Long-Awaited Marijuana Legalization Bill Introduced in the U.S. Senate

More than a year after introducing a first draft, U.S. Senators Chuck Schumer (D-N.Y.), Cory Booker (D-N.J.) and Ron Wyden (D-OR) finally introduced their proposed marijuana legislation, the Cannabis Administration and Opportunity Act (CAOA) on Thursday, July 21.

The CAOA is a comprehensive bill that 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. The CAOA also provides for cannabis industry workers’ rights, a federal responsibility to set an impaired driving standard, expungements of criminal records and penalties for possessing or distributing large quantities of marijuana without a federal permit. It would also create a new federal definition for hemp that would increase the permissible THC by dry weight to 0.7 percent from the current 0.3 percent, and the definition would include all THC isomers, not just delta-9 THC. Other features of the bill include grant programs for small business owners hoping to enter the industry who come from communities that were disproportionately affected by the war on drugs, increased funding for law enforcement for illegal cultivation, and cannabis marketing restrictions.

Under the proposal, the Drug Enforcement Administration would no longer have jurisdiction over cannabis and would be regulated by the U.S. Food and Drug Administration and the Alcohol and Tobacco Tax and Trade Bureau (TTB) within the Treasury Department. The bill proposes a 5% to 12.5% excise tax for small and mid-sized cannabis producers. It would charge an initial tax of 10% on larger cannabis businesses and gradually increase it to 25%.

The Senate Judiciary Subcommittee on Crime and Terrorism chaired by Booker scheduled a hearing for Tuesday, July 26 titled, “Decriminalizing Cannabis at the Federal Level: Necessary Steps to Address Past Harms.”

While the bill is unlikely to garner the required 60 votes to pass in the Senate, many see it as a first step toward opening the cannabis debate on Capitol Hill and passing incremental reform that could finally end the federal prohibition on cannabis.

As we have previously reported, the U.S. House of Representatives has passed legislation multiple times in the past few years that would decriminalize cannabis and allow cannabis businesses to access the federal banking system. However, none of those measures have yet made it to the Senate floor.

 

Cannabis-Related Reimbursement Claims Hit Healthcare Insurers

Healthcare insurers are used to dealing with claims for reimbursement by hospitals, providers, and patients. Medical marijuana treatment provides another vehicle for such claims.

New Mexico passed the Behavioral Health Services Equity Act (BHSEA) last April, effective January of 2022, which mandates that health insurance must cover in full the cost of services or medication used to treat behavioral health services. In February, New Mexico Top Organics – Ultra Health sent a letter to several insurers and the Office of the Superintendent of Insurance seeking affirmation that the insurers will provide coverage as prescribed by the act for the 74,000+ patients currently enrolled in the medical marijuana program as a result of PTSD. The request was denied. Now, several New Mexico health insurance companies are defending against a class action lawsuit filed by New Mexico Top Organics – Ultra Health, and six medical marijuana patients, seeking “recovery for themselves, and for every other similarly situated behavioral or mental health patient unlawfully subjected to paying for the entire cost of medically necessary cannabis in violation of state law” for failing to pay for the cost of medical marijuana as provided under the act.

Other legislatures are discussing similar laws that provide for insurance coverage of medical marijuana programs. For example, New York has pending legislation that if passed, would define medical marijuana as a “prescription drug,” “covered drug,” or “health care service” that would qualify for coverage under public programs. The United States Supreme Court recently denied certiorari for a pair of cases concerning workers’ compensation for medical marijuana, an issue that has not been decided uniformly amongst the states. For example, Minnesota and Maine have determined that the Federal Controlled Substance Act preempts the state law requiring reimbursement for medical marijuana due to a work-related injury, while New Hampshire and New Jersey have ruled in favor of reimbursement regardless of federal preemption.

The passage of New Mexico’s Act mandating behavioral health coverage in full and subsequent lawsuit brings a new wrinkle into cannabis litigation, with broad implications across the healthcare industry. Indeed, early clinical reports and case studies have shown positive results from the use of medical marijuana to treat PTSD, a disorder that effects an estimated 12 million Americans, and with medical marijuana available in 37 states, the class action lawsuit seeking reimbursement under the BHSEA may serve as a preview of a type of cannabis-related litigation that may be brought against healthcare insurers.

