Cannabis Project Newsletter - May 20, 2020
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What Happened in May?
By Austin Bernstein
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On the federal level, April showers led to May flowers in the form of banking legislation. Earlier this week, House Democrats passed
another $3 trillion dollar stimulus package
, which will now be sent to the Senate for consideration. Included within the provisions of the bill is the
SAFE Banking Act
, which would create a safe harbors for financial institutions and insurance companies who service the cannabis industry. In perhaps a nod to Sen. McConnell, the current version of the bill includes language that would extend the safe harbor for banking of hemp cultivators and CBD extractors.
And while cannabis banking is front and center, the comment period on DEA's proposed rule closes on Friday, May 22. The proposed rule is intended to increase the number of federally registered cannabis cultivators and researchers but has drawn criticism from the industry as heavy handed. The goal of increasing access to scientific research on cannabis use is supported across the aisle.
Efforts to expand recreational cannabis continue in states but petition gatherers face an uphill battle. And across the states, law enforcement and regulators are grappling with the multitude of legal questions spawning from cannabis legalization, including drugged driving, employment drug testing, and preventing youth from accessing cannabis products.
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By Cole White
Last June, after the SAFE Banking Act was first introduced to Congress, a bipartisan coalition of attorneys general circulated a sign-on letter to be sent to Congress in support of the act.
A similar group of attorneys general, led by Phil Weiser and Wayne Stenehjem, sent a letter reiterating support for passage of the SAFE Banking Act, or similar legislation.
As the attorneys general make clear, support for the Act does not call for legalization of medical or retail marijuana but rather reflects the realities on the ground -- during the COVID-19 pandemic, the lack of access to national banking has created public health and public safety issues for millions of Americans.
The inclusion of SAFE in the stimulus package is not without critics, however, and Senate Republicans have expressed a
strong resistance
to the relief bill and its inclusion of cannabis banking.
To provide an overview of the legal and policy issues surrounding cannabis banking, the Cannabis Project published the attached white paper, "
Solving an Untenable Situation: The Public Health and Safety Rationale Behind the Secure and Fair Enforcement Banking Act.
"
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Summaries by Cole White
Florida Supreme Court Hears Arguments on Legal Recreational Ballot Initiative
- In early May, the Florida Supreme Court heard arguments on whether a state ballot initiative to legalize recreational adult use marijuana is misleading to voters. The Florida Attorney General’s office argued that the language in the initiative is misleading because it does not clarify that "permitted uses" of marijuana would remain illegal under federal law. The court also heard arguments on whether the initiative has a sufficiently narrow focus, and whether a new law which imposes additional requirements on the process applies. Click
here
for more info.
Massachusetts Recreational Stores Will Reopen May 25th
- Two months after they were initially closed as “non-essential” businesses," Massachusetts will allow recreational cannabis dispensaries to begin re-opening on May 25th. Every other state with legal recreational cannabis classified adult use dispensaries as “essential businesses” early into the pandemic. The Governor’s order was upheld last month when it was challenged by recreational dispensary owners in court. Click
here
for more info.
Missouri Imposes New Regulations on Edible Products
- Lawmakers in Missouri recently passed a bill which would outlaw producing edible marijuana products of certain shapes or designs. The purpose of the bill is to make the products less attractive to children. States with recreational marketplaces prohibit similar products. The bill also stipulates that a universal marijuana logo must be used on all marijuana product packaging, and outlines a requirement that store owners, employees and contractors must pass state and federal background checks. Click
here
for more info.
New York Law Criminalizes Cannabis Pre-Employment Testing
- A newly enacted law would prevent public and private employers in New York from requiring that prospective employees undergo a test for marijuana as a condition of employment. The law states that requiring such a test is an unlawful and discriminatory practice. The law would not apply, however, to certain positions or fields such as in law enforcement, commercial driving positions, child or medical care, or some specific positions in the construction industry. Click
here
for more info.
Signature Gathering Resumes in Nebraska & Montana
- After being stalled by the Coronavirus, signature gathering campaigns in Nebraska and Montana announced last week that they would resume signature collection under new guidelines. Volunteers must wear gloves and masks, sanitize and disinfect their equipment frequently, and provide single use pens for each signor. For a comprehensive status update of state reform efforts across the nation, click
here
.
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Summaries by Cole White
USDA Approves More State & Tribal Hemp Production Plans
On May 7th, the USDA approved a hemp production plan for the state of
Massachusetts
, as well as 5 Indian tribes, bringing the total number of state approvals to 17 and tribe approvals to 19. Since the production and cultivation of hemp was legalized in the 2018 Farm Bill, the USDA has promulgated an interim final rule outlining how states may engage in domestic hemp production. States have the choice of cultivating hemp under the 2014 Farm Bill pilot rules, developing their own production plan, or following the federal production plan as outlined by the rule. The result has been a patchwork of different regulations across the different states, as shown
here
.
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Market Consolidation in Cannabis and Hemp
As we move further into 2020, data on the cannabis and hemp industry suggests a steep decline in asset valuation and merges and acquisitions going forward. After the 2018 Farm Bill legalized the cultivation of hemp, many farmers rushed to begin cashing in on the new market. This excess supply has created a price crash; where in 2014, one kilo of processed CBD oil could be sold for around $70,000, today the average price for one kilo is around $750. These massive asset write-downs create big problems for public companies looking for lending sources.
The COVID-19 pandemic has also stalled industry consolidation, at least temporarily. In 2019, the total deal value for mergers and acquisitions of CBD and hemp businesses was around $9.2 billion. So far in 2020, total M&A deal value has fallen to $325 million. Experts suggest that, in the long term however, the pandemic represents an opportunity for greater industry consolidation. Marty Clemons, Director of the North Carolina Industrial Hemp Coalition, expects that only 5 CBD producers will remain in North Carolina after the pandemic. Long-term industry viability may depend on other industry subsets like fiber and textiles, which currently see very little investment inside the U.S. Click
here
for more info.
