FTC Approves Consent Orders Against CBD Manufacturers

Seth Goldberg
Seth A. Goldberg

As I previously wrote, in December 2020 the FTC announced consent agreements reached with CBD manufacturers 1) Bionatrol Health, LLC; 2) Epichouse LLC (First Class Herbalist CBD); 3) CBD Meds, Inc.; 4) HempmeCBD; 5) Reef Industries, Inc.; and 6) Steves Distributing, LLC, in connection with a “crackdown” the FTC termed “Operation CBDeceit” for allegedly spurious health claims. The FTC today followed up that announcement with an announcement that those consent orders have been approved by the FTC in unanimous votes as to each. These manufacturers will now be required to comply with the consent orders, which could include fines and ceasing to make “unsupported health claims” in connection with the marketing of their products. 

Bipartisan Adult-Use Bill To Be Introduced in Pennsylvania

Seth Goldberg
Seth A. Goldberg

Senators Dan Laughlin (R) and Sharif Street (D) are introducing legislation that would legalize marijuana for adult recreational use in Pennsylvania. This is the first time a republican senator has backed such a bill. The proposed legislation will attempt to generate revenue for the commonwealth and to promote social equity by way of increasing the number of licenses to operate, imposing a 6% sales tax, and imposing a 10% excise tax that would go toward a Cannabis Business Development Fund to provide aid, grants, and technical assistance to businesses and individuals in areas that have been disproportionately impacted by criminal prosecution for cannabis violations. Expungement of cannabis crimes would also be available.

Laughlin’s pragmatic views may encourage his republican colleagues in PA’s legislature to join him. As Laughlin stated during a press conference: “Our proposal prioritizes safety and social equity. And furthermore, it will let Pennsylvania’s robust agricultural industry participate in marijuana cultivation.” And both Laughlin and Street encouraged PA legislators to keep pace with lawmakers in New Jersey and New York, stating in their co-sponsorship memo: “This year our neighbors in New Jersey have signed adult use marijuana into law and our neighbors in New York are likely to legalize. It is our duty to taxpayers to seize the initiative and legalize marijuana concurrently with bordering states. Failure to do so risks permanently ceding hundreds of millions of dollars of new tax revenue as well as thousands of jobs at a time when taxpayers can least afford it.”

 

New Jersey’s Legal Cannabis Framework Creates Economic Opportunity with an Eye to Social Justice

On February 22, 2021, Governor Murphy signed into law The New Jersey Cannabis Regulatory, Enforcement Assistance, and Marketplace Modernization Act, regulating cannabis use and possession for adults 21 years and older. The ratification of the bill follows a protracted legislative logjam since Election Day, when New Jersey voters overwhelmingly approved a mandate to provide the infrastructure for the legalization of cannabis in the state. The legalization immediately decriminalizes certain amounts of marijuana and hashish statewide. Meanwhile, the recreational production and sale remains subject to regulatory schemes not yet enacted.

Continue reading “New Jersey’s Legal Cannabis Framework Creates Economic Opportunity with an Eye to Social Justice”

Merrick Garland’s Comments Suggest Return to Cole-like Prioritization

Seth Goldberg
Seth A. Goldberg

During his confirmation hearing on February 22, 2021, Attorney General nominee Merrick Garland’s comments hearkened back to the Obama-era de-prioritization of enforcement against marijuana-related crimes under the Cole memorandum, stating: “This is a question of the prioritization of our resources and prosecutorial discretion… It does not seem to me a useful use of limited resources that we have, to be pursuing prosecutions in states that have legalized and that are regulating the use of marijuana, either medically or otherwise. I don’t think that’s a useful use.”

In addition, Garland explained that social justice warranted such deprioritizing, acknowledging that people of color are arrested for non-violent marijuana-related crimes at far greater rates than white people.  According to Garland, the federal government should not be expending resources criminalizing non-violent marijuana related crimes, as doing so in the past “has disproportionately affected communities of color and damaged them after the original arrest because of the inability to get jobs.”

