On 1-9-19, Rep. Earl Blumenauer (D-OR) introduced H.R. 420, the “Regulate Marijuana Like Alcohol Act.” Blumenauer, the co-sponsor of the Rohrabacher–Blumenauer amendment, better known as the on-going appropriations provision that prohibits the Justice Department from spending federal funds to enforce federal law that is in conflict with state medical cannabis laws.
Proposed Bill 420 is a total overhaul of the federal government’s treatment of marijuana. Among other things, the bill:
1. Decriminalizes marijuana by removing it from the Controlled Substances Act;
2. Amends the Federal Alcohol Administration Act to enable the Secretary of the Treasury to issue permits to those who want to to manufacture, distribute, or sell marijuana;
3. Transfers jurisdiction from the DEA to the Bureau of Alcohol, Tobacco, Firearms and Explosives;
4. Prohibits widespread advertising for marijuana; and
5. Grants to the FDA the same authority for marijuana as it has for alcohol.
Rep. Blumenauer noted: “Congress cannot continue to be out of touch with a movement that a growing majority of Americans support. It’s time to end this senseless prohibition.” In this vein, per a Pew Research Center study released last fall, nearly 66% of Americans support legalization at the federal level.
The new co-chairs of the 2019 bipartisan Congressional Cannabis Conference are Rep. Barbara Lee (D-CA) and Dave Joyce (R-OH), Rep. Earl Blumenauer (D-OR) and Don Young (R-AK).
With the rapid spread of marijuana legalization in the US, lawyers are discovering that the tangled web of regulations guiding the rapidly growing industry is a boon for business. …
There are several key reasons lawyers are attracted to the marijuana industry. For one, as cannabis companies grow, merge, and start getting the attention of Fortune 500 corporations as acquisition targets, they need more sophisticated advice on financing, tax planning, corporate structure, and M&A. …
That’s an opportunity to a select group of lawyers who have cut a trailblazing path into the industry. Once reluctant, some of the biggest law firms, like Duane Morris, Baker Botts and Dentons, are building out specialized cannabis practice groups as the industry continues to grow in profitability and complexity. …
Business Insider has pulled together a list of the top lawyers who’ve worked on the largest deals in the past year in the growing marijuana industry.
Location: Philadelphia, New York, and San Francisco
Duane Morris has staked out big territory: It’s one of the few AmLaw 100 firms marketing its cannabis practice group, said Neeraj Kumar, an associate at the firm who works on cannabis issues.
“This is a very good opportunity for our firm,” said Seth Goldberg, the chair of the firm’s practice in Philadelphia. Cannabis is one of the “few emerging markets that has multibillion-dollar potential.”
Goldberg, a seasoned trial lawyer with decades of experience, said he spearheaded the firm’s involvement in the industry in 2014 after Colorado became the first state to allow recreational pot shops.
And for Kumar, the opportunity to become an expert in a field where there’s “a new development every week” was something he couldn’t turn down.
Duane Morris represented iAnthus, a US cannabis company, in its $640 million merger with MPX Bioceutical, also the first public-to-public transaction in the US cannabis industry. Further, the firm has advised investors on real-estate acquisitions.
Update: The Senate passed this bill on December 11, 2018; the House of Representatives passed it on December 12, 2018. It was signed into law on December 20, 2018.
Duane Morris will be following further developments and issuing updates.
The 2018 Farm Bill removes hemp from the Controlled Substances Act;
The 2018 Farm Bill confers on the Department of Agriculture (“DOA”) authority over hemp, including CBD derived from hemp;
States desiring to have primary regulatory authority over hemp must submit a plan to DOA pursuant to which the state will establish hemp regulations to provide for the growth and use of hemp, including CBD derived from hemp;
No laws will be erected to prohibit the interstate transportation of hemp, or CBD derived from hemp;
The Food and Drug Administration may intensify its involvement with CBD as more products for human consumption hit the market;
Banking and insurance for hemp derived CBD products should become increasingly available as those products are no longer “unlawful”; and
CBD derived from unlawful marijuana is still unlawful.
