What Happened in May?
By Cole White
As we continue to find our way through the new normal, state regulators continue to push cannabis issues across a variety of policy domains. Many states are grappling with the difficulties of conducting ballot initiative campaigns during COVID, with a variety of responses by courts across different jurisdictions. Businesses are experiencing a debilitating cash shortage, which is likely to result in a much leaner industry once COVID has passed.
On the federal level, several recent cases have been handed down which do not bode well for the industry. Decisions regarding the interplay between federal and state law create hurdles for medical patients in the student and veteran communities. Social equity and criminal justice reform advocates are putting forward recommendations to reduce confusion and increase inclusion in the industry. And on the hemp front, the USDA continues to add to the list of approved state hemp production plans under the 2018 Farm bill.
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Summaries by Cole White
Louisiana Legislature Sends Two Cannabis Bills to Gov's Desk
- On May 31
st
, the Louisiana legislature approved a bill which would significantly expand access to medical cannabis in the state. H.B. 819, which has been sent to the Governors desk for signature, would expand the list of conditions which make a patient eligible for medical marijuana from the 14 currently listed conditions to any condition that a doctor finds debilitating to the patient. Another bill, H.B. 211, which would provide safe harbors to state financial institutions who service the cannabis industry, has also been sent to the Governor’s desk. Click
here
for more info.
Nearly 3,000 Legal Cannabis Jobs in New York
- A recently published study by Leafly found that New York ranks 16th in the nation on the number of legal cannabis jobs, with nearly 3,000 jobs. New York regulators estimate around $125 million in annual sales of cannabis in 2019. Across the nation, Leafly identified more than 243,000 legal cannabis jobs, and showed that the rate of job increase is faster than in any other American occupation. National sales estimates based on state projections put national annual sales at around $11 billion for 2019. Click
here
to see a comprehensive list of the number of state cannabis jobs and estimated annual sales, and click
here
to read the Leafly Jobs Report.
California Ethics Committee Allows Attorneys to Advise Cannabis Clients
- The California State Bar Ethics Committee recently issued an opinion which clarified that attorneys may advise cannabis clients on compliance with California law, regardless of the federal-state law conflict, without necessarily triggering an ethical violation. Such advice may include the provision of certain legal services necessary to the lawful operation of the businesses, but clients must be advised of the federal-state conflict and of the potential for criminal liability. The opinion reminds counsel that under no circumstances may an attorney assist a client in evading federal law, and that the opinion is advisory, and non-binding in nature. Click
here
to read the order.
Colorado Extends Medical Marijuana Orders
- Governor Jared Polis recently extended his temporary orders granting flexibility to doctors and medical dispensaries during the COVID-19 pandemic. The order allows medical dispensaries to continue sales via online and curbside pickup, and also permits doctors to continue using telemedicine for medical marijuana patients through June 28
th
. While the orders are temporary, several dispensaries have expressed a desire to keep the alternate sales methods in place after the pandemic subsides. Click
here
for more info.
New Signature Gathering Campaign Rules Under Scrutiny in Ohio -
On May 19
th
, U.S. District Court Judge Edmund Sargus Jr. issued an order allowing ballot initiative campaigns in Ohio to collect electronic signatures, while also extending the signature gathering deadline to July 31
st
. That decision was recently stayed by the U.S. Court of Appeals for the 6
th
Circuit after the Ohio Attorney General and the Secretary of State appealed, arguing that changing the signature gathering rules would require a constitutional amendment. As a result, several ballot initiative campaigns, including a cannabis decriminalization initiative, remain in limbo. Click
here
for more info.
Federal Judge Temporarily Allows Electronic Signature Gathering in Arkansas -
On May 25
th
, a federal judge issued a temporary injunction requiring the Secretary of State of Arkansas to accept signatures from ballot initiative campaigns that were collected electronically. Arkansas voters may now download, print and mail in their signed petitions to campaigns, but only temporarily. Judge P.K. Holmes III stated that he doubts that digital signature gathering will be allowed in the final ruling. Click
here
for more info, and to read the order.
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Summaries by Cole White
No Bankruptcy Protection for Cannabis Workers, DOJ Says
COVID-19 has produced a wave of unemployment across the country, and federal bankruptcy protection offers individuals a way to weather the storm. Yet, even as the vast majority of states with legal cannabis have designated their medical and recreational businesses as essential, the DOJ continues to enforce its policy that individuals who receive income from cannabis businesses or other ancillary cannabis businesses are not eligible for federal bankruptcy protection. The DOJ reasons that cannabis remains illegal under federal law, and that the U.S. Bankruptcy code may not be used to violate federal law.
Attorneys sometimes attempt to circumvent this policy by separating their client’s income derived from cannabis businesses from other income which can be used to pay off debt, but the results have been mostly negative in courts. While many judges are willing to recognize that the situation creates inequities for employees and businesses owners, most ultimately side with the justice department due to a lack of any federal legal protection. Click
here
for more info.
Federal Judge Holds There Is No Constitutional Right to Grow Cannabis
On May 28
th
, a U.S. District Court judge in Washington State dismissed a federal constitutional challenge brought by a farmer against county officials, holding that there is no federally protected constitutional right to grow cannabis. Raymond Schmitten, a farmer in Chelan County, invested around $630,000 in developing a cannabis cultivation business between 2014 and 2017, after the state legalized adult use cannabis. When Chelan County officials issued new zoning regulations in 2017 which forbid the cultivation of cannabis on Schmitten’s property, his investment was rendered essentially useless.
