Pennsylvania state representatives Dan Frankel (D-Allegheny) and Rick Krajewski (D-Philadelphia) plan to propose a bill in the House of Representatives that would legalize recreational cannabis. Under their proposal, cannabis would be controlled by the state’s Liquor Control Board, the name of which would be changed to the Liquor and Cannabis Control Board. Cannabis would be sold at existing state liquor stores; meanwhile, private businesses would be permitted in the industry in cultivation and consumption sites, similar to bars.
Proponents of the state-run system argue that this system provides stable jobs, including consistent benefits and reliable pensions, for over 5,000 Pennsylvanians, while also returning millions of dollars in profits to the state. Furthermore, this system gives the state more control to prevent underage liquor sales.
Opponents of this system argue that Pennsylvanians should have more freedom over decisions regarding liquor sales. They also hypothesize that privatizing liquor sales would allow more stores to arise and more sales to occur, which would increase tax revenue for the state. For example, less than three years after Washington State privatized liquor sales, the number of liquor stores increased by approximately 327%, and the industry’s revenue collections increased by approximately 18%.
Despite this debate, Pennsylvania’s state-run system for liquor sales has remained in place. However, a state-run system for cannabis dispensaries may run into a separate issue: the potential conflict with federal law. Cannabis remains a controlled substance under Schedule I of the Controlled Substances Act, and Section 280E of the Internal Revenue Code disallows all tax deductions or credits for amounts paid or incurred in carrying on trade or business that consists of “illegally trafficking” a Schedule I controlled substance. As recently as June 2024, the IRS has issued reminders that this section applies to businesses selling marijuana, even if they operate in states which have legalized the sale of cannabis. It remains to be seen whether state-run dispensaries would be subject to this same provision.
Representatives Frankel and Krajewski’s bill would also provide for the possibility of expungement for people charged with cannabis-related crimes, invest revenue into communities impacted by prohibition policies, implement public health protections, and assist minority business owners in entering the industry.
For years, movies, music and other aspects of popular culture have hailed Amsterdam as the number one destination for openly consuming cannabis purchased from “coffee shops.” […] However, one difference — at least in California where adult use cannabis was legalized in 2016 with the passage of Proposition 64 — is that consumption lounges have been unable to offer prepared noncannabis food and beverages on-site. This changed on Sept. 30, when California Gov. Gavin Newsom signed California A.B. 1775 into law.
California Governor Gavin Newsom’s emergency order prohibiting THC in food products claiming to be derived from hemp went into effect yesterday. The order expands the definition of THC under California law to include a broad range of THC molecules, such as Delta-8 and Delta-10, that can be intoxicating, and that are manufactured by chemically converting non-intoxicating cannabinoids that are found in hemp, such as CBD. The emergency order was issued in the interest of public safety, as Governor Newsom noted that such intoxicating substances are being marketed in ingestible products without the same types of regulation as state-legal marijuana, which contains intoxicating Delta-9 THC, and thus may be consumed by those unaware of their intoxicating effect, including children.
As reported by Marijuana Moment, Manufacturers of ingestible products made using hemp and the now CA banned chemically converted synthetic THCs have challenged the emergency order in Court. While that, and potentially similar actions to be filed, play out, legislators on Capitol Hill may consider a federal solution to the loophole created by the 2018 Farm Bill that has resulted in the proliferation of intoxicating substances chemically converted from non-intoxicating hemp cannabinoids on the claim that those substances were “derived” from hemp. Earlier this year the House Agriculture Committee approved an amendment to a new Farm Bill proposed by Rep. Mary Miller (R-IL) that would close the loophole by restricting synthetic intoxicating substances converted from hemp in ingestible products. Similar language was adopted in a House appropriations bill.
The FDA, which has authority over foods and beverages, has not established a regulatory framework for CBD or synthetic intoxicating substances chemically converted from hemp, but rather has said they are prohibited in foods and beverages, and has issued warning letters to manufacturers of foods and beverages containing such substances on the basis that they are adulterated under the Food, Drug and Cosmetics Act.
As reflected in the Marijuana Moment article, manufacturers of synthetic intoxicating substances chemically converted from hemp concede that those substances should be regulated because of their intoxicating effect, but they argue measures like Newsom’s emergency order and the Miller amendment go too far in restricting the substances.
