As we begin this New Year, we’re taking some time to reflect on all that’s transpired in the cannabis arena over the past 12 months. It’s clear that 2018 was one of the most pivotal and exciting years for the burgeoning marijuana industry. In addition to seeing successful state legalization efforts across the country, we saw signs of support from both political parties (including the President), and witnessed the first legalization of recreational marijuana in an industrialized country with the passage of the Cannabis Act in Canada.
Despite a shaky start to the year, triggered by then-Attorney General Jeff Sessions’ revocation the Cole Memorandum, five states approved legalization initiatives (including Vermont’s vote to approve marijuana in the same week Sessions revoked the Memo). With Vermont and Michigan approving recreational marijuana in 2018, and Oklahoma, Utah and Missouri approving use of medical marijuana, there are now 32 states with some form of legalized marijuana, including 10 which have legalized adult-use marijuana.
This year also saw bi-partisan support for cannabis legalization and its potential social and economic impact. There were a handful gubernatorial races in which candidates made cannabis legalization a key campaign issue. Democrats J.B. Pritzker (IL), Tim … Keep reading
Last week, a House-Senate panel approved the 2018 Farm Bill, thereby ending a months-long stalemate over a piece of legislation that provides critical subsidies to farmers. While much of the bill mirrors current law, the legislation, if passed, will bring an end to five decades of hemp prohibition. Hemp was afforded limited legal protections in 2014, when Congress passed a farm bill that authorized states to develop pilot programs for its research. The 2014 Farm Bill eventually gave rise to a patchwork of state regulations regarding hemp and hemp-derived CBD.
While the hemp industry experienced substantial growth under the 2014 Farm Bill, the new bill is undoubtedly a watershed moment for the entire cannabis industry, as its changes to current law are more far-reaching than its predecessor. If passed, the bill would remove hemp’s low amounts of THC from the Controlled Substances Act, allow the U.S. Department of Agriculture to regulate the crop like any other agricultural commodity, and permit hemp products – like CBD – to be introduced into interstate commerce. Further, it would lift restrictions on advertising, banking, and other financial services.
The bill would also:
- Allow hemp production in all 50 states for any use, including
… Keep reading
The following interview appears in the November–December 2018 issue of the Corporate Counsel Business Journal.
Corporate Counsel Business Journal: Burns & Levinson has had a cannabis law practice since 2013 and has already handled hundreds of millions of dollars in corporate transactions in this emerging industry. How has your cannabis practice evolved and changed since you first started?
Frank A. Segall: Our goal in entering the cannabis space was to bring our sophisticated corporate expertise to this industry. While we certainly started and remain committed to representing operators looking for licensure, we are heavily focused on working with entities raising capital through the public and private markets, forming venture capital funds and acquiring and selling operations on a nationwide basis. We have also been retained to assist groups in cannabis-related workouts and restructures. In addition, we are highly focused on addressing the banking issues confronting this industry, and we are structuring solutions by working with banks and credit unions that are willing to enter this space.
Understanding the depth of the industry, we endeavored from day one to predict the legal needs of the many cannabis-related businesses that are essential to this industry. We are fortunate to … Keep reading
The closely watched Massachusetts cannabusiness case, Crimson Galeria Limited Partnership, et al. v. Healthy Pharms, Inc., et al., has been dismissed. On November 9, 2018, Judge Allison D. Burroughs of the U.S. District Court for the District of Massachusetts issued an order closing the action upon stipulation by the parties to dismiss the action with prejudice. Plaintiffs, whose property is located within 200 feet of Health Pharms’ registered marijuana dispensary, alleged that the operation of the RMD diminished the market value of their properties and restricted future development opportunities. They contended that the RMD made the surrounding area less desirable for prospective buyers or renters, who would “reasonably worry” about “increased crime” and “pungent odors.”
The Healthy Pharms case was followed closed by those in the cannabis industry due to several important issues raised in the complaint. The Plaintiffs asserted claims against the “Government Defendants” for declaratory and injunctive relief, arguing that federal law (i.e., the Controlled Substances Act) preempts Massachusetts’ legalization of medical marijuana dispensaries. They also asserted claims against Healthy Pharms and the other Dispensary Defendants, alleging civil violations of the Racketeer Influenced and Corrupt Organizations Act, for acting and conspiring to distribute marijuana in violation … Keep reading
Following Tuesday’s midterm elections, three states—Michigan, Missouri, and Utah—adopted new cannabis laws: Michigan voters approved a measure that legalizes marijuana for recreational use, Missouri approved the creation of a comprehensive medical marijuana program, and Utah passed a measure legalizing medical marijuana for patients with certain qualifying illnesses.
Proposal 1 makes Michigan the first Midwestern state to pass adult-use marijuana legalization. It establishes several classes of licenses and gives the Department of Licensing and Regulatory Affairs (LARA) up to one year to promulgate regulations. For at least 24 months, LARA will only accept adult-use applications from existing medical marijuana businesses. Marijuana Business Daily has projected Michigan’s recreational cannabis market will generate between $1.4 billion and $1.7 billion in annual sales within several years of launching, making it one of the largest in the nation.
Missouri voters approved Amendment 2 (Medical Marijuana and Veteran Healthcare Services Initiative), making the Show-Me State one of the 33 in the Union that have embraced medical marijuana. The measure creates regulations and licensing procedures for medical marijuana and medical marijuana facilities—dispensaries, cultivators, and testing and marijuana-infused-product manufacturing facilities. Moreover, Amendment 2 tasks the Missouri Department of Health and Senior Services to regulate the … Keep reading
If you read my most recent post on Section 280E of the Internal Revenue Code, you might have picked up on my disappointment with the Alpenglow opinion. Whether the conclusion is right or wrong, in my estimation, it could have been much more thoroughly reasoned.
