A webinar replay of Mainstreaming Cannabis: Bankruptcy, Receiverships and Reorganization is now available for viewing.
Citing the facts that Pennsylvania (i) is bordered almost entirely by states that have legalized cannabis for adult use; (ii) loses millions to the black market for cannabis annually; and (iii) projects hundreds of millions in annual revenue gains, in his budget address for 2024 Pennsylvania Governor Josh Shapiro called on Pennsylvania’s legislature to deliver by July 1, 2024, legislation that would legalize cannabis for adult-use in Pennsylvania:
“Well, last year, 57 percent of voters in Ohio supported an initiative to legalize recreational marijuana. And now, Ohio, New York, New Jersey, Delaware, and Maryland – practically all of our neighbors – have legalized marijuana. We’re losing out on an industry that, once fully implemented, would bring in more than 250 million dollars in annual revenue. And our failure to legalize and regulate this only fuels the black market and drains much needed resources for law enforcement. It’s time to catch up. I ask you to come together and send to my desk a bill that legalizes marijuana. But that bill should ensure the industry is regulated and taxed responsibly. That we create jobs and build wealth here in Pennsylvania, especially in the communities that have been disproportionately harmed by criminalization. And that those who have been convicted for nonviolent possession of small amounts of marijuana have their records expunged. Let’s stop hamstringing ourselves and start competing.”
Governor Shapiro’s urgency is not surprising. Pennsylvania should have been leading the way in legalizing cannabis for adult-use, given its successful medical marijuana program, but instead other states have spring-boarded ahead of Pennsylvania. Those states are now enjoying the revenues, job growth and overall economic benefits of legal cannabis, including even profiting from Pennsylvania residents crossing the border to buy their cannabis. It truly is time for Pennsylvania “to catch up” and “start competing” in the legal cannabis market for the good of all Pennsylvanians.
On Wednesday, January 18, 2024, the NJ Cannabis Regulatory Commission (the “CRC”) approved regulations to allow cannabis consumption lounges where consumers will be able to buy and use cannabis products on-site. Continue reading “NJ Cannabis Regulatory Commission Approves Regulations To Allow Cannabis Consumption Lounges”
The Duane Morris Cannabis Industry Group, the American Trade Association for Cannabis and Hemp and Centri Business Consulting will present Mainstreaming Cannabis: Bankruptcy, Receiverships and Reorganization on Wednesday, February 7, 2024, at 12:00 p.m. Eastern.
I have previously written about lawsuits filed against manufacturers and sellers of hemp-synthesized intoxicants (HSI), such as Delta-8 THC, by the Attorneys General of California and Nebraska, as well as warning letters issued by the FDA, to stop the marketing and sale of HSIs. Add to those, recent enforcement actions by the Attorney General of Connecticut against seven HSI manufacturers/sellers, which claim they have violated the CT’s unfair competition laws by marketing and selling unregulated cannabis products.
The key point of all of the above actions is the unregulated nature of HSIs, which creates public safety concerns. As the CT AG explained: “Cannabis is legal for adults in Connecticut, but it’s not a free-for-all—retailers must be licensed and legal cannabis products must comply with strict safety standards. . . None of these products have been subject to Connecticut’s rigorous testing standards or contain appropriate warnings. Some are sold in dangerous and misleading packaging designed to appeal to children. These products are designed to deceive consumers into believing they are safe, tested, and regulated—that is false. ”
HSIs can be just as intoxicating, if not more so, than cannabis products regulated under a state’s medical or adult-use cannabis laws and regulations. However, in many states HSIs are not regulated and thus may not have undergone safety testing or be accurately labeled, posing health and safety risks to consumers. While, as I have previously written, the cannabis and hemp industries may debate whether the 2018 Farm Bill legalized HSIs, there should not be any real debate about the need for product safety or the right of states to protect their citizen consumers.
Imagine that a cannabis beverage manufacturer’s plant draws water from a public watershed that is contaminated with a synthetic chemical or chemicals that are classified as probable human carcinogens. Unbeknownst to the manufacturer, the advertising and labeling for their beverage products include a marketing campaign focused around the phrases “organic” or “all natural.” This scenario is more than a hypothetical. Synthetic compounds known as per- and polyfluoroalkyl substances (PFAS) are found in public water supplies across the United States. There are about 15,000 different chemical compounds that fall under the PFAS umbrella. The International Agency for Research on Cancer (IARC) has classified certain of these chemicals carcinogenic, as well as possibly carcinogenic to humans.
