Since the Secure and Fair Enforcement (SAFE) Banking Act (the “Act”) found bipartisan support in the House Financial Services Committee back in March, the industry has been waiting for even the slightest sign of its legislative progress. Fortunately — on September 25, 2019 — the U.S. House of Representatives formally passed the SAFE Banking Act of 2019, which marks the first standalone cannabis reform bill to ever pass the House. The Act, if codified into law, would unshackle the cannabis industry and open access to insurance, traditional banks and other imperative financial service companies.
Even as states have made marked progress on cannabis legalization, the federal government’s regulatory regime continues to burden the industry, including with respect to banking and similar services. Two primary issues plague the cannabis industry’s access to meaningful financial services: (i) any business operating pursuant to a state law, whether it be a financial institution, real estate company, or any other ancillary operation working in connection with cannabis industry, is subject to risk of being construed as aiding or abetting a criminal conspiracy in violation of the Controlled Substance Act since those services do, in fact, facilitate and promote the marijuana industry; and … Keep reading
Over the past seven months, and just as recently as three weeks ago, the Federal Trade Commission (“FTC”) has released several warning letters to businesses selling CBD products. These letters concern the FTC’s review of potential violations of the Federal Trade Commission Act of 1914, §§ 41-58, as amended, (the “FTC Act”) made in websites and marketing materials of CBD-related businesses. Participants throughout the CBD industry may take prudence in reviewing not only these health claims called to question by the FTC, but also by how these other industry participants have responded to the FTC’s warning letters.
The FTC and the CRS Evidence Standard
The FTC is an independent federal agency centered on maintaining marketplace competition that benefits both businesses and consumers. The FTC identifies its purpose as, “seek[ing] to protect consumers by enforcing laws and rules that promote truth in advertising and fair business practices, and by educating consumers and businesses about their rights and responsibilities.” FTC Warning Letter to 4Bush Holdings, LLC, dated September 9, 2019.
In its warning letters, the FTC expressed concerns with companies “making false or unsubstantiated advertising claims about the health benefits of products containing cannabidiol (CBD).” The FTC … Keep reading
On September 24, 2019, the Cannabis Control Commission (“CCC”), the Massachusetts government agency that oversees and regulates the state’s marijuana industry, voted to approve a set of revised marijuana regulations that provides for a number of updates to the existing versions, including several significant changes. Of note, the CCC is contemplating the establishment of a licensing process that would permit marijuana companies to engage in new lines of business, including social consumption and delivery services. While home delivery services are expected to begin within the coming months, the CCC noted that the newly approved “Social Consumption Establishment Pilot Program” may require legislative action before it can be implemented.
Under this Social Consumption Establishment Pilot Program, certain brick and mortar marijuana establishments will be permitted to sell marijuana products to customers who could consume the goods on-site. Similar businesses, often referred to as “cannabis cafés” or “cannabis lounges”, were first made popular in Amsterdam and have recently become a hot topic in the domestic U.S. industry, as more states, such as California, have passed regulations allowing for their proliferation. While many have voiced valid concerns regarding such businesses (including local neighborhood nuisances and the intoxicated operation of motor vehicles), there … Keep reading
In response to the growing crisis around vaping-related illness, Governor Baker has declared a public health crisis and issued a four-month ban on the sale of all vaping products in Massachusetts. The state’s Public Health Council subsequently issued a formal approval of the ban shortly thereafter. The ban – which went into effect immediately on September 24th – is set to last through late January 2020.
Since the media first reported on the issue, doctors have identified more than 530 confirmed or possible cases of vaping-related illnesses across 38 states, according to the Centers for Disease Control (“CDC”). And while the CDC has reiterated that many patients have in fact used THC-based products, some obtained on the street rather than from state-licensed recreational or medical marijuana retailers, the exact cause of such vaping-related illnesses has yet to be determined. Nonetheless, Massachusetts’ officials have reported 61 possible cases of vaping-related illnesses in the state as of this week, including among teenagers — a jump from 38 just last week. In light of this uncertainty, the Governor has halted all sales to allow for investigations by both medical and law enforcement authorities, at both the state and federal level.
Pursuant to … Keep reading
In early August, hemp farmers in central Oregon confronted a dilemma that every crop farmer fears. Severe thunderstorms – showering golf ball-sized hail – rolled through nearly five hundred acres of farmland, severely damaging the hemp crops in its path. Early estimates tallied the storm’s damage at nearly $25 million (~ $50,000 an acre), though losses now appear to be less than initially believed. Nonetheless, the destruction witnessed in central Oregon, one of the United States’ most densely planted hemp regions, elucidates a key challenge to the industry’s continued growth and profitability; namely, a lack of access to affordable crop insurance.
Put simply, the status quo for many hemp farmers, especially small-scale operations, is simply too burdensome. Most farmers engaging in hemp production do so at their own risk since the private insurance that is on the market is often too expensive. And even if hemp farmers too are willing to purchase an expensive policy, many cannot overcome the private insurance industry’s self-imposed barriers to coverage. For example, many private insurers require that operations have at least 25 acres of hemp crop.
