As we’ve blogged before, we don’t believe that Attorney General Sessions’ revocation of the Cole Memorandum will have much impact on the regulated, licensed marijuana industry. As of this post, we’ve neither heard nor read of any U.S. Attorney seeking to prosecute a licensed, compliant marijuana operation. Beyond statements by key political players, certain data points can give the industry comfort. Below are some that we believe illustrate that the attorney general’s actions and statements will not meaningfully reverse the progress that the industry has realized over the past few years.

  • Per an October 2017 Gallup poll, 64% of Americans support marijuana legalization, including 51% of polled Republicans. Per a July 2017 Quinnipiac University poll, 75% of Americans, including 59% of Republicans, oppose the enforcement of federal marijuana laws in states that have legalized cannabis.
  • The legal cannabis industry (not including cannabis-adjacent businesses) employs an estimated 165,000 to 230,000 workers. This is two to three times more workers employed by the coal-mining industry.
  • Although estimates of actual revenues from legal cannabis enterprises vary, The Arcview Group states that, in 2016, the industry generated at least $6.7 billion—that figure is projected to increase to $21 billion by 2021.
  • The cannabis
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Congratulations to Vermont

Last week, the Vermont House and Senate passed H.511, which seeks to permit recreational- and adult-use marijuana in the state. The law would remove civil penalties by allowing individuals to possess one ounce or less of marijuana, as well as up to two mature and four immature marijuana plants to grow at home. Expected to be signed into law by Governor Phil Scott, the bill would go into effect on July 1, 2018.

Although H.511 does not provide or allow for licensure of adult-use cannabis cultivation, processing, or dispensary operations, supporters nonetheless see it as an important first step to full implementation of an adult-use marijuana program in Vermont.

As other commentators have noted, the passage of H.511 is important for two other reasons:

  • This is the first time a state legislature has legalized recreational marijuana. The eight states that presently permit adult use got there via citizen ballot initiatives.
  • The legislation was passed (and the governor has pledged to sign the bill into law) after Attorney General Sessions’ revocation of the Cole Memorandum, giving hope to many in the industry that Sessions’ actions will not chill the industry.

Here at the Blog, we congratulate Vermont’s legislature … Keep reading

Assessing the Sessions Memo's Impact on Legalized Marijuana

As most are by now likely aware, last Thursday, Attorney General Jeff Sessions issued a memorandum to all U.S. Attorneys entitled “Marijuana Enforcement,” which noted that decisions to prosecute even legal marijuana have been, and shall continue to be, guided by prosecutorial discretion, in light of the government’s “finite resources.” It went on to state that previous guidance with respect to marijuana enforcement, including the Cole Memorandum, was “unnecessary” and, therefore, rescinded.

The Massachusetts U.S. Attorney, Andrew Lelling, who was confirmed just last month (December 2017), said the following soon after the release of Attorney General Sessions’ memo:

This office will pursue federal marijuana crimes as part of its overall approach to reducing violent crime, stemming the tide of the drug crisis, and dismantling criminal gangs and in particular the threat posed by bulk trafficking of marijuana, which has had a devastating impact on local communities … As with all of our decisions, we will continue to use our prosecutorial discretion and work with our law enforcement partners to determine resource availability, weigh the seriousness of the crime and determine the impact on the community.

In a further statement, he went on to say:

I

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Earlier today, Attorney General Jeff Sessions issued a memorandum rescinding several Obama-era policies (notably outlined in the Cole Memo) regarding the possession, distribution, and cultivation of marijuana. Whereas the government has largely allowed states to decide how best to define and enforce their positions on cannabis, the Attorney General has now essentially green-lit prosecutors across the country to determine how to enforce federal drug laws regarding the substance, particularly alarming those in states that have moved to legalize.

We believe that further information is necessary to truly assess what impact, if any, this development may have on the industry. For now, our message is: Let’s not overreact.

Sessions saying that it is now up to individual AGs to determine how to handle cannabis, is not much different from the way things are being done now. The Cole Memo was simply a list of prosecutorial priorities. It never prevented the Justice Department from going after cannabis entities—it just stated that, unless certain things were happening (e.g., money laundering or sales to minors), the feds wouldn’t waste resources. Now that Justice is short-staffed and underfunded, it’s doubtful that there will be much movement on this front, except in, perhaps, … Keep reading

What to Watch For: The Near-Term Outlook on Cannabis

We anticipate 2018 as being a pivotal year for cannabis across the country. As momentum for the movement to legalize continues to build, here are some of the things we’re keeping an eye on.

Rohrabacher-Blumenauer Extension
The Rohrabacher-Blumenauer Amendment was extended until January 19, 2018, as part of the budget deal passed on December 21, 2017, that averted a federal shutdown. With the New Year, we are eager to see whether Congress will continue to extend the protection provided by the Amendment, which prevents the federal government from using federal funds to prosecute fully compliant and licensed medical marijuana operations. Should the Amendment not be extended, attention will turn to Attorney General Sessions, to see what measures he may take to shut down or otherwise impede the progress of the industry.

While there is certainly legitimate cause for concern, many industry advocates doubt that the Attorney General will do much in the way of going after licensed medical facilities, given that the Amendment does not bar the use of federal funds for crackdowns on the recreational cannabis industry, coupled with the fact that the government has, at least to date, not begun any such crackdowns.

