There are significant differences between professional employment organizations (PEOs), administrative services only (ASO) providers, and payroll providers. Why are these services critical for cannabis companies and their financial institutions? Which one do you need – and when? Katrina Skinner of Burns & Levinson joins Brian Wall of AdaptiveHR and Stacie McLauchlan of Paragon Payroll to discuss why cannabis companies should outsource HR and payroll, the implications of 280E, 401(k) options, how banking is affected, and of course – the cost of obtaining and providing these services.
The Massachusetts Cannabis Control Commission (CCC)’s new regulations for adult-use and medical-use are to be effective on January 8, 2021.
The new final regulations’ simplified language in the Advertising, Labeling, and Packaging sections clarified the permitted and prohibited practices under these categories and implemented a pre-approval process.
We encourage marijuana businesses to seek guidance from a trusted attorney regarding these final regulations and the potential impacts on your business or operations.
Pre-Approval Process for Packaging & Labeling
In addition to complying with the Advertising, Labeling, and Packaging regulatory requirements set forth 935 CMR 500.104 (4)-(6), the CCC must pre-approve a package or label. An application for pre-approval may be submitted at any time but should be submitted prior to sales or before implementing a substantive change to an already approved package or label. The pre-approval application fee is $50 per product.
The CCC may determine the form and manner for a pre-approval application, but, in addition to such application, applicants will also need to submit images of the proposed package or label to the CCC as an electronic file. Packaging applicants should submit front and back photographs of the packaging and labeling applicants should submit one photograph of each … Keep reading
In an industry already rife with significant regulatory complexities, cannabis issuers face challenges familiar to many small and emerging businesses raising capital. One of which is the regulatory minefield posed by hiring unregistered broker-dealers, also known as “finders,” to assist issuers with raising capital in private markets from accredited investors. This is particularly true for the capital raising ecosystem within the cannabis space, which, due to its federal illegality among other factors, lacks the type of established, robust capital raising networks available to other, more traditional industries.
This post is the first of two installments of a “mini-series” discussing the potential impact of the SEC’s proposed limited conditional “finder” exemptions on issuers’ capital raising efforts.
Earlier this fall, the SEC took a significant step forward by proposing an exemptive order offering limited conditional “finders” exemptions from broker-dealer registration to individuals assisting issuers with raising capital in private markets from accredited investors (the “Proposed Exemption”). The objective of the proposed new exemption is to advance one of the SEC’s stated missions to support the capital raising efforts of privately held businesses, and also to provide regulatory clarity to investors, issuers, and the intermediary finders who assist them.… Keep reading
Financial institutions involved in the cannabis space must safeguard themselves – and their leadership – against the risks associated with the continually-evolving industry. Patrick Ryder of HUB International joins Burns & Levinson Attorney Scott Moskol to discuss the benefits of the Directors and Officers Liability Insurance Policy. Learn about coverage features, common claimants specific to cannabis, and how the product can protect banks, credit unions, money transmitters, payment processors, broker-dealers, and more.
Last week, the cannabis industry celebrated as the House of Representatives passed the Marijuana Opportunity Reinvestment and Expungement Act (the “MORE Act”), which decriminalizes cannabis on the federal level and provides retroactive expungement for certain marijuana offenses.
The passage of the MORE Act by the Democrat-led House illustrates a shifting perspective at the federal level upon the cannabis industry as a whole. If the MORE Act gets signed into law, the decriminalization of cannabis will open up several opportunities and benefits to those in the existing cannabis industry as well as encourage new participants. In theory, this sounds like a win. In reality, the House vote is merely the first step in a long process to affect any tangible change.
The MORE Act’s most well-known measure is to remove cannabis from Schedule 1 of the federally controlled substance list, which decriminalizes cannabis. While this would legalize cannabis on the federal level, the measure does not equate to a nationwide and uniform approach. It will be up to each state to legislate and regulate its own respective cannabis programs.
The bill also affords the cannabis community greater access to government resources such as Small Business Administration loans and demographic tracking … Keep reading
As in past years, the Fourth Annual State of the Cannabis Industry Conference brought some of the industry’s top leaders and regulators to discuss and reminisce on the industry’s growth, the current state of the industry, and the future of the industry. With topics ranging from restructuring and workouts to hemp and CBD, the Conference concluded with its final panel, discussing the current status of the industry’s capital markets and M&A transactions with a panel of the industry’s top investors and funds. The panel’s discussions centered on the current state of capital in the industry, the recent valuation reset of the industry, methodologies, and determinations of deploying capital, and new trends and key developments in the past 2-3 years.
