Cannabis Highlights in the NBA’s New Collective Bargaining Agreement

By: Deanna J. Lucci and Danielle M. Dwyer

On April 26, 2023, the National Basketball Association (NBA) announced the ratification of its new, seven-year Collective Bargaining Agreement (CBA) with the National Basketball Players Association (NBPA).  The CBA will take effect on July 1, 2023, and will run through the 2029-30 season.  The CBA provides, among other things, certain key changes to cannabis-related matters, particularly in connection with the NBA’s Anti-Drug Program and NBA players’ business opportunities.

Anti-Drug Program

According to a summary of the agreement as reported by Law360, the NBA decided to remove cannabis from its Prohibited Substances List.  However, NBA players are still subject to random drug tests.  The NBA has authority to conduct up to 1,925 random urine tests each season.  In addition, teams may refer players to a treatment program if they suspect them of (1) being under the influence of cannabis while participating in league activities, or (2) experiencing a dependency on cannabis.

Furthermore, the NBA may still discipline players for violating the law or for being under the influence during league or team activities.  Players who neglect or fail to comply with the Anti-Drug Program will be banned from league activity.  Nevertheless, players may now apply for reinstatement of eligibility after one year, as opposed to the two-year rule enforced since 1983.

Business Opportunities

NBA players are also now permitted to: (1) invest in companies that make CBD-infused products, and (2) hold a passive, non-controlling interest in companies that make products with more substantial concentrations of THC.  Although players may now promote companies that make CBD-infused products, the NBA continues to prohibit players from promoting cannabis companies and marijuana products.

Does SAFE Banking Have a Chance

Great analysis of the chances that the SAFE Banking Act becomes law from Howard Penney at Hedgeye Risk Management:

The MSOs rallied 7% last week on the back of a bipartisan group of lawmakers reintroducing the SAFE Banking Act. The bill has a 0% chance of passing without hearing from Senator Mitch McConnell. In reality, SAFE does not change much for the industry. Other reform elements around 280e taxes, interstate commerce, and an updated Cole memo are more impactful to the industry’s fundamentals. Unfortunately, lawmakers in Washington, DC, have had difficulty passing modest cannabis reform for several reasons, including the following:

    •  Playing Politics: The cannabis reform issue has become highly politicized, with Democrats typically favoring legalization and Republicans generally opposing it. This is because cannabis reform has become a highly controversial topic, with politicians more concerned with political posturing and pleasing their base than with finding common ground; this can make it difficult to pass any meaningful reform measures.
    • No consensus: Even among people who favor cannabis reform, there may be differing opinions regarding the strategy that should be utilized. Some people may push for marijuana to be fully legalized, while others may merely favor incremental reform measures such as decriminalization or the legalization of medical marijuana. Because of this, it may be challenging to arrive at a consensus that has the potential to gain enough support to enact legislation.
    • A seemingly insurmountable conflict: even though several states have decriminalized cannabis in some form, the drug is still Schedule 1, making it against the law on the federal level. Because of this, there is a potential for legislation at the state and federal levels to contradict one another, making it more challenging to enact effective rules and regulations.
    • Lobbying and special interests: The cannabis sector in prohibition is in its infancy and rapidly undergoing change; as a result, a significant number of conflicting interests and stakeholders are involved. Lobbying efforts by these organizations (esp. pharma, tobacco, and alcohol) can sway legislators’ attitudes about the matter at hand and make it more challenging to enact reform measures that might not serve the interests of the lobbying organizations.

In general, achieving cannabis reform in D.C. is a complicated subject incorporating various elements, including political, social, and economic considerations. Even while there may be widespread popular support for cannabis law reform, D.C. is unlikely to change the challenging process actually to bring about significant change.

Employee Numbers up at Some Cannabis Msos Despite Challenging Conditions

News of widespread layoffs at cannabis companies across the United States has dominated headlines, but an analysis of employee counts at America’s largest multistate operators shows several actually grew their payrolls last year.

The fact that employee payrolls were up for some marijuana MSOs at the end of 2022 but down for others underscores how several factors can play a role in determining a company’s health.

Those factors include geographic footprint, taxes, operating costs and capital availability, experts said.

“The present moment is the Great Rationalization for the industry,” Paul Josephson, a New Jersey-based partner and leader of the cannabis industry group at the Duane Morris law firm, told MJBizDaily via email.

“Price compression and profitability varies tremendously by state and even within a state. So smart operators are taking a hard look at where they are investing their human capital.”

That means winding down operations in some areas and investing in others with more opportunity for revenue growth.

To read the full text of this article, please visit the MJBizDaily website.

