General – Page 26 – Cannabis Industry

February 5, 2019 by Duane Morris

The 2018 Farm Bill Preserves FDA Right to Regulate Cannabis Products

Last year was a record year for cannabis. Canada passed the Cannabis Act, making adult-use cannabis legal there. The FDA approved a cannabidiol-based medicine, Epidiolex. And the President signed the Agriculture Improvement Act of 2018, aka the 2018 Farm Bill, into law on December 20, 2018.

While the 2018 Farm Bill granted the U.S. Department of Agriculture the ability to regulate hemp, it also preserved the right for the U.S. Food and Drug Administration (FDA) to regulate products containing cannabis or cannabis-derived compounds. The FDA regulates products such as human and animal drugs, biological products, cosmetics, food and animal feed, among other things. So any inclusion of cannabis or cannabis-derived compounds, like CBD, in any of those types of products would be regulated by the FDA. The FDA has stated that this is true regardless of the source of the cannabis substance, be it hemp or marijuana.

Read the full Duane Morris alert.

February 5, 2019 by Duane Morris

Is New Hampshire the Next State to Legalize Cannabis?

The first public hearing on New Hampshire House Bill 481, which would legalize the adult use of cannabis in the state, is scheduled for February 5, 2019. The bill outlines how New Hampshire would regulate cannabis products, including recreational “adult use” products, the licensing and regulation of sales establishments, and the taxation scheme.

Massachusetts, Maine and Vermont all have legalized the “adult use” of cannabis, leaving New Hampshire as the only state in northern New England that has yet to do so. New Hampshire’s economy is very integrated into the New England and Metro Boston economies and serves as a valuable new market for the cannabis industry.

The February 5 public hearing will begin at 1:00 p.m. at Representatives Hall in the State House before the House Criminal Justice and Public Safety Committee. The committee will amend the bill the following day, vote on the bill on Thursday, February 7, and send the bill to the floor of the New Hampshire House for its consideration in February.

Although Governor Christopher T. Sununu has said he will veto the bill, the bill is receiving bipartisan support and is expected to easily pass the House and Senate in the coming weeks, setting the stage for a potential veto override. It is also anticipated that the legislative effort will take a couple of months. Duane Morris will continue to follow these developments.

Read the full Duane Morris Alert.

January 19, 2019 by Brad A. Molotsky

Bill 420 – It’s “That” Time Again!

On 1-9-19, Rep. Earl Blumenauer (D-OR) introduced H.R. 420, the “Regulate Marijuana Like Alcohol Act.” Blumenauer, the co-sponsor of the Rohrabacher–Blumenauer amendment, better known as the on-going appropriations provision that prohibits the Justice Department from spending federal funds to enforce federal law that is in conflict with state medical cannabis laws.

Proposed Bill 420 is a total overhaul of the federal government’s treatment of marijuana. Among other things, the bill:

1. Decriminalizes marijuana by removing it from the Controlled Substances Act;
2. Amends the Federal Alcohol Administration Act to enable the Secretary of the Treasury to issue permits to those who want to to manufacture, distribute, or sell marijuana;
3. Transfers jurisdiction from the DEA to the Bureau of Alcohol, Tobacco, Firearms and Explosives;
4. Prohibits widespread advertising for marijuana; and
5. Grants to the FDA the same authority for marijuana as it has for alcohol.

Rep. Blumenauer noted: “Congress cannot continue to be out of touch with a movement that a growing majority of Americans support. It’s time to end this senseless prohibition.” In this vein, per a Pew Research Center study released last fall, nearly 66% of Americans support legalization at the federal level.

The new co-chairs of the 2019 bipartisan Congressional Cannabis Conference are Rep. Barbara Lee (D-CA) and Dave Joyce (R-OH), Rep. Earl Blumenauer (D-OR) and Don Young (R-AK).

January 17, 2019April 6, 2020 by Ryan Wesley Brown

New Cannabis Regulations Approved in California

On January 16, 2019 the California Office of Administrative Law (OAL) approved the final regulations that were submitted by California’s three licensing agencies, the Bureau of Cannabis Control (BCC), the Department of Food and Agriculture (CDFA) and the Department of Public Health (CDPH), in December. These new, approved regulations went into effect immediately, meaning the previous emergency regulations (under which the industry has been operating for the past year) are no longer in effect. The regulations can be viewed here.

In a joint press release issued by the three agencies, BCC Chief Lori Ajax stated: ““These approved regulations are the culmination of more than two years of hard work by California’s cannabis licensing authorities. Public feedback was invaluable in helping us develop clear regulations for cannabis businesses and ensuring public safety.”

Continue reading “New Cannabis Regulations Approved in California”

January 12, 2019January 14, 2019 by Brad A. Molotsky

Opportunity Zones – Government Shut Down Stalls Treasury Responses and requested clarifications

Putting aside partisan points of view on the wall and whether a government shut down to get a wall paid for is a good idea, the shut down is already impacting US Treasury’s ability to finalize new regulations to clarify certain aspects of the Opportunity Zone program.

