Minnesota Becomes 23rd State to Legalize Recreational Cannabis

This week, Minnesota Gov. Tim Walz signed into law a bill that legalizes recreational cannabis for adults 21 and older.  The law goes into effect on August 1, 2023, and will permit adults to have up to two pounds of marijuana at home and two ounces while in public.  The law also creates a new regulatory framework for licenses to cultivate, manufacture and sell cannabis at retail dispensaries.  Until the regulations are drafted and licenses are issued, the sale of cannabis in Minnesota remains illegal without a license.  Licensed retail dispensaries are expected to open within 12-18 months.

Under the law, non-felony cannabis offenses will be automatically expunged and a board will be established to review more serious crimes involving cannabis.

In the wake of the new law, the St. Paul, MN office of the federal Bureau of Alcohol, Tobacco, Firearms, and Explosives (“ATF”) issued an advisory warning that Minnesotans who use cannabis cannot legally own firearms.  This is because cannabis remains a Schedule I controlled substance under federal law.

The ATF warning said, “Until marijuana is legalized federally, firearms owners and possessors should be mindful that it remains federally illegal to mix marijuana with firearms and ammunition.”

Cannabis Highlights in the NBA’s New Collective Bargaining Agreement

On April 26, 2023, the National Basketball Association (NBA) announced the ratification of its new, seven-year Collective Bargaining Agreement (CBA) with the National Basketball Players Association (NBPA).  The CBA will take effect on July 1, 2023, and will run through the 2029-30 season.  The CBA provides, among other things, certain key changes to cannabis-related matters, particularly in connection with the NBA’s Anti-Drug Program and NBA players’ business opportunities.

Anti-Drug Program

According to a summary of the agreement as reported by Law360, the NBA decided to remove cannabis from its Prohibited Substances List.  However, NBA players are still subject to random drug tests.  The NBA has authority to conduct up to 1,925 random urine tests each season.  In addition, teams may refer players to a treatment program if they suspect them of (1) being under the influence of cannabis while participating in league activities, or (2) experiencing a dependency on cannabis.

Furthermore, the NBA may still discipline players for violating the law or for being under the influence during league or team activities.  Players who neglect or fail to comply with the Anti-Drug Program will be banned from league activity.  Nevertheless, players may now apply for reinstatement of eligibility after one year, as opposed to the two-year rule enforced since 1983.

Business Opportunities

NBA players are also now permitted to: (1) invest in companies that make CBD-infused products, and (2) hold a passive, non-controlling interest in companies that make products with more substantial concentrations of THC.  Although players may now promote companies that make CBD-infused products, the NBA continues to prohibit players from promoting cannabis companies and marijuana products.

Does SAFE Banking Have a Chance



Great analysis of the chances that the SAFE Banking Act becomes law from Howard Penney at Hedgeye Risk Management:

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.

New York City Introduces Several Local Laws Aimed at Helping to Control the Unlicensed Cannabis Industry in NYC

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=

 

 

New York State Advertising Rules Effective Today

Effective March 22, 2023, New York’s cannabis advertising rules are now in place. These rules aim to protect public health, particularly minors, and ensure that cannabis advertising is truthful and not misleading.

    •  Cannabis advertisements cannot be displayed within 1,000 feet of a school or daycare center.
    • Ads cannot target individuals under 21 years of age or depict minors, toys, characters, or cartoons.
    • Advertising cannot claim cannabis is safe or healthy or that it has curative or therapeutic effects unless supported by substantial evidence.
    • Ads cannot contain false, misleading, or deceptive information.
    • The warning statement “This product may be intoxicating and may be habit-forming” must be included in all cannabis advertisements.
    •  Promotions, such as giveaways or coupons, are prohibited except in licensed dispensaries.
    • Advertising cannot be displayed on any public transportation or property owned or leased by the state or local government.
    • All ads must include the New York State Department of Health’s “Know the Facts” educational campaign website address.

CANNABIS INDUSTRY THE LATEST FRONTIER FOR LABOR ORGANIZING EFFORTS

As legal adult-use cannabis continues to spread across the country, so does a movement to unionize cannabis workers.  The need for dispensary and cultivation workers has rapidly increased, along with the demand for higher wages, improved benefits, diversity and inclusion efforts, and more.

