According to recent reporting from the NJ Cannabis Regulatory Commission (“NJCRC”), sales of legalized, recreational adult use cannabis in NJ exceeded $116.5 Million from July to September of 2022. This Q3 revenue figure represents a 46% increase from sales receipts in Q2 of 2022 of $80 Million generated from April to June 2022, when 13 state dispensaries expanded to adult cannabis sales for the first time.
By way of background, New Jersey legalized the sale of recreational marijuana for those 21 and over in April 2021. Sales were initially confined to 12 licensed dispensaries, which had approximately $24 Million in sales through May 2021, or an average of $5 Million per week in a state with 9.3 Million residents. By comparison, adult recreational cannabis generated approximately $80 Million in total sales between April and June 30 per the Cannabis Authority or $6.7M per week. Continue reading “NJ Cannabis – 3Q 2022 Adult Use Sales Numbers Continue to Blaze”
Simple Possession Pardons Can Complicate Employment Background Checks
By Danielle Dwyer and Jesse Stavis
On October 6, 2022, President Biden issued a blanket pardon to all citizens and lawful permanent residents convicted of simple possession of marijuana under the federal Controlled Substances Act. Because possession of marijuana offenses predominantly fall under the jurisdictions of the states, not the federal government, the immediate impact of these pardons is limited– only about 6,500 people have been convicted for simple possession under federal law and a few thousand more have been convicted under the District of Columbia Code. However, President Biden has urged governors to follow suit, and some states have begun to explore the idea of pardoning non-violent marijuana crimes. As such, employers need to be aware of the effects such pardons have on their criminal background processes. Continue reading “Simple Possession Pardons Can Complicate Employment Background Checks”
Medical Cannabis Research Bill Set to Become Law
Last week, the Senate unanimously passed H.R. 8454, or the Medical Marijuana and Cannabidiol Research Expansion Act (the “Act”), sending the bill to President Biden’s desk for signature. The bill passed the House this summer by a vote of 325 – 95, and marks the first time a standalone cannabis bill has been approved by the federal government. Essentially, the Act is intended to simplify and expand research into the medical possibilities of both cannabis and cannabidiol as a treatment for certain serious ailments. However, the Act does not de-schedule cannabis under the Controlled Substances Act, instead keeping cannabis a Schedule 1 drug. This means that cannabis will still be deemed to be a drug with a high likelihood for abuse, with no accepted medical use.
In particular, the Act provides for a streamlined process for the approval of cannabis research applications as follows:
- An applicant under the Act must submit a completed application to the U.S. Attorney General, which the Attorney General must approve, deny, or request additional information within 60 days. The application must include: 1) details relating to the applicant’s research protocol, reviewed and approved by the Secretary of the Department of Health and Human Services (the “DHS”), the National Institutes of Health, or another agency, or according to provisions in the Federal Register, and 2) the safety measures to prevent diversion of cannabis substance (including storing it in a locked, constructed cabinet).
- If the Attorney General requests additional information and the applicant so provides, the Attorney General must approve or deny the application within 30 days of the applicant providing such additional information. If the Attorney General ultimately denies any application, an explanation of the denial must be provided.
- A registrant may update its research protocol without informing the Drug Enforcement Administration, if the quantity and form of cannabis, the source of the cannabis, and the conditions of storage will not change. If any of the foregoing items will change, the registrant must notify the Attorney General via registered mail or an electronic means permitted by the Attorney General.
- If the Attorney General does not object to the changed protocol within 30 days, it is considered approved and the registrant may go ahead with the changed protocol.
Moreover, the Act also streamlines the process for applying to manufacture cannabis products for research purposes. The application timeline is similar to the research application process, but will only begin when the Attorney General posts in the Federal Register that the Attorney General’s office will increase the number of entities able to be registered under the Act as manufacturers of cannabis for medical research purposes. Then, entities may submit applications to the Attorney General. The application must show:
- The requirements of the Act and the Federal Register have been satisfied.
- The applicant will only transfer cannabis to those who are registered under the Act to perform preclinical or clinical research.
- The applicant will only transfer or sell cannabis under the Act with the prior written consent of the Attorney General.