Boston Beer Company Joins the Growing Cannabis Beverage Market

As interest in cannabis beverages continues to increase, Boston Beer Company (the maker of Sam Adams) recently announced plans to introduce a line of non-alcoholic, THC-infused teas, joining a number of other beverage companies in this growing market. The new product line, called TeaPot, will not be available in the United States – yet. Boston Beer is beginning its launch of TeaPot in Canada, in July, and plans to expand into the US and globally as the regulatory landscape develops. Boston Beer’s entrance into the cannabis beverage space is tailored strategically, through its creation of a subsidiary to operate in partnership with entities based in Canada that will provide the cannabis for TeaPot and manufacture and distribute the product. This approach leads to a more nimble operation than would Boston Beer’s attempting to control the entire supply chain. Continue reading “Boston Beer Company Joins the Growing Cannabis Beverage Market”

Cannabis Product Safety Is Paramount

Last week, my colleague Seth Goldberg and I published a client alert highlighting a series of cases filed in Oregon federal court against Curaleaf for allegedly mislabeling THC products as containing only CBD, which allegedly caused consumers of those products to experience and unwanted “high” resulting from ingestion of the products. A consumer class action lawsuit seeking $200 for each consumer who purchased the products was filed by the same Plaintiffs’ counsel. This class action lawsuit further highlights the fact that cannabis manufacturers need to ensure that proper SOPS, protocols, and measures of compliance are in place to ensure the safety of their products, and it demonstrates the types of claims that can be asserted when cannabis product safety issues, such as labeling discrepancies, arise. Class action claims, given the number of potential class members who may potentially recover, raise the stakes of litigation resulting from product safety issues. In addition, there also may be regulatory action taken and statutory fines imposed.

Cannabis: NJ Assembly Passes Decriminalization Bills for Possession of Certain Amounts of Cannabis

The NJ Assembly passed two bills, 1897 and 4269 that would decriminalize possession of certain amounts of cannabis, while reducing penalties for what would still be deemed to be an arrestable/convictable offense.

The measures, which were introduced at the Assembly Community Development and Affairs Committee on Monday, passed by a 63-10 vote.

Per NJBIZ, a Senate version (Senate Bill 2535) was introduced on March 16 to the Senate Judiciary Committee, but has not moved since introduction.

There will still be work to do to reconcile the Assembly bills with Senate Bill 2535 which was introduced on June 4th and referred to the Senate Judiciary Committee but much of the same language was used in both the Assembly and Senate versions.

One the key difference between the Senate and Assemble versions is the treatment regarding possession of up to a pound of marijuana. Yes, you read that right – a POUND.

Under the Senate bill, possession of up to a pound of cannabis will no longer be an arrestable offense, replacing it with a written warning for first offenses and a $25 civil penalty or community service for any afterward.

The Assembly bills instead call for a reduced penalty for possession of up to a pound and thereby lowers a first-time offense from 18 months to 6 months of imprisonment, and fines from $10,000 to $1,000. Any subsequent offenses would be met with the current level of punishment.

Possession of up to 2 oz. of cannabis, under current state law, has sentencing guidelines for up to 18 months in jail and fines of up to $10,000.

Under current law, possession of between 1 pound and 5 pounds is punishable with imprisonment between 3-5 years or fines up to $25,000, or both.

These bills come a few months before the upcoming 2020 presidential election, where voters will decide whether recreational marijuana should be legalized for adult-use. Currently, polling has support for legalization at 67% among NJ residents.

Duane Morris has a robust Cannabis Practice Group to assist clients in all facets of the cannabis arena including formation, licensing, fund raising, regulatory, real estate, and intellectual property. Contact your Duane Morris attorney for more information. Prior Alerts on the topic are available on the team’s webpage.

For Further Information:

If you have any questions about this post, please contact Brad A. Molotsky, Paul Josephson or the attorney in the firm with whom you are regularly in contact.

Be well and stay safe!

New York Conditional Cultivation License – Advanced Preparation (What You Can Do Now To Be Ready)

As we noted is our blog post earlier this week, New York recently adopted legislation to allow licensed hemp farmers to grow and process cannabis for the adult use market with the aim to have product available once retail sales are permitted.

While the New York Office of Cannabis Management has yet to release the form of application (and any implementing regulations), that doesn’t mean that potential applicants should sit idly by and wait.  In reviewing the legislation, its clear that there is plenty of work that can be done now. Continue reading “New York Conditional Cultivation License – Advanced Preparation (What You Can Do Now To Be Ready)”

Cannabis Beverages are on Fire! — THC Limits

In the second edition, and first substantive blog, in my series on Cannabis Beverages, entitled Cannabis Beverages are on Fire!, I am writing about THC limits, which is one of the hot-button issues for cannabis beverage producers and consumers.  Given its psychoactive effect, there is no denying that the amount of THC in a beverage should be measurable and limited so that consumers can safely ingest them and obtain the experience they are seeking. This means that a serving size of a beverage might have a THC limit, and so might there be a total container limit.

