Duane Morris partner Seth Goldberg is quoted in the New York Law Journal article, “Medical Marijuana Business Banking Remains Difficult.” Mr. Goldberg discusses how banking is a major hurdle for the legal medical marijuana business.
The Court of Appeals for the Ninth Circuit revived a chapter 13 debtor’s bankruptcy case holding that the bankruptcy court below made no specific finding that the debtor violated the Controlled Substance Act (“CSA”) to support dismissal of the case.
In In re Olson, 2018 WL 989263 (B.A.P. 9th Cir. Feb. 5, 2018), the debtor, a 92 year old landlord, rented a storefront to a cannabis dispensary. The landlord filed bankruptcy to stay a lawsuit that the tenant dispensary commenced against her. The bankruptcy court dismissed the bankruptcy case based on the ground that the landlord’s rental income constituted illegal proceeds and, thus, the landlord violated the CSA. On appeal, the Bankruptcy Appellate Panel overturned the dismissal holding that the bankruptcy court had not detailed sufficiently its findings with respect to the offending lease to support a conclusion that the landlord violated the CSA. The Panel held that the bankruptcy court could not rely just on the CSA itself to dismiss the case. Continue reading Will the Scope of US Trustee’s Policy on Cannabis-Related Bankruptcy Filings be Limited?→
Although, in making the above comments, Sessions was clear that marijuana was still illegal in the U.S., he appears to have drawn a box around those types of marijuana-related criminal activities on which federal prosecutors are focused. The above comments are not inconsistent with the Sessions memo of January 4, 2018, and may help clarify what prosecutorial discretion looks like under that memo. Based on the above comments, it would seem that activities conducted pursuant to state marijuana programs are not the types of activities on which federal prosecutors are focused.
On Tuesday, March 6, 2018, the Cannabis Control Commission (the “Commission”) unanimously agreed to final regulations for adult-use cannabis in the State of Massachusetts. These regulations have not yet been published, but the Commission indicates that they will “incorporate language approved at [today’s] meeting into the final regulations before filing them with the Secretary of State.” There are nine licensing categories, which are intended to meet the varying needs of the cannabis industry. The material departures from the draft regulations adopted in December 2017 include:
On-site consumption and delivery of cannabis are not yet permitted, but regulations for these activities are expected to be released within one year.
Dispensaries will have to reserve at least 35% of their inventory for medical cannabis patients if they are co-located with a registered marijuana dispensary.
Licensees growing cannabis will be limited to 100,000 square feet of canopy
Any person with drug trafficking convictions will be banned from the industry, except if such convictions are related to cannabis.
The Commission is still committed to authorizing legal sales of adult-use cannabis by July 1, 2018, but there could be delays from individual municipalities in the adoption of their own regulations and permits. In order to meet this goal, the Commission anticipates accepting adult-use license applications starting on April 1, 2018, and the first adult-use licenses being issued to cannabis establishments on June 1, 2018. Priority status will be given to Economic Empowerment Applicants (applicants from communities disproportionately impacted by marijuana-related crimes) and to licensees of Registered Marijuana Dispensaries (licensees of medical dispensaries), which is consistent with the draft regulations.
An Israeli peer-reviewed study, just published in the European Journal of Internal Medicine, reports that pain and nausea of cancer patients can be lessened through the use of medical cannabis. The study included thousands of cancer patients using medical cannabis between 2015 and 2017. Over 95% of the patients reported an improvement in their condition after using cannabis. The conclusion of the study: “Cannabis as a palliative treatment for cancer patients seems to be well tolerated, effective and safe option to help patients cope with the malignancy related symptoms.”
As we know, the US Government continues to defend the status of cannabis as a Schedule I drug, deemed as dangerous as heroin and LSD. Their previous claims suggested that no research shows that cannabis is safe or has medical benefit. At the same time, the Government severely limits the amount of research on cannabis that can be conducted in the US. According to the DEA website, Schedule I drugs are “drugs with no currently accepted medical use and a high potential for abuse.” This study, with others also underway, appear to now counter the belief that cannabis has no accepted medical use.
With the recent dismissal of a constitutional challenge to the Controlled Substances Act as it relates to cannabis (which may be appealed), more eyes are turning to Congress and the various bills pending to deschedule cannabis at the federal level.
Another breakthrough for the cannabis space occurred on Tuesday, February 27, 2018, when Toronto-based Cronos Group Inc. began trading on the Nasdaq Stock Market. (MJN:CN). This marks the first listing of a company focused purely on cannabis on a major U.S. stock exchange. The listing of Cronos comes within two months of the memorandum issued by Attorney General Sessions that rescinded the federal government’s previous guidance regarding enforcement of state-lawful cannabis activities under the Cole Memorandum. That earlier guidance is credited with providing the cannabis space with a window of opportunity for the warp-speed growth the space has seen in recent years. The Sessions memo was intended to slow the growth of the cannabis space, especially with respect to the capital markets. The Nasdaq listing of Cronos suggests that 2018 could be another strong year for cannabis-related investments; 2017 was believed to have resulted in approximately $2 billion in cannabis-related investments in the U.S.
A potentially groundbreaking federal lawsuit brought last summer was dismissed by New York judge Alvin Hellerstein today. The case, brought by five plaintiffs including two children, two veterans and former NFL player Marvin Washington, all of whom use state legal medical cannabis, claimed that the Controlled Substances Act is unconstitutional as it relates to the plant.
The judge ruled that the plaintiffs should have first complied with administrative processes by filing a petition with the Drug Enforcement Administration, and that the case was not appropriate to bring to court. He was sympathetic to the plaintiffs, however, noting that “this decision should not be understood as a factual finding that marijuana lacks any medical use in the United States, for the authority to make that determination is vested in the administrative process.”
He did, however, rule that it was “not irrational” that the Government deemed cannabis dangerous enough to be listed as a Schedule I drug, as it did for heroin and LSD. Statements by former Nixon Administration officials in the 1990s that they knew they were lying about the drugs at the time of the CSA were not considered dispositive, since Congress passed the law.
News reports indicate that the plaintiffs’ attorneys, Mike Hiller, Joe Bondy and Lauren Rudick, may appeal the decision or ask the judge to reconsider. They claim that the petition process would be futile and that there is substantial evidence that the US government has taken actions supporting the notion that there is medical benefit to cannabis.
Duane Morris Partner Paul P. Josephson will be moderating and leading a panel for New Jersey Institute for Continuing Legal Education, “Getting Into the Weeds of Legal Marijuana/Cannabis” which Partner David N. Feldman and Special Counsel Patricia H. Heer will also be speaking at. It is to be held Monday, March 26, 2018 at 9:00 a.m.
For more information and to register, please visit the event page.
Duane Morris Partner Paul P. Josephson and Associate Sarah M. Bachner will be speaking on a panel for the Commerce and Industry Association of New Jersey, “Legalizing Marijuana in New Jersey – What It Means to Your Business” to be held Wednesday, March 7, 2018 at 8:00 a.m
For more information and to register, please visit the event site.
Duane Morris is presenting a series of monthly webinars throughout 2018 to discuss issues affecting the cannabis industry. Each session will cover a specific subject and feature a “Hot Topics” segment to cover recent developments in the industry.
Join us for the second session on Tuesday, February 27, 2018, covering topics impacting the cannabis industry.
Cannabis 102: Intellectual Property, Trademark and Branding, and Marketing
Trademarks and Branding Cannabis Products
Patenting Cannabis and Cannabis Products
Trade Secrets: Advantages and Challenges
A Company’s Perspective with Guest Speaker: Gary Traynor, VP of Operations and Sales, LeafGoods, LLC