- The applicant has completed the review process set forth in 21 U.S.C. § 823(a) of the Controlled Substances Act, which discusses general registration requirements for manufacturing Schedule I and II Controlled Substances.
- The applicant has established and actually follows a process for storing and handling a Schedule I controlled substance.
- A license to operate, if the State in which the applicant operates requires one.
The Act further authorizes registered covered institutions of higher education, like medical schools and research schools, to manufacture, distribute, dispense and possess cannabis for medical research, with guidance from the DHS and the U.S. Food and Drug Administration.
Additionally, the Act allows for doctors to discuss with their patients, and their patients’ parents if the patient is a minor, the potential benefits and risks in using medical cannabis under state medical cannabis laws. Prior to the Act, it was unclear whether such an act was a punishable offense under federal law. Senate Majority Leader Chuck Schumer is hopeful this provision, and the Act in general, will help patients with conditions like Parkinson’s, epilepsy, and severe post-traumatic stress.
Lastly, the Act requires the DHS to report to Congress on particular topics of research, including but not limited to, the effects of cannabis on the human body, effects on the adolescent brain, potential impairment of cognitive ability, and barriers and solutions to studying cannabis from states with legal cannabis.
Importantly, there are a few things the Act does not do. The Act does not allow research using state-legalized products for medical research purposes; the Act only allows for using the products manufactured through the Act’s protocols. Therefore, there will not be research into the products people are currently using to treat their medical ailments under state medical cannabis laws. Furthermore, as mentioned above, the Act does not de-schedule or re-schedule cannabis. President Biden issued an executive order in October asking the Secretary of the DHS and the Attorney General to begin the administrative process of de-scheduling cannabis. Presumably, research performed under this Act may lead to either de-scheduling or re-scheduling cannabis, but it is far too soon to tell.
Additionally, the Act does not implement more widespread reform. President Biden issued a pardon last month for simple cannabis possession offenses under federal law, but further reform will not be enacted unless the Senate passes one of several reform bills on the table. Even so, critics and proponents alike across the political spectrum, are lauding the Act as a necessary step for the federal government to catch up to the state legalization wave.
To read the full text of the Act, see https://www.congress.gov/bill/117th-congress/house-bill/8454/text.
Could Cannabis Banking Reform Finally Pass In Lame Duck?
In the Nov. 8 midterm elections, voters in both Maryland and Missouri approved legalization of cannabis for adult use, while voters in Arkansas, North Dakota and South Dakota voted no on legalization.
With the passage in Maryland and Missouri, 21 states as well as the District of Columbia have now legalized cannabis for adult use, and another 16 states permit cannabis for medical use.
Despite the fact that nearly half of all states have now legalized cannabis for adult use, it remains illegal under the federal Controlled Substances Act as a Schedule I drug, along with drugs like heroin and LSD. Such a classification means that cannabis has a high potential for abuse and has no acceptable medical use, despite research to the contrary.
To read the full text of this article by Duane Morris attorney Deanna Lucci, originally published in Law360, please visit the firm website.
New York Expects 20 Dispensaries to Open by End of Year and Issues Guidance for the State’s First Adult-Use Retail Cannabis Dispensaries
On October 28, 2022, the New York Office of Cannabis Management (OCM) released forward-looking guidance for those seeking to operate within the state’s recreational cannabis market.
The Background
In January, Gov. Kathy Hochul published an extensive State of the State book, laying out New York’s plan for 2022, including $200 million loan fund in support of social equity applicants within the state’s nascent marijuana market.
The state government set a goal of opening dispensaries by the end of the year that will allow New Yorkers to legally purchase cannabis. Hochul told the editorial board of Advance Media, owner of the Syracuse Post-Standard, that the state would open 20 dispensaries by the end of the year, with another 20 opening each month thereafter.
On October 17, Hochul told reporters that New York is “on track” to open some cannabis dispensaries within months.
Under Hochul’s plan, it is up to the state to select and lease locations for the dispensaries, including 70 in New York City. While the state’s OCM has not yet announced any locations for dispensaries anywhere in the state, it recently issued guidance in clear anticipation of this plan unfolding in the near future.