There now seems to be consensus around the need to regulate synthetic intoxicating substances chemically converted from hemp. Federal legislation that creates a clear definition of hemp or such intoxicating substances, and places their regulation under state authority, could clarify whether and how such intoxicating substances may be manufactured and marketed.
The list honors cannabis practitioners via the publication’s annual survey of clients and lawyers in the cannabis legal services sector as well as its personal editorial decisions based on its reporting of the industry for nearly 10 years.
Recently, Attorney General Matthew J. Platkin announced a Finding of Probable Cause by the New Jersey Division on Civil Rights (DCR) against Prince Telecom LLC (Prince) for declining to hire a medical marijuana user as a cable installation technician. The DCR found the job applicant was subject to disability discrimination in violation of the New Jersey Law Against Discrimination (LAD). The basis for the DCR’s determination was Prince’s rescission of a job offer after the applicant, a medical marijuana user, tested positive for cannabis in connection with a pre-employment drug screen.
Prince, a company that constructs and maintains telecommunications and cable systems, offered a technician job to the applicant pending a drug test. The applicant informed the company that he had a medical marijuana prescription and used marijuana to treat a disability. When the applicant tested positive for cannabis, he provided his medical marijuana prescription card to the company, after which Prince rescinded the job offer. Prince maintained that it could not provide the applicant with any accommodation given the safety-sensitive nature of the job duties of the position (such as, driving company vehicles, operating machinery, working with electrical wires, climbing ladders and lifting 50 pounds or more). According the DCR, Prince assumed that hiring a medical marijuana user to perform such tasks would expose the company to “enormous” liability.
The DCR issued a Finding of Probable Cause because Prince did not ask the applicant for additional information about the nature of his disability; how often and what time of day the applicant used marijuana; and what effect, if any, his medical marijuana use might have on him during work hours. By failing to initiate discussions of that nature with the applicant, the DCR concluded that Prince did not meet its obligation to engage in the interactive process. Under the LAD, employers have an affirmative duty to consider reasonable accommodations for applicants and employees. Broadly speaking, this means an employer should have a dialogue with a disabled applicant or employee and should ask questions to determine whether the individual can perform the essential functions of the job with or without a reasonable accommodation. Once the employer has sufficient information from the individual and/or the individual’s healthcare provider about the disability and any proposed accommodations, the employer can evaluate whether it is able to offer a reasonable accommodation without posing an undue burden on the company. Employers who fail to engage in this interactive process violate the LAD—which is exactly what the DCR has accused Prince of doing.
While the LAD protects individuals with disabilities, it is also worth noting that both medical and adult marijuana use are legal in New Jersey and the state has enacted protections for the use of marijuana. The Jake Honig Compassionate Use Medical Cannabis Act (CUMCA) prohibits an employer from taking an adverse employment action against an employee or applicant (e.g., terminating or refusing to hire) based on the fact that the employee is registered as a medical marijuana user. The Cannabis Regulatory, Enforcement Assistance, and Marketplace Modernization Act (CREAMMA) protects adult use of marijuana and prohibits employers from taking adverse employment actions due solely to a positive drug test for cannabis. CREAMMA also has specific and stringent protocols with respect to drug testing in the workplace. Because CREAMMA went into law after Prince rescinded the applicant’s job offer, the DCR did not review Prince’s conduct to determine whether it violated that statute as well.
Notably, the DCR did not find that Prince had to accommodate the applicant’s use of marijuana in workplace or that it had an obligation to hire him. The agency found that Prince had an obligation to engage in the interactive process—to gather information sufficient to consider whether it could have reasonably accommodated the applicant’s disability. If Prince had learned the applicant used medical marijuana after work hours and would not be impaired or under the influence when reporting for duty, Prince may have been able to reasonably accommodate the applicant’s disability. The laws in New Jersey are clear that employers have a right to maintain a drug-free workplace and do not have to accommodate use of medical marijuana in the workplace or during work hours. Based on the DCR’s finding, Prince’s error was that it made too hasty a decision and did not gather any information from the applicant to determine whether it could have accommodated his disability.
