AG Consumer Protection Lawsuits Target Delta-8 and Perceived “Loophole” in 2018 Farm Bill

Seth Goldberg
Seth A. Goldberg

The Nebraska Attorney General and the California Attorney General have filed lawsuits recently under their states’ consumer protection statutes targeting the manufacturers of hemp products containing Delta-8 THC, noting the health and safety risk to consumers of these products.  Such products, known as “hemp synthesized intoxicants” or “HSIs” are often just as intoxicating as the Delta-9 THC in state-legal adult-use and medical marijuana, but may not be subject to the same types of licensure, testing, and packaging/labeling requirements imposed under state cannabis programs. 

As I have previously written, the manufacture and distribution of HSIs appears to be the result of a perceived loophole in the 2018 Farm Bill’s legalization of hemp and its “derivatives, extracts, cannabinoids, isomers.”  Proponents of HSIs assert that, in defining hemp in the 2018 Farm Bill, Congress did not prohibit the chemicals in hemp from being converted into psychoactive compounds.

Opponents of HSIs argue that hemp was legalized as an agricultural commodity, and the 2018 Farm Bill was focused on the production (cultivation) of hemp, not consumer finished products that could be manufactured using its constituents.  They posit that Congress did not intend for the chemicals in hemp to be converted into a host of compounds just as intoxicating as Delta-9 THC. 

State AG consumer protection lawsuits against manufacturers of products containing HSIs are an attempt to curb their proliferation.  Congress may address the perceived loophole that is being exploited to manufacturer HSIs in the forthcoming Farm Bill. 

 

Cannabis Banking Ticks Up, But the Industry Needs SAFE Banking

Seth Goldberg
Seth A. Goldberg

Just ahead of the Senate Banking Committee’s vote on the Secure and Fair Enforcement (SAFE) Banking Act, the Financial Crimes Enforcement Network (FinCEN) has reported that a total of 812 banks and credit unions filed reports in the 2d quarter 2023 indicating they are actively providing banking services to cannabis industry participants, referred  to by FinCEN as Marijuana Related Businesses, which is the highest number since FinCEN began reporting on cannabis banking activity in 2014.  However, those 800 or so banks are just a fraction of the thousands of FDIC banks that could be providing banking services to the cannabis industry.   Even with the increase in banks providing their services to the cannabis industry since 2014, the industry remains burdened by a dearth of banking.   Cannabis companies, employees, and consumers are not able to access traditional financing, payroll services, credit cards, ACH, and debit services, which are the lifeblood of other consumer packaged goods industries.  Meanwhile, banks are routinely analyzing entering the cannabis space, but deciding against it because of the cost of compliance, among other reasons.  SAFE Banking would provide access to critical banking services.

California AG Targets Online Sales of Hemp Synthesized Delta-9 Inhalable Products

Seth Goldberg
Seth A. Goldberg

On September 11, 2023, the California Attorney General’s Office filed a Complaint against a handful of manufacturers of “inhalable hemp products” because they contained hemp-synthesized Delta-9 THC and beta-Myrcene.   The Complaint alleges that the sales of such inhalable hemp products violates California’s Proposition 65 and California’s Unfair Competition statutes.   Although under California’s AB 45 hemp and cannabinoids, extracts, or derivatives of hemp are permitted to be included in food and beverages , dietary supplements, cosmetics, processed pet food, AB 45 explicitly prohibits the sale of inhalable hemp products in California.  Likewise, Prop 65 identifies Delta-9 THC and beta-Myrcene as chemicals known to cause developmental harm, and are thus required to be labeled accordingly; Defendants products were not so labeled.  Importantly, none of the Defendants are California residents, and all of the products at-issue appear to have been purchased online and delivered from outside California.  Thus, this action should send a strong message to hemp synthesized D-9 manufacturers selling inhalable products into California.

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.

 

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.

