Duane Morris partner Paul Josephson was once again named to the New Jersey ROI Influencers: Power List for Government Affairs and Cannabis.
On November 7, 2023, Ohio voters will decide the fate of Ballot Issue 2, a citizen-initiated proposed law that would commercialize, regulate, legalize and tax cannabis for adult use. Recent polling data suggests broad support for Issue 2. A majority vote in favor of Issue 2 would make Ohio the 24th state—and the sixth in the Midwest—to make recreational cannabis legal under state law.
If Issue 2 passes, a new chapter 3780 in the Ohio Revised Code called Adult Use Cannabis Control would take effect December 7, 2023. However, the cannabis industry expects sales in Ohio of adult use cannabis to commence in the summer of 2024. Continue reading “Ohio Is Poised To Become The Next State to Legalize Cannabis For Adult Use”
This week, the New York State Cannabis Advisory Board (CAB) and the Cannabis Control Board (CCB) held meetings to discuss the current state of the cannabis industry and proposed regulations and legislation. The CCB is the approval and oversight body of the Office of Cannabis Management and is responsible for approving the regulatory framework for New York’s cannabis industry. This includes licensing cannabis businesses and approving the regulations and rules that will govern the cannabis industry in the state.
Cannabis Advisory Board Meeting
On June 13, 2023, the CAB met at CUNY School of Law in Queens to discuss the revised proposed regulations after receiving 3,500 public comments. These regulations range from focusing on achieving environmental and sustainability targets in the industry to rules for third-party platforms. Current proposals involve allowing the current Registered Organizations (i.e. vertically integrated medical cannabis operators) to co-locate three adult use dispensaries among their eight medical dispensaries. The CCB will vote on the final regulations at its first meeting in September. The CAB and CCB’s hope is to have a live functioning cannabis industry “with all the bells and whistles.”
The Conditional Adult-Use Retail Dispensary (CAURD) License is the first retail dispensary license available to businesses in New York State. These licenses are awarded to justice-involved New Yorkers and their family members. A “justice-involved” individual is someone who has been convicted of certain marijuana-related offenses in New York.
The State hopes to create a foundation to support an equitable industry. The CAB discussed the benefits of being a part of the CAURD Academy, which offers live education, seminars, office-hour meetings, calls with operators from other states, one-on-one mentorship, vendor demos, and access to accountants. Twenty-five licensees have taken part in the Academy thus far.
The CAB also discussed the NY Social & Economic Equity Plan and its recent report analyzing the national landscape of the cannabis market. Between 1980 and 2021, cannabis-related misdemeanor and felony convictions resulted in lost lifetime earnings of approximately $31 billion, and Black and Hispanic people accounted for 83% of those losses.
Acknowledging that it is inherently difficult for small operators to compete against large corporations, regardless of funding, the CAB agreed that New York State must protect its two-tiered market, enforce antitrust laws, protect against predatory practices, and approve regulations that are pro-competition and pro-employee. The CAB noted that cannabis cultivators and farmers want a clear path to licensure, additional Registered Organizations, and a community-driven incubator program.
Cannabis Control Board Meeting
On June 15, 2023, the CCB met in Buffalo to discuss recent Board updates and hear from the public. Chair Tremaine Wright opened the meeting by assuring New York residents that the state is continuing to open more dispensaries, expand access, and further develop New York’s cannabis supply chain.
The CCB approved Resolution No. 2023-23: Consideration of Conditional Adult-Use Retail Dispensaries. This adds 36 CAURD licenses in the Bronx, Brooklyn, Manhattan, Queens, Central NY, Mid-Hudson, and‒for the first time‒the Finger Lakes. Seven dispensaries were approved in the Finger Lakes region. This approval brings the number of CAURD to 251. Wright said these locations will help farmers get more of their product to market.
The Board then presented updates to the market. There are currently 13 open retailers statewide with more than 40 in development. Twenty-one percent of New Yorkers now live in a city with legal cannabis access. Some dispensaries are delivery-only, which is a new form for the state. Consumers are asked to look for a QR code on the window of the dispensary confirming that it is approved by the state. Retail sales are growing; cannabis sales year-to-date are $22.6 million. Some of the dips in sales were attributed to pop-up shops that have transition to brick-and-mortar spaces, which often require a brief shutdown to build out a new space. Product innovations are occurring regularly. Flower sales make up 51% of the revenue, with the rest split between beverages, complex caramels, premium vapes, and more. This widening of product options draws more consumers to the legal market.
The Executive Director reported next that under a newly enacted law, the Office of Cannabis Management (OCM) and the taxing authorities began raids on unlicensed businesses since June 7, 2023. This law allows OCM to take action against businesses selling cannabis without licenses, bolsters OCM authority by conducting regulatory inspections, utilizes court orders to padlock doors if necessary, and allows OCM to seize illicit cannabis.