Of note, a Finding of Probable Cause is not a final determination on the merits. It means the DCR determined that there is sufficient evidence to warrant further proceedings against Prince. The parties will now have the opportunity to resolve the case voluntarily through conciliation. If the parties cannot resolve the matter, the case will move to the Office of Administrative Law or the Superior Court for further adjudication.
I originally published the blog below with the title “Delta-8 Bans Are Having a Moment,” which on reflection seems a bit flip. The reality is that the ambiguities in the 2018 Farm Bill and the lack of federal regulation of such substances have created a conundrum for those who market Delta-8 and similar substances, as well as for the cannabis industry, and for states that are weighing public safety against financial interests.
Just as those who were participating in the cannabis industry in its early days – before federal cannabis policy was so transparent – had to weigh the risk of federal enforcement and criminal penalties, purveyors of intoxicating substances manufactured from hemp cannabinoids must weigh the risk that the 2018 Farm Bill could be read by some, including Congress and state governments, as not legalizing those substances simply because they have some relation to legal hemp.
As a lawyer who represents clients who manufacture and market cannabis and hemp products, I have seen them weigh the risks attendant to the unclear regulatory landscapes for both cannabis and hemp, and I have not been surprised – and have been disappointed – when some have opted not to make the leap into cannabis or hemp.
Even today, where cannabis is legal and where federal cannabis policy has de-prioritized enforcement against state cannabis activities that comply with state law, the cannabis market is too risky for the vast majority of businesses to expand into. Think about all of the consumer packaged goods companies that have been watching cannabis and hemp, but have not made the move, not even to CBD, not to mention almost the entire financial institution market.
Thus, when those who have decided to market Delta-8 and similar intoxicating substances on the basis that the 2018 Farm Bill legalized them, I can’t help but think about whether they were advised about and accepted the risk that the 2018 Farm Bill could be read differently, or they simply jumped into the market blindly or on poor advice. Yes, the market for those substances has grown and is in the billions, but that does not somehow make the 2018 Farm Bill less ambiguous or somehow make the substances any safer.
The fact that cannabis companies are increasingly moving to hemp and even Delta-8 and similar substances also does not change the ambiguity in the 2018 Farm Bill. It does, however, underscore the risk cannabis market participants took when they entered a space burdened by the capital restraints resulting from federal prohibition and 280E. Many of these companies are now desperately in need of another source of revenue, and hemp is a logical choice, but there is still a risk when it comes to Delta-8 and similar substances.
The tack of saying there is a cannabis and hemp “civil war,” or that state bans against Delta-8 and similar substances and clarifying changes to the 2018 Farm Bill will “kill the hemp industry” seems to miss the mark. This does not seem to be about the “hemp industry” or “hemp farmers,” but rather about a market that has developed for intoxicating ingestible products that may be manufactured using hemp cannabinoids and other chemicals. Every intoxicating substance poses a public safety risk, and the public safety risk resulting from Delta-8 and similar substances should outweigh financial interest. As such, the emphasis should be on whether and how to regulate Delta-8 and similar substances in a way that ensures public safety.
That state legislators and regulators are imposing restrictions in that direction does not seem surprising. States should have the right to govern these types of intoxicating substances. While bans may be undesirable, in the absence of clarity in federal law or federal regulation, it appears to be the solution for some states. As a result, those manufacturing and marketing Delta-8 and similar substances must continue to weigh the risks and manufacture and market their products knowing there is uncertainty as to the legal/regulatory landscape.
******
My original blog posted under the title “Delta-8 Bans Are Having a Moment.”
Ingestible products containing substances that are manufactured using naturally occurring hemp cannabinoids, such as CBD, and other chemicals to creating intoxicating hemp substances, such as Delta-8 THC, have become increasingly available throughout the U.S., being sold at gas stations, vape shops, and convenience stores. Such substances are often as or more intoxicating than marijuana, but by and large they have not been regulated with the same product safety requirements as marijuana that has been legalized in states for adult or medical use. The FDA views such intoxicating substances as prohibited in food and beverages, and while the FDA may take enforcement action, which it has done, it has not created a regulatory framework for the manufacture and ingestion of intoxicating hemp substances. Instead, it is waiting for Congress to clarify what some perceive to be a loophole in the 2018 Farm Bill that has allowed the proliferation of such substances, because of language legalizing hemp and its “derivatives.”
