June 2018

High Hopes and Torched Dreams

This week’s cannabis news was filled with high hopes for some and torched dreams for others. On the one hand, the Food and Drug Administration made history by approving Epidiolex, a cannabis-derived medication used in the treatment of two rare forms of epilepsy. On the other hand, Massachusetts’ Attorney General, Maura Healey, issued a ruling that permits cities and towns in the Commonwealth to extend the temporary moratorium on retail and other marijuana businesses through June 2019—almost a full year past the date approved by Massachusetts voters when recreational sales were to commence. This marked a reversal by Healey, who previously indicated that local freezes could not extend beyond December 31, 2018, due to constitutional concerns.

The Epidiolex announcement cuts at the very argument used by many anti-cannabis activists that all too often focus on the lack of research into cannabis as a reason to uphold its prohibition. In a statement, FDA Commissioner Scott Gottlieb said:

This approval serves as a reminder that advancing sound development programs that properly evaluate active ingredients contained in marijuana can lead to important medical therapies … We’ll continue to support rigorous scientific research on the potential medical uses of marijuana-derived products and

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The West Coast has pioneered the national cannabis industry, with California, Oregon, and Washington leading the way in decriminalization and legalization efforts, and that trailblazing reputation has contributed to the impression that market concentration may be skewed toward the Pacific Ocean. However, it’s companies that have been established in the more restrictive, under-the-radar medical cannabis markets of states like Massachusetts, New York, Pennsylvania, New Hampshire, and Ohio, that may have the best long-term positioning and highest valuations.

The reason for this might be counter-intuitive: West Coast states have been much more liberal in issuing licenses to operate cannabis businesses, which has created a market saturated with retail, cultivation, and processing licenses, which, in turn, has created more competition for increasingly smaller market shares. States on the East Coast typically have stricter rules, and companies there must jump through a number of hoops before being granted a license to operate. So while markets in these states is, therefore, limited, given the relatively few licenses granted and high barriers to entry, there is also less competition than out west. The more highly competitive application process also creates an environment that has resulted in eastern companies being some of the best capitalized … Keep reading

Crimson Galeria Limited Partnership et al (the Plaintiffs) vs. Healthy Pharms, Inc. et al (the Defendants), in Civil Action No. 1:17-cv-11696-ADB (the Complaint), which is currently pending in the United States District Court for the District of Massachusetts, is an interesting case to watch, as it could have far-reaching implications for the cannabis industry. In it, Plaintiffs allege that all Defendants are criminally conspiring to grow and sell cannabis and cannabis products, in violation of the Controlled Substances Act and the federal Racketeer Influenced and Corrupt Organizations (RICO) Act. This is a stretch, as one of the defendants, Century Bank and Trust Company, only provides banking services to Healthy Pharms, Inc., a Massachusetts-licensed registered marijuana dispensary located in Harvard Square. Not to put too fine a point on the dispute, but by invoking the RICO statute, Plaintiffs are attempting to make a federal case out of what amounts to a Harvard Square landlord dispute, because the landlord does not approve of Healthy Pharms, Inc.’s operation and is concerned about the potentially negative ramifications it may have on its own business and real estate value.

On December 15, 2017, Century Bank filed a brief in support of its motion to … Keep reading