Enter the 2018 Farm Bill, known as the “Agriculture Improvement Act of 2018,” set forth in final form in a Conference Report yesterday, and which will be voted on as early as this week and could be signed into law next week. The 2018 Farm Bill defines hemp as follows: The term ‘hemp’ means the plant Cannabis sativa L. and any part of that plant, including the seeds thereof and all derivatives, extracts, cannabinoids, isomers, acids, salts, and salts of isomers, whether growing or not, with a delta-9 tetrahydrocannabinol concentration of not more than 0.3 percent on a dry weight basis. It goes on to explicitly remove hemp from the Controlled Substances Act, as follows:
SEC. 12619. CONFORMING CHANGES TO CONTROLLED SUBSTANCES ACT. (a) IN GENERAL.—Section 102(16) of the Controlled Substances Act (21 U.S.C. 802(16)) is amended— (1) by striking ‘‘(16) The’’ and inserting ‘‘(16)(A) Subject to subparagraph (B), the’’; and (2) by striking ‘‘Such term does not include the’’ and inserting the following: ‘‘(B) The term ‘marihuana’ does not include— ‘‘(i) hemp, as defined in section 297A of the Agricultural Marketing Act of 1946; or ‘‘(ii) the’’. (b) TETRAHYDROCANNABINOL.—Schedule I, as set forth in section 202(c) of the Controlled Substances Act (21 U.S.C. 812(c)), is amended in subsection (c)(17) by inserting after ‘‘Tetrahydrocannabinols’’ the following: ‘‘, except for tetrahydrocannabinols in hemp (as defined under section 297A of the Agricultural Marketing Act of 1946)’’.
The 2018 Farm Bill confers on the DOA the regulation of hemp, and contemplates federal regulations that would allow for states to become the “primary regulator” of hemp. Importantly, the 2018 Farm Bill explicitly provides for the interstate transportation of hemp and prohibits states from restricting the interstate transportation of hemp, stating “nothing in this title or an amendment made by this title prohibits the interstate commerce of hemp (as defined in section 297A of the Agricultural Marketing Act of 1946 (as added by section 10113)) or hemp products…No State or Indian Tribe shall prohibit the transportation or shipment of hemp or hemp products produced in accordance with subtitle G of the Agricultural Marketing Act of 1946 (as added by section 10113) through the State or the territory of the Indian Tribe, as applicable.”
Significantly, the 2018 Farm Bill does not remove CBD derived from THC-containing marijuana from the Controlled Substances Act. Consequently, the DEA’s pronouncement as described above is still in effect, CBD derived from unlawful marijuana is still unlawful. However, there is now clarity. CBD derived from “hemp,” as defined in the 2018 Farm Bill, and grown pursuant to state regulations established pursuant to the 2018 Farm Bill, is lawful and may not be the subject of federal prosecution.
Banking: It should be underscored that banks and other financial institutions, such as investment firms and insurance companies, that have been cautious or reluctant about CBD products because of their connection to unlawful marijuana may view the 2018 Farm Bill as a green light for banking, investing and insuring hemp derived CBD products as hemp and CBD derived from hemp are no longer “unlawful.”
Most importantly, the 2018 Farm Bill does not eliminate the regulation of hemp or CBD derived from hemp. Rather, it envisions the promulgation of additional federal regulations and state regulations intended to promote its growth and use, and federal agencies like the FDA may increase their involvement with CBD. Those interested in participating in the hemp and hemp derived CBD markets should retain counsel well-versed in the pertinent state and federal regulations to provide guidance that will allow for the achievement of business objectives.
These investments demonstrate the strengthening gravitational pull of the cannabis space on non-cannabis companies. The significant involvement of major companies like Altria and Constellation likely comes as no surprise to those following the burgeoning cannabis space, and should have their competitors considering similar moves. There are innumerable legal hurdles to clear in entering the space, but there are few markets today that offer new ground to plow.
The Controlled Substances Act defines “marijuana” as: all parts of the plant Cannabis sativa L., whether growing or not; the seeds thereof; the resin extracted from any part of such plant; and every compound, manufacture, salt, derivative, mixture, or preparation of such plant, its seeds or resin. Such term does not include the mature stalks of such plant, fiber produced from such stalks, oil or cake made from the seeds of such plant, any other compound, manufacture, salt, derivative, mixture, or preparation of such mature stalks (except the resin extracted therefrom), fiber, oil, or cake, or the sterilized seed of such plant which is incapable of germination.
Just like THC-containing products that are lawful under a state’s marijuana laws, CBD that may be lawful under a state’s marijuana laws, is still federally unlawful if sourced from the parts of the plant included in the definition of marijuana.
