Dentons Publish Their Oct 2024 Cannabis Update

They write

October 22, 2024

In this week’s edition:

Federal

Vice President Kamala Harris Pledges to Federally Legalize Cannabis – If elected, the Harris campaign said Kamala Harris will “break down unjust legal barriers that hold Black men and other Americans back by legalizing marijuana nationally, working with Congress to ensure that the safe cultivation, distribution, and possession of recreational marijuana is the law of the land.”

FDA to Host Webinar on Cannabis Products – The Food and Drug Administration’s Division of Drug Information in the Center for Drug Evaluation and Research will host a webinar titled “FDA Drug Topics: Cannabis Products and the Potential Impact on Patients” on Tuesday, October 29. The webinar will provide an overview of the cannabis marketplace and general information on how products are manufactured and regulated. It will also cover clinical and pharmacological considerations for patients.

GOP Senator Files Bill to Triple THC Cap for Hemp – Sen. Rand Paul (R-KY) filed the legislation titled the Hemp Economic Mobilization Plan (HEMP) Act, which is identical to a version he proposed during the last session. In the same week, Sen. Ron Wyden (D-OR) announced separate legislation that would create a federal regulatory framework for hemp-derived cannabinoids, allowing states to set their own rules for products such as CBD.

DOJ Defends Federal Cannabis Ban in Court – In a brief filed in the U.S. Court of Appeals for the First Circuit, lawyers for the Department of Justice contend that the plaintiffs’ aims to unravel federal cannabis prohibition would impact rescheduling because “Congress would lack congressional authority to regulate marijuana as a Schedule III drug for the same reasons that it could not regulate marijuana as a Schedule I drug” and the lawyers rejected the idea that the federal government would defer to state laws.

Federal and State Candidates’ Positions on Legalization – The Marijuana Policy Project published guides to help voters identify which candidates are most likely to advance a cannabis reform agenda and those that would pose a threat to ongoing legalization efforts. Voters in 11 states will be electing governors next month, and there are 34 Senate seats on the ballot.

State

AR – The Director of Elections at the Arkansas Secretary of State’s office stated that an initiative in Arkansas to legalize medical cannabis obtained enough signatures to qualify for the November ballot. The campaign successfully appealed after Secretary of State John Thurston said previously that the signature-gathering effort had fallen more than 2,000 signatures short of the 91,000 signature threshold to qualify.

DE – The Delaware Office of the Marijuana Commissioner received 1,269 applications from those interested in entering adult-use cannabis marketplace, with only 125 licenses available. The lottery is scheduled for October 24 and will be broadcast live.

GA – A Georgia pharmacy launched medical cannabis sales to patients in defiance of warnings from the Drug Enforcement Administration. The agency’s letters sent last year emphasized that pharmacies cannot legally dispense medical cannabis because it remains a Schedule I drug.

HI – The Hawaii Office of Medical Cannabis Control and Regulation issued a request for proposals, soliciting input from existing vendors to “conduct an independent assessment of the Medical Cannabis Dispensary Licensing framework and an analysis of the demand for cannabis, both for medical cannabis and adult-use, in Hawaii should the State legalize adult-use of cannabis.”

KY – Kentucky will hold the state’s first medical cannabis business lottery for cultivator and processor licenses on October 28. The state issued three licenses to safety compliance (testing) facilities and has not yet announced the lottery date for medical cannabis dispensaries.

MA – The Massachusetts Cannabis Control Commission is set to eliminate the requirement that two drivers be present in vehicles delivering cannabis by the end of the year. This change will reduce labor costs for state cannabis businesses. The next steps in the process involve a formal rulemaking procedure, which includes public hearings and a comment period to gather input from stakeholders before finalizing the new regulations.

MO – Missouri regulators have denied certification to the majority of winners of the cannabis social equity microbusiness licenses citing issues with the application process and eligibility criteria. The Missouri Department of Health and Senior Services found that many applicants did not meet the necessary requirements leading to a significant number of disqualifications. Examples of applicants not meeting the necessary requirements include failing to provide sufficient documentation of residency, not demonstrating a history of economic disadvantage, and lacking proof of prior cannabis-related convictions. This decision has sparked concerns and discussions about the fairness and transparency of the licensing process among stakeholders.

MS – A Fifth Circuit panel questioned attorneys about when governments can restrict commercial speech related to activities illegal under federal law but regulated under state law, focusing on a Mississippi medical cannabis business’s challenge to advertising restrictions. The plaintiffs argued that federal bans should not negate their right to commercial speech about Mississippi’s legal medical cannabis program.