Comment letters have been sent in by various trade association and OZ groups my team and I are involved with to the IRS and Treasury but, unfortunately, the clarity we are looking for will need to wait until the shutdown has been resolved plus two weeks thereafter (at least) per a notice posted in the Federal Register. Open issues that the Real Estate Roundtable, Novogradac’s OZ team and others are seeking include the following:

Defining original use and substantial improvements
Two tiered structures and the “working capital” impact – 31 months
How vacant land might qualify as “original use” property
Clarifying how and when the 180 day rule applies to certain pass through entities
Clarifying how Section 1231 gains of pass through entities are eligible for deferral
Seeking a removal of the fixed end of 2047 for sale purposes to qualify for a stepped up basis
Clarification regarding the methodology for applying the 90% and 70% asset tests
Requesting limitations on non compliance penalties to the portion of the aggregate assets of a QOF that are funded with gains for which a deferral election has been made
Definition of “substantially all” – keeping the definition at 70% and generally requiring real property businesses to hold 90% of tangible property inside a QOZ
Clarifying if property that straddles a QOZ can treat the improvements as being all within the QOZ
Clarifying the requirement that a substantial portion of the intangible property of a QOZB be used in the “active conduct of a trade or business” in the QOZ
Clarifying the timing of capital gains and dividend treatment for REITs

While our clients are still closing deals and effectively using the OZ program to defer, reduce and ultimately, hopefully, create a capital gain free sale after 10-years at the federal level, additional clarity would, in fact, be nice.

Border security for sure, but let’s get these rules clarified now so we can spur investment where its needed without the histrionics and the child like tantrums.

See attached Novogradac letter to US Treasury for more details – https://www.novoco.com/system/files/group/Opportunity%20Zones%20Working%20Group/novogradac_wg_comment_letter_proposed_regs_122818.pdf

January 10, 2019 by Duane Morris

Federal Court Tosses RICO Claim Against California Cannabis Growers, Landlord

On December 27, 2018, the Northern District of California dismissed a civil RICO claim brought against the owners and operators of a Sonoma County cannabis growing operation and the operation’s landlord. See Bokaie v. Green Earth Coffee LLC, 3:18-cv-05244-JST, 2018 WL 6813212 (N.D. Calif. Dec. 27, 2018). The lawsuit was filed by neighbors who alleged that the operation’s “skunk-like stench” interfered with the enjoyment of their property and drove down their property values. The Bokaie court found that such alleged harms did not constitute a “RICO injury,” and thus dismissed plaintiffs’ claim (albeit without prejudice, allowing 30 days to amend).

The Bokaie case is part of a growing trend of RICO lawsuits filed in legalized states—to date, roughly a dozen have been filed in California, Colorado, Massachusetts and Oregon—that seek to exploit the tension between state law and the federal Controlled Substances Act (CSA). RICO defines “racketeering activity” to include CSA violations, and a civil lawsuit can proceed upon allegations that an enterprise’s pattern of racketeering activity caused damage to the plaintiffs’ business or property. 18 U.S.C. §§ 1961(1), 1962(c), 1964(c). RICO’s civil remedy provision awards prevailing plaintiffs triple damages and attorneys’ fees, id. § 1964(c), thus giving “not in my backyard” plaintiffs and their attorneys a powerful tool against their neighbors. By alleging that the smell of cannabis interferes with the enjoyment of their property and drives down their property value, plaintiffs in these cases are effectively elevating common law nuisance claims into federal RICO lawsuits.

Read the full Duane Morris Alert.

January 9, 2019February 25, 2025 by Duane Morris

Meet the Duane Morris Lawyers Who Are Working on Some of the Biggest Deals in the Booming Marijuana Industry

With the rapid spread of marijuana legalization in the US, lawyers are discovering that the tangled web of regulations guiding the rapidly growing industry is a boon for business. …

There are several key reasons lawyers are attracted to the marijuana industry. For one, as cannabis companies grow, merge, and start getting the attention of Fortune 500 corporations as acquisition targets, they need more sophisticated advice on financing, tax planning, corporate structure, and M&A. …

That’s an opportunity to a select group of lawyers who have cut a trailblazing path into the industry. Once reluctant, some of the biggest law firms, like Duane Morris, Baker Botts and Dentons, are building out specialized cannabis practice groups as the industry continues to grow in profitability and complexity. …

Business Insider has pulled together a list of the top lawyers who’ve worked on the largest deals in the past year in the growing marijuana industry.

Duane Morris represented iAnthus, a US cannabis company, in its $640 million merger with MPX Bioceutical, also the first public-to-public transaction in the US cannabis industry. Further, the firm has advised investors on real-estate acquisitions.

For more information, visit the Business Insider website.

December 21, 2018 by Duane Morris

“Q&A Webinar on the 2018 Farm Bill” Replay

As anticipated, President Trump signed the 2018 Farm Bill yesterday, removing hemp from the Controlled Substances Act. View the video replay of our Q&A Webinar on the 2018 Farm Bill for information about the legislation.

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December 18, 2018April 6, 2020 by Ryan Wesley Brown

California’s Bureau of Cannabis Control Submits Final Regulations for Administrative Review

The three agencies that regulate the cannabis market in California, the Bureau of Cannabis Control, Department of Food and Agriculture, and Department of Public Health, submitted a final version of regulations to the Office of Administrative Law (“OAL”) in California this month. The OAL reviews regulations for compliance with procedural requirements and substantive standards under California law. The OAL has 30 working days — until January 16, 2019 — to review the regulations.

This blog post will highlight some of the important changes to the regulations made by the Bureau of Cannabis Control (“BCC”). Continue reading “California’s Bureau of Cannabis Control Submits Final Regulations for Administrative Review”

December 4, 2018 by Duane Morris