As many in the industry are well aware, raising capital in the cannabis space has never been easy. This year alone, capital raising has declined by 67% since last year, with $2.6 billion raised in the first half of 2020 compared to the $5.5 billion raised in the first half of 2019. However, the panelists noted that, while capital raises are down, the opportunity and leverage for investors has never been stronger. … Keep reading
Burns & Levinson’s Fourth Annual State of the Cannabis Industry Conference featured a panel of various hemp & CBD industry participants discussing the current climate of the market, legal developments and pitfalls, and projections on making improvements in 2021.
The panel was moderated by Burns & Levinson’s own Katrina Skinner, recently named a “Cannabis Trailblazer” by the National Law Journal.
So what is the state of the Hemp and CBD Industry?
The discussion was kicked-off by an overview from Julie Lerner on the pricing of the hemp and CBD industry over the past year. Julie is the founder and CEO of PanXchange, a web-based negotiation and trading platform for physical commodities. She revealed that prices dropped significantly from July 2019 to May 2020, with the pricing of hemp biomass falling roughly 84%. Julie noted that the market is facing oversupply down the supply chain and provided notable insight from her experience in commodities compared to hemp. According to Julie, the industry will likely continue to see CBD develop in pockets servicing its respective regions, but with many bankruptcies and M&A ventures occurring in the space, its too early to … Keep reading
On Tuesday, October 20, 2020, the Cannabis Control Commission (the “Commission”) approved several policy changes with respect to its draft regulations; the most significant change being the re-categorization of two Marijuana Establishment types which, if enacted, would authorize licensees to provide limited delivery services to adult-use cannabis consumers in the Commonwealth. The approval comes after a public comment period which ended on October 15. A final vote on all policy changes to both the adult-use and medical marijuana regulations is scheduled to be held at a public meeting on October 29.
In its press release, the Commission states that the newly categorized Marijuana Courier and Marijuana Delivery Operator license types – which were previously referred to as the Limited Delivery License and the Wholesale Delivery License – will further the Commission’s mission to enable meaningful participation in the legal cannabis industry by communities that have been disproportionately harmed by marijuana prohibition. Further, the Commission asserts that such policy changes are necessary in order to satisfy consumer demand which is currently being met by the illicit cannabis market. In light of the Commission’s stated motivation behind the policy change, the draft delivery regulations currently specify that both newly categorized … Keep reading
As marijuana reform happens across the country, Colorado continues to lead the way. On October 1st, Governor Jared Polis signed an executive order that pardoned almost 3,000 Coloradans who were convicted by the State of possession of one ounce or less of marijuana, thereby restoring all rights of citizenship without condition. In doing so, Gov. Polis stated that Colorado was “…finally cleaning up some of the inequalities of the past…” that were created by former anti-marijuana policies. The power to issue the pardons was included in a bipartisan bill signed into law in June that included provisions promoting social equity in Colorado’s legal marijuana market.
HB20-1424, titled Social Equity Licensees in Regulated Marijuana, changed the term “accelerator licensee” to “social equity licensee” in the Colorado Marijuana Code, as well as, amended those who qualified for such licensees. The accelerator licensing program pairs established marijuana business owners with disadvantaged applicants who may not have the necessary skills or access to traditional funding sources to enter the space. Under the new bill, social equity applicants can now apply for these licenses if the applicant is a Colorado resident and has not been the owner of a revoked cannabis license, … Keep reading
Marijuana-related businesses (“MRBs”) planning to raise money in private offerings should be aware of recent changes to the “accredited investor” definition under the Securities Act of 1933, as amended (“Securities Act”). The U.S. Securities and Exchange Commission (“SEC”) recently adopted a final rule (the “Final Rule”) amending Rule 501(a) of Regulation D promulgated under the Securities Act, which expands the definition of “accredited investor.”
Topline conclusion: These changes establish additional investor eligibility qualifications, thereby increasing the available pool of potential investors who may participate in private securities offerings. This is good news for MRBs hoping to raise money, particularly under Rule 506(b) or Rule 506(c).
When will these changes become effective? The Final Rule will become effective sixty (60) days following its publication in the Federal Register. It is anticipated that the effective date will be sometime in early November 2020.
Will the Final Rule change the income and net worth standards required for individuals? No. The income and net worth thresholds for individuals remain the same. That is, individuals must still have an annual income of at least $200,000 (or $300,000, together with his/her spouse) or a net worth of more than $1 million (excluding the … Keep reading