ND – A recent poll indicates that 45% of respondents support Measure 5, which would establish a new chapter in the North Dakota Century Code to permit the production, processing, sale, and legal possession of cannabis for individuals aged 21 and older, while 40% oppose it and 15% remain undecided.

NE – Amid a state challenge to Nebraska’s medical cannabis legalization ballot initiatives, the campaign Nebraska Families 4 Medical Cannabis (NF4MC) touted an economic analysis that estimates that medical cannabis patient registrations could exceed 93,000, translating into more than $925 million in economic benefits for the state by 2030.

NY – New York cannabis regulators have approved 141 new adult-use cannabis company permits and, for the first time since 2015, added three new vertically integrated licenses to the medical side of the industry. The move brings the total of vertically integrated licenses in the state to 12.

OH – Ohio dispensaries have generated nearly $100 million in cannabis product sales within the first 60 days of the state’s adult-use cannabis program. According to new state data, sales reached $98.3 million from 1.3 million receipts.

PA – Pennsylvania lawmakers have sent a bill to the governor to correct an omission that unintentionally excluded dispensaries from state-level tax relief for the medical cannabis industry. This corrective legislation follows a budget bill signed by Gov. Josh Shapiro that included tax reform provisions to partially counteract a federal ban on tax deductions for cannabis businesses but initially failed to cover dispensaries due to a drafting error.

TX – The Texas Department of Public Safety (DPS) released a report that highlighted the medical cannabis system’s lack of statewide access for patients and the need for a significant increase in the number of licensed dispensaries to meet demand (recommending an increase from three presently to more than ten). Although released by DPS, the report was conducted by Weeds, Inc., a New Mexico-based firm, and it has not been endorsed by the state. Since implementation of the medical cannabis law in 2015, the patient count in the Texas Compassionate Use Program has surged to close to 100,000 enrollees.

DC – The Alliance of Legal Cannabis Entities-DC (ALCE) have recently filed two civil complaints against unlicensed cannabis “gifting” stores and their landlords, alleging that the illicit operations have caused significant financial harm to legal retailers. The plaintiffs reportedly base their claims on the Lanham Act, arguing that the unlicensed stores are misrepresenting their products as legal, which gives them an unfair competitive edge over licensed operations. The plaintiffs are seeking damages equivalent to the unlicensed dispensaries’ profits.

Hemp

National Academies of Science, Engineering and Medicine Proposes Banning All Hemp THCs – A report from the National Academies of Sciences, Engineering, and Medicine proposes a ban on all hemp-derived THC products. This recommendation stems from concerns about the lack of regulation and safety data associated with these products, which have become increasingly popular in the market. The report emphasizes the need for clearer guidelines and research to ensure consumer safety and product efficacy. This potential ban could significantly impact the hemp industry and access to various cannabinoid products.

AK – Attorneys for the state of Alaska are asking a federal court to dismiss a lawsuit from the Alaska Industrial Hemp Association that seeks to block regulations banning the sale of intoxicating hemp products, asserting that the regulations are not preempted by federal law. Alaska is asserting that the 2018 Farm Act allows states to impose stricter regulations than those set by the federal government, and that its rules do not interfere with interstate commerce but simply prevent the sale of certain products within the state.

CA – A California state judge denied a hemp industry request for a temporary restraining order that would have blocked emergency regulations banning consumable hemp products. The state court noted that the petitioners did not demonstrate sufficient irreparable harm, especially when weighed against the risks posed by intoxicating hemp products to children. Additionally, the judge found that petitioners were unlikely to succeed on the merits based on their statutory challenges to the agency’s rulemaking authority.

MO – Missouri Governor Mike Parson’s ban on intoxicating hemp products is currently paused, but plans are in place to resume enforcement next summer as indicated by a preliminary budget request from the Department of Health and Senior Services. The department has requested $877,000 to fund necessary food inspections and litigation related to Parson’s executive order, which reportedly prohibits the sale of foods containing psychoactive cannabis unless they come from approved sources.

NJ – U.S. District Court Judge Zahid N. Quraishi granted a partial win to the hemp industry in its legal challenge of the state’s recent law restricting the sale of intoxicating hemp products, ruling that some parts of the law violate the dormant commerce clause and are preempted by the 2018 Farm Bill. The district judge, however, declined to strike down the entire law, allowing New Jersey to continue regulating hemp production so long as it does not impede interstate transport of hemp and hemp products.