PFAS are commonly known as ‘forever chemicals’ because of the time it takes for them to degrade. Not only have PFAS been linked to cancer, but also to immunodeficiencies, reproductive harm, and developmental defects in children.
According to the Centers for Disease Control, exposure to PFAS can occur from eating food packaged in PFAS-containing material, eating food grown or raised near places that used or made PFAS, but, most significantly, from drinking water. Here is a link to PFAS contamination sites in the United State as of November 28, 2023, and it is estimated that drinking water for 26 million U.S. citizens may be contaminated with PFAS.
PFAS litigation is on the rise. The past few years have seen many lawsuits filed by attorneys general and private citizens against PFAS manufacturers stemming from public water supply contamination. Additionally, over the past few years, the Environmental Protection Agency (EPA) has worked to establish uniform permissible PFAS levels as it pertains to public water supplies.
In 2018, the cannabis beverage market was valued at over $900 million, and is projected to grow by 17% until 2033. The emulsification process used to create cannabis infused beverages involves creating water-soluble cannabinoids that are then mixed into water-based solutions, and the final product can appear in the form of a soda, sparkling water, or juice, to name a few.
The EPA, state and local governments, and plaintiffs’ attorneys are keeping a close eye on the evolution of PFAS, and additional litigation is almost certain. The scenario presented above may potentially lead to not only personal injury claims, but also presents a classic situation on which consumer fraud class actions are based.
Cannabis beverage manufacturers must be vigilant in complying with not only state regulations pertaining to cannabis manufacturing, but also must be mindful to appropriately handle PFAS contaminated water the company uses to manufacture cannabis beverages.
On December 5, 2023, FDA issued a warning letter to a manufacturer (Hemp XR) of food products, such as gummies, cookies, etc., that contain delta-8 THC. The warning letter notes that delta-8 THC has not been generally recognized as safe (GRAS) for use in food, and has not received pre-market approval to be used as a food ingredient, which requires data demonstrating safety. As a result, FDA warns that the interstate marketing of the food products at issue violates the Food, Drugs and Cosmetics Act. The warning letter makes similar assertions with respect to the manufacturer’s food products containing CBD.
FDA notes that its concerns with respect to delta-8 THC include: “1) Delta-8 THC products have not been evaluated or approved by FDA for safe use and may be marketed in ways that put the public health at risk; 2) FDA has received adverse event reports involving Delta-8 THC containing products; 3) Delta-8 THC has psychoactive and intoxicating effects; 4) FDA is concerned about the processes used to create the concentrations of Delta-8 THC claimed in the marketplace; and 5) FDA is concerned about Delta-8 THC products that may be consumed by children, as some packaging and labeling may appeal to children.”
As I have previously written, manufacturers of products containing delta-8 THC are exploiting an ambiguity in the definition of hemp under the 2018 Farm Bill that they assert legalized chemical substances converted from hemp cannabinoids through chemical processes on the notion that such substances were “derived” from hemp.
A California Superior Court recently granted class certification relative to a class of hundreds of employees against a group of dispensary defendants where the Plaintiffs presented sufficient evidence that the off-the-clock work claims, meal and rest period claims, and reimbursement of necessary business expenses claims predominated over individual inquiries and were typical of the class. The Court did not rule on the merits of the integrated enterprise, alter ego, or joint employer arguments, nor did the Court agree with the Defendant’s arguments that the claims were not typical because the Plaintiffs were not employed by each Defendant. Nonetheless, the ruling is important for employers in general and cannabis dispensaries in particular.
Kathryn Brown authored the article “Prepare Workplace Policies for Legalized Cannabis,” which was published in the Legal Connections section of Columbus Business First.
On November 7, 2023, Ohio made history when a majority of voters approved Issue 2, a proposed law to control and regulate cannabis for Ohioans 21 and older. In so doing, Ohio became the 24th state to legalize cannabis for adult use without a medical card. Read the full article.