Husch Blackwell Partner Steve Levine is presenting today, September 19, at the Colorado Real Estate Journal 2017 Industrial Summit & Expo. Steve will be moderating a Cannabis Update panel that will include Chuck Smith, Chief Operating Office from Dixie Elixirs & Edibles and Paul Kluck, First Vice President at CBRE. See more info on the industrial market on the CREJ website here.
The deadline for compliance with new edible restrictions and labeling requirements is fast-approaching. Infused product manufacturers (medical and retail) may no longer produce, transfer, or donate any edible marijuana products in the shape of a human, animal, or fruit or shapes that bear the likeness or contain characteristics of a realistic or fictional human, animal, or fruit, including artistic, caricature, or cartoon renderings. Also beginning on October 1, 2017, no medical marijuana center or retail marijuana store may sell any non-compliant edible product. Any marijuana business with non-compliant edible products must follow waste disposal rules.
Also beginning on October 1, 2017, each container holding medical and retail marijuana product must be labeled with the potency of THC and CBD. The potency must be expressed in milligrams and either be:
- in a font size that is not less than 10 point font and at least two font sizes larger than the surrounding label text, and must be bold, and enclosed within an outlined shape such as a circle or square; or
- highlighted with a bright color such as yellow.
These new potency labeling regulations apply to medical and retail establishments. Operators have been aware of these rules for some time and should be in compliance ahead of the October 1 deadline. We suggest operators use the next few weeks to double check inventory for old stock of non-compliant product.
On June 27, 2017, a three-judge panel for the 10th U.S. Circuit Court of Appeals vacated a district court ruling that nixed Denver-based Fourth Corner Credit Union’s bid to receive a master account with the Federal Reserve Bank of Kansas City. Fourth Corner has been waiting since the end of 2015 for such ruling. The ruling effectively allows for the credit union to continue with its lawsuit against the Federal Reserve in an attempt to obtain its master account so it can function as a state-legal credit union in Colorado.
What does this mean?
The opinion relied on the fact that the case is not about Fourth Corner violating federal drug laws. U.S. Circuit Judge Robert E. Bacharach wrote: “The district court dismissed the amended complaint, reasoning that Fourth Corner would use the master account to violate federal drug laws. This ruling was erroneous,” Essentially, the district court relied on suspicions about what Fourth Corner might do and such standard is not sufficient to approve a motion to dismiss.
Fourth Corner still has a long road to haul until it can reach a resolution, but this ruling is a positive step towards normalization of state-legal marijuana in Colorado.
On May 24, 2017 Vermont Governor Phil Scott vetoed legislation that would have begun the process of Vermont becoming the 9th state to legalize recreational marijuana. However, the legislation is not dead. Governor Phil Scott, referencing his libertarian streak, reiterated in a letter to the Senate he is not “philosophically opposed to ending the prohibition on marijuana”. He continued he believes if the Governor and the legislature work together they can “move forward on this issue”. The Governor offered his recommendations on the legislation which included removing confusion around what penalties apply to the sale and dispensing of marijuana to minors; more aggressive penalties for consumption while driving and use in the presence of minors (smoking marijuana in the car with a child present is only a small civil fine); ensure public safety officials can continue to enforce remaining drug laws; and expand the key stakeholders on the Marijuana Regulatory Commission to include Departments of Public Safety, Health, and Taxes.
The Governor reiterated his concern for public health and safety and his desire to “get this right”. He wants the Commission to have at least one year to create recommendations. He wants to ensure Vermont knows how to measure and detect impairment on roadways (the Governor confirmed he reached out to the Coalition of Northeastern Governors to engage in a discussion about creating a regional highway safety standard), fund additional substance abuse prevention education, and keep children safe while penalizing those who don’t.
The Governor opened the opportunity to discuss and work with the Legislature during the summer session on these revisions to move this legislation forward.
Like much of the industry, we will have to stay tuned.
Over the last few weeks, we have tried to glean what the direction of state and federal policy on marijuana may be. On May 5, Trump used a signing statement to signal his disagreement with provision 537, which prohibits federal funds from being used to prevent states from implementing their own laws that authorize the use, distribution, possession or cultivation of medical marijuana. This provision lists 44 states that have some form of medical marijuana legalization at the state level. (Indiana and North Dakota were not on the list but have enacted medical marijuana programs).
As these statements spur discussions, it seems people are relatively unaware of the current landscape of state marijuana policies. Numbers can fluctuate depending on how you classify marijuana and legalization, (some states only allow cannabidiol or CBD oil, others have laws allowing medical marijuana but it is inaccessible because the states lack infrastructure for the purchase, sale, and manufacturing). The below summary is done as a waterfall, so once it is in one category it will not appear in a subsequent category. (For instance, a state that allows recreational marijuana also allows medical or a state allowing medical marijuana may also decriminalize the possession of recreational marijuana). Below is a summary of state policies as of May 12, 2017.
Cannabis is illegal at the Federal level. Under the Controlled Substances Act, Marihuana is classified as a level 1 drug, the same schedule as heroin. The DEA confirmed as recently as December, the level 1 classification covers all cannabiniods from marihuana and cannabis. This is vastly inconsistent with the majority of Americans’ views and state law definitions of marijuana. In fact, there is not a single state that penalizes an individual in the same manor for marijuana and heroin possession.