Safety concerns have been raised about the intoxicating potency of these substances, as well as about the chemicals used to manufacture them, resulting in state regulations restricting or banning their use. Regardless of where you stand on whether the 2018 Farm Bill legalized intoxicating substances that can be manufactured using cannabinoids from legal hemp, in the absence of federal regulation, states have been banning or heavily restricting them in the name of public safety. While advocates of such substances decry those bans and limits, states who view them as a safety risk are taking action to protect their citizens.
In contrast, whereas Missouri has legalized and regulates the sale and use of marijuana for medical purposes, on August 1, Missouri Governor Michael Parson issued Executive Order 24-10, which bans “unregulated psychoactive cannabis products,” including “delta-8 tetrahydrocannabinol (THC), delta-10 THC, hexahydrocannabinol (HHC), tetrahydrocannabinol (THC-O), tetrahydrocannabiphoral (THCP), tetrahydrocannabivarin (THCV), and other similar compounds.” As the Executive Order states, “there are currently no safety standards, packaging requirements, or other regulations related to the safety of consuming unregulated psychoactive cannabis products in Missouri,” and “actions must be taken to protect consumers, including children, from the sale of foods that include unregulated psychoactive cannabis products.”
In Iowa, like Missouri, marijuana has been legalized for medical use, and the sale and consumption of marijuana is governed by Iowa’s medical regulatory program, and, like Missouri, Iowa recently issued regulations, effective July 1, 2024, banning “synthetic consumable hemp products,” including “Delta-8 THC, Delta-10 THC, Hexahydrocannabinol (HHC), Tetrahydrocannabiphorol (THC-P), and Tetrahydrocannabinol-O-acetate (THC-O).” Iowa’s ban of synthetic consumable hemp products was challenged in Climbing Kites LLC, et al., v The State of Iowa, et al., et al., 4:24-cv-202 (SD IA), by a low-dose THC beverage manufacturer, along with other low dose-THC beverage manufacturers, but after the Court refused to enjoin the ban, the lawsuit was withdrawn.
South Dakota HB-1125 went into effect on July 1, 2024, and provides that no person may “(1) chemically modify or convert industrial hemp as defined in § 38-35-1, or engage in any process that converts cannabidiol, into delta-8 tetrahydrocannabinol, delta9 tetrahydrocannabinol, delta-10 tetrahydrocannabinol, or any other tetrahydrocannabinol isomer, analog, or derivative; or (2) Sell or distribute industrial hemp or an industrial hemp product that contains chemically derived cannabinoids or cannabinoids created by chemically modifying or converting a hemp extract.” HB 1125 includes the following definition for the term Chemically Derived Cannabinoid: “a chemical substance created by a chemical reaction that changes the molecular structure of any chemical substance derived from the cannabis plant. The term does not include: (a) Cannabinoids produced by decarboxylation from a naturally occurring cannabinoid acid without the use of a chemical catalyst; (b) Non-psychoactive cannabinoids; or (c) Cannabinoids in a topical cream product.”
Clearly, the manufacture and sale of intoxicating substances using hemp cannabinoids, such as Delta-8, is being scrutinized. As such, manufacturers and sellers of such products need to be mindful of the regulatory landscape.
In the absence of federal enforcement action, state legislatures have stepped into the breach, enacting laws regulating products containing intoxicating substances that are chemically synthesized versions of chemicals in hemp. Those substances are referred to here as hemp-synthesized intoxicants or HSIs. Challenges to state authority to regulate HSI are being filed. In a recent decision that may foreshadow what is to come, a federal court declined to enjoin Wyoming’s hemp law.
As we have previously reported, the passage of the Agriculture Improvement Act, commonly referred to as the 2018 Farm Bill, opened the floodgates to unregulated intoxicating hemp products across the country. Though the 2018 Farm Bill authorized the U.S. Food and Drug Administration to regulate hemp-derived products intended for human consumption, the FDA has yet to promulgate rules for such products or HSIs. In the absence of federal regulations, states have begun to enact their own rules.
