DEA Rescheduling, Pa. Legalization Efforts May Breathe New Life Into Cannabis Practices

Duane Morris cannabis industry group team lead Paul Josephson spoke with The Legal Intelligencer on Pennsylvania cannabis legalization as the Drug Enforcement Administration has officially moved to reschedule marijuana from a Schedule I to a Schedule III substance.

“There’s not a legal practice area that hasn’t touched or worked for our cannabis practice here,” he said, although he and other attorneys emphasized the potential growth in financing work should rescheduling and local legalization efforts go through.

“Removing this from Schedule I … it provides immediate tax relief to companies in the cannabis business,” Josephson said, explaining that as the law currently stands, cannabis businesses aren’t allowed to deduct business expenses when they calculate and pay taxes, resulting in razor-thin profit margins. “When rescheduling happens, when that monkey comes off the back of the industry, it will improve cashflows for everyone in the business and allow for more investment.” Read more on the Duane Morris website.

Selling Cannabis: A Look at Advertising Practices as Pa. Considers Adult-Use Legalization

On Friday, April 23, 1999, the lights went out in Times Square—and in countless locations coast to coast—for tobacco advertising. That was the date by which the largest tobacco companies in the country agreed to ensure all cigarette advertisements were removed from billboards, transit locations, malls, stadiums, arenas and just about every other public place, in accordance with a settlement agreement involving most every state and territory in the United States.

The so-called Master Settlement Agreement resolved lawsuits between the country’s largest tobacco companies and more than 50 state and territorial attorneys general. Among its principal features was the imposition of significant restrictions on the marketing activities employed by tobacco companies, particularly any advertising and promotion practices that might target or appeal to young people.

Read The Legal Intelligencer article by Patrick Smith and Deanna Lucci on the Duane Morris website.

Steady Hands at the Tiller – New NJCRC Executive Director Appointed

New Jersey Governor Murphy announced yesterday that current NJCRC Executive Director Jeff Brown is returning to the New Jersey Department of Health to take on the role of Deputy Commissioner for Healthcare Systems, effective May 20, 2024.

Current NJCRC Deputy Executive Director and former General Counsel Christopher Riggs will assume the role of acting Executive Director upon Brown’s departure.

Brown has served as the Executive Director since the formation of the NJCRC in April 2021, and before that as Assistant Commissioner for the Division of Medicinal Marijuana at the New Jersey Department of Health since 2018.

Despite the inevitable friction and challenges associated with this nascent field and reporting to a board of very active, full time commissioners, Brown has proven a steady hand at the tiller both at NJDOH and at NJCRC. Throughout his tenure in both agencies, Brown has been instrumental in the development and implementation of New Jersey’s medical and recreational laws and rules. He led the reinvention of New Jersey’s moribund-by-design medical marijuana program, and then stood up the NJCRC as a new agency to regulate both adult-use and medicinal cannabis. Under Brown’s leadership, New Jersey’s cannabis market has grown each year with 2024 cannabis sales expected to top $1 billion.

Though Brown will be a hard act to follow, Acting Executive Director Riggs is expected to be another steady hand at the tiller leading regulation of the market. Well-equipped to assume the role of Executive Director, Riggs has worked for the NJCRC since its inception.  He initially served as the NJCRC’s first chief counsel and led the drafting and promulgation of the laws and rules that govern the industry. Before that, he was a Deputy Attorney General in the Office of the Attorney General and was assistant chief of the section representing the Department of Health and Human Services.

Well regarded among attorneys and industry veterans alike, it is expected Riggs and the NJCRC will now focus on streamlining and rationalizing regulatory processes to improve oversight and reduce bureaucratic delay and red tape. Riggs has also indicated he intends to prioritize clinical registrant applications and social equity certification process at the NJCRC.

We wish both well in their new roles.

The American Lawyer Features Duane Morris on Cannabis Rescheduling

Seth Goldberg, partner and team lead of Duane Morris’ Cannabis Industry Group, spoke with The American Lawyer about how the firm is preparing for cannabis rescheduling.

“What makes reclassification a watershed event is that it frees up capital and allows for more growth and allows for potential consolidation and more successful companies, more competition with respect to multistate operators and get back to a place of equity investment,” said Goldberg.

“We have been preparing for that, and lawyers in each of our practice areas—whether IP, corporate, employment—who have cannabis practices are already thinking about how they‘re going to advise clients in the cannabis industry and also outside of the cannabis industry with respect to how reclassification impacts that type of law.” […]

The combined impact on cannabis businesses of tax liabilities and lack of access to financing “can’t be overstated,” Goldberg said. Removal of 280E “will have an immediate impact on operator balance sheets,” he said. Continue reading “The American Lawyer Features Duane Morris on Cannabis Rescheduling”

DEA Recommendation to Reschedule Cannabis is Imminent

Seth Goldberg
Seth A. Goldberg

Multiple news sources reported today that the DEA will be recommending rescheduling cannabis to a Schedule III drug.  The recommendation will then lead to a public comment period and then a Final Rule will be issued, so the actual reclassification of cannabis is months away.  However, as with recent moves toward rescheduling, such as the HHS recommendation and President Biden’s directive to study whether to reschedule, today’s news and the forthcoming recommendation will boost the cannabis market, as operators and investors look forward to a better performing industry resulting from the reclassification.  The actual reclassification will have an immediate impact on operator profitability, as IRS Code 280E, which prevents cannabis operators from deducting normal business expenses, will no longer apply to cannabis businesses.  This is just one of the very significant changes to the industry that will spur more capital and more growth.  Banks and other sources of capital that have been reluctant to enter the space may finally get off the sidelines and join the game, which would obviously be the shot in the arm the industry has needed for some time.  

Marijuana Bankruptcy Reform Could Be Inching Closer for US Operators

Distressed U.S. marijuana operators remain largely unable to access bankruptcy relief, an ongoing challenge in a tough industry where business failures are common. But with federal marijuana rescheduling possible in the near future – and with signs of shifting attitudes in recent bankruptcy court cases – reform could be somewhere over the horizon.

Duane Morris’ Ryan Spengler is cautiously optimistic that progress in court rulings, combined with rescheduling, could help open the door to new bankruptcy options for U.S. plant-touching marijuana companies. Read the full article on the MJBiz Daily website.

EEO-1 Filing Deadline Is Fast Approaching for Large Cannabis Employers

Having just submitted your company’s tax returns for 2023—no easy feat as a cannabis business—you may be hoping for a break from regulatory filings. If your business has 100 or more employees, however, you may need to assemble 2023 data for an entirely different purpose as another federal filing deadline looms in June of 2024.

The Equal Employment Opportunity Commission (EEOC), the federal agency that enforces workplace anti-discrimination and anti-harassment laws, requires private employers that had 100 employees in the fourth calendar quarter of 2023 (October 1- December 31) to file an EEO-1 Component 1 report.  The report consists of specific workforce data, including job titles and sex, race and ethnicity demographics. Continue reading “EEO-1 Filing Deadline Is Fast Approaching for Large Cannabis Employers”

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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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