Tracy Gallegos, partner and team lead of the Duane Morris Cannabis Industry Group, discussed the cannabis industry’s mergers and acquisitions (M&A) landscape at the Benzinga Cannabis Capital Conference on September 27, 2023.
The discussion also touched upon the rescheduling of cannabis, with differing opinions on its likelihood. Ms. Gallegos said she skeptical due to formal rulemaking processes and international treaty considerations.
Yesterday, the Senate Committee on Banking, Housing, and Urban Affairs reported the Secure and Fair Enforcement Regulation (“SAFER”) Banking Act, formerly known as the SAFE Banking Act, out of committee by a vote tally of 14-9. Although the House of Representatives approved the SAFE Banking Act seven times over the past several years, it never made any traction in the Senate. That changed with yesterday’s vote, marking the first time that any version of the bill was sent to the Senate floor. The Chairman of the committee, U.S. Senator Sherrod Brown (D-OH), expressed his satisfaction with the result, stating that this “bipartisan bill is necessary” to “make it safer for legal cannabis businesses and service providers to operate in their communities and protect their workers.”[1] Continue reading “Milestone For SAFE[R] Banking”
Paul Josephson, partner and team lead of the Duane Morris Cannabis Industry Group, moderated a fireside chat with U.S. Virgin Islands Governor Albert Bryan Jr. at the Benzinga Cannabis Capital Conference on September 27, 2023.
“A governor who really gets economic development,” as Josephson said, Bryan said the region is on the cusp of an unprecedented economic surge. “We have a $4-billion economy right now. And we have $15 billion in sales over the next 10 or so years.”
Duane Morris partner Michael Schwamm has been named to Green Market Report’s 2023 list of Notable Leaders in Cannabis, which recognizes industry professionals who have demonstrated a willingness to effect meaningful change in a dynamic industry.
On August 29, 2023, the U.S. Department of Health and Human Services responded to President Biden’s October 2022 call for a federal review of marijuana scheduling: The drug should be rescheduled as a Schedule III controlled substance. Below, we explore questions on the tax ramifications to the cannabis industry if marijuana is rescheduled as such.
Read this Duane Morris Alert for FAQs on cannabis rescheduling.
I have been touting the benefits of medical marijuana for nursing home/senior care residents for many years now. As a cannabis attorney, as well, I have been immersed in the research and studies, showing how marijuana can benefit nursing home residents, just like any other drug our residents may take for their well-being.
But the risks of utilizing marijuana in the nursing home, I’ve been stating, have been too great. Marijuana remains a Schedule I federally illegal controlled substance, and, as such, the Controlled Substances Act defines cannabis and its distinct cannabinoids as possessing “a high potential for abuse … no currently accepted medical use … [and] a lack of accepted safety for the use of the drug under medical supervision.”
Read the full column by Duane Morris partner Neville M. Bilimoria in McKnight’s Long-Term Care News.
Duane Morris, in partnership with FTI Consulting, will hold its next Cannabis Webinar, Distressed Cannabis M&A, on Thursday, October 5, 2023, from 1:30 p.m. to 2:30 p.m. Eastern.
Learn more and register on the Duane Morris website.
On August 18, 2023, a New York Supreme Court judge, ruled that the state’s discretionary licensing process violates the law.
A group of disabled military veterans filed a lawsuit against cannabis regulators claiming the initial round of New York licenses were improperly limited to people with prior marijuana convictions, rather than a wider group of service-disabled veterans and other social equity applicants prioritized by New York’s Marihuana Regulation and Taxation Act.
Supreme Court Judge Kevin Bryant upheld the lawsuit and stated, “There is no dispute” that state law says applications “shall be opened for all applicants at the same time.” As a result, Justice Bryant issued an injunction blocking the the state Office of Cannabis Management (OCM) from processing or issuing marijuana dispensary licenses until at least Aug. 25.
This is the latest setback in a series of delays since New York legalized marijuana two and a half years ago. There are only 23 legal dispensaries in the state, with more than 300 farmers and manufacturers in need of a place to sell their goods.
Further arguments on the ruling will be held Aug. 25. The OCM plans to appeal, a spokesperson said in a statement Monday.
Although several states have relaxed their stances on marijuana, and in turn protected employees’ lawful off-duty use of marijuana, employees (and often contractors) of the federal government are usually excluded from these protections. Marijuana remains a Schedule I substance under federal law, and thus is unlawful, without exceptions.
However, the federal government is starting to take steps towards softening its stance on marijuana, which may be welcomed news to many considering that the federal government is the largest employer in the United States.
On July 27, 2023, Representatives Jamie Raskin (D-MD) and Nancy Mace (R-SC) introduced bipartisan legislation in the U.S. House of Representatives that would allow job applicants who are current or former marijuana users to receive federal security clearances and have access to federal job opportunities. The Act, titled the Cannabis Users’ Restoration of Eligibility Act, or the “CURE Act,” would amend the Intelligence Reform and Terrorism Prevention Act to prohibit current or past use of marijuana from being a consideration with respect to a person’s eligibility for security clearances or eligibility for employment with the federal government.
Individuals who are denied security clearance or employment will also be afforded the opportunity to have that decision reviewed by the applicable federal agency under the Act. If it is determined that current or past marijuana use was the reason for the denial, the agency is to reconsider the same.
The Act, in its current form, is silent as to whether federal agencies can continue to test current employees for marijuana, and what actions, if any, agencies can take against current employees who test positive for marijuana.
The CURE Act has a ways to go before it becomes law, and it is likely to meet significant resistance along the way. Nevertheless, the progress marijuana has made in becoming more acceptable and mainstream is evident, and those on Capitol Hill are taking notice.
A sea change in the funding of New Jersey cannabis businesses has been approved by New Jersey’s Legislature and is pending on Governor Murphy’s desk awaiting his signature. Duane Morris attorneys assisted in the conception and drafting of this legislation.
That legislation, A4151, will allow far greater levels of investment in minority, women and disabled veteran owned adult use cannabis businesses by those best positioned to invest in them on equitable terms – current licensees and cannabis funds. The bill will increase the equity stake a licensee or investment fund may have in these diversely owned businesses from 5% to 35%, and allow them to invest in up to 7 diversely owned licensees. This will also allow capital stacks to rely more heavily towards equity, reducing the debt component at high interest rates that burn cash flow new operators need to get their businesses on solid footing. To date, these terms have only been available to New Jersey small universe of diversely owned medical cannabis licensees.
The bill protects against predatory conduct by preventing investors from acquiring a majority interest in the diversely owned business, even in cases of default. In the event of default, majority ownership by diverse interests must be maintained. Terms must be commercially reasonable as determined by the Cannabis Regulatory Commission.
Context: Hundreds of New Jersey conditional licensees are struggling to raise the $250,000 to $1 million initial investment they need to fund even a simple dispensary given high real estate, labor, tax and compliance costs in New Jersey. Without funding, they simply cannot complete the steps needed to convert to annual licensure (i.e., secure real estate and municipal approval and complete their operational plans and SOPs) and open for business.
Without funding, many of those conditional licensees will be forced to abandon their efforts and in many cases wipe out their personal investments to date, which often are funded out of 401(k) and other savings accounts.
Diversely owned cannabis businesses and equity investors alike interested in learning more about this opprtunity should contact Paul Josephson, Tracy Gallegos, or Michael Schwamm.