New York City Introduces Several Local Laws Aimed at Helping to Control the Unlicensed Cannabis Industry in NYC

Two pieces of legislation were recently introduced in the New York City Council aimed at  controlling the unlicensed cannabis market in New York City.

The first bill  bill would prohibit knowingly leasing commercial premises to a tenant who uses the premises for distribution or sale of cannabis or cannabis products without a license. The first time that an unlicensed cannabis seller is found to be operating in leased commercial premises, the Sheriff, Police Department, or any other relevant agency would issue a warning to the owner of the premises. If an unlicensed cannabis seller is later found to be operating in the same commercial premises, the owner would be liable for civil penalties.

The second bill would require the Department of Health and Mental Hygiene  to collaborate with the Department of Consumer and Worker Protection  and any other relevant agency to create and implement a public awareness campaign on the dangers of purchasing cannabis or cannabis products from unlicensed cannabis retailers. The campaign would target minors and young adults and focus on the risks of consuming cannabis products adulterated with synthetic cannabinoids and other harmful substances and the risk of purchasing such products from unlicensed cannabis retailers .



Chicago Cubs Partner with CBD Beverage Company Under new MLB Sponsorship Rules

On April 7, 2023, the Chicago Cubs announced a partnership with MYND DRINKS, a Chicago-based cannabis beverage company.  This historic partnership recognizes the Cubs as the first Major League Baseball (MLB) team to collaborate on a business venture with a cannabis company.


Back in December 2019, MLB modified its list of abusive drugs by removing cannabis to implement a more treatment-based approach.  The league’s updated drug policy allows players to use natural cannabinoids for medical purposes, such as to help relieve pain, improve quality of sleep, and manage stress or anxiety.

A couple years later, on June 22, 2022, MLB announced a landmark decision to approve CBD sponsorships.  However, the sponsorships must satisfy two requirements:

  1. CBD companies must receive the NSF Certified for Sport® designation, a certification designed to:
    1. favor products infused with CBD, a non-psychoactive compound found within the hemp plant, and
    2. disfavor products infused with psychoactive levels of THC, which pose a risk of drug-induced sensations to consumers, and
  2. MLB teams must receive approval from the Commissioner’s office.

MYND DRINKS produces 100% plant-based, CBD-infused, sparkling beverages.  The three beverage flavors—Lemon Ginger, Elderberry Passionfruit, and Orange Mango—each satisfied MLB’s safety measures to obtain NSF certification.  The CBD company promotes wellness and recovery, and aspires to change the world “one MYND at a time.”

Partnership & Opportunities

The partnership between the Cubs and MYND DRINKS includes, among other things, on-field signage at Wrigley Field stadium, certain in-game features, and international marketing rights in the United Kingdom.

Furthermore, MLB’s Chief Revenue Officer stated that the league is open to featuring jersey patch sponsorships for the 2023 season.  Since opening day, on March 31, 2023, a handful of MLB teams debuted sponsorships with a company logo adorned on the sleeve of players’ jerseys.  Cannabis companies are permitted to participate in such deals as well.  However, a company interested in this arrangement must “have a brand that represents sports.”  CBD brands supporting wellness and recovery, like MYND DRINKS, will likely receive a green light from the league’s administration.

Cannabis Market Trends 

Market competition is intensifying due to the increasing therapeutic properties of cannabis and continuing legalization of markets.  As a result, there has been a rise in demand for cannabis-infused beverages, edibles, and other related products.  The global cannabis market was valued at about $13 billion in 2022 and is projected to grow at a compound annual growth rate of 22% to reach over $66 billion by the end of the decade.  Cannabis companies are thus eager to establish a position in this rapidly expanding market.

Therefore, this CBD partnership will be revolutionary for MLB and other professional sports leagues across the globe.

Read the full text of the article on Law360.

Minnesota Adult-Use Legalization Bill Inches Toward the Finish Line

As the end of the state congressional session approaches next month, a pair of adult-use cannabis legalization bills continues to move through committee in Minnesota’s House and Senate. Democrats currently hold a majority in both chambers, and party officials have confidence the pending legislation will be enacted this year. The Senate version of the bill passed the Rules and Administration Committee on April 4, with several recent amendments. Significantly, the Senate bill contemplates regulating cannabis separately from hemp, to not unduly burden the state’s existing, federally-legal hemp industry. The bill similarly contains a separate licensing category for manufacturers of food and beverages containing low levels of THC, which Minnesota legalized last year.

The House’s version of the bill was also recently amended to include a new licensing category for low-potency THC products, contemplating a green light for on-site consumption of these products at establishments holding liquor licenses. A new, contentious provision of the House bill is a lower sales tax on adult-use marijuana sales – this tax rate would be progressively lowered in subsequent years, from an initial 8% to 5.25% in 2025. While Minnesota’s Governor, Tim Walz (D), has expressed support for adult-use legalization, his budget request released in January includes a proposal to tax cannabis sales at 15%, to raise revenue to fund substance use treatment programs and marijuana conviction expungements.

