Earlier this month, surprising many in the industry, the Drug Enforcement Administration announced it is proposing to significantly increase the amount of cannabis it will permit to be grown for research purposes in 2019. The 2018 limit, about 1000 pounds, will be increased to over 5400 for 2019, an over five-fold increase. The proposal remains open for public comment for the next 30 days, then the DEA will make final decisions on the matter.
Until 2016, only the University of Mississippi was permitted to grow cannabis for federally approved research purposes. But very few licenses were approved, and in most cases researchers learned that the low quality of product from Ole Miss made research essentially worthless. The Obama Administration, in its last months, approved a dramatic increase in research and opened up the right for other institutions to apply to grow cannabis for that purpose. Dozens applied, but Attorney General Jeff Sessions, until now, had not let any licenses be approved. Some believe it is relentless pressure on Sessions from the Senate that has led him not to stand in the way of this new action. In a hearing almost a year ago he had even admitted that adding more grow facilities for research could be “healthy.”
Cannabis medical research has been exploding elsewhere, particularly in Israel. For example, a published, peer-reviewed study earlier this year from there showed that over 95% of thousands of tested cancer patients said their condition improved with the use of cannabis. There is also a state-funded “Center for Medical Cannabis Research” in California that has commenced several studies, including one on the efficacy of CBD on autism spectrum disorder. Another California group is studying whether smoked cannabis can help with post-traumatic stress disorder. Most of these studies, however, are not “double blind” clinical trials given the federal restrictions. Many in the industry hope that the expanded DEA licensing will open the door to more exploration of the potential medical benefits of cannabis.
Senators Cory Gardner (R-CO) and Elizabeth Warren (D-MA) today introduced the Strengthening the Tenth Amendment Through Entrusting States (STATES) Act. While we have not seen the text yet, Sen. Warren has published a summary. The bill would amend the Controlled Substances Act (CSA) saying it no longer applies to anyone acting in compliance with state (or tribal) laws relating to the manufacture, production, possession, distribution, dispensation, administration or delivery of cannabis. It also legalizes industrial hemp and removes it from the CSA. In addition to other provisions, the bill prohibits the distribution or sale of cannabis to anyone under 21 other than for medical purposes.
There are a number of pending bills promising various levels of cannabis legalization or decriminalization. This bill is important because it is the result of conversations between Sen. Gardner and the President. When Attorney General Jeff Sessions rescinded the 2014 Cole Memo which de-emphasized cannabis enforcement against legal state actors, Sen. Gardner angrily stopped approving new judicial nominations. That led to Trump’s commitment to Gardner to support “states rights” legislation if brought to him. Advocates hope this bill has a chance to move quickly as a result.
While not listed in the summary, according to MJBizDaily, the bill also would repeal tax code Section 280E which prohibits cannabis companies from deducting their ordinary business expenses, and also would allow federally insured banks greater ease in accepting cannabis customers. Stay tuned!
On January 4, US Attorney General Jeff Sessions rescinded all prior advisory memos on prosecutorial priorities relating to cannabis, including the 2014 Cole Memo which many relied on in entering the space. One consequence of rescinding the Cole Memo is its effect on US Treasury Department guidelines for banks and financial institutions that seek to take cannabis customers. Those 2014 guidelines, issued by the Treasury’s Financial Crimes Enforcement Network (FinCEN), outline processes and filings to be undertaken when a cannabis customer is signed up. The main focus of the process is on due diligence the bank must do on the proposed customer, including ongoing monitoring while the company is a customer. The guidelines also require filing of a “suspicious activity report” (SAR) with FinCEN for each such potential customer.
The banking guidelines focus heavily on the now-rescinded Cole Memo, which suggested the low prioritization of enforcement against people complying with state cannabis laws. The Memo contained a list of exceptions, and if one of the exceptions was present, then enforcement could be pursued. The exceptions included things like providing cannabis to minors, the involvement of organized crime or firearms, and the like. The FinCEN guidelines require a bank to conduct an analysis of whether the potential customer is complying with the Cole Memo priorities. Indeed the type of SAR that the bank must file varies depending on whether or not the potential customer appears to be in compliance with the Cole Memo.
