufacturers should be sure to build into their internal compliance safeguards against such claims.  

Relatedly, on the radar for hemp-derived CBD is legislation proposing to categorize CBD as a dietary supplement under the FDA’s regulatory regime for drugs, dietary supplements and foods and beverages under the Food, Drugs and Cosmetic Acts. That bill will be introduced today by Sens. Ron Wyden (D-Ore.), Rand Paul (R-Ky.), and Jeff Merkley.  

 

SAFE Banking Act Reintroduced in the House with Broad Support

Seth Goldberg
Seth A. Goldberg

With the explicit support of the American Banking Association, and after passing in the House during the last congress, the SAFE Banking Act was reintroduced in the House on March 18, and a companion Act is expected to be introduced in the Senate next week. The proposed legislation would allow financial institutions to provide their services to cannabis – marijuana and hemp – clients without fear of federal sanctions. The proposed legislation enjoys bi-partisan support, and is in “position A” for passing in 2021.  

Given the billions of dollars of revenues, including tax dollars, generated by the industry, which are generated by cannabis companies and companies that provide services to the industry, cannabis banking is truly a public concern. The very laws that seek to create transparency as to the public fisc, such as the Bank Secrecy Act, have forced cannabis to be a cash business, which means not all of the cannabis dollars may be accounted for as in other industries, thereby undermining the objectives of those laws.  The SAFE Banking Act would resolve those concerns by allowing core and ancillary companies to utilize all of the electronic banking, checking, payroll, and accounting functionality that businesses in all other industries enjoy. There is no question the passage of this legislation would provide a game-changing boost to the cannabis space.

FTC Approves Consent Orders Against CBD Manufacturers

Seth Goldberg
Seth A. Goldberg

As I previously wrote, in December 2020 the FTC announced consent agreements reached with CBD manufacturers 1) Bionatrol Health, LLC; 2) Epichouse LLC (First Class Herbalist CBD); 3) CBD Meds, Inc.; 4) HempmeCBD; 5) Reef Industries, Inc.; and 6) Steves Distributing, LLC, in connection with a “crackdown” the FTC termed “Operation CBDeceit” for allegedly spurious health claims. The FTC today followed up that announcement with an announcement that those consent orders have been approved by the FTC in unanimous votes as to each. These manufacturers will now be required to comply with the consent orders, which could include fines and ceasing to make “unsupported health claims” in connection with the marketing of their products. 

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The opinions expressed on this blog are those of the author and are not to be construed as legal advice.

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