Schmitten brought a claim in state court for denial of due process, arguing that he had a constitutional right in the non-conforming land use before it was taken from him by county officials. The state successfully removed the case to federal court, where Judge Rosanna Malouf Peterson stated that “Even when cannabis production is a legitimate use of one’s property at the state level, such use is not recognized as a protectable property interest under the U.S. Constitution.” Schmitten’s attorney has said that he plans to pursue the claims in state court, where his client’s chances of success are much higher. Click
here
for more info.
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Summaries by Cole White
USDA Approves More State & Tribal Hemp Production Plans
As we discussed in last week’s newsletter, the USDA is currently in the process of approving state, territorial and tribal plans for hemp production after the 2018 Farm bill legalized the cultivation of hemp across the nation. On May 27
th
,
USDA announced
that it had approved hemp production plans for the U.S. Virgin Islands, as well as the Cheyenne River Sioux and Chippewa Cree Tribes, the Lac Courte Oreilles Band of Lake Superior Chippewa Indians, and the Red Lake Band of Chippewa Indians. This brings the total number of states, tribes and territories with approved hemp production plans under the 2018 Farm Bill to 47, with the U.S. Virgin Islands becoming the first U.S. territory to have their plan approved. While almost half of states have chosen to continue hemp production under the 2014 pilot program, the majority of Native American tribes have chosen to seek USDA approval under the 2018 bill. Click
here
for a comprehensive list of hemp production plans by state, territory, or tribe.
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Summaries by Cole White
Universities That Allow Medical Cannabis are Ineligible for Federal Health Grants
In Maine, state law requires that universities allow students to use medical cannabis if they have a valid medical card, but questions are surfacing about funding for federal programs. Last year, the Substance Abuse and Mental Health Services Administration issued a new rule in its application for funding which stated that individuals and organizations may not receive any federal grants for substance abuse or mental health services if those funds are used, either directly or indirectly, to provide cannabis as a treatment. As a result, Maine’s department of education announced in mid-May that the state’s universities are no longer eligible for any such aid.
Marijuana Moment
has reported that 12 states and the District of Columbia have similar protections in place for students, which may also place their access to these grants in jeopardy. Click
here
for more info.
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Veterans Denied Access to Medical Cannabis
A recent article from Politico highlighted the various obstacles that military veterans face when seeking medical cannabis as a treatment alternative. While the majority of states allow their residents to seek a doctor’s permission for medical cannabis, federal law makes it impossible for the Department of Veterans Affairs (VA) to prescribe it to patients. Recreational prices are also often too high for veterans on fixed incomes, frequently requiring them to spend more than half their monthly income on medicine. These factors, coupled with the still present stigma that comes with cannabis consumption, drive most veterans who want to use medical cannabis as an alternative to addictive opioids to the illicit market.
Veterans associations, like the American Legion and the Weed For Warriors Project, are calling on Congress to address the problem. Last year, House representatives introduced two separate bills, H.R. 712 and H.R. 1647, which would direct the VA to undertake trails to show the effects of cannabis on certain ailments and allow VA doctors to recommend medical cannabis prescriptions to patients. Neither bill has passed the House. In the meantime, Veterans are expressing their frustration and covertly purchasing their cannabis from illicit sources. Click
here
for more info.
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Council on Criminal Justice's Recommendations for Cannabis Criminal Justice Reform
Last year, the Council on Criminal Justice (CCJ) was formed to investigate and recommend national criminal justice policy reform. Comprised of several high-level former prosecutors, mayors, governors, and industry executives, the group recommends policy reform across a number of different criminal justice areas, including cannabis. In May, the group released its 15 recommendations to Congress and the Executive to achieve a more equitable criminal justice system. Click
here
to read more about the CCJ.
In its report, the task force determined federal legalization or de-scheduling would best resolve the problems faced by states, but in absence of legalization, the federal government should develop a waiver program by which states could waive federal enforcement of cannabis laws if their states cannabis system meets several procedural hurdles. The council recommended the creation of an interagency task force to develop those state system requirements. The council also recommends that the interagency task force should develop guidance for banks, and for state law enforcement. Click
here
for more info, and click the button below to read the CCJ report.
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Denver Officials Discuss How to Make Cannabis Hospitality Safe and Equitable
In 2016, Denver voters approved Initiative 300, which allowed Denver businesses to apply for a license for their patrons to consume cannabis on location, but did not allow sales at such locations. In 2019, the Colorado legislature approved H.B. 912 30, which allows jurisdictions who opt in to create “marijuana hospitality spaces” where cannabis can be both consumed and sold. However, zoning regulations make it difficult for such businesses to remain financially sustainable, and at the second meeting of Denver’s Marijuana Licensing Work Group, that topic was front and center.
A central question of the discussion was the barriers to entry in the industry and how equity can be injected into the process. At least one member recommended that every other license for a consumption location be given to an equity candidate. Other questions addressed in the meeting included what forms of cannabis may be consumed on location, and how best to balance public health and safety with industry goals. Click
here
for more info.
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Cash Shortages Driving Industry Consolidation
COVID-19 has created a cash shortage in the cannabis industry, and accelerated the industry’s trend toward consolidation. Investors have become highly skeptical, making it much more difficult to obtain infusions of cash. Overall, capital raised by the industry fell by 70% from February to March this year, and is down 60% year-over-year. A lack of willing investors, coupled with the industries inability to obtain traditional financing and relief, is likely to result in a series of business closures over the coming months. In short, while most analysts expected to see consolidation in the cannabis space in 2020, that consolidation has been mostly destress-driven, rather than success-driven as expected. However, many industry analysis are looking to the silver lining, arguing that COVID will eliminate inefficient businesses and allow the best operators to rise to the top. Many also suggest that the financial pressure on state and local governments brought about by the pandemic may incentive more states to turn to cannabis as a new source of revenue going forward. Click
here
for more info.
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The Cannabis Litigation Blog continues to cover the latest developments in cannabis law.
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.
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