To date, 21 states and the District of Columbia have legalized adult use marijuana.  Bills to legalize adult use marijuana are pending in several other states.  According to Forbes, cannabis sales in the United States are estimated to reach $57 billion by 2030.  The industry shows no signs of slowing down.  Labor unions have taken notice and have seemingly set their sights on the cannabis workforce.

The efforts of labor unions have been buoyed by labor peace agreement (LPA) laws.  While LPA laws vary by state, they generally require cannabis companies to take a hands-off approach to union organizing efforts as a condition of doing business in the state.  This means the company cannot interfere with organizing efforts.  However, unions typically also agree via the LPAs not to interfere with the operations of the business.  Alternatively, some LPA laws offer preferential status in licensing applications for companies that enter into LPAs.

California, New York, New Jersey, and Virginia all have varying degrees of requirements with respect to LPAs in their states.  Pennsylvania and Illinois do not require LPAs, but the states offer certain advantages to companies who enter into LPAs.  Several other states, such as Massachusetts, Connecticut, and Minnesota, are contemplating enacting their own LPA requirements.

The apparent enthusiasm of organizing efforts largely paid off for unions in 2022.  According to Bloomberg Law’s NLRB Election Statistics report, unions prevailed in 76% of overall elections in 2022, one of the highest success rates on record. The United Food and Commercial Workers Union, which has dubbed itself “the Cannabis Workers’ Union” representing more than 10,000 cannabis members, won 70% of representation elections in 2022.  They are not the only ones.  The International Brotherhood of Teamsters, which has unionized some cultivation workforces, won 66% of representation elections in 2022.

While there has been some litigation surrounding LPAs and organizing efforts, to date, most cannabis companies do not appear to be challenging these requirements.  This has the strategic benefit of allowing cannabis businesses to get licenses and begin operations, rather than engage in what could be a prolonged legal battle.  However, as unions expand and tighten their grasp on cannabis workforces, industry groups may start to fight back.

NJ Cannabis – 3Q 2022 Adult Use Sales Numbers Continue to Blaze


According to recent reporting from the NJ Cannabis Regulatory Commission (“NJCRC”), sales of legalized, recreational adult use cannabis in NJ exceeded $116.5 Million from July to September of 2022. This Q3 revenue figure represents a 46% increase from sales receipts in Q2 of 2022 of $80 Million generated from April to June 2022, when 13 state dispensaries expanded to adult cannabis sales for the first time.

By way of background, New Jersey legalized the sale of recreational marijuana for those 21 and over in April 2021. Sales were initially confined to 12 licensed dispensaries, which had approximately $24 Million in sales through May 2021, or an average of $5 Million per week in a state with 9.3 Million residents. By comparison, adult recreational cannabis generated approximately $80 Million in total sales between April and June 30 per the Cannabis Authority or $6.7M per week. Continue reading “NJ Cannabis – 3Q 2022 Adult Use Sales Numbers Continue to Blaze”

Pennsylvania Almost Surrounded With Adult-Use Cannabis

Cannabis had a decent day at the polls yesterday, with voters in Maryland and Missouri legalizing adult-use, bringing the number of adult-use states to 21, but voters in Arkansas and the Dakotas voted against adult-use. With Maryland legalizing adult-use, Pennsylvania, which has a medical marijuana program, is getting closer to being surrounded by states where adult-use is legal. Across it’s northern, eastern, and southern borders Pennsylvania is now adjacent to adult-use states – New York, New Jersey, and Maryland. All three states are predicted to generate billions each in cannabis sales.

The election of Josh Shapiro as Pennsylvania Governor would guarantee the passage of adult-use legislation should it pass in the Pennsylvania senate. However, notwithstanding the tax revenues, job growth, and overall economic boost expanding from medical marijuana to adult-use would create in Pennsylvania, most believe state legislators are not there. Perhaps revenues lost from Pennsylvanians crossing the border to buy cannabis in New York, New Jersey, and Maryland will make the difference.

 

New York Expects 20 Dispensaries to Open by End of Year and Issues Guidance for the State’s First Adult-Use Retail Cannabis Dispensaries

On October 28, 2022, the New York Office of Cannabis Management (OCM) released forward-looking guidance for those seeking to operate within the state’s recreational cannabis market.