President Biden’s Pardon for Simple Marijuana Convictions

Seth Goldberg
Seth A. Goldberg

Today, President Biden took executive action and pardoned those convicted of simple possession of marijuana under the federal Controlled Substances Act, and encouraged state governors to issue similar pardons to those convicted of simple marijuana possession under their state’s laws.  In issuing the pardon, President Biden explained: “Criminal records for marijuana possession have also imposed needless barriers to employment, housing, and educational opportunities. And while white and Black and brown people use marijuana at similar rates, Black and brown people have been arrested, prosecuted, and convicted at disproportionate rates.”  He also asks the Secretary of Health “to initiate the administrative process to review expeditiously how marijuana is scheduled under federal law,” noting that marijuana is scheduled higher than fentanyl and methamphetamine.  The executive action could mark the real beginning of the ending of the federal prohibition on marijuana.  As President Biden stated, “Too many lives have been upended because of our failed approach to marijuana.  It’s time that we right these wrongs.”
 

 

 

RICO Claims Against Cannabis Companies Are Evolving

A few years ago, a trend began to emerge — driven by the anti-cannabis lobby — of civil claims being asserted against state-licensed cannabis operators under the Racketeer Influenced and Corrupt Organizations Act.

The suits were brought in an attempt to curtail operators’ state-legal cannabis activities based on the allegation that such activities violated the federal Controlled Substances Act and thereby satisfied the predicate act requirement under RICO.

In all such cannabis-related RICO cases, the plaintiffs’ bid for a civil judgment failed, and the trend of civil RICO claims against cannabis operators seemed to vanish as quickly as it appeared.

Recently, a putative class action, Plumlee v. Steep Hill Inc., was filed in the U.S. District Court for the Eastern District of Arkansas against four state-licensed cannabis operators, asserting civil RICO claims arising out of allegations that the operators falsified the amount of THC in their cannabis products.

To read the full text of this article by Duane Morris attorneys Ethan Feldman and Seth Goldberg, please visit the firm website.

Duane Morris Attorneys Named to Top 200 Cannabis Lawyers List

Duane Morris partners Paul P. Josephson, Michael D. Schwamm, Tracy Gallegos and Seth A. Goldberg have been named to Cannabis Law Report‘s Top 200 Cannabis Lawyers for 2022/23.

Cannabis Law Report compiled the list from the publication’s annual survey of clients and lawyers in the cannabis legal services sector “as well as our personal editorial decisions based on our reporting of the industry on a daily basis for the past six years.”

For more information, please visit the Top 200 Cannabis Lawyers website.

 

Cannabis Product Mislabeling Leads to Investigation and Recall in Oregon

The Oregon Liquor and Cannabis Commission (OLCC) is conducting an ongoing investigation into Curaleaf regarding an alleged mislabeling of a nonpsychoactive cannabidiol (CBD) product, which actually contained psychoactive delta-9 tetrahydracannabinol (THC). Curaleaf operates 101 retail cannabis dispensaries in 16 states. The OLCC investigation revealed that the alleged mislabeling resulted from an employee’s confusing the CBD bottles with the THC bottles in preparing the Curaleaf cannabis products at issue. The incident caused consumers ingesting those products to have experienced a “high” they did not anticipate, and ultimately led to the recall of approximately 500 bottles of tincture from the Oregon market. At least three of those consumers went to the emergency room due to the high, one consumer was hospitalized and one consumer’s estate brought a claim for wrongful death.

To read the full text of this Duane Morris Alert, please visit the firm website.

Seth Goldberg is a Team Lead of Duane Morris’s Cannabis Industry Group, a cannabis business advisor, and a trial attorney with experience in products liability and consumer fraud claims. Ethan Feldman is an associate in the firm’s Trial department, with experience in products liability and consumer fraud.

All About Legal Cannabis and Cannabis Beverages

Seth Goldberg
Seth A. Goldberg

Beverages infused with cannabis are becoming increasingly popular categories in both the beverage and cannabis industries. However, the regulatory regime resulting from the federal prohibition of cannabis inhibits the growth of this category in unique ways. Seth Goldberg, a Duane Morris trial partner and Team Lead of the Cannabis Industry Group, was a guest of the popular alcohol industry broadcast “On & Off” to discuss the current state of the cannabis industry, the rising popularity of cannabis beverages, and unique aspects of cannabis beverage regulation.

https://soundcloud.com/user-bevinfogroup/all-about-legal-cannabis-and-cannabis-beverages

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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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