January 2020

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