International

Thailand – The Public Health Ministry is set to issue a new regulation aimed at tightening control over the production, import, export, sale, and possession of cannabis and hemp extracts, classified as Type 5 narcotics. The draft regulation, approved in principle by the Cabinet, will establish criteria for obtaining and renewing licenses for various purposes including medical, commercial, and scientific use. Violations of the regulation could lead to severe penalties including up to five years in prison.

Spain Introduces Draft Royal Decree to Regulate Medical Cannabis – The Ministry of Health of Spain has introduced a draft royal decree that seeks to regulate medical cannabis. The proposed decree authorizes medical cannabis use for patients with certain qualifying medical conditions who do not respond to treatment. The guidelines established by the decree permit the use of standardized cannabis preparations only, meaning that only THC and/or CBD extracts registered with Spain’s Medicines and Health Products Agency will be allowed, require informed consent, and include other strict requirements for hospital pharmacies, manufacturers, and healthcare providers. While cannabis consumption and personal cultivation has been decriminalized, cannabis production, import, and sale remain prohibited in Spain.

Malta’s Cannabis Authority Contemplates ‘Safe Places’ Designated for Cannabis Consumption – The CEO of Malta’s cannabis authority stated that the cannabis authority is working with stakeholders to analyze the feasibility of “safe places” for on-site cannabis consumption, among other regulatory and legislative aims. The authority has commented that such safe places would be “away from minors, public places, and other people who are bothered by the [odor]” and could possibly reduce illegal smoking on the street. Malta’s cannabis authority was established to eradicate the black cannabis market and has implemented various regulatory controls, including age verifications, restrictions on advertising and consumption, and licensing requirements.

Business

CBO Releases Economic Impact Study on Cannabis Banking Act – The Congressional Budget Office (“CBO”) has released an analysis on the economic impact of the Secure and Fair Enforcement Regulation (SAFER) Banking Act approved by the Senate Banking Committee, which establishes guidelines and protections for banks servicing the cannabis industry. Some of the key highlights include an increase in federally insured bank deposits and administrative costs. In total, CBO estimates the SAFER Banking Act would increase net direct spending by $63 million over the 2024-2034 period.

IRS Will Keep Applying and Collecting 280E Tax – The IRS has again stated that Section 280E, which prohibits cannabis businesses from claiming any tax deductions or credits, will continue to apply until a final rescheduling rule is issued. The IRS has further clarified that it will seek to collect all taxes due from cannabis businesses for any years prior to such final rescheduling. Dentons views the IRS’s interpretation of Section 280E to be unreasonably narrow. Please contact tax attorney Mark Loyd if you are interested in learning more about the work that Dentons has been doing in this space.

Tilray Brands Launches THC Drinks in the US – Tilray Brands, a Canada-based cannabis and beverage company, has entered the US market with a range of Delta-9 THC mocktails and seltzers.

Cannabis Software Employee Denied Visa for Work ‘Abetting’ US Drug Law Violations – Treez, a business that offers a software platform for the cannabis industry, filed suit asking a US judge to override immigration authorities who denied an employee a visa on the grounds that is work “aided and abetted activities related to violations of federal drug laws.” A trial date is tentatively scheduled for November 13.

New Rule Excludes Companies Working with Cannabis Business from Participating in Federal Loan Program – The Rural Utilities Service, part of the U.S. Department of Agriculture, has proposed a rule that bars any entity that “derives income from illegal drugs, drug paraphernalia, or any other illegal product or activity as defined under federal statute” from participating in its guaranteed loan program known as OneRD. The authority has clarified this rule applies to borrowers who lease to or enter into agreements with cannabis dispensaries.

Fed Rate Cut Signals Potential Benefits for Cannabis Operators – The Federal Reserve’s decision to lower interest rates by 50 basis points signals monetary policy shift that could benefit the conditions of financing for cannabis operators by improving investment outlook, the terms and conditions for refinancing maturing debt, and lowering the interest due on unpaid federal taxes.

NORML Op-Ed – NORML penned an op-ed that covers the myths and stereotypes perpetuated by the US media and policymakers in the 1900s that led to the broad criminalization of cannabis use, as well as the shift in public opinion supporting modern efforts to legalize. For example, in July 1927 the New York Times published an article claiming that a Mexican family had gone insane by eating the marihuana plant. These old arguments resemble modern claims of increased psychosis caused by cannabis, a claim that has been debunked numerous times.