Fortunately, the United States Department of Agriculture (USDA) is beginning to take steps to protect some hemp … Keep reading
On Thursday, July 25, 2019, the Senate Agriculture Committee held a hearing before federal regulatory agencies in the agriculture, public health and pesticides space concerning efforts to implement the legalization of hemp. Representatives from the U.S. Department of Agriculture (USDA), the Environmental Protection Agency (EPA) and the Food and Drug Administration (FDA), among others, were invited to attend. The hearing was an effort to provide “certainty and predictability for farmers,” stated Pat Roberts, Chairman of the Agriculture Committee.
Why was this hearing needed?
The passage of the Federal Agriculture Improvement Act of 2018 (the “2018 Farm Bill”), which was signed into law by President Donald Trump on December 22, 2018, took monumental steps to remove several federal prohibitions on the U.S. hemp industry. For instance, the 2018 Farm Bill legalized the cultivation and distribution of hemp, defined as any part or derivate of the cannabis plant with 0.3 percent or less of tetrahydrocannbinol (THC).
However, while the Farm Bill provided some regulatory framework at the federal level for the cultivation of hemp, it did not resolve all uncertainty as to the FDA’s regulatory authority. In addition, there is still unrest as a result of ongoing concerns and … Keep reading
The Food and Drug Administration (FDA), following up on its public concerns about the science, safety, effectiveness and quality of unapproved products containing cannabidiol (CBD), recently issued a warning letter to Curaleaf Inc., of Wakefield, Massachusetts, for illegally selling unapproved products containing CBD online with unsubstantiated claims that the products treat cancer, Alzheimer’s disease, opioid withdrawal, pain and pet anxiety, among other conditions or diseases.
Acting FDA Commissioner Ned Sharpless, M.D., commenting on the warning letter, indicated that “selling unapproved products with unsubstantiated therapeutic claims — such as claims that CBD products can treat serious diseases and conditions — can put patients and consumers at risk by leading them to put off important medical care.” He further stated that “there are many unanswered questions about the science, safety, effectiveness and quality of unapproved products containing CBD and that the agency stands firm in its commitment to continue monitoring the marketplace and protecting the public health by taking action as needed against companies that deceive consumers and put them at risk by illegally selling products marketed for therapeutic uses for which they are not approved.”
The agency has established an internal working group to explore potential regulatory pathways for various … Keep reading
Early this month, New Jersey enacted new workplace protections for authorized medical cannabis users
Under the new regulations, employers are prohibited from taking an adverse employment action against an existing or prospective employee on the basis of the person’s status as a registered qualified user of medical cannabis. Under the recent amendment to the New Jersey Compassionate Use Medical Marijuana Act (“CUMMA”), “adverse employment action” is defined as “refusing to hire or employ an individual, barring or discharging an individual from employment, requiring an individual to retire from employment, or discriminating against an individual in compensation or in any terms, conditions, or privileges of employment.” Any employee or applicant, who is registered and qualified under New Jersey’s medical marijuana program and tests positive for cannabis, is required to receive a written notice by its employer offering the employee or applicant the right to (i) state a “legitimate medical explanation” for the positive test result, which may include authorized use issued by a health care practitioner, or (ii) request a retest of the sample within three days of receiving such notice. Further, the amendment’s notable silence on an employer’s obligation to accommodate an employee’s use of medical marijuana … Keep reading
The nascent cannabis industry is much like a younger sibling, riding the wake of its forerunner, alcohol. In joining the vice industry’s consumer products market segment, the cannabis industry has had the benefit of being able to follow in the footsteps of the alcohol industry and anticipate potential upcoming obstacles. This use of the alcohol industry as a guinea pig can be readily observed in connection with the evolving legal and regulatory frameworks currently being formulated for cannabis. It is in this light that the June 26, 2019 U.S. Supreme Court decision in Tennessee Wine & Spirits Retailers Association v. Thomas, a case concerning certain Tennessee alcohol regulations, can offer some guidance and foreshadow the future of cannabis laws and regulations.
In Thomas, the Tennessee Wine and Spirits Retailers Association (a trade association of in-state Tennessee liquor stores), sought relief from the Supreme Court in their endeavor to have certain Tennessee state regulations -which required state residency for holders of alcohol licenses- upheld. Justice Alito and the Court ruled against the Association in their holding that such regulations were unconstitutional.
Although a number of other regulations requiring that alcohol license holders and applicants in Tennessee be residents … Keep reading
On May 30, 2019, the U.S. Court of Appeals for the Second Circuit —in an opinion delivered by the eminent Guido Calabresi— offered the cannabis industry a glimmer of hope in its pursuit of the federal legalization of marijuana. In the case of Washington et al. v. Barr et al., a set of plaintiffs challenged the DEA’s classification of marijuana as a Schedule 1 drug under the Controlled Substances Act (“CSA”). Most courts, including the SDNY (where the case originated), have had a general tendency to dismiss such cases, citing the preeminent precedent established in Gonzales v. Raich, which confirmed the supremacy of the federal government’s prohibition of marijuana over state legalization. The Second Circuit, in Washington, stopped short of dismissing the appeal from the SDNY and set up the opportunity for a potential challenge to the federal ban in the near future.
While the plaintiffs in Washington surmounted an incredible obstacle, by avoiding outright dismissal, the Court did not go so far as to provide them with the relief they sought. Instead, Calabresi and his peers opted to concur with the SDNY’s ruling that the plaintiffs had failed to fully exhaust their available alternative remedies … Keep reading