Midterm Elections and Cannabis Reform


The 2018 midterm elections could hold significant consequences when it comes to the immediate future of the cannabis policy throughout the U.S. Not only will a number of states be deciding their local policy, some experts suggest that if the U.S. House flips in favor of the Democrats, federal cannabis reform could shortly follow.

At the state level, California, Michigan, Missouri, Ohio, Utah, and Wisconsin will vote on a variety of different cannabis-related proposals. Michigan will decide on Proposal 1, which has the support of 62 percent of registered voters, permits people over the age of 21 to possess and grow personal-use quantities of cannabis and related concentrates, and also offers licensing activities related to commercial marijuana production and retail marijuana sales. North Dakota will vote on Measure 3, which would legalize the possession and use of marijuana by adults and automatically expunge most prior cannabis convictions. Missouri will decide on ballot questions specific to providing medical cannabis access. Utah will vote on Proposition 2, which regulates the licensed production and distribution of medical cannabis products to qualified patients. In Wisconsin, 16 counties and two cities face referendum questions concerning cannabis decriminalization; however, all are “advisory … 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

A Conversation with Massachusetts Cannabis Control Commissioner, Steven Hoffman – Part II


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.
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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

A Conversation with Massachusetts Cannabis Control Commissioner, Steven Hoffman – Part I


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

The Path to Greenlighting CBD


Last week, the industry was energized by the Drug Enforcement Administration’s order placing certain drugs containing cannabidiol, or CBD, in Schedule V of the Controlled Substances Act. This marks the first time in history that the DEA has removed any type of cannabis from Schedule I, and clears the way for the sale of the first non-synthetic, cannabis-derived medicine to win federal approval.

Under the CSA, CBD remains a Schedule I substance, which means that it is not considered to have any currently accepted medical use. On June 25, 2018, the Food and Drug Administration announced that it approved the drug Epidiolex for the treatment of seizures in connection with epilepsy. Epidiolex is an oral solution that contains CBD, and is also the first FDA-approved drug derived directly from the cannabis plant. According to the DEA order, because the drug was recently approved by the FDA, it is now considered to have an accepted medical use. Therefore, it no longer meets the criteria for placement in Schedule I. The shift in policy means that Epidiolex may now be prescribed by doctors and accessed by patients through traditional pharmaceutical channels, rather than through a marijuana dispensary or compassion center.

While … 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[1]—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

2018 Farm Bill to Grow CBD Industry


After nearly 50 years as a Schedule I federally controlled substance, hemp is set to become a legal crop. If passed, the 2018 omnibus farm bill (which includes the Hemp Farming Act of 2018) will allow cannabidiol (CBD) to be legally sold in all 50 states. While related as members of the Cannabis sativa family, hemp and marijuana have different biological characteristics. Most importantly for federal legislators, hemp contains negligible amounts of the psychoactive constituent tetrahydrocannabinol (THC).

The federal government’s decision to the legalized hemp is part of a longer, more comprehensive process that stretches back four years, when President Obama signed the 2014 farm bill. At Senate Majority Leader Mitch McConnell’s urging, the 2014 farm bill created a pilot research program that authorized state departments of agriculture and universities to grow and research hemp under limited circumstances. However, due to continued federal prohibition on the crop, there were many restrictions on its cultivation during the pilot period. For example, farmers seeking to participate in the program needed to obtain a waiver from the Drug Enforcement Administration, and the bill also limited the number of acres that farmers could legally plant. The pilot program was a success, … Keep reading

Ohio Defines Its Position on CBD


The Ohio Board of Pharmacy declared that over-the-counter sales of cannabidiol (CBD) are illegal, despite the substance’s current widespread availability in grocery, health, and other non-licensed stores across the state.

This means that CBD sales are now only legal in Ohio from state-licensed medical marijuana dispensaries. The problem, however, is that no state medicinal marijuana licenses have yet been issued, even though Ohio approved medical marijuana in 2016, and may not be until 2019, due to the state’s regulatory delays.

“Until dispensaries are operational,” the Board wrote, “no one, including board licensees, may possess or sell CBD oil or other marijuana-related products.” The board issued 56 provisional licenses in June of this year, granting licensees six months to build out their facilities and meet all obligations in state law and rules.

The new guidance means that all products containing CBD must comply with the same rigorous testing procedures and adhere to the same rules as products with real cannabis. Further, any product derived from cannabis must have a “known source,” showing quantities of active ingredients, and CBD must undergo testing in a state-licensed lab. However, no labs that were issued provisional licenses are presently open for business, and … Keep reading

Case Watch: Crimson Galeria Limited Partnership v. Healthy Pharms, Inc.


Recently, in a closely watched cannabusiness case, U.S. District Court for the District of Massachusetts Judge Allison D. Burroughs issued a memorandum and order on motions to dismiss in Crimson Galeria Limited Partnership, et al. v. Healthy Pharms, Inc., et al. [1] For a bit of background, the Plaintiffs are property owners in Cambridge, Massachusetts’ Harvard Square, whose property either abuts or is located within 200 feet of Healthy Pharms’ now-open registered marijuana dispensary. At the time the Plaintiffs filed suit, Healthy Pharms was not open for business, so the Plaintiffs based their claims on the idea that Healthy Pharms’ disclosure of the potential dispensary hurt their property values and interests.

The Plaintiffs alleged that Healthy Pharms’ potential operation diminished the market value of their properties and hurt development opportunities, in their eyes, the RMD made Harvard Square a less desirable location for prospective buyers or renters who “reasonably worry” about “increased crime” and “pungent odors.” 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. This was a clear attempt by the Plaintiffs to create a private right of … Keep reading

Making Sense of Internal Revenue Code Section 280E – Part II


Today, we’re picking up right where we left off last week, shedding more light on Section 280E by examining some of the noteworthy cases (and one memo) that have come to define it.

IRS Chief Counsel Advice Memorandum

In 2015, the IRS Office of Chief Counsel issued guidance on the application of Section 280E in the form of a memorandum. It’s a very technical document, but also very useful in understanding the statute, walking through the distinction between gross receipts and gross income (primarily, COGS) and discussing what constitutes COGS for purposes of Section 280E. The key takeaway from the Chief Counsel Advice Memorandum is that COGS should be determined under the Section 471 inventory rules, and that the Section 263A UNICAP rules have limited bearing, as they require capitalization of otherwise deductible expenses. Effectively, a cannabis business can’t use Section 263A to convert business expenses disallowed under Section 280E into COGS.

Alterman

Finally, on to some new case law. Alterman doesn’t offer any new issues to contend with. It is, in many ways, similar to Olive, but with somewhat more compelling facts. Alterman sold cannabis products, and in order to meet Colorado licensing requirements, also had … Keep reading