Tax Code
For 2018, … Keep reading

A Cannabis-Themed Wish List for 2018

This past year has been a memorable one for so many different reasons. For Burns, it saw the growth and expansion of our Cannabis Business Advisory Group, the launch and development of this blog, and the successful execution of our first-ever cannabis conference.

In winding down 2017, Scott Moskol and Mike Andreasen weigh in with their “wishes” for all things cannabis related in the coming year.

Scott Moskol

I’d like to see…

  • The end of the new development of private lawsuits being brought by neighbors of cannabis cultivation and/or dispensary facilities against such entities under the auspices of the RICO (Racketeer Influenced and Corrupt Organizations) Act. These complaints generally seek damages, in addition to injunctive relief, that, if granted, would curtail the power of the states to issue valid licenses. Accordingly, to those defendants that are still parties to such lawsuits, we wish for speedy dismissals.
  • Congress amend the Tax Code, such that 280E would no longer apply to a valid, state-licensed, compliant cannabis business. This way, marijuana businesses would not be subject to such an extra, and oftentimes onerous, taxation burden.
  • Whatever new spending bill that is ultimately passed contain a version of the Rohrabacher-Blumenauer Amendment (formerly, the
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Following the Money: Analyzing Capital Flow into the Legal Cannabis Industry

At our recent cannabis conference, financial services experts gathered to discuss the evolution of cannabis-related investments. A panel consisting of Kyle Detwiler (Northern Swan Holdings), Jeff Finkle (ARC Angel Fund), Scott Greiper (Viridian Capital Advisors, LLC), and Harrison Phillips (Viridian Capital Advisors, LLC) talked about specific investor trends, and how these trends will shift as the industry begins to mature. Below are a few highlights from that discussion.

What are the current investor types? When will traditional VC and PE funds do more than “dip their toes?” 
Cannabis-related investments have grown exponentially since 2014, in large part due to the engagement of certain cannabis-focused venture capital funds, special-purpose vehicles, family offices, tech-focused VC funds ancillary to the cannabis industry, public companies, high net-worth individuals, professional angel investors, angel networks and funds, individual partners in VC and private equity funds, and even certain accelerators. While there has also been some traditional VC and PE fund activity over the last few years, this activity represents only 20% of the overall investments made, as the traditional VC and PE funds are still hung up on the obvious hurdles to the industry (e.g., regulation, legality, reputation, mature … Keep reading

The Shifting Landscape of Local Communities

When Massachusetts initially approved the legalization of recreational cannabis in November 2016, some communities exhibited a strong resistance to the end of prohibition by implementing local bans or limitations on future cannabis retail. The way the law is currently structured, if a town’s population voted against legalization in 2016, its officials may impose bans or moratoriums on local retail shops. On the other hand, if a town’s population voted for legalization in 2016, it may still impose bans or moratorium on retail shops, but must first hold a local referendum to decide on the matter. Massachusetts towns have since gone on to impose more than 120 bans or moratoriums on marijuana-related businesses. Although this will not prohibit adults from legally possessing or using cannabis in these communities, it may create a lack of retail supply in certain areas when recreational cannabis shops begin opening next summer, beginning in July 2018.

This pattern of local push-back is not unique to Massachusetts – it’s estimated that in Colorado, the first state to legalize recreational marijuana, more than 60% of local communities have implemented bans against cannabis shops. In Washington, approximately 35% of local communities have implemented bans or moratoriums. Many of … Keep reading

Breaking Down California's Proposition 64 Rules

Last year, Californians passed Proposition 64, which legalized recreational marijuana use across the state. On Thursday, November 16th, state regulators released their 276-page set of cannabis rules to go along with the legalization that is set to be effective January 1, 2018. In general, California will treat cannabis like alcohol, allowing people 21 and older to legally possess up to an ounce and grow six marijuana plants at home.

Scaled fees are spelled out, with costs for annual licenses ranging from $800 for businesses transporting cannabis, up to $120 thousand for businesses doing multiple activities and making more than $4.5 million annually.

Even though the state seems ready for the January 1st roll-out, some cities – including two of California’s largest, Los Angeles and San Francisco – will not be ready. The reason that matters is that, to apply for a state license, a grower or seller first needs a local permit; therefore, residents in those areas will have to wait until their city finalizes the local cannabis rules.

For people in cities that are prepared for the January 1st date, starting in December, they will be allowed to apply for licenses through an … Keep reading

Reflections on MJBizCon 2017

Recently, I traveled to Las Vegas with colleague and fellow Cannabis Advisory Group co-chair, Frank Segall, to attend the Marijuana Business Conference & Expo, also known as “MJBizCon,” which bills itself as “the largest cannabis conference in the world.” Launched in 2012 by the editors of Marijuana Business Daily, MJBizCon hosts bi-annual events in the fall and spring, bringing together thousand professional cannabis operators and investors every year.

This was my fourth MJBizCon (one spring, three fall), and it was, by far, the largest. The official attendance was announced at 18,120, and the number of exhibitors was over 650. Anticipating this volume, the conference was held at the Las Vegas Convention Center, having overgrown its previous host venue, the Rio Las Vegas, and it will undoubtedly continue to scale in terms of scope and intensity.

This year, for the first time, adult-use cannabis is legal in Nevada. And while usage of any cannabis products was forbidden inside the Convention Center, it was evident that the majority of the attendees enjoyed the recent change in the law. For me, one of the clearest differences between this conference and ones from years past was the types of exhibitors … Keep reading