The Regulations
The New York OCM’s “Guidance for Adult-Use Dispensaries” is a series of prospective regulations for Conditional Adult-Use Retail Dispensary (CAURD) licensees and applications and are immediately effective.
The 27-page document includes requirements and operational rules addressing everything from operations and compliance measures to marketing, sales and distribution parameters, while providing insight into the OCM’s plans for issuing licenses when the time comes. This includes topics of record-keeping requirements, required training for staffers, and inventory and tracking requirements, among others.
While these guidelines are not yet formally adopted and enacted as rules, they at least offer both CAURD licensees and regulators a “working” preview of the New York Cannabis Control Board’s (CCB) expectations for the forthcoming dispensaries.
Indeed, the document states that it “serves to provide the framework that will assist CAURD licensees plan for how to operate their dispensary before regulations are formally adopted. . . and provides clarity on what the Office’s expectations are in relation to those regulations and laws currently in place and the regulations that will be promulgated in the future.”
What Does This Mean for CAURD Licensees?
The state and regulators are gearing up for the opening and development of these dispensaries, possibly within the next few weeks, and throughout the next 15 months. CAURD licensees in New York should adhere to OCM’s newest guidance, in addition to existing Cannabis Law and Title 9 of the New York Codes, Rules and Regulations, until a copy of the final regulations is made available on the OCM’s website.
On November 3, a Business of Cannabis: New York panel discussion ensued, where much of the conversations centered on the importance of providing equal opportunities to small business and justice-involved entrepreneurs to participate in the industry. Panel participants included Tremaine Wright, Chair of the CCB, Crystal Peoples, New York State Assembly Majority Leader, and Jeremy Berke, Reporter for Business Insider.
The same day, Wright tweeted, “[New York] is on target to open stores by the end of the year.” Axel Bernabe, Chief of Staff & Senior Policy Director for OCM, who delivered the keynote more specifically assured, “In 15 months, we’ll have a fully established supply chain built on social equity. That supply chain will form the backbone of what we’re going to build on in the future.”
Qualifying New York small business owners and entrepreneurs should keep a close pulse on this evolving regulatory landscape over the coming weeks and months to ensure they remain in legal compliance and best positioned to take full advantage of this next phase of the state’s cannabis initiative.
Paul Josephson Named to Insider NJ’s Insider 100: Cannabis Power List 2022
“Paul Josephson has been one of New Jersey’s top pot lawyers for a very long time. The longtime policy and regulatory counsel for New Jersey Cannabis Industry Association, Mr. Josephson leads the Cannabis Industry Group at Duane Morris, an international law firm with strong roots in New Jersey…”
Read the full article on InsiderNJ.com:
House Approved Its First Appropriations Bill that Supports Tribal Cannabis Production and Distribution
Tribal leaders of federally-recognized tribes that have legalized cannabis, either medicinally or for adult use, may soon be able to breathe a sigh of relief. The Fiscal Year 2023 appropriations bill for the Department of the Interior (the “2023 Appropriations Bill”), awaiting Senate approval after having passed the House, includes a provision prohibiting the use of any Interior funds to enforce federal laws that otherwise criminalize cannabis on Indian lands where tribal law authorizes its use, distribution, possession, or cultivation. There are, however, two important caveats.
First, if the tribe is subject to state law that is contrary to tribal law, or the tribal land is located in a state where cannabis is illegal, the non-enforcement provision does not apply. Some tribes are still subject to Public Law 280, a relic from the 1950s, which gives certain states criminal jurisdiction over tribal members on tribal land. For those tribes, state criminal law would control and cannabis use, distribution, possession, or cultivation would remain illegal on tribal land.
Second, tribes must take reasonable steps to ensure tribal laws regarding cannabis are compatible with certain federal policy objectives, such as prohibiting cannabis use for minors and ensuring cannabis is not diverted to states or tribes where it is illegal, used to support organized crime or other illicit drugs, or brought onto federal public lands.
