Checking in on the SAFE Banking Act

While the legalization of medical and recreational marijuana continues to build momentum across the U.S., access to banking and other financial services has remained a consistent barrier to the legal marijuana industry. As we discussed back in October, there was major optimism when the Secure and Fair Enforcement Banking Act (the “SAFE Banking Act”) was finally passed by the U.S. House of Representatives in September 2019. However, this has remained idle in the hands of the Senate Banking Committee since September without any notable advancement.

The legislation, which does not address the decriminalization or legalization of marijuana, would provide a much needed safe harbor for banks and other financial institutions offering financial services to cannabis-related businesses. In addition to providing peace of mind to banks and credit unions that wish to service legal marijuana businesses, the legislation would also allow cannabis companies to move away from operating primarily on a cash basis, which has been a growing public safety concern for many of the affected businesses.

In December, the Chair of the Senate Banking Committee, Mike Crapo, proposed certain changes to the bill and requested public comment to assist with the Committee’s decision-making. Some of these proposals have … Keep reading

CBD as a Dietary Supplement – A Potential Regulatory Avenue for Retail Hemp Operators Selling THC Extracts

On January 13, 2020, Representative Collin Peterson, the Chairman of the House Agricultural Committee, introduced a new bipartisan bill, H.R.5587 (Bill 5587), in the U.S. House of Representatives that would potentially provide significant developments for the regulation of hemp-derived cannabidiol (CBD).  In short, Bill 5587 would (1) regulate CBD as a dietary supplement, provided all other applicable requirements for a dietary supplement are satisfied and (2) allow CBD to be included as an additive in foods that are introduced in interstate commerce and (3) mandate research by the UDSA on challenges faced in the industry.

First, a Recap of How CBD is Presently Treated.

The Agriculture Improvement Act of 2018 (2018 Farm Bill), removed industrial hemp containing not more than 0.3% of tetrahydrocannabinol (THC) and certain hemp by-products (such as CBD) from Schedule I of the U.S. Controlled Substances Act.  It further preserved the authority of the U.S. Food and Drug Administration (FDA) to regulate hemp/CBD and hemp/CBD-related products under the Federal Food, Drug, and Cosmetic Act and Section 351 of the Public Health Service Act. Accordingly, products containing hemp and hemp-derived CBD are subject to the same requirements as FDA-regulated products containing any other substance.

However, after the … Keep reading

New York Legislature Optimistic to Legalize Recreational Cannabis in 2020


New York is gearing up to become the 12th US state to legalize recreational cannabis, and the 2nd US state to do so by way of legislative measure (as opposed to voter initiative), as Gov. Andrew Cuomo vowed to legalize recreational cannabis in his 2020 State of the State address in early January. Gov. Cuomo followed up his vow as he introduced language legalizing recreational cannabis in the state’s budget legislation last week.

State legislators are also optimistic that a law regulating recreational cannabis will be enacted in the coming months. That is… if the Governor and the state legislature are able to agree to the details following the failure of similar efforts just last year… Contention remains on many fronts as the Governor and state legislators have been unable to agree, among other things, on the proper method to distribute revenue from taxing recreational cannabis. The legislature’s bill proposal seeks to dictate how much funding is allocated for drug treatment and traffic-safety programs. It also specifies that half of the new resources be invested into communities that were disproportionately impacted by laws that criminalize the possession and sale of drugs.

Such “social equity” provisions remain a … Keep reading

Stuck in the Weeds with Massachusetts HCAs

A few years ago, the Commonwealth was considered an East Coast cannabis trailblazer for legalizing adult-use cannabis in 2016. However, there is mounting criticism faulting Host Community Agreements (HCAs) for dampening the industry’s growth potential in Massachusetts.  Let’s take a look at the basics and burden of Massachusetts’ HCAs:

Hosting Headaches

As a prerequisite for filing an application for a license in Massachusetts, a marijuana establishment must execute a Host Community Agreement with municipality where it intends to be located. (1) A HCA is a negotiated contract between the establishment and municipality, which includes terms and conditions relating to how the establishment will operate in the local community. There is not a standard form HCA because each municipality will need to consider the relevant circumstances and effects of an adult-use establishment entering the local community. This is not a quick administrative decision- the municipality must first vote to consider whether it even wants an adult-use establishment within its borders and any limitation on the number of establishments permitted. After deciding to open its doors to an adult-use establishment, in negotiating the Host Community Agreement the municipality also needs to consider the financial impact and related fees to charge to … Keep reading

Raising Capital in the Cannabis Industry: Fundraising Dos and Don’ts

Last year proved challenging for companies seeking to raise capital in the cannabis industry. The capital markets tightened and available funding dried up. Many of the industry’s publicly traded companies saw precipitous declines in valuations. Although fundraising efforts in the current environment still face genuine hurdles, there is cause for optimism that 2020 can be a banner year for companies seeking to raise capital in the industry.

It hasn’t been all doom and gloom for the industry’s capital raising efforts. In fact, venture capital firms invested almost $2 billion in U.S.-based cannabis startups alone through the first three quarters of last year – more than doubling the $835 million venture-backed investments in all of 2018. However, those taking a “glass half empty” view will focus on the decline in total funding from $967.1 million in the second quarter of 2019 to $452.8 million in the third quarter of the year.

