Cannabis Industry

February 27, 2019February 28, 2019 by Duane Morris

Cannabusiness: The Marijuana Industry on Sirius XM

A two-hour special program, “Cannabusiness: The Marijuana Industry,” will be broadcast on Sirius XM’s Business Radio, Channel 132. Duane Morris partner Seth Goldberg will be interviewed on the program. The program will be re-broadcast at the following times:

Tuesday, February 26 from 2 to 4 pm ET
Tuesday, February 26 from 8 to 10 pm ET
Wednesday, February 27 from 1 to 3 pm ET
Thursday, February 28 from 2 to 4 pm ET
Friday, March 1 from 5 to 7 pm ET
Saturday, March 2 at Midnight and then again from 7 to 9 pm ET
Sunday, March 3 at 8 am ET and then again from 6 to 8 pm ET

Listen to the program on the Business Radio podcast site.

February 20, 2019 by Brad A. Molotsky

New Jersey – One step closer to Adult Use, Recreational Marijuana Legalization

Earlier this week, Governor Murphy, Senate President Stephen Sweeney, D-3rd District, and Assembly Speaker Craig Coughlin, D-19th District, reached a tentative agreement on key pieces of adult use marijuana legislation, overcoming one of the key sticking points of how to tax the product sales, reaching a collective consensus of a $42 an ounce tax.

According to a recent Monmouth University Poll, 6 in 10 New Jersey adults support legalizing recreational marijuana. The February poll interviewed 604 New Jersey adults between Feb. 8 and 10, found that 62% of respondents favored legalizing small amounts of marijuana for personal use, compared to 32% of adults who said no to the prospect of legal marijuana in New Jersey.

68% of respondents said it would support the state economy, while 40% of respondents who support legal cannabis said it would boost tax revenue for New Jersey.
From an age perspective, 81% of millennials (i.e., ages 18 to 34), support legalizing marijuana, compared to 74% of adults ages 35 to 54, and 67% of adults 55 and older.

One of the other bones of contention that was overcome involved who will control the oversight commission. The current agreement would create a 5-member Cannabis Regulatory Commission to oversee the state’s marijuana industry, and Governor Murphy would be able to appoint 3 of the members without requiring Senate approval.

A earlier New Jersey marijuana legalization bill that was advanced by Assembly and Senate commitees in the fall of 2018 included a 12% sales tax. Under the Monday compromise, adult use marijuana purchasers will pay the same tax rate no matter what amount they purchased – meaning, $42 for an ounce, $21 for a half-ounce, $10.50 for a quarter-ounce or $5.25 for an eighth-ounce.

The Senate Budget and Appropriations Committee vote was 7-4 in favor, while the Assembly Appropriations Committee voted 7-3 to advance the bill. If legislation is moved, the “Marijuana Legalization Act” would allow users 21 years old and up to possess up to an ounce of marijuana.

February 13, 2019 by Duane Morris

Harborside Positions Itself for the Future with Big Merger

Add to the list of companies making major moves in terms of expansion the legendary name of Harborside. They recently announced a reverse merger with Canadian-based Lineage Grow Company.

Harborside is not the first United States-based company to use a reverse merger to take advantage of the more advanced Canadian markets, and they won’t be the last. “US-based cannabis companies are increasingly taking advantage of the robust Canadian capital markets,” Nanette Heide, co-chair of the private equity practice at Duane Morris LLP and the attorney who represented Harborside in the deal, told The Marijuana Times. “The transactions are somewhat complex in structure, but executed well can provide ready access to capital for growth and expansion.”

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

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, 2019April 6, 2020 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.

Seth Goldberg: Duane Morris

Firm: Duane Morris

Location: Philadelphia

“This is a very good opportunity for our firm,” said Seth Goldberg, the chair of the firm’s practice in Philadelphia. Cannabis is one of the “few emerging markets that has multibillion-dollar potential.”

Goldberg, a seasoned trial lawyer with decades of experience, said he spearheaded the firm’s involvement in the industry in 2014 after Colorado became the first state to allow recreational pot shops.

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.