Each location inspected is issued a notice of violation for selling cannabis without a license. The maximum penalty is $10,000 per day, plus potential additional penalties and consequences if sales continue.
Finally, during the closing comments, board member Reuben McDaniel resigned, presumably as a result of the perceived conflict of interest of his being both a CCB board member and also as the president of DASNY.
The MSOs rallied 7% last week on the back of a bipartisan group of lawmakers reintroducing the SAFE Banking Act. The bill has a 0% chance of passing without hearing from Senator Mitch McConnell. In reality, SAFE does not change much for the industry. Other reform elements around 280e taxes, interstate commerce, and an updated Cole memo are more impactful to the industry’s fundamentals. Unfortunately, lawmakers in Washington, DC, have had difficulty passing modest cannabis reform for several reasons, including the following:
- Playing Politics: The cannabis reform issue has become highly politicized, with Democrats typically favoring legalization and Republicans generally opposing it. This is because cannabis reform has become a highly controversial topic, with politicians more concerned with political posturing and pleasing their base than with finding common ground; this can make it difficult to pass any meaningful reform measures.
- No consensus: Even among people who favor cannabis reform, there may be differing opinions regarding the strategy that should be utilized. Some people may push for marijuana to be fully legalized, while others may merely favor incremental reform measures such as decriminalization or the legalization of medical marijuana. Because of this, it may be challenging to arrive at a consensus that has the potential to gain enough support to enact legislation.
- A seemingly insurmountable conflict: even though several states have decriminalized cannabis in some form, the drug is still Schedule 1, making it against the law on the federal level. Because of this, there is a potential for legislation at the state and federal levels to contradict one another, making it more challenging to enact effective rules and regulations.
- Lobbying and special interests: The cannabis sector in prohibition is in its infancy and rapidly undergoing change; as a result, a significant number of conflicting interests and stakeholders are involved. Lobbying efforts by these organizations (esp. pharma, tobacco, and alcohol) can sway legislators’ attitudes about the matter at hand and make it more challenging to enact reform measures that might not serve the interests of the lobbying organizations.
In general, achieving cannabis reform in D.C. is a complicated subject incorporating various elements, including political, social, and economic considerations. Even while there may be widespread popular support for cannabis law reform, D.C. is unlikely to change the challenging process actually to bring about significant change.
Two pieces of legislation were recently introduced in the New York City Council aimed at controlling the unlicensed cannabis market in New York City.
The first bill bill would prohibit knowingly leasing commercial premises to a tenant who uses the premises for distribution or sale of cannabis or cannabis products without a license. The first time that an unlicensed cannabis seller is found to be operating in leased commercial premises, the Sheriff, Police Department, or any other relevant agency would issue a warning to the owner of the premises. If an unlicensed cannabis seller is later found to be operating in the same commercial premises, the owner would be liable for civil penalties. https://legistar.council.nyc.gov/LegislationDetail.aspx?From=Alert&ID=6165428&GUID=33A0F77B-950A-4A9E-8033-F0316A346404&Options=ID%7CText%7C&Search=cannabis
The second bill would require the Department of Health and Mental Hygiene to collaborate with the Department of Consumer and Worker Protection and any other relevant agency to create and implement a public awareness campaign on the dangers of purchasing cannabis or cannabis products from unlicensed cannabis retailers. The campaign would target minors and young adults and focus on the risks of consuming cannabis products adulterated with synthetic cannabinoids and other harmful substances and the risk of purchasing such products from unlicensed cannabis retailers .https://legistar.council.nyc.gov/LegislationDetail.aspx?ID=6165413&GUID=59A6FC8D-E54A-43D2-B621-906AA1B706A2&Options=&Search=
As we previously reported, on October 6, 2022, President Biden announced that he would pardon those convicted of simple marijuana possession offenses under the federal Controlled Substances Act. As part of his executive action, Biden directed the Attorney General to develop an administrative process to issue Certificates of Pardon to eligible individuals.
On March 3, 2023, the Department of Justice announced the launch of an online application form for individuals seeking proof that they were pardoned under Biden’s proclamation. The form requires the applicant to provide their full name, contact information, date and place of birth, and citizenship status, followed by information about their charge or conviction with supporting documentation.
In order to be eligible for the Certificate of Pardon, applicants must satisfy the following:
- Applicant must have been charged with or convicted of simple marijuana possession by either a federal district court or D.C. Superior Court;
- Applicant must have been a U.S. citizen or lawfully present in the U.S. at the time of the offense; and
- Applicant must have been a U.S. citizen or lawful permanent resident on October 6, 2022, when Biden announced the pardon.
Note that the pardon neither indicates the innocence of the federal offender nor expunges their conviction. Nevertheless, it may remove civil restrictions such as the right to vote, hold office, or sit on a jury. The pardon may also alleviate limitations placed on obtaining certain licenses or employment.
