In our previous posts,[1] we discussed why state-legal medical and recreational marijuana businesses are likely not eligible to receive federal financial assistance under the Paycheck Protection Program due to the fact that these businesses are inherently engaged in federally illegal activities.

While our view has not necessarily changed, this post is intended to highlight the implications of a recent temporary restraining order prohibiting the U.S. Small Business Administration (“SBA”) from excluding strip clubs from receiving financial relief under the Coronavirus Aid, Relief, and Economic Security Act (“CARES Act” or the “Act”).

The Case for Strip Clubs to Receive SBA Assistance

The Facts

Last month, DV Diamond Club of Flint LLC (d/b/a Little Darlings) sued the SBA in the U.S. District Court for the Eastern District of Michigan claiming, among other things, that the agency exceeded its authority under the CARES Act by excluding otherwise eligible strip clubs from receiving Paycheck Protection Program (“PPP”) loans.

On April 6, 2020, Little Darlings, an adult entertainment establishment licensed in Flint, Michigan, applied for a PPP loan to mitigate its business losses as a result of the COVID-19 pandemic.

Due to rapidly diminishing PPP funds and the rejection of applications submitted by other seemingly eligible adult entertainment establishments, Little Darlings filed a claim against the SBA alleging that the agency’s April 15, 2020 “Business Loan Program Temporary Changes; Paycheck Protection Program “ Rule (the “Interim Rule”) exceeded the SBA and Department of Treasury’s regulatory authority under the CARES Act.

The Interim Rule, in part, provided that:

“Businesses that are not eligible for PPP loans are identified in 13 CFR 120.110 and described further in SBA’s Standard Operating Procedure (SOP) 50 10, Subpart B, Chapter 2,[2] except that nonprofit organizations authorized under the Act are eligible.” (emphasis added)[3]

The Interim Rule effectively clarified that those businesses that “are identified” in 13 C.F.R. § 120.110 (the “Ineligibility Rule”) and “described further” in Standard Operating Procedure 50 10 5(K)[4]  are “not eligible for PPP loans.”

The Ineligibility Rule – 13 C.F.R. §120.110

In 1996, the SBA declared that certain types of businesses are not eligible to participate in SBA lending programs. Under the Ineligibility Rule (codified at 13 CFR § 120.110), certain sexually oriented businesses[5] and “businesses engaged in any illegal activity, [6]” in addition to other enumerated businesses, were barred from receiving SBA financial assistance.

The SOP

In 2019, the SBA issued “Standard Operating Procedure for Lender and Development Company Loan Programs 50 10 5(K)” (the “SOP”) providing guidance to lenders regarding how to administer the Ineligibility Rule. The SOP explained that certain business types such as “Businesses Providing Prurient Sexual Material”[i] and “Businesses Engaged in any Illegal Activity,[ii]” among others, may be “ineligible” to participate in SBA programs.[7]

The Argument

In addition to arguing that the SBA’s regulations violated Little Darlings’ Constitutional rights under the First and Fifth Amendments, Little Darlings alleged that the SBA lacked authority to promulgate regulations clarifying what businesses were eligible for PPP loans, as Congress intended to “increase eligibility” for PPP loans under the CARES Act by establishing only two criteria for PPP eligibility. Moreover, Little Darlings relied on the fact that Congress explicitly  provided that “any business concern . . .  shall be eligible” for a PPP loan if it met the criteria identified in 15 U.S.C. § 636(a)(36)(D)(i) of the CARES Act.

As a result, Little Darlings sought a Temporary Restraining Order (TRO), Preliminary, and Permanent Injunction enjoining the SBA from enforcing or utilizing the Ineligibility Rule or SOP to exclude otherwise eligible PPP loan applicants. As part of the orders, the SBA would be required to immediately notify all SBA lending banks to immediately discontinue utilizing 13 CFR § 120.110 or the SOP as criteria for determining PPP eligibility and to process all PPP loan applications without reference to such regulations and procedures.