Under the current proposals, both the House and Senate bills would allow adults ages 21 and older to purchase, and possess in public, up to two ounces of cannabis and possess up to five pounds in their homes; establish a procedure for automatic expungement of prior marijuana convictions; allow counties and municipalities to own and operate dispensaries; and legalize cannabis delivery services. As with prior versions of the bills, the current proposals would not allow municipalities to institute prohibitions on marijuana businesses, but would allow for reasonable restrictions on the hours and locations in which businesses may operate.

Recent polling shows that a majority of Minnesota residents support legalization of adult-use cannabis, but the current proposals face pushback, including from hemp farmers and retailers and groups concerned about the social equity implications of the bills. The state’s legislative session ends in May, so lawmakers are facing pressure to wind up negotiations to avoid delaying finalization of these bills until next year.

International Arbitration and Cross-Border Disputes in the Cannabis Industry

As continued legalization of cannabis across jurisdictions in the U.S. and foreign countries causes the industry to become increasingly lucrative, determining proper avenues for dispute resolution controlling underlying agreements and investments has become a critical consideration for business-owners and foreign investors alike. Foreign investment in businesses involving cannabis is subject to a complex web of oversight that could include any combination of local and foreign laws, agreements, regulations, and practices. Many foreign investors in the cannabis industry have turned to international arbitration as a method for navigating these complexities and resolving disputes that may arise from such investments and business relationships. This post explores high-level considerations for foreign investors in the cannabis industry when assessing the viability of arbitration as a means for dispute resolution.

To read the full post by Duane Morris attorney Ramsey Schultz, please visit the Duane Morris International Arbitration Blog.

Interview with Axel Bernabe of the New York Office of Cannabis Management Regarding True Party of Interest Rules

In an interview published on March 23, 2023, Green Market Report spoke with Axel Bernabe, the Chief of Staff and Senior Policy Director for the New York Office of Cannabis Management (“OCM”). The interview is significant because Axel Bernabe is one of the leading policymakers in the OCM. The interview ranged over many topics; however, the most-detailed part of the interview was devoted to the proposed True Party of Interest rules (“TPI”) issued in December of last year.

In the interview, Axel Bernabe explained that the focus in understanding the TPI rules should not be on the mechanics of the rules but on their purpose. The purpose of the rules is to prevent ownership or control between the supply tier of the cannabis industry, consisting of cultivation, processing and wholesale distributing, and the retail tier of the cannabis industry, consisting of retail dispensaries, on-site consumption establishments and delivery. This two-tier market structure is fundamental to the New York Cannabis Law. Accordingly, if a person or entity has an ownership or control interest in a business in the supply tier, then that person or entity cannot have any ownership or control interest in any business in the retailing tier. Similarly, if a person has an ownership or control interest in a business in the retailing tier, then that person cannot have any ownership interest in any entity in the supply tier.

Bernabe explained that New York has adopted this policy because suppliers who had an interest in the retailing tier would be able to exert anti-competitive pressures on retailers, which would limit choice and quality of product.

Bernabe admitted that there has been heated criticism that the TPI rules would hobble the ability of dispensary operators to raise funds because many investors want to buy into vertically integrated operation, due to the perceived economic advantages of vertical integration. However, Bernabe seemed dubious about these economic advantages. In addition, he felt that the investors (for the most part) who would be discouraged by the TPI rules would be existing cannabis businesses that are vertically integrated. As a side note, although Bernabe did not mention it, less than half of California cannabis businesses are vertically integrated, which helps his argument that prohibition of vertical integration does not foreclose businesses in the retail tier from finding investors.

Bernabe further argued that barring businesses in the supply tier from dictating to the retail tier would, in fact, further (rather than discourage) the ability of the retail tier to raise investment money from investors new to the cannabis industry. He added that this model has been used in the liquor industry in New York and has produced a market of thousands of profitable, small and often family-owned liquor stores.

In short, from the policy point of view enunciated by Bernabe, the only purpose of the TPI rules is to prevent ownership between the two tiers. The idea is straightforward. If the true person of interest is identified, then prohibited cross-ownership would be easy to detect by comparing whether the same name is appearing on one tier and the other tier. Accordingly, the application for a conditional adult use dispensary license requires both a personal history disclosure form and an entity history disclosure form. (In fact, the TPI definitions in the rules proposed in December of last year are substantially the same as the TPI definitions in the Conditional Adult-Use Retail Dispensary rules, which were adopted in final form on August 3, 2022, and presumably are already affecting investors in positive and negative ways.)
Bernabe stressed that horizontal integration among licensees in a tier is permitted, although subject to certain limitations on size such on the number of acres in a farming facility or the amount of passive investment in multiple retail dispensaries. Accordingly, the horizontal integration rules are much less severe than the absolute prohibition on vertical integration. Bernabe confirmed that out-of-state vertically integrated operators would be free to invest in New York supply operations as long as the operators did not invest or control businesses in the retail sale tier.