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Persistent Problems with Cannabis Impairment and DUI Enforcement
By Cole White
Illinois has become the latest recreational cannabis state to grapple with the difficulties in monitoring and enforcing DUI laws for cannabis impairment. As we have discussed previously, a reliable link between blood-THC content and impairment has yet to be discovered, so determining a driver’s impairment based on blood analysis remains problematic. In Illinois, a
per se
limit allows officers to easily determine if an individual should be arrested for driving under the influence. While a
per se
limit may ease the burdens on law enforcement, that limit may not accurately determine whether the individual was actually impaired.
States without such
per se
limits must rely on the informed judgment of trained officers, which many experts say is a more equitable evaluation of the driver’s impairment. Many states, however, want to make the process of determining impairment less susceptible to bias and more uniform. Regulators are advocating for research into a breathalyzer-type device for detecting cannabis impairment, and
Oklahoma may begin testing such a device
in the near future. But the research suggests that so far, while such devices may work well for determining if an individual has consumed marijuana within a certain amount of time, more research on the link between THC consumption and impairment is required before such a device will be able to accurately determine a driver’s individual level of impairment. Click
here
for more info.
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New Study Finds Daily Cannabis Users Consume More Intensively Than Others
By Cole White
A recent study published in the International Journal of Drug Policy, by researchers Jonathan P. Caulkins, Bryce Pardob, and Beau Kilmer, leads to important conclusions on the frequency and intensity of cannabis use.
Frequency of use is defined as the number of days of use in the past month, and intensity of use is defined as the average amount consumed per day of use. Ultimately, the authors found that the relationship between frequency and intensity of use is not linear, and that individuals who used cannabis less than near daily have a relatively low intensity of use. For daily users, however, there were substantial increases in intensity of use over non-daily users. Click the button below to read the full study. Some key findings include:
- The average amount of cannabis consumed per use day roughly doubles for those that report daily use relative to those that report using less than daily.
- For an individual living in Washington State in 2018, the intensity of use for different levels of users was roughly: 1 gram per day for those using infrequently, 1.25 grams per day for those using near daily, and 2.1 grams per day for those using daily. The differences were even more pronounced in Colorado.
- Near daily users consume almost 80% of all cannabis produced, and the roughly 50% of people who report using on ten or fewer days in the past month consume less than 10% of all cannabis.
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Consumer Brands Association Launches Coalition for Smart CBD Regulation
By Cole White
On Tuesday May 19th, the Consumer Brands Association (CBA), the nation's leading trade association for consumer packaged goods, announced the creation of a broad coalition of some of the country’s preeminent law enforcement organizations, leading consumer watchdog groups, and critical industry groups. The Coalition's focus will be on protecting consumers while advocating for consistent and informed regulations around the production and sale of CBD products.
The coalition includes the Major Cities Chiefs Association (MCCA), the National Narcotics Officers’ Associations’ Coalition (NNOAC) and the National Sheriffs’ Association (NSA); consumer watchdog group the Digital Citizens Alliance (DCA); and critical industry groups like the National Association of Convenience Stores (NACS), the National Confectioners Association (NCA) and the Retail Industry Leaders Association (RILA).
Consumer Brands’ research shows that although one-in-three Americans report using CBD, the overwhelming majority (76%) assume CBD products are subject to federal regulations, when in fact few regulations exist. A recent investigation by DCA found that 70 percent of American CBD users were replacing medications with CBD for issues ranging from anxiety to Alzheimer’s disease. Click
here
to read CBA's official announcement.
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Some Ancillary Cannabis Businesses May Be Eligible for Stimulus Funding
By Cole White
In early May, an ancillary cannabis business was awarded stimulus funding under the Paycheck Protection Program after initial signs suggested such businesses would not be eligible for relief. The Denver based firm MassRoots, a cannabis social media platform, was able to show in their application for relief that they are not an “indirect marijuana business” and that their activity does not violate any state or federal laws. Legal experts point out that as long as an ancillary cannabis business can show that they meet these requirements,
they should be eligible for relief
.
Study Shows Legal Cannabis Increases Tourism Revenue for States
Data in a recently published study shows that cannabis tourism has increased revenue in states with legal adult use. While the conclusion may seem obvious, there has been little data until now to prove the effect of legal recreational cannabis on a states tourism industry. The study analyzes hotel prices and bookings in Colorado and Washington before and after each state legalized recreational marijuana, and compares that data to other prohibition states. In Colorado, after adult use was legalized in 2014, the state saw a 6% increase in the number of hotel bookings, or about 120,000 additional rooms. Once dispensaries opened and recreational sales began, the hotel industry in Colorado saw an additional $23.71 million in revenue the following year. A similar trend can be seen in Washington, though the effects were not as large. The authors of the study point out that Colorado and Washington may loose this advantage if other states continue the trend of legalization. Click
here
for more info.
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The Cannabis Litigation Blog continues to cover the latest developments in cannabis law.
We are extremely grateful for Professor Robert Mikos' generous contribution of his time and energy to educate the attorneys general on various cannabis related issues during the month of April. His textbook,
Marijuana Law, Policy, and Authority,
should be standard reading for anyone deeply involved in the industry.
This week's post will focus on the SAFE Banking Act as included in the House's most recent stimulus package, with a specific emphasis on the Financial Crimes Enforcement Network (FinCEN) guidance and the impact of the bill on Hemp and CBD.
Interested in becoming a contributing author?
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