On May 11, 2020, U.S. District Judge, Matthew Leitman, granted Little Darlings’ TRO blocking the SBA from enforcing the Ineligibility Rule and SOP finding that Congress intended to provide temporary paycheck support to “all Americans employed by all small businesses that satisfied the two eligibility requirements – even businesses that may have been disfavored during normal times.” [8]

Notably, the Sixth Circuit refused to overturn the TRO reasoning that withholding loans from previously “ineligible” businesses, such as strip clubs, conflicts with the broad interpretation of the CARES Act.

Similar cases have also been brought in Illinois and Wisconsin on behalf of adult entertainment businesses who have been denied PPP relief. Notably, on April 23, 2020, the U.S. District Court for the Eastern District of Wisconsin issued a comparable injunction blocking the SBA from denying federal financial assistance to multiple Wisconsin gentlemen clubs.

 Implications for Marijuana Businesses

As we previously discussed,[9] one of the largest hurdles for marijuana businesses to receive federal financial assistance from the SBA is that applicants must make a good faith certification that they are not engaged in any federally illegal activity.[10]

The SBA has historically relied on both the Ineligibility Rule and SOP to uphold its position that “illegal activities” include both Direct Marijuana Businesses[iii] and Indirect Marijuana Businesses[iv] that “make, sell, service, or distribute products or services used in connection with illegal activity.”[11]

However, should Judge Leitman’s interpretation hold true and continue to prohibit the SBA from utilizing the Ineligibility Rule or the SOP as criteria for determining PPP eligibility, marijuana businesses (namely Indirect Marijuana Businesses[12]) may be eligible to receive PPP loans so long as they satisfy the eligibility requirements identified in the CARES Act.

Although it would ordinarily be absurd to conclude that Congress intended to provide financial assistance to businesses operating in clear violation of federal law (such as direct marijuana business), the U.S. District Court for the Eastern District of Michigan and the Sixth Circuit have concluded that the expansive definition of “any business concern” in the CARES Act is not subject to SBA limitations.

As Judge Leitman elaborated in his May 11, 2020 order:

“Congress’s decision to expand funding to previously ineligible businesses is not an endorsement or approval of those businesses. Instead, it is a recognition that in the midst of this crisis, the workers at those businesses have no viable alternative options for employment in other, favored lines of work and desperately need help. It is not absurd to conclude that in order to support these workers, Congress temporarily permitted previously excluded businesses to obtain SBA financial assistance.”

Therefore, although we believe it to be highly unlikely that marijuana businesses will actually receive PPP loans due to their continued violation of the Controlled Substances Act (“CSA”) and need to make a good faith certification that they are not engaged in any federally illegal activity, the door has been opened for certain marijuana businesses to potentially receive PPP loans should the SBA remain prohibited from relying on the Ineligibility Rule or SOP to disqualify otherwise eligible applicants.

 Contact Us

To learn more about the impact of the COVID-19 outbreak on your cannabis businesses, please contact Steve Levine, Megan Herr or your Husch Blackwell attorney.

Husch Blackwell will continue to provide updates upon additional information. Husch Blackwell has launched a COVID-19 response team providing insight to businesses as they address challenges related to the coronavirus outbreak. The page contains programming and content to assist Colorado Marijuana Industry clients and other interested parties across multiple areas of operations, including labor and employment, retailing, and supply chain management, among others.

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[1] https://www.cannabislawnow.com/2020/03/cares-act-stimulus-package-wont-aid-the-marijuana-industry/

https://www.cannabislawnow.com/2020/04/marijuana-businesses-harmed-by-covid-19-remain-ineligible-to-receive-federal-financial-assistance/

[2] https://www.sba.gov/document/sop-50-10-5-lender-development-company-loan-programs

[3] See Interim Rule, p. 2812

[4] https://www.sba.gov/sites/default/files/2019-02/SOP%2050%2010%205%28K%29%20FINAL%202.15.19%20SECURED%20copy%20paste.pdf

[5] 12 C.F.R. § 120.110(p) Businesses which: (1) Present live performances of a prurient sexual nature; or (2) Derive directly or indirectly more than de minimis gross revenue though the sale of products or services, or the presentation of any depictions or displays, of a prurient sexual nature

[6] 12 C.F.R. § 120.110(h) Businesses engaged in any illegal activity.