Just weeks after Senators Elizabeth Warren (D-Mass) and Cory Gardner (R-Colo) introduced bi-partisan legislation to make marijuana lawful under a state’s marijuana laws also lawful under the Controlled Substances Act (CSA), Senate Minority Leader Chuck Schumer (D-NY) introduced legislation removing marijuana from the CSA altogether on Wednesday, June 27. Schumer’s bill also comes just one day after Oklahoman’s passed legislation legalizing medical marijuana in their traditionally red state, and one day before the U.S. Senate passed legislation legalizing hemp for all purposes, including extracts from hemp, such as cannabidiol.
By removing from the purview of the CSA, state-legal cannabis and proceeds derived therefrom, the Warren/Gardner legislation, if passed, would likely have the effect of nationwide legalization, but state operators and consumers would still need to be concerned about marijuana’s Schedule 1 status under the CSA, whereas the Schumer bill, if passed, would eliminate those concerns by removing marijuana from the CSA.
On the White House lawn this morning, getting ready to leave for the G-7 summit in Canada, Pres. Trump made positive comments about the cannabis bill introduced yesterday by Sen. Cory Gardner (R-CO) and Elizabeth Warren (D-MA). The STATES Act would allow states the freedom to legalize cannabis within their borders with no federal enforcement action permitted. The text of the Senate bill, just released, removes state legal cannabis from enforcement under the Controlled Substances Act.
On the lawn, the President said of the bill, “I probably will end up supporting that, yes.” He said, “We’re looking at it,” but also noted that he “really” supports Sen. Gardner. Of course the bill has to be passed by Congress before being sent to the President. The question is whether the process can be completed before the “silly season” of midterm elections brings most legislative activity to a stop. Trump promised to support a bill like this in exchange for Sen. Gardner resuming approval of judicial nominations, which he had stopped after Attorney General Jeff Sessions rescinded an Obama-era memo de-emphasizing federal enforcement against actors in cannabis legal states.
The House version of the bill was introduced this morning but text is not yet available. The initial sponsors will be Rep. Jared Polis (D-CO), David Joyce (R-OH) and Earl Blumenauer (D-OR). The bill also appears to effectively repeal IRS Code Section 280E which prevents cannabis companies from deducting ordinary business expenses. It also removes activity by cannabis companies being assumed to be money laundering, which will hopefully help more banks to take cannabis companies as customers. Certainly a dramatic potential development.
Yesterday, Senators Elizabeth Warren (D-Mass) and Cory Gardner introduced bipartisan legislation that, if passed, would make the regulation of marijuana a state issue. Comments by Senator Gardner show public safety issues resulting from the dearth of banking providing services to the industry are a focus of the newly-proposed legislation. The Hill reports Gardner stating when introducing the legislation:
“This city of Denver, the state of Colorado, can collect taxes … they can take it to the bank,” Gardner said. “But if you’re in the business, if you work for the business, you can’t get a bank loan or set up a bank account because of the concern over the conflict between the state and federal law. We need to fix this public hypocrisy.”
It was widely reported on April 13, 2018, that President Trump promised to Senator Gardner that he would support a states’ rights approach to marijuana, which promise appears to have resulted in this proposed legislation. A lot has to happen before this bill reaches Trump, but if it does, a veto may be unlikely. Such states’ rights legislation could then pave the way for more banks to service the industry.
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!
While the Cole Priorities were in place, that guidance provided a clear path for banking cannabis industry participants adhering to the Cole Priorities. FinCen’s guidance is still in place, and banking cannabis is still possible, but confusion about how to do so without the Cole Priorities as guideposts has caused greater reluctance on the part of banks.
Enter proposed legislation in California, SB-930, which passed in the California Senate yesterday. Not a complete solution to the banking problem by a long shot, but progress nonetheless. If it becomes law SB-930, would result in the establishment of a California-chartered bank that would permit California cannabis industry participants to deposit the proceeds of their state-lawful cannabis activities, and would provide to them limited banking services that would allow for payment of taxes and vendors by check.
As reported in the Sacramento Business Journal, the Bill’s sponsor, Sen. Bob Hertzberg (D-Van Nuys), characterized SB-930 as an attempt alleviate the public safety concerns resulting from the federal government’s current hands off approach to banking cannabis. As Herzog stated, “It’s not only impractical from an accounting perspective, but it also presents a tremendous public safety problem. This bill takes a limited approach to provide all parties with a safe and reliable way to move forward on this urgent issue.”