While proposed legislation such as the MORE Act and the SAFE Banking Act could provide greater certainty for the cannabis industry, until such time as laws like those are passed, the establishment of priorities regarding federal enforcement of state-legal cannabis would encourage greater participation in the cannabis industry, as the risks of federal enforcement would become more clear and thus easier to weigh against the rewards of entering the still emerging market.  The DOJ has been largely hands off of the state-legal cannabis market since the Cole memorandum, even though it was rescinded by AG Session, but clarity from Merrick Garland would nonetheless be very well-received by industry participants.

 

NJ – Governor Murphy signs Adult Use Cannabis Bill – Now Adult Use Cannabis is Law of the Garden State

Earlier today, February 22, 2021, NJ Governor Murphy signed legislation to create an adult use/recreational marijuana marketplace, decriminalize cannabis and loosen certain penalties for underage possession of the drug and alcohol.  NJ joins 13 other states (and the District of Columbia) which have legalized adult use marijuana including Alaska, Arizona, California, Colorado, Illinois, Maine, Massachusetts, Michigan, Montana, Oregon, South Dakota, Vermont, Washington and Washington, D. C. 

The Assembly and Senate passed a compromise bill to address most of Governor’s concerns that had held up the signing of the Bills – these areas mostly focused on easing penalties on underage possession of both alcohol and marijuana.

Under the law, NJ adults may legally purchase and possess up to 1 ounce of marijuana; retail sales will be taxed with 70% of such revenue being dedicated to lower income communities; a Cannabis Regulatory Commission will be established and oversee licensing; NJ will allocate 37 new grower licenses over the next 2 years; and currently licensed medical cannabis retail operations will be eligible to sell adult use cannabis.

The firm has an active Cannabis and Hemp practice, with over 65 lawyers who counsel businesses and investors in the regulatory and licensing area, the funds formation and fund raising arena, the leasing and acquisition of real estate fronts and the patents, trademarks and IP area of the cannabis and hemp industry. 

We can be reached at any of the following email addresses and will direct your inquiry to the appropriate person within our Cannabis and Hemp Taskforce – bamolotsky@duanemorris.com; tagallegos@duanemorris.com; ppjosephson@duanemorris.com; or sagoldberg@duanemorris.com.

Be safe.

 

Cannabis – NJ Legislature Passes Historic Adult Use Cannabis Legalization Bill, Off to the Governor’s Desk

Earlier today, Thursday, December 17, 2020, the NJ Legislature passed an historic bill legalizing and taxing recreational marijuana for adults use.

The 240-page Assembly Bill 21 passed by a 49-24 vote with 6 abstentions in the Assembly and a 23-17 vote in the state Senate.

The final bill creates a 5-member Cannabis Regulatory Commission to oversee the new market, as well as the existing medical marijuana market.

Licenses for cultivators are capped at 37 for the first 24 months following the bill’s enactment.

Cannabis sales will be taxed at 7% – which includes the 6.625% sales tax on retail sales, and a tax on cultivators, which adds up to a 7% rate in total.

70% of sales tax revenue and all the money from a tax on cultivators are dedicated toward legal aid, health care education and other social services for lower-income, minority communities.

The remaining 30% in sales tax revenue will go to fund the Cannabis Regulatory Committee and to help fund local police departments for the training of “Drug Recognition Experts”.

Per NJBIZ, employers must have a “reasonable suspicion” that their workers are high on the job in order to conduct a drug test. And the test must be accompanied by an assessment from a Drug Recognition Expert to ensure the person’s behaviors match someone who’s high.

That would allow workers to use marijuana while off the clock, just as with alcohol.

Separately, another measure, Senate Bill 2535, was passed which ends arrests for possession of up to 6 ounces of cannabis, while Senate Bill 3256 will also lower penalties for possession of psilocybin (i.e., mushrooms).