However, Biden’s pardon merely affects several thousand federal offenders. As we previously reported, only about 6,500 people have been convicted for simple possession under federal law and a few thousand more have been convicted under the Code of the District of Columbia. The vast majority of cannabis convictions for simple possession occur at the state level. Those convicted of state marijuana offenses do not qualify for the pardon. Biden urged state governors to follow his lead and issue similar pardons.
Since Biden’s proclamation, several states have flirted with the idea of pardoning nonviolent marijuana crimes, some of which took more substantial steps forward. For example, on November 21, 2022, the governor of Oregon pardoned more than 47,000 people with convictions for simple marijuana possession and forgave more than $14 million in unpaid fines and fees.
As of the present, Connecticut, Missouri, Rhode Island, and Alaska have demonstrated similar relief efforts. Connecticut expunged the record of about 44,000 residents convicted of cannabis possession, while Missouri expunged the record of about 7,500 residents and ultimately expects 100,000 expungements in the coming months. The Chief Justice of the Rhode Island Supreme Court issued an executive order directing judges to establish and implement marijuana expungement procedures. Rhode Island expects 30,000 residents to be able to clear their record. Justices of the Alaska Supreme Court issued a similar order, permitting residents convicted of possessing less than one ounce of marijuana to seal the records related to such convictions. Alaska expects 800 residents to benefit from the order, which takes effect May 1, 2023.
To date, 24 states have enacted legislation to expunge marijuana-related criminal convictions. According to the National Organization for the Reform of Marijuana Laws, state and local officials have issued more than 100,000 pardons and more than 1.7 million marijuana-related expungements since 2018. More states are likely to follow in the same breadth soon.
Read the full text of the article on Law360.
On Oct. 6, 2022, President Joe Biden issued a blanket pardon to all citizens and lawful permanent residents convicted of simple possession of marijuana under the federal Controlled Substances Act. The move reflects a shift in attitudes towards low-level drug offenses, and should serve as an impetus to employers to review their policies on criminal record checks.
Because marijuana possession 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 Code of the District of Columbia.
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.
FarmaceuticalRX LLC, licensed to process cannabis in Pennsylvania and Ohio, describes itself as “bringing healthcare, science, and innovation to the medical marijuana sector.” FarmaceuticalRX LLC boasts a “world-class research and development team” tasked with studying the effects of the cannabinoid in the treatment of opioid addiction, to lung cancer, and tumor cell remediation.
A lawsuit was filed in the USDC for the WDPA by former FarmaceuticalRX LLC delivery drivers, classified as independent contractors, seeking lost wages for overtime pay under the FLSA and PA Minimum Wage Act resulting from a misclassification as independent contractors rather than employees. According to the Complaint, the drivers attempted on several occasions to raise this misclassification, but the issue was never fixed. And one at least one occasion, the drivers were told that changing the classification mid-year may raise red flags with the IRS. The Complaint further alleges that the defendants controlled the work schedule and provided the drivers company cars. The defendants put out an advertisement looking for replacement workers about a month before the plaintiffs were fired.
This is just another example of lawsuits that cannabis operators and those in the industry may face. As previously reported, products liability and class action suits resulting from alleged mislabeling were filed earlier this year. Additionally, RICO and consumer fraud claims have also been filed. In addition to plaintiffs seeking monetary compensation, cannabis businesses and operators are open to virtually any kind of litigation, such as landlord-tenant disputes and patent infringement claims. These lawsuits continue to highlight the importance of remaining vigilant in all aspects of business. As the industry continues to expand, it is likely that lawsuits will as well.
After finally introducing the comprehensive Cannabis Administration and Opportunity Act (CAOA) in the U.S. Senate last month, last week Sen. Cory Booker (D-N.J.) softened his prior position on a separate, narrower cannabis banking bill when he said that he would now consider the banking bill with modifications. As we previously reported, the SAFE Banking Act 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 Banking has passed the House of Representatives seven times in recent years but so far has not been taken up in the Senate.
Since the introduction of the CAOA last month, which would not only permit cannabis companies to access the banking system but would legalize and decriminalize recreational cannabis with an eye toward supporting communities that have been most impacted by the war on drugs, Sens. Booker and Schumer (D-N.Y.) have said they would be willing to consider more incremental cannabis reform such as SAFE Banking with added equity provisions. Many are referring to the as-yet proposed bill as “SAFE Banking Plus,” which would ensure equitable access to financial services for minority-owned cannabis businesses and require financial institutions to prove compliance with anti-discrimination laws, among other things.
Schumer and Booker have been meeting with other lawmakers to work on a compromise bill, and Booker said a proposal might come after the November elections and before the new Congress starts in January.