Eaze is Going Out of Business – Eaze, the San Francisco-based cannabis technology giant that was once valued at more than $700 million is laying off more than 500 workers and “wind[ing] down operations” this year. The company, which launched in 2014, offers on-demand delivery services to California and Michigan residents. The company’s CEO stated in a LinkedIn post that it sold its assets at auction in early August and plans to be completely shuttered by December 31. Eaze’s ignominious ending continues the trend of failing California cannabis giants—MedMen and Herbl have both shut down operations this past year—as the market struggles against purported overregulation and competition from illicit cannabis sources.

Cannabis Businesses are Taking Marketing ‘Lessons’ from Tobacco and Alcohol – In a recent blog post, National Institute of Drug Abuse Director Dr. Nora Volkow argued that cannabis businesses have learned marketing “lessons” from Big Tobacco and Alcohol. Although lawmakers and health agencies have seen progress in combating the use of other legal substances like tobacco, Volkow said the cannabis industry has “presented new opportunities for commercial interests to drive drug consumption across all ages and demographics.”

Medicine

‘Lesser-Known’ Cannabis Components CBG and THCV are ‘Promising’ Treatments for Parkinson’s and Alzheimer’s – A new scientific review highlights the potential of lesser-known cannabinoids, such as CBG (cannabigerol) and THCV (tetrahydrocannabivarin), as promising treatments for neurodegenerative diseases like Parkinson’s and Alzheimer’s. Researchers found that these compounds may offer neuroprotective effects and could help alleviate symptoms associated with these conditions.

A Majority of Pain Physicians Favor Federal Legalization of Medical Cannabis – A survey reveals that a majority of pain physicians support the federal legalization of medical cannabis. The findings indicate that these healthcare professionals recognize the potential benefits of cannabis in managing chronic pain and improving patient care. Many respondents believe that legalization could enhance access and reduce stigma surrounding medical cannabis use. The survey highlights a growing acceptance among pain specialists regarding the role of cannabis in treatment strategies.

New Research Debunks the ‘Lazy Stoner’ Stereotype – New research investigates a prevalent myth about cannabis: that it universally impairs cognitive function and mental health. While cannabis can affect individuals differently, research shows that not everyone experiences negative effects, and some may even benefit from its use. The researchers emphasize the importance of context, such as dosage and individual differences, in determining how cannabis impacts cognitive abilities.

Psychedelics

DEA Calls for Increased Production of Certain Psychedelics for Research – The Drug Enforcement Administration is calling for increased production of certain psychedelics for research purposes as cannabis quotas stabilize in anticipation of a scheduling decision. This move reflects growing interest in the therapeutic potential of psychedelics alongside ongoing regulatory considerations for cannabis.

New Michigan Bill Would Legalize Psychedelic Mushrooms for People with PTSD – A new bill in Michigan is aimed at legalizing psychedelic mushrooms for individuals with PTSD. The proposed legislation seeks to allow regulated access to psilocybin as a treatment option for those suffering from the condition. Proponents argue that the therapeutic effects of psychedelics could provide significant relief for PTSD patients. This initiative reflects a growing movement to explore the medical potential of psychedelics in treating mental health issues.

Minnesota Government Psychedelics Task Force Recommends Decriminalizing Psilocybin Mushrooms – Minnesota’s psychedelics task force has advised lawmakers that they should decriminalize psilocybin mushrooms. The task force argues that decriminalization could promote research into the therapeutic benefits of psilocybin particularly for mental health treatment. They emphasize the importance of addressing public safety and health concerns associated with psychedelic use. This recommendation reflects a broader trend in various states reevaluating their policies on psychedelics and exploring potential benefits for mental health care.

Dentons Speaks

Food and Beverage Insider published an article by Chicago Health Care partner Joanne Cáceres discussing the rapid growth of the hemp market and the resulting opportunities and legal challenges for alcohol vendors navigating shifting regulations.

Hemp Coalition Claims Congressional Bill is a Game Changer for CBD Regulation – ONE HEMP, a coalition of industry leaders, lauded Congressional action toward the regulation of CBD as a dietary supplement, voicing support for the Cannabinoid Safety and Regulation Act introduced by Sen. Ron Wyden (D-OR). ONE HEMP counsel and Dentons partner Kelly Fair stated, “The Wyden bill marks the beginning of a process that will ultimately lead to an approach that will promote a vibrant CBD industry and ensure access for millions of consumers to the highest quality and safest CBD products.”

Portland partner Hannah King spoke on a panel titled The Business of Cannabis: A Legal and Accounting Update.

Please click here for more information on the Dentons US Cannabis group.

Authored by associates Malina Dumas, Lauren Estevez, Seena Forouzan, Sarah Pennington Richards, and Jacob Raver