[7] See the 2019 SOP, ECF No. 12-11, PageID.570

[8] Specifically, U.S. District Judge Matthew F. Leitman reasoned that:

“While Congress may have once been willing to permit the SBA to exclude these businesses from its … lending programs, that willingness evaporated when the COVID-19 pandemic destroyed the economy and threw tens of millions of Americans out of work…”

In response to the SBA’s argument that such an interpretation would lead to “absurd results,” Judge Leitman stated:

“[T]hese are no ordinary times, and the PPP is no ordinary legislation. The COVID-19 pandemic has decimated the country’s economy, and the PPP is an unprecedented effort to undo that financial ruin.”

[9] https://www.cannabislawnow.com/2020/04/marijuana-businesses-harmed-by-covid-19-remain-ineligible-to-receive-federal-financial-assistance/

[10] See Borrower Application Form, page 2; see also COVID-19 Economic Injury Disaster Loan Application

[11] See SOP 50 105(K) at Ch. 2(III)(A)(8).

[12] It is our position that Indirect Marijuana Businesses (or non plant-touching businesses that service state licensed marijuana establishments) will have an easier time alleging that they are not operating in violation of federal law than those businesses whose existence is inherently premised on cultivating and distributing marijuana in violation of the Controlled Substances Act

[i] 15. Businesses Providing Prurient Sexual Material (13 CFR § 120.110(p))

  1. A business is not eligible for SBA assistance if:
  2. It presents live or recorded performances of a prurient sexual nature; or
  3. It derives more than 5% of its gross revenue, directly or indirectly, through the sale  of  products,  services  or  the presentation  of  any  depictions  or  displays  of  a  prurient sexual nature.
  4. SBA has  determined  that  financing  lawful  activities  of  a prurient sexual nature is not in the public interest. The Lender must  consider  whether  the  nature  and  extent  of  the  sexual component causes the business activity to be prurient.

[ii] 8. Businesses Engaged in any Illegal Activity (13 CFR § 120.110(h))

  1. SBA must not approve loans to Applicants that are engaged in illegal activity under federal, state, or local law. This includes Applicants that make, sell, service, or distribute products or services used in connection with illegal activity, unless such use can be shown to be completely outside of the Applicant’s intended market.
  2. Marijuana-Related Businesses:
  3. Because federal law prohibits the distribution and sale of marijuana, financial transactions involving a marijuana-related business would generally involve funds derived from illegal activity. Therefore, businesses that derive revenue from marijuana-related activities or that support the end-use of marijuana may be ineligible for SBA financial assistance.

[iii] “Direct Marijuana Business” mean “a business that grows, produces, processes, distributes, or sells marijuana or marijuana products, edibles, or derivatives, regardless of the amount of such activity. This applies to recreational use and medical use even if the business is legal under local or state law where the applicant business is or will be located.”

[iv] “Indirect Marijuana Business” means “a business that derived any of its gross revenue for the previous year (or, if a start-up, projects to derive any of its gross revenue for the next year) from sales to Direct Marijuana Businesses of products or services that could reasonably be determined to aid in the use, growth, enhancement or other development of marijuana. Examples of Indirect Marijuana Businesses include businesses that provide testing services, or sell or install grow lights, hydroponic or other specialized equipment, to one or more Direct Marijuana Businesses; and businesses that advise or counsel Direct Marijuana Businesses on the specific legal, financial/ accounting, policy, regulatory or other issues associated with establishing, promoting, or operating a Direct Marijuana Business. However … [the] SBA does not consider a plumber who fixes a sink for a Direct Marijuana Business or a tech support company that repairs a laptop for such a business to be aiding in the use, growth, enhancement or other development of marijuana. Indirect Marijuana Businesses also include businesses that sell smoking devices, pipes, bongs, inhalants, or other products if the products are primarily intended or designed for marijuana use or if the business markets the products for such use.”

bright green marijuana plant

On Thursday April 23, 2020, Representatives Earl Blumenauer (D-OR) and Ed Perlmutter (D-CO) introduced the “Emergency Cannabis Small Business Health and Safety Act” in the House. Blumenauer and Perlmutter have been influential in protecting state-legