Cannabis Law

The Cannabis Administration and Opportunity Act: Too Much Too Soon? Too Little Too Late? Or Just the Right Time?

On July 14, 2021, Senators Chuck Schumer, Cory Booker and Ron Wyden introduced a bill to legalize and regulate cannabis at the federal level, titled “The Cannabis Administration and Opportunity Act.” This short, impactful bill is sure to stir up controversy and polarizing debate among legislators when, and if, it ever reaches the Senate floor.

The deadline for public comment recently passed – September 1, 2021 – and, unsurprisingly, the drafters of the bill were flooded with input from special interests groups, including the U.S. Cannabis Council, the Marijuana Policy Project, a number of prominent universities and legal scholars, and the DC Fiscal Policy Institute.

While not required, it is likely the drafters of the bill will revise based on some of the comments received, with the actual filing of the bill to follow. Once filed, it will be sent to committee for continued revision and debate.

Recent polls state that 60% of Americans support the legalization of cannabis, but, despite the ideological promises of a representative government, popular support does not necessarily convert into affirmative votes on the Senate floor. The bill requires the support of every Democratic Senator and at least 10 Republicans.

Many Washington insiders are … Keep reading

Cannabis Reform Hits the Senate: A Brief Overview of the Cannabis Administration and Opportunity Act

This past week, Senate Majority Leader Chuck Schumer (D-NY) unveiled the first draft of his long-awaited bill to legalize marijuana at the federal level. Along with Senate Finance Committee Chairman Ron Wyden (D-OR) and Sen. Cory Booker (D-NJ), Sen. Schumer presented the proposal at a July 14 press conference. Titled the Cannabis Administration and Opportunity Act, the legislation – which was partly modeled after the social equity-focused Marijuana Opportunity Reinvestment and Expungement (MORE) Act – largely aligns with advocate and stakeholder expectations.

See “MORE Act: Federal Cannabis Legalization Reintroduced in House” for discussion of the House legislation and its social equity provisions.

“Communities that have been most harmed by cannabis prohibition are benefitting the least from the legal marijuana marketplace,” reads the findings section of the bill, further noting that a “legacy of racial and ethnic injustices, compounded by the disproportionate collateral consequences of 80 years of cannabis prohibition enforcement, now limits participation in the industry.” If enacted, the senators’ bill would decriminalize and deschedule cannabis, expunge prior convictions, and allow the states to create their own marijuana policies.

The proposal is multifaceted and comprehensively addresses several critical issues:

  • Federalism: States may decide whether or how
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Proposed Reforms to Local Host Community Agreements in Massachusetts

Earlier this week, the Massachusetts Legislature’s Joint Committee on Cannabis Policy held a virtual hearing on nine proposed bills focused on reforming the approval process of host community agreements (“HCAs”) between municipalities and marijuana businesses licensed to operate in those cities and towns. Massachusetts lawmakers listened to testimony from advocates, former regulators, attorneys, cannabis business leaders, entrepreneurs and others who argued that the existing local approval process gives municipalities undue leverage in HCA negotiations with marijuana establishments.

As a prerequisite to obtaining state cannabis licensure in Massachusetts, marijuana establishments are required to have an HCA in place with the appropriate municipality. HCAs typically include significant fees imposed by cities and towns, which are ostensibly required to offset the impact by the operation of the cannabis business on the surrounding community. Massachusetts cannabis regulations require the community impact fees to be “reasonably related to the costs imposed upon the municipality by the operation of the marijuana establishment.”

Many of the proposed bills in front of the Joint Committee emphasized, in particular, the community impact fees charged by cities and towns in negotiating HCAs with marijuana establishments. A number of the proposed bills centered around further clarifications to ensure that the … Keep reading

Navigating the SPAC Trend in the Cannabis and Hemp/CBD Market

Special Purpose Acquisition Companies (SPACS) have had increased activity in the cannabis and hemp/CBD industries over the past year. Presently, these “blank check companies” have raised more than $3 billion. Investors and operators interested in partaking in these vehicles and participating in the public market should be aware of which SPACs will be looking to acquire participants in the cannabis and hemp/CBD industries and the tools they will need to navigate these somewhat rocky waters.

Understanding SPACs and the Cannabis Industry

While SPACs are not new to the public market, they have recently taken on some novelty by targeting businesses in the cannabis and hemp/CBD industries, and ancillary businesses to those industries.