Bernabe admitted that the final TPI rules will likely be strict, broad and perhaps mechanical, but that it is necessary to draw a “bright line” to preserve the integrity of the two-tier regulatory regime.
Bernabe did not say when the TPI rules—whose comment period ended on February 13, 2023—would be issued in the final form.

Senate Bill aims to dismantle Minnesota’s recreational cannabis market

On Friday, a Minnesota senator introduced a bill that would drastically alter the state’s adult-use cannabis industry only a year after it launched adult-use cannabis sales.

Senate Bill 546, introduced by Sen. Keith Regier, R-Kalispell, focuses on “eliminating adult-use dispensaries” and intends to “reduce the demand for marijuana sales.”

The bill would prohibit non-medical marijuana sales, increase the state tax on medical marijuana from 4% to 20%, lower the THC cap on flower from 35% to 10%, lower the THC levels in individual edibles from 10 milligrams to 5 milligrams, and cap the THC percentage in concentrates at 10%.

According to the Montana Free Press, these significant limits on medical marijuana potency and allowable amounts for possession would not only reduce the consumer base for existing cannabis businesses, but would also drastically reduce revenue for state coffers. Since adult-use sales began in January 2022, Montana has generated $54 million in tax revenue from the industry, derived almost entirely from recreational consumers that pay a 20% tax to the state. In 2022, retailers sold $202,947,328 worth of recreational cannabis, which is roughly double the amount of medical marijuana sales.

“If SB 546 passes, it would render the entire cannabis program worthless, not only for the operators but also for consumers and patients in the state,” Zach Block, owner of Kalispell dispensary Montana Canna, told the Montana Free Press.

Minnesota’s Business, Labor and Economic Affairs Senate Committee plans to hold a hearing on Senate Bill 546 on Wednesday, March 29, 2023.

Cannabis Companies Infringe Popular Ferrara Candy Trademarks

The Ferrara Candy Company (Ferrara) is an American candy manufacturer owned by the Ferrero Group.  Ferrara — well known for candy brands such as Laffy Taffy, SweeTarts, and Nerds — has achieved enormous commercial success throughout the United States.

On May 31, 2022, Ferrara filed a lawsuit in federal court in Colorado against a cannabis edibles maker on the grounds of trademark infringement.  Trademark infringement occurs when a party violates the exclusive rights of a trademark owner, without authorization or license.

On March 20, 2023, the federal judge found that the cannabis company illegally copies the logos, names, and packaging of Nerds, Trolli, and Runts candy for its THC-infused products.  Ferrara never authorized the use of its logos and trademarks for cannabis products.  The products appear to have a significant amount of THC, with some containing as much as 600 milligrams, which is more than 60 adult servings.  The THC-infused products thus pose a public health hazard – especially to children — who are easily susceptible to believing that the cannabis products are ordinary candy.  As a result, the court determined that injunctive relief is appropriate and ordered the cannabis company to:

      1. stop producing and selling cannabis products that infringe the Ferrara candy brands;
      2. destroy any remaining products infringing Ferrara’s brands; and
      3. pay Ferrara all profits derived from the acts of trademark infringement.

Ferrara takes a serious approach to such cannabis products in order to protect consumers.  In addition to this judgment and injunction in Colorado, Ferrara has also successfully enjoined cannabis companies from selling THC-infused knockoff versions of its signature candy products in California, Florida, and Illinois.  Shortly after these proceedings commenced, the attorneys general of New York and Connecticut issued warnings about designing the packaging of cannabis products to look like well-known candy or snacks, both citing a nationwide rise in accidental overdoses among children.

While the desire to appeal to consumers is understandable, it is unlawful to profit off another’s registered trademark.  Manufacturing and marketing cannabis products that copy well-known consumer brands and packaging opens the door to litigation that in turn poses huge legal, financial, and reputational risks.  Trademark infringement is a serious legal matter that, as illustrated above, will likely result in unfavorable consequences to violators.  Cannabis companies should act with caution when adopting and commercializing brands, to avoid creating the potential for consumer confusion between their THC-infused products and the products of already established mainstream brands. This is particularly true when the established mainstream brands are used for candy or other products appealing to children.

Read the full text of the article on Law360.

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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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