Duane Morris attorneys in offices throughout the U.S. have extensive experience with the wide array of issues attendant to legal cannabis business activities, including real estate development and leasing; licensing for cultivation, processing and dispensing; litigation; banking and finance; raising and deploying capital; protecting intellectual property; public company representation and SEC filings; land use and zoning; healthcare and research; and taxation.

For more information on this blog post, do not hesitate to contact Brad A. Molotsky or Paul Josephson or any of the other Duane Morris attorneys you regularly engage with.

FTC Ratchets Up Enforcement Against “Spurious” CBD Health Claims

Seth Goldberg
Seth A. Goldberg

In connection with a crackdown on CBD manufacturers pursuant to its “Operation CBDeceit,” the FTC announced today settlements with six CBD-infused product manufacturers who, according to the FTC, allegedly made a “wide range of scientifically unsupported claims about their ability to treat serious health conditions, including cancer, heart disease, hypertension, Alzheimer’s disease, and others.” Under the settlements of the respective Complaints against them, each of the manufacturers will be required to pay a fine, and cease making “unsupported health claims” in connection with the marketing of their products.

In issuing its press release today the FTC attached the Consent Agreement and the FTC’s findings of violations of the FTC Act, which are set forth in a draft Complaint. These documents illustrate the FTC’s procedures in actions like these, and highlight the FTC’s concerns regarding allegedly misleading representations about CBD-containing products in violation of the FTC Act. Specifically, the FTC views health claims in connection with marketing such products to be misleading unless they “rely upon competent and reliable scientific evidence that is sufficient in quality and quantity based on standards generally accepted by experts in the relevant disease, condition, or function to which the representation relates, when considered in light of the entire body of relevant and reliable scientific evidence, to substantiate that the representation is true.”

Significantly, the FTC has not required the settling manufacturers to remove their products from the shelves and to cease selling them. They must, however, remove any unsupported health claims. Moreover, it would not be surprising if the announcement of these settlements spawns consumer fraud litigation against the manufacturers, which is often a much more serious concern to the business.

It is unclear how “Operation CBDeceit” will be implemented when the Biden administration takes over. For now, however, CBD manufacturers should continue to be mindful of their packaging, labeling and other marketing materials.

NJ Lawmakers Agree on Adult Use Cannabis Legislation – Vote slated for later in December

According to lawmakers, a deal has been reached to compromise on legislation to enable adult use cannabis in NJ.

The compromise bill allows for 37 licenses for marijuana growers during the first 2 years of legal sales. The license limit does not apply to micro-licenses, which can be granted to businesses with 10 or fewer employees.

Minority Communities – 70% of the sales tax revenue as well as all of the funds raised by a tax on cultivators will be used to support restorative programs for legal aid, health care, mentoring in minority communities.

NJ voters approved a ballot question seeking to amend the state constitution and legalize marijuana on Nov. 3.

Per NJ Biz, legislators reached another deal on that issue earlier last week to pass a bill that will allow people to possess up to 6 oz. of marijuana.

Lawmakers are also expected to move forward with the bill to decriminalize marijuana later in December.

Senators also introduced a new constitutional amendment that could go before voters in 2021. It seeks to solidify the tax structure outlined in Senate Bill 21, ensuring that the money only go to social and racial justice causes, and not the state’s general fund.

Given the current legislative calendar, it is likely that the legalization bill will go before the Senate Judiciary Committee on Dec. 14 and for a full vote on Dec. 17, 2020.

Duane Morris attorneys in offices throughout the U.S. have extensive experience with the wide array of issues attendant to legal cannabis business activities, including licensing for cultivation, processing and dispensing; litigation; banking and finance; raising and deploying capital; protecting intellectual property; real estate development; public company representation and SEC filings; land use and zoning; healthcare and research; and taxation.

For more information on this blog post, do not hesitate to contact Brad A. Molotsky or Paul Josephson or any of the other Duane Morris attorneys you regularly engage with.