Given the nature of these corporate vehicles, there is often limited information on the SPACs’ targeting businesses, as by design these types of companies do not have a firm business purpose.

SPACs typically have 18-to-24 months to purchase private companies or return money back to their investors. To the extent a hemp/CBD- specific SPAC or a SPAC that has expressed intentions of acquiring a cannabis operator, but has not yet combined with one, the SPAC may register on a U.S. exchange – and many of them have … Keep reading

New Massachusetts Cannabis Regulations Up for Public Comment and Final Vote

The Cannabis Control Commission (CCC) assembled on July 20, 2020, to approve draft changes to the cannabis adult-use, medical-use, and colocated operator regulations. A Virtual Public Hearing on the draft regulations was held on August 3rd and public comments will be accepted until August 14th.

The new draft regulations encompass various changes across the board – from new CCC approval procedures, operational requirements, licensing updates, and receivership processes. Given the expansiveness of the proposed changes, it is critical for current and future operators as well as investors, lenders, and financial institutions engaging with industry participants to review and understand the additions and modifications.

Colocated Marijuana Operators (CMOs). In regard to the promulgated regulations concerning Colocated Marijuana Operators, the CCC has proposed to combine the regulations previously set forth in 935 CRM 502.000 with the existing  935 CMR 500.000 (Adult-Use Regulations) and 935 CMR 501.000 (Medical-Use Regulations) due to redundancy in the currently effective colocated operator regulations.

Licensure/Certifications. Some key developments in the new regulations regarding licensure include:

  • Expansive processes pertaining to patient certification/registration such as:
    • permitting patients with certain identified hardships to renew on a 2-year basis instead of annually
    • expressly adding telehealth visitation
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Increasing Lawsuits Against Cannabis-Related Businesses Places Spotlight on Adequacy of Disclosures

Class action lawsuits against publicly traded cannabis-related companies more than doubled from 2018 to 2019, with 13 class action cases filed in 2019 compared to 6 class action cases filed in 2018 – a staggering 116% increase. Lawsuits against cannabis-related businesses continue to grow concurrently with the expanding industry growth and mostly focus on disclosure issues. Such lawsuits are ordinarily filed by shareholders in an attempt to recover investment losses, often after a company’s stock price decreases, and are asserted, in the event that the company allegedly made false and misleading statements or omissions in connection with a securities offering, under the Securities Act of 1933 or the Securities Exchange Act of 1934 for public company disclosures.

For example, on January 16, 2020, Aurora Cannabis Inc. (TSX: ACB), in Warren v. Aurora Cannabis Inc., et al., No. 20-cv-00555, received claims for allegedly making false and misleading statements and/or failing to disclose adverse information regarding Aurora’s business and prospects. Claims against Aurora were brought under the Securities Exchange Act of 1934 after the company announced disappointing results for Q1 2020 (reporting a 25% sales decline) and that the company was halting construction on its operating facilities in various regions – … Keep reading

Suit Filed Against Governor Baker to Re-Open Recreational Marijuana Businesses

On Tuesday, April 7, 2020, five recreational (adult-use) marijuana companies and one individual, a veteran of the U.S. armed forces, filed suit against Massachusetts Governor Charles Baker, seeking declaratory and injunctive relief that would, if successful, nullify the Governor’s executive orders to classify recreational marijuana establishments as “non-essential”, which has forced them to close shop. On March 23, 2020, in light of the COVID-19 crisis, Governor Baker issued an executive order that all “non-essential” businesses close their physical (brick-and-mortar) facilities until April 7, 2020 (extended to May 4, 2020 by a subsequent executive order). While medical marijuana establishments were deemed “essential” and therefore able to remain open, recreational marijuana facilities were not. The following are some of the key takeaways from the complaint filed in connection with the suit and related issues impacting the recreational marijuana industry as a result of their forced cessation of operations.

  • Harm to Recreational Marijuana Businesses. The Governor’s executive orders were a gut punch to Massachusetts’ fledgling marijuana industry and likely killed a number of the commonwealth’s recreational marijuana companies in the cradle. Many of these businesses have only just gotten up of the ground and running, as a result of the lengthy
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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

Hemp Insurance is Cropping Up as the Industry Awaits USDA Regulations

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