In Alpenglow, the 10th Circuit Court of Appeals was asked, among other less interesting questions, whether the IRS has authority to apply Section 280E if the taxpayer has not been convicted of drug trafficking. The court summarily concluded that the IRS’s authority was not limited to instances involving a conviction. The opinion’s main themes are as follows:
- The IRS has authority to determine whether and when to deny deductions under Section 280E.
- Section 280E has no requirement that there be a criminal investigation or conviction in order for it to apply, and if that was Congress’ intent, they could have easily placed that language in the statute.
- Other courts have upheld tax deficiencies against state-sanctioned cannabis businesses based on application of Section 280E without questioning the IRS’s authority.
If you consider the legislative intent, this historical application, and what is currently taking place in the cannabis industry, it feels like this was … Keep reading
On October 17, 2018, Canada became the first of the G7 countries (Canada, France, Germany, Italy, Japan, the UK, and the U.S.) to fully legalize the consumption and sale of recreational cannabis nationwide – and only the second country worldwide, following Uruguay in December 2013. While recreational marijuana consumption remains largely prohibited throughout the world, there seems to be no stopping the upward-trending legalization movement sweeping the globe. Case in point: 13 countries – Australia, Canada, Chile, Colombia, Germany, Greece, Israel, Italy, Netherlands, Peru, Poland, Sri Lanka, and the UK (effective November 1, 2018) – now permit cannabis use for medicinal purposes.
Over recent years, especially, marijuana has realized a monumental –and, perhaps, unprecedented – shift in public perception and, in turn, investment activity. Regarding the former, take, for example, the UK: its government is reversing policies on cannabis and is now set to legalize its medical use, with a current investigation into relaxing laws that govern when cannabis-based medicines can be prescribed by doctors. With respect to the latter, the industry is experiencing a flurry of global investment from pharmaceutical, alcohol, tobacco, and food and beverage companies, which are partnering with or providing significant capital to cannabusinesses, to … Keep reading
Below is the conclusion of the conversation that Burns partner and Cannabis Business Advisory Group co-chair Frank A. Segall had recently with Steven Hoffman, Chairman of the Massachusetts Cannabis Control Commission, regarding the state of the industry in the Commonwealth.
FRANK SEGALL: Let’s talk about [the 3% sales tax incentive]. Host-community agreements have received some attention – for those in the audience, the regulations are pretty clear: Towns can charge up to 3% of gross revenue, with respect to costs that are associated – we’ll say directly, but it’s not clear – with operating an establishment. What we’re seeing is, it’s pretty much 3% flat, with no analysis as to the costs. And there are additional requests that towns have been making – we’d like that new fire truck, we’d like that new park – that have created some consternation and raised questions about whether the rules are being followed and the playing field is level. What are your thoughts on that?
COMMISSIONER HOFFMAN: This is a complicated issue – there’s been a lot of comment and feedback on this. We’ve looked at 15+ host-community agreements that we’ve signed thus far, and there are three things that we … Keep reading
At last week’s State of the Cannabis Industry Conference, Frank A. Segall, Co-Chairman of Burns & Levinson’s Cannabis Business Advisory group and Chairman of the firm’s Business Law and Finance practices, sat down with Steven Hoffman, Chairman of the Massachusetts Cannabis Control Commission, for a wide-ranging interview that touched upon a number of hot-button issues regarding cannabis in the Commonwealth. Below is a transcript of the first half of their conversation. ________________________________________________________________________________________________________________________________________________________________________
COMMISSIONER HOFFMAN: From day one, we’ve said that we’re going do this right—we’re not going to adhere to an arbitrary deadline. There are some deadlines in legislation: We had to have final regulations populated by March 15th, which we did; we had to start accepting license applications by April 1st, which we did. We’ve always said that we’re going to try to hit the deadline [for recreational sales], but we’re going to do it right, and that’s more important to us. I’m very proud of the progress we’ve made—we’re doing it right, we’re doing it carefully, and I hope the citizens of this state care more about what this business looks like in July of 2019 or 2020, than arbitrary deadlines.… Keep reading
Picking up from an earlier post this month post, this week, we’re drilling down into the arguments raised by Century Bank and Trust Company—one of the non-government defendants—as to why the Plaintiffs’ RICO claim against it should be dismissed. Century Bank provides banking services to Healthy Pharms and, according to the Plaintiffs, does so “knowing that [Healthy Pharms] intends to operate a marijuana business.” Plaintiffs bring one count against Century Bank for alleged violation of 18 U.S.C. § 1962(d), which makes it “unlawful for any person to conspire to violate any of the [substantive RICO provisions].” As explained in the prior post, the court left ultimate resolution of the pending motions to dismiss open-ended, granting 30 days’ leave to allow the Plaintiffs to file an amended complaint, based on the fact that Healthy Pharms opened and began operating after Plaintiffs’ original complaint was filed. However, the court also seemed to cast significant doubt as to whether an action could be maintained against Century Bank, as evaluated below.
Century Bank presented multiple arguments as to why Plaintiffs’ complaint should be dismissed, including abstention and failure to allege that Century Bank was involved in a RICO enterprise beyond … Keep reading