These policy objectives mirror ones that had been included in the “Wilkinson Memo,” a 2014 Obama-era statement of policy emphasizing the Department of Justice’s non-enforcement policy against tribes for legal cannabis businesses (both medicinal and adult-use). That memo gave tribes and tribal members some comfort that legalization efforts would not subject them to prosecution, or prevent federal funds from continuing to support their communities. When Attorney General Sessions rescinded that policy statement in 2017, tribal legalization was left in political limbo. The Biden administration has remained silent on the issue of tribal legalization, despite President Biden’s pardon announcement earlier this month.
If the Senate approves the 2023 Appropriations Bill, it will give tribes that have already legalized cannabis some much-needed clarity on where the federal government stands on enforcement of the federal Controlled Substances Act. During the Obama administration, tribes in states like Washington and Nevada found success in compacting with the state to create a uniform system of distribution. Tribes in California do not have that option as the state has prevented any such partnership, despite the state and tribes separately legalizing adult-use. More recently, some tribes located in New York went ahead without state partnership while state adult-use licenses linger in the approval process. Indeed, more than 100 dispensaries have opened in New York on Native land.
For tribes in states where cannabis remains prohibited in some or all forms, or the state has criminal jurisdiction over tribal members, the 2023 Appropriations Bill is a reminder that the complex system of federal and state law governing tribal affairs continues to create issues affecting tribal sovereignty.
California Joins Growing List of States to Protect Employees’ Off-Duty Use of Marijuana
By Jennifer Kearns and Danielle Dwyer
Starting January 1, 2024, employers in California will be prohibited from interfering with their employees’ off-duty use of marijuana. On September 18, 2022, Governor Gavin Newsom signed into law Assembly Bill 2188 (AB 2188), which amends California’s Fair Employment and Housing Act (FEHA) to add protections for employees by prohibiting employers from refusing to hire, firing, or otherwise taking an adverse action against an employee based on the employee’s “use of cannabis off the job and away from the workplace.” Although medicinal marijuana has been legal in California since 1996, and recreational marijuana legal since 2016, the FEHA did not previously provide workplace protections for employees’ permissive use of marijuana.
AB 2188 also amends the FEHA to prohibit discrimination in hiring or any term or condition of employment based on employer-required drug screening tests that detect “nonpsychoactive cannabis metabolites” in the employee’s “hair, blood, urine, or other bodily fluids.” The California legislature stated that because most marijuana tests can only detect whether cannabis metabolites are present, and have “no correlation to impairment on the job,” employers will need to instead rely on alternative tests to determine whether an employee is under the influence at work. These alternative tests can include “impairment tests” that “measure an individual employee against their own baseline performance,” or tests that “identify the presence of THC in an individual’s bodily fluids.”
Although the law does not specify what constitutes an “impairment test,” it is possible the legislature was referencing tests that measure an individual’s motor functions, the visual effects of being high, and/or obvious cognitive impairments such as impaired gait or mobility, glassy eyes, changes in speech, and/or reasoning ability. However, at this time, there is no universal definition, legally or medically, of what constitutes “impairment.” Employers wishing to utilize impairment tests should develop a protocol that identifies the signs of impairment that will be assessed and that includes training supervisors on recognizing and documenting signs of impairment.
It is also not immediately clear upon which bodily fluid tests employers can rely given that THC can remain detectable in a person’s system weeks after use and such tests might not be able to provide objective data as to whether an employee is impaired at a specific time. The intent of AB 2188 is to protect an employee’s off-duty use, so if an employee partakes on a Saturday and fails a drug test on a Wednesday, but is not impaired on Wednesday, taking action against that employee would be discriminatory and unlawful. Employers that rely on physical drugs should consider incorporating impairment tests into their drug testing procedures. A two-fold approach may better protect an employer from liability under AB 2188. Employers should also confirm with their drug testing providers that the provider tests for the presence of THC and not nonpsychoactive cannabis metabolites.
Importantly, AB 2188 does allow employers to prohibit marijuana use on the job and/or at the worksite and specifically states that there is a “consensus” that employees “should not arrive at a worksite high or impaired.” Employers would also still be permitted to maintain drug-free workplaces and prohibit the possession of marijuana at the workplace. The bill exempts employees “in the building and construction trades,” and positions which require federal drug tests and/or background tests.