With a hopeful eye toward further industry growth, this is the first installment of a series of posts that will discuss some of the important “fundraising dos and don’ts.”  While the volatility of many of the sector’s publicly traded companies has garnered the lion’s share of media attention, this … Keep reading

2020: New Year, New Opportunities

Now that the new year is here and in full swing, B&L’s cannabis advisory practice is taking some time to reflect on successes and shortfalls in the cannabis industry’s over the past 12 months. Following a momentous 2018 — which saw the passage of a federal Farm Bill legalizing hemp as well as marked increase in public support for legalization — this past year made clear that the industry has not yet reached its next phase of long-term growth.

In short, industry developments in 2019 have received mixed reviews — cannabis stocks fell sharply while federal legislation slowly progressed in Congress, bipartisan support for cannabis legalization continued to grow as several states were blindsided by the vaping crisis and so on. Thus, while the state of the industry remains strong (and we remain optimistic), its shortfalls reflect an industry still in its adolescence. Nonetheless, this was an exciting year as lawmakers on both the federal and state level

Federal Developments

In Congress, the dam appears to have broken on the introduction of cannabis legislation as there were several positive developments this year. For one, the long-awaited Secure and Fair Enforcement (SAFE) Banking Act was finally passed by the U.S. … Keep reading

See Capital Markets, M&A, and Beyond Panel here.

The Burns & Levinson 2019 State of the Cannabis Industry Conference concluded with a final panel, covering the current status of the industry’s capital markets and M&A transactions; finishing off with a look into the future.  The discussion centered on the effects of the industry’s recent nosedive earlier this year and how that has played out in the various related financial markets and asset classes.  Drawing across a broad spectrum of specialists, from investment bankers and accountants to operators and lawyers, the seasoned professionals on the panel echoed a few key points, which those in the industry should be aware of in the coming months, as they adjust to the fluid capital landscape on the horizon.

The cannabis industry is one that is continuously plagued by public sentiment, for better or worse, as seen over the past several days, with public cannabis company share prices rollercoasting up (when the U.S. House Judiciary Committee approved a bill legalizing marijuana) and down (with the FDA’s recent issuance of warning letters to companies selling CBD), often with intraday deltas in excess of 1,000 bps.  Over the past several months, the public sentiment and … Keep reading

See Hemp & CBD Panel here.

With the cannabis space continuing its significant pace of growth, the industry has witnessed new players enter the arena: hemp and cannabidiol (“CBD”). The demand for hemp and CBD has skyrocketed in recreational, industrial, and retail spaces, however, the Food and Drug Administration (“FDA”) has not kept up with this influx despite its prohibition of the sale of CBD. Attendees of the Third Annual State of the Cannabis Industry Conference had the opportunity to learn from the experts during our Hemp and CBD panel. Among other things, our panelists discussed future FDA enforcement actions and what possibility there is, if any, of regulations loosening.

Moderated by Scott Moskol, co-chair of Burns & Levinson’s Cannabis Business Advisory Practice, the panel opened with a brief discussion of the lack of standardization in the CBD industry despite the ubiquity of CBD products. Kevin Pilarski, the Chief Commercial Officer of Revolution Enterprises, underscored the need for independent third-party testing of CBD. With respect to compliance, Mr. Pilarski explained that until the industry standardizes a testing requirement it is difficult for hemp purchasers to know what they are getting. Such uncertainty threatens the overall stability of the … Keep reading

See Hot Smoking Topics in Operations Panel here.

The growth and legitimacy of the cannabis industry is at an all-time high with nearly two-thirds of the country in support of the federal legalization of cannabis. With such legitimacy and potential for further growth, it’s no surprise ancillary businesses are coming to the forefront to provide services to the cannabis industry. However, with so many new and ever-changing developments in the rapidly growing cannabis industry, ancillary businesses need to be positioned to understand and adapt to the complex landscape of the cannabis industry in order to provide sound advice and guidance to cannabis operators.

The Hot Smoking Topics in Operations Panel, presented by Burns & Levinson, examined the landscape of ancillary services provided to the cannabis industry and the Governor’s ban on vaping products.

Tina Sbrega, President and CEO of GFA Federal Credit Union, a well-capitalized, $540 million member-focused credit union, is at the forefront of providing services to the cannabis industry. Under Ms. Sbrega’s leadership, GFA Federal Credit Union created a subsidiary company in 2018 to provide banking services to cannabis operators, employees of cannabis operators and other companies willing to service the cannabis industry.

According to Ms. … Keep reading

See the State of the Cannabis Industry Panel here.

As previously blogged, Burns & Levinson hosted its third annual State of the Cannabis Industry Conference on October 23rd with over 200 attendees present. The conference began with its State of the Cannabis Industry Panel that examined where things presently stood on a national and local level within the industry. The panel opened with a reflected upon what has transpired over the past year and dug into what may be expected as legalize marijuana continues to come online throughout the country. Such an examination was led by Frank A. Segall, who moderated the panel of speakers in the State of the Cannabis Industry Panel.

Public support for cannabis legalization is at an all-time high, with nearly two-thirds of the country supporting federal legalization. Pursuant to such trends, the House of Representatives has shown increased willingness to support the increasing popularity of federal legalization. The “McClintock Amendment,” which would protect adult-use marijuana programs similar to that of the “Rohrabacher–Farr amendment,” which protects medical-use marijuana programs, passed the full House by a vote of 265-167; the Senate has yet to take action on the Amendment. Furthermore, the House passed the … Keep reading