In Green Room LLC, et al. v. State of Wyoming, et al., a group of HSI wholesalers, retailers, and manufacturers filed a federal suit challenging amendments to Wyoming’s hemp laws and requesting a preliminary injunction. In pertinent part, the amendments expanded the definition of THC to include any psychoactive structural, optical, or geometric isomers of THC, encompassing both CBD and the popular Delta-8 THC. Because cannabis remains illegal in Wyoming, the amendments effectively prohibited the possession, sale, transport, and production of intoxicating substances synthesized from hemp. The plaintiffs argued, in part, that the amendments were unconstitutional because they were preempted by the 2018 Farm Bill, which they claim legalized all hemp substances, including intoxicating substances synthesized from hemp, for intrastate and interstate purposes.
On July 19, 2024, the federal court denied plaintiffs’ request to enjoin enforcement of the new law, finding that they do not have a substantial likelihood of success on the merits.
Specifically, the court found that the 2018 Farm Bill does not prevent states from regulating HSIs. The court found the 2018 Farm Bill did not confer any right on plaintiffs to manufacture or sell intoxicating products resulting from hemp, but merely redefined the term hemp. Most important, it held the 2018 Farm Bill contains an express “no preemption” clause permitting states to regulate hemp more stringently than federal law. The no preemption clause expressly permits a state to enact laws regulating intoxicating substances synthesized from hemp in a manner “more stringent” than the 2018 Farm Bill. The court further concluded that Wyoming’s amendments do not violate the dormant commerce clause, do not amount to a regulatory taking, and are not unconstitutionally vague or overbroad.
Green Room is not the first challenge to state restrictions on HSIs. In Bio Gen LLC et al. v. Sanders et al., the State of Arkansas appealed a trial court decision enjoining Arkansas regulations that restrict the manufacture and distribution of products that contain synthetic cannabinoids that could be intoxicating, such as Delta-8 THC. In Northern Virginia Hemp and Agriculture LLC, et al. v. Commonwealth of Virginia, et al., the plaintiffs, an HSI product manufacturer/distributor and consumer, appealed a trial court decision that denied their motion to enjoin the State of Virginia from enforcing Virginia regulations that restrict the manufacture and distribution of products that contain synthetic cannabinoids that could be intoxicating, such as Delta-8 THC.
Those pending appeals present the possibility of a federal circuit split on the question whether the 2018 Farm Bill legalized intoxicating substances that could be derived from hemp. On behalf of the American Trade Association for Cannabis & Hemp, Duane Morris filed an amicus brief in each case that asserts that the 2018 Farm Bill did not legalize hemp-synthesized intoxicants, and it reserved for states the right to regulate such substances in the interest of public safety.
As more states roll out new restrictions on intoxicating hemp products and operators, we expect to see more challenges. Though not a final ruling on the merits of the suit, the court’s decision suggests these plaintiffs and others challenging state intoxicating hemp laws have an uphill battle ahead.
A recent study by ASTM International’s Journal of Testing and Evaluation published a study entitled Market Audits Combat Cannabis Misinformation demonstrates through “off the shelf” testing that the labels of cannabis products are very often materially inaccurate with respect to THC potency, microbial contaminants, and heavy metals. While the study advocates for using periodic off the shelf testing and forensic data from seed-to-sale tracking systems to identify bad actors and police such conduct, the public safety risks from mislabeling raise the likelihood of products liability and consumer fraud lawsuits as another check on mislabeled cannabis (including hemp) products.
A number of consumer fraud class action lawsuits have been filed in California and other states arising out of the alleged mislabeling of infused pre-rolls. Such claims assert that consumers were duped by the THC potency claims on packaging and labeling, and should be compensated for being duped. In contrast, a products liability action would result from a physical injury caused by an improperly labeled cannabis product. Improperly labeled THC potencies, microbial contaminants, and heavy metals could all lead to such injuries, and state laws would give rise to claims for damages, including punitive damages, for such injuries.
Manufacturers who sell and the labs who test products that are labeled inaccurately are exposed to this litigation risk, and should consider incorporating risk mitigating compliance protocols into their quality assurance and control programs.