With the amendments to the FEHA, California joins a growing list of states that have enacted employee protections for the recreational use of marijuana including Connecticut, Illinois, Montana, New Jersey, New York, and Rhode Island.
Biden’s Pardon Announcement Gives a Boost to SAFE Banking Prospects
As we previously reported, on October 6, President Biden took executive action and announced that he would issue pardons for all prior Federal offenses of simple possession of marijuana, and urged state governors to do the same. As part of his executive action, Biden also directed the Secretary of Health and Human Services (HHS) and the Attorney General to “initiate the administrative process to review expeditiously how marijuana is scheduled under federal law,” which is currently classified as a Schedule I drug, along with heroin and LSD.
Many observers think that this executive action could usher in cannabis banking reforms. While some have noted that if cannabis is actually de-scheduled, banks and financial institutions will feel more comfortable banking with cannabis and cannabis-related companies, it seems more likely that Biden’s pardon announcement may push Congress to finally pass some version of the SAFE Banking Act.
After Biden’s announcement, Sen. Cory Booker (D, N.J.) said he was hopeful that Congress would pass federal legislation in the lame-duck session after the November election. On that front, Booker alluded to “bipartisan movement” due to “problems in the banking industry” that many think refers to a version of “SAFE Banking Plus” or “SAFE Plus” that we previously reported senators were discussing.
The SAFE Banking Act – which has passed the House of Representatives seven times in recent years but has not been taken up in the Senate – would allow cannabis businesses to access the federal banking system and service providers to the cannabis industry such as attorneys, accountants, bankers and landlords would be permitted to accept payment from cannabis businesses without the risk of violating federal law.
“SAFE Plus” would add equity provisions to the SAFE Banking Act, ensuring equitable access to financial services for minority-owned cannabis businesses, requiring financial institutions to prove compliance with anti-discrimination laws, as well as other reforms like expungements, veterans medical cannabis access and more.
Biden Statement on Cannabis Scheduling: Be Careful What You Wish For …
On October 6, 2022, President Biden issued perhaps the
biggest shift in federal policy on cannabis since enactment of
the Controlled Substances Act, issuing a Statement on Marijuana Reform that:
– Pardons all prior federal offenses of simple possession or use of
marijuana;
– Urges all Governors to pardon all prior state offenses of simple
possession or use of marijuana; and
– Requests that the Secretary of Health and Human Services and the
Attorney General initiate an administrative review of marijuana’s
scheduling under the CSA.
This unexpected but welcome shift in Administration policy led to the usual bump in prices of publicly-traded cannabis companies, as investors seized on any legalization news as good news.
But this may well be one of those be careful what you wish for moments.
Many commenters presume this move presages the federal legalization of cannabis. But astute observers understand that the devil is in the details when it comes to so-called federal legalization – and that there are many shades of legalization with very different outcomes for the current industry, legacy operators, and the various noncannabis industries waiting for a break in federal policy that will allow them to enter the cannabis space.
Notably, President Biden did not instruct his agencies to deschedule or even to reschedule cannabis. Instead, he “ask[ed]” HHS and DOJ “to initiate the administrative process to review expeditiously how marijuana is scheduled under federal law.”
The President noted that “… even as federal and state regulation of marijuana changes, important limitations on trafficking, marketing, and under-age sales should stay in place.” Reading the statement closely, it would seem that descheduling is an unlikely result, unless done in tandem with federal legislation creating a federal regulatory regime or authorizing states to regulate the business.
And rescheduling is not necessarily good news for the industry, either. Rescheduling could result in FDA regulation of products that would all but require cannabis companies to operate like pharmaceutical companies.
If cannabis is descheduled or rescheduled, existing state regulatory schemes that feature or include local protectionist measures would likely fall as substantial burden on interstate commerce. The only sure way to preserve existing state-based markets will be an act of Congress authorizing the states to continue to discriminate in favor of local operators and local cultivation.
The big questions following this Statement:
– Will DEA/DOJ/HHS drag their feet yet again?
– Will marijuana be declassified altogether?
– Will it be re-classified as a Schedule II, III, IV, or V controlled substance?
– Will it remain a Schedule I controlled substance?
Any of these outcomes are possible. And where you stand on this review very much depends on where you sit.