A story in Politico quoted a FinCEN spokesman who was asked if they are looking to bring their policies into line with the Justice Department. He said, “FinCEN works closely with law enforcement and the financial sector to combat illicit finance and provide relevant information that allows law enforcement to pursue their priorities. We will continue to work with DOJ and other stakeholders on this issue.” It does appear that confusion and uncertainty on this issue will continue until FinCEN provides further clarification or interpretive guidance. In the meantime, this might mean that some financial institutions will stop servicing cannabis customers and others that were considering it may suspend their efforts.
This post was the combined effort of David Feldman and Neeraj Kumar.
US Attorney General Jeff Sessions today rescinded all prior advisory memoranda regarding enforcement priorities in connection with alleged cannabis crimes. This includes the key so-called Cole Memo issued in 2014. That memo advised US attorneys not to prioritize pursuing criminal cases against those complying with state legal cannabis laws as long as certain concerns (such as the involvement of organized crime or distribution to minors) were not present.
In his memo issued today, Sessions indicates that no special guidance is needed in the cannabis space and that general guidelines applicable to all potential prosecutions apply. These guidelines include, according to the memo, “federal law enforcement priorities set by the Attorney General, the seriousness of the crime, the deterrent effect of criminal prosecution, and the cumulative impact of particular crimes on the community.”
In justifying his action, Sessions lists federal statutes making cannabis illegal, indicating his belief that those statutes “reflect Congress’ determination that marijuana is a dangerous drug and that marijuana activity is a serious crime.”
Sessions has been hinting at taking some action regarding the Cole Memo for a while. There was talk that he might replace it with another cannabis memo, maybe a bit tougher, but this memo seems to suggest that will not happen. A federal law known as the Rohrabacher-Blumenauer amendment still prohibits spending federal dollars on enforcement against those complying with state medical cannabis laws. That law will expire with the current budget bill in a few weeks, and it is not clear that it will be retained in the new federal budget. Stay tuned.
On January 1, 2018, hundreds of California residents lined up outside just licensed cannabis retail dispensaries to purchase newly legal recreational marijuana. The founder of Buddy’s dispensary in San Jose, which holds one of California’s first recreational marijuana licenses, described it as the busiest day in the dispensary’s history. The California cannabis industry is projected to reach profits of $3.7 billion dollars in 2018 alone. Projections indicate there could be up to 4 million consumers of recreational marijuana in California. This huge opportunity has many new entrepreneurs, including celebrities like Mike Tyson, pursuing the cannabis business.
Under the new law, Californians over the age of 21 can now possess up to an ounce of marijuana, eight grams of marijuana concentrate, and grow up to six plants at home for their personal use. While public consumption is still banned, the new framework gives recreational users new flexibility. Those on the business side of recreational cannabis, however, still have a lot to consider before diving into this new market.
This is especially true given the news today that Attorney General Jeff Sessions is rescinding an Obama-era directive discouraging enforcement of federal marijuana laws in states where cannabis is legal. We will know more about how this decision will impact the California market after the announcement is officially made by AG Sessions later today. For now, we will provide an update on the first week of recreational cannabis sales in California.
Articles appearing this week in the LA Times and the Philadelphia Inquirer, among other recent articles, highlight the horrors of the opioid crisis and the need for research into cannabis as a possible solution. While the federal government warns about the spiraling toll of the opioid epidemic, it refuses to grant the applications of world-renowned scientists at major universities and research centers seeking to explore the ways in which the well-documented therapeutic properties of cannabis can alleviate the pain and suffering – physical, emotional and financial – being caused by opioid abuse. There is no shortage of deep pockets willing to fund the research, and US-based scientists are ready, willing and able to get to work, yet the federal government refuses to depart from its antiquated “reefer madness” established in the early 20th Century. 2018 should be the year the federal government stops blocking cannabis research so that scientists can determine if and how cannabis can stem the opioid crisis. Fingers crossed!
As we get ready to stick a fork in 2017, the speculation has begun as to which US states might consider legalizing full adult use of cannabis next year. Many are betting on these five: Arizona, Florida, Michigan, Missouri and Nebraska. And of course New Jersey is expected to legalize adult use under new Governor-elect Phil Murphy. Certainly an interesting mix! Some don’t even have legal medical cannabis yet and would try to do both at the same time. Of these one would think Arizona, NJ and Florida, particular tourist destinations already, could really benefit from legalization.
Why does this matter? For several reasons. First, the steamroller that is the state legalization and growing public acceptance of adult use of cannabis is clearly strengthening. Second, knowing which states may be next creates business opportunities. For example, real estate speculators can buy up locations that might be useful for growing, processing or selling cannabis. In the absence of federal trademark registration being available, seeking state trademarks on potential brands in these upcoming locations also could be beneficial. Others like technology providers are working to ensure that states’ regulatory schemes are designed to accommodate their products.
We will learn shortly whether the Rohrabacher-Blumenauer amendment, preventing the spending of federal enforcement dollars against state legal medical cannabis businesses, will survive in the next budget bill. Some are challenging its renewal, but a strong bi-partisan effort to retain it has been building as well. As more states look to legalize cannabis, one hopes that the Feds will continue their prior mostly hands off approach from a regulatory perspective, despite the recent threatening tone of the Attorney General Jeff Sessions.
According to The Fresh Toast, US Attorney General Jeff Sessions is now hinting at expanding enforcement of federal cannabis laws. The report indicates that, at a news conference this past Wednesday, Sessions said they are looking “very hard right now” at possible changes to the Cole Memo. That 2013 memo adopted a policy to de-emphasize enforcement activities against those complying with state cannabis laws, with certain exceptions. He added, “We’ll be working our way through to a rational policy. But I don’t want to suggest in any way that this department believes that marijuana is harmless and people should not avoid it.”
Sessions has used various methods to seek to interfere with state legal cannabis. He is attempting to stop the renewal of the Rohrabacher-Blumenauer amendment to the annual budget bill. That amendment prohibits the spending of federal money to bring enforcement action against those complying with state medical cannabis laws. It is not clear whether the amendment, passed annually since 2014, will survive the current budget battle. The existing continuing resolution expires in several weeks along with the current budget.
The Attorney General has also put governors in adult use states on notice to ensure they are working hard to enforce their local laws, implying he might come in if they do not, something permitted by the Cole Memo. That said, Sessions’ boss, the President, has said he is “100%” in favor of medical cannabis and believes adult use should be up to the states. Therefore it seems Sessions would not be acting at Trump’s direction if he were to do something dramatic. Watch this space.
The entire cannabis industry descended on Las Vegas this week for the MJBiz conference where over 18,000 professionals gathered. While we were there, US Attorney General Jeff Sessions made some news during a Congressional grilling focused more on his involvement with Russian players.
Many have worried that Sessions intends to change or eliminate the Cole Memo. Issued in 2013, in this memo Obama’s Attorney General declared, essentially, that the US will not put any priority on enforcing federal cannabis laws against those legally complying with state laws. Certain exceptions were included, such as keeping cannabis away from children and keeping organized crime out of the business.
Many in the industry felt a bit of relief when Sessions said to Congress this past Tuesday, “Our policy is the same really, fundamentally, as the Holder-Lynch [ie Obama] policy, which is that the federal law remains in effect and a state can legalize marijuana for its law enforcement purposes, but it still remains illegal with regard to federal purposes.”
Sessions made some more news as well. For the first time, he agreed that cannabis is not as dangerous as heroin, even though both are listed as Schedule I drugs, i.e. deemed the most dangerous of all. He had previously called cannabis “only slightly less awful” than heroin.
In addition, he acknowledged that “we are bound” by the Rohrabacher-Blumenauer amendment, a statutory mandate. This amendment, renewed annually since 2014, prevents the use of federal funds to go after those complying with state medical marijuana laws. There had been some question after the most recent amendment thanks to a confusing statement issued by President Trump. Some interpreted the statement as potentially suggesting Trump views the amendment as not constitutional. Sessions has been attempting to convince Congress not to renew the amendment in the current budget.
Last week the US Senate Appropriations Committee voted to renew the Rohrabacher-Blumenauer amendment when it expires September 30. That amendment, renewed annually since 2014, blocks the US Department of Justice from using federal funds to interfere with the implementation of state medical cannabis laws. The passage included 16 Republicans, showing this as a bipartisan issue in the Congress.
This early vote is important because US Attorney General Jeff Sessions has asked the Congress not to renew the amendment. Sessions also commissioned a task force on drugs and violent crime whose final report is expected soon. He says in the meantime he has been “on a rolling basis” implementing some of the as yet unrevealed recommendations. Many believe the task force will link cannabis to violent crime and push for stronger sentences for people who grow or sell marijuana.
It appears, however, that there remains strong bipartisan support in Congress to retain the restriction on federal spending for now, and that the amendment will be renewed as part of the final Congressional appropriations in September. Stay tuned.