Cannabis beverage manufacturers are not starting from scratch in this area, however. Popular THC serving size limits in edibles and similar products include 5mg and 10mg could likely be applied to THC beverages, resulting in a total container limit based on the container size and number of servings. The current offerings of cannabis-infused drinks vary and the markets within states offer a wide variety of different THC levels. For example, Cann, a bestselling THC drink, contains 2mg THC and 4mg CBD per 12 ounce can. Cann is available in over 200 California dispensaries. Similarly, Tomato Jane drinks have 10mg THC per 12 ounce bottle. Comparatively, Matt’s High Soda offers an infused beverage called Uncle Arnie’s Iced Tea Lemonade with 100mg of THC per bottle—although each bottle is considered to be 10 servings.  As the market for cannabis beverages develops, THC limits are certain to be an issue that gets a lot of attention.  In the next installment of this series I’ll touch on cannabis beverage ingredients and labeling.

Cannabis Beverages are on Fire!

Want to know where the cannabis industry is going? How about the beverage industry? The answer is cannabis beverages! The hottest new product segment in both markets. Don’t believe me… just run an internet search for “cannabis beverages” and you’ll see cannabis-infused beverages tied to major beverage companies like Constellation Brands, such as Canopy Growth’s Quatreu water, and Molson Coors, with its Truss brand, and dozens of  smaller cannabis beverage brands, such as Forth, Kikoko, and Recess. 

A cannabis beverage generally contains either THC derived from marijuana grown pursuant to state adult-use marijuana and/or medical marijuana laws, or containing CBD derived from marijuana or derived from hemp grown pursuant to a state’s hemp laws.  Given the federal prohibition on marijuana, the federal legality of hemp, and the FDA’s current restriction of CBD in foods and beverages, the federal and state regulatory framework for producing, distributing, and consuming cannabis beverages is complex, to say the least.  In the coming weeks I will be covering in a series of short blogs some of these issues, including product labeling, THC and CBD percentages, serving size, and social consumption.

Pennsylvania’s Cannabis Market: What Investors And Entrepreneurs Need To Know

Duane Morris partner Seth Goldberg was quoted in an article on Benzinga:

Seth Goldberg, a partner and team leader at Philadelphia-based law firm Duane Morris‘ cannabis department, said PA’s program has remained stable during its three years of operation. He added that the state’s marijuana department has “worked out the administrative program kinks” to create a smooth-running program.

Goldberg highlighted achievements, including over 400,000 registered MMJ patients and soaring tax revenue, both of which help boost public support for the program.</blockquote?

To read the full text of the article, please visit the Benzinga website.

Cannabis Products Liability/Consumer Fraud Litigation and CBD Regulation

Seth Goldberg
Seth A. Goldberg

Yesterday, a California court federal court judge did not follow other federal courts in staying a consumer class action brought on behalf of CBD product consumers on the basis of the FDA’s primary jurisdiction over the regulation of CBD products.  The Court in Rodriguez v. Just Brands USA Inc. et al., 2:20-cv-04829, C.D. Cal., determined that claims that CBD product maker Just Brands’ labeling did not accurately state the amount of CBD in its products could give rise to state law claims for breach of warranty  and fraud that should not be stayed because, according to the Court, the FDA’s forthcoming regulations would not alter the expectation that CBD product manufacturers would accurately convey the amount of CBD in their products.  

The decision in Rodriguez should be on the radar of the entire cannabis industry, as it demonstrates how products liability and consumer class action lawsuits may be brought under state statutory and common law to seek damages for improperly labeled cannabis products.  Cannabis – hemp and marijuana – product manufacturers should be sure to build into their internal compliance safeguards against such claims.  

Relatedly, on the radar for hemp-derived CBD is legislation proposing to categorize CBD as a dietary supplement under the FDA’s regulatory regime for drugs, dietary supplements and foods and beverages under the Food, Drugs and Cosmetic Acts. That bill will be introduced today by Sens. Ron Wyden (D-Ore.), Rand Paul (R-Ky.), and Jeff Merkley.  

 

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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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