The Background

In January, Gov. Kathy Hochul published an extensive State of the State book, laying out New York’s plan for 2022, including $200 million loan fund in support of social equity applicants within the state’s nascent marijuana market.

The state government set a goal of opening dispensaries by the end of the year that will allow New Yorkers to legally purchase cannabis. Hochul told the editorial board of Advance Media, owner of the Syracuse Post-Standard, that the state would open 20 dispensaries by the end of the year, with another 20 opening each month thereafter.

On October 17, Hochul told reporters that New York is “on track” to open some cannabis dispensaries within months.

Under Hochul’s plan, it is up to the state to select and lease locations for the dispensaries, including 70 in New York City. While the state’s OCM has not yet announced any locations for dispensaries anywhere in the state, it recently issued guidance in clear anticipation of this plan unfolding in the near future.

The Regulations

The New York OCM’s “Guidance for Adult-Use Dispensaries” is a series of prospective regulations for Conditional Adult-Use Retail Dispensary (CAURD) licensees and applications and are immediately effective.

The 27-page document includes requirements and operational rules addressing everything from operations and compliance measures to marketing, sales and distribution parameters, while providing insight into the OCM’s plans for issuing licenses when the time comes. This includes topics of record-keeping requirements, required training for staffers, and inventory and tracking requirements, among others.

While these guidelines are not yet formally adopted and enacted as rules, they at least offer both CAURD licensees and regulators a “working” preview of the New York Cannabis Control Board’s (CCB) expectations for the forthcoming dispensaries.

Indeed, the document states that it “serves to provide the framework that will assist CAURD licensees plan for how to operate their dispensary before regulations are formally adopted. . . and provides clarity on what the Office’s expectations are in relation to those regulations and laws currently in place and the regulations that will be promulgated in the future.”

What Does This Mean for CAURD Licensees?

The state and regulators are gearing up for the opening and development of these dispensaries, possibly within the next few weeks, and throughout the next 15 months. CAURD licensees in New York should adhere to OCM’s newest guidance, in addition to existing Cannabis Law and Title 9 of the New York Codes, Rules and Regulations, until a copy of the final regulations is made available on the OCM’s website.

On November 3, a Business of Cannabis: New York panel discussion ensued, where much of the conversations centered on the importance of providing equal opportunities to small business and justice-involved entrepreneurs to participate in the industry. Panel participants included Tremaine Wright, Chair of the CCB, Crystal Peoples, New York State Assembly Majority Leader, and Jeremy Berke, Reporter for Business Insider.

The same day, Wright tweeted, “[New York] is on target to open stores by the end of the year.” Axel Bernabe, Chief of Staff & Senior Policy Director for OCM, who delivered the keynote more specifically assured, “In 15 months, we’ll have a fully established supply chain built on social equity. That supply chain will form the backbone of what we’re going to build on in the future.”

Qualifying New York small business owners and entrepreneurs should keep a close pulse on this evolving regulatory landscape over the coming weeks and months to ensure they remain in legal compliance and best positioned to take full advantage of this next phase of the state’s cannabis initiative.

Cannabis Industry Sees Rise in Consumer Fraud Class Actions, With More To Come With Interstate Sales

Consumer Protection

Cannabis products – such as vapes, pre-rolled joints, tinctures, gummies, and beverages – are consumer packaged goods that are required under state law to be marketed with packaging and labeling that demonstrates their safety to consumers. Although the U.S. state-licensed cannabis industry has been one of the fastest-growing industries in the U.S. over the past decade, consumer fraud lawsuits arising out of alleged packaging and labeling problems, which are a common risk for CPG manufacturers in other industries, have, until now, not been a major consideration for the cannabis supply chain.  However, that is changing. As three recent lawsuits suggest, consumer fraud class actions may be on the rise in the industry. Given the media attention cases like these attract, and the potential for damages for thousands or millions of potential consumers, the cannabis supply chain should take notice. As we discuss in the full text of this post, this is going to be especially true once cannabis products are permitted to be sold interstate.

To read the full text of this post by Duane Morris partners Seth GoldbergGerald L. Maatman, Jr., and Jennifer A. Riley, please visit the Duane Morris Class Action Defense Blog.

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The opinions expressed on this blog are those of the author and are not to be construed as legal advice.

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