Some key points on the analysis – the analysis covers all 50 states and the District of Columbia. The population numbers used are from the U.S. Census bureau estimates on July 1, 2016, where the total U.S. population was 323,127,513.
There are currently eight states and the District of Columbia that have passed legislation for legal adult-use (recreational/retail) marijuana. The states that currently offer licenses and have established legal frameworks are Alaska, Colorado, Oregon, and Washington. In November 2017, four more states approved adult-use marijuana and are developing a legal framework for licensing – California, Maine, Massachusetts, and Nevada. The District of Columbia allows you to possess and home grow marijuana but has not developed any legal structure for purchase, sale or manufacturing. That is 68.7 million people, or 21% of Americans live in a state (or district) that allows recreational marijuana. Continue Reading The States of Marijuana
Today, May 19, Steve Levine presented at the 5th Annual Recreational CLE Conference. The CLE program covers Weed & the Government: Post Election Outlook. Steve’s presentation specifically covered Mergers and Public Offerings. This event is being held at the Embassy Suites in downtown Denver and brings industry professionals up-to-speed on issues including real estate, employment, intellectual property, mergers and public offerings and ethics. For more details, please read here.
Last week, the DOJ sent a letter to trustees who handle consumer bankruptcy reminding them that marijuana is a federally illegal drug and warned them not to handle any money from the sale of marijuana-related property. The letter goes on to state “Our goal is to ensure that trustees are not placed in the untenable position of violating federal law by liquidating, receiving proceeds from, or in any way administering marijuana assets.”
What does this mean?
Colorado courts have already dismissed numerous cases where the company was engaged in state-legal marijuana cultivation and sales, so this is nothing new. However, this letter might be illustrative of Attorney General Sessions’ previous statements that the DOJ will increase legal scrutiny on marijuana.
While it is clear that marijuana business likely do not have federal bankruptcy protection based on the current law, there are state laws regarding the receivership and assignment for the benefit of creditors that can be utilized to assist a failing marijuana company deal with its debts.
The Colorado adult-use marijuana industry is off to a record-setting start in 2017, with sales increasing by more than 30% over figures from 2016. This is on the heels of a record setting $1.3 Billion in sales last year and threats over a federal crackdown on adult-use marijuana.
What does this mean?
If the trends hold, 2017 will be the third-year in a row for Colorado seeing dramatic growth. While there are numerous factors driving the increase, the linked article points to “hoarding” by regular users if their access is denied by the DOJ. I would also point to wider acceptance from the community in general, less fear mongering of the dangerous of adult-use marijuana by the anti-legalization movement and more diverse product offerings from the industry. Subject to federal intervention by the DOJ, I expect the adult-use marijuana industry to continue to grow and expand for several years to come.
Today, on 4/20, I was invited by the Academy of Hospitality Industry Attorneys (AHIA) to present on Colorado marijuana issues at the Spring 2017 meeting in Colorado Springs, CO. This presentation will take a look at the current marijuana market in Colorado as well as discuss national marijuana trends. For more details, please read here.
Senator Ron Wyden and Congressman Earl Blumenauer introduced “The Path to Marijuana Reform” this week. As provided for in the executive summary linked in the previous sentence:
The Path to Marijuana Reform includes three bills that pave the way for responsible federal regulation of the legal marijuana industry, including:
- Small Business Tax Equity Act
This legislation would repeal the tax penalty that singles out state-legal marijuana businesses and bars them from claiming deductions and tax credits.
- Responsibly Addressing the Marijuana Policy Gap Act
This legislation would reduce the gap between Federal and State law by removing federal criminal penalties and civil asset forfeiture for individuals and businesses acting in compliance with state law. It would also reduce barriers for state-legal marijuana businesses by ensuring access to banking, bankruptcy protection, marijuana research, and advertising. It would protect individual marijuana consumers in states that have legalized marijuana, by providing an expungement process for certain marijuana violations, ensuring access to public housing and federal financial aid for higher education, and ensuring that a person cannot be deported or denied entry to the U.S. solely for consuming marijuana in compliance with state law. Finally, it would remove unfair burdens by ensuring veterans have access to state-legal medical marijuana, and protecting Native American tribes from punishment under federal marijuana laws.
- Marijuana Revenue and Regulation Act
This legislation would responsibly deschedule, tax, and regulate marijuana. It would impose an excise tax on marijuana products similar to current federal excise taxes on alcohol and tobacco, escalating annually to a top rate equal to 25 percent of the sales price. Marijuana producers, importers, and wholesalers would be required to obtain a permit from the Department of Treasury, and the marijuana industry would be regulated in a manner similar to alcohol. Strict rules would prohibit sale or distribution of marijuana in states where it is illegal under state law.
What does this mean?
Of particular note is the Small Business Tax Equity Act. This bill is notable because it is a potential fix to the massive problem of 280E but is also co-sponsored by Sen. Rand Paul (R-KY) and Rep. Carlos Curbelo (R-FL) is sponsoring companion legislation in the House. Curbelo is a member of the House Ways and Means Committee, which oversee all tax-related legislation. This is a great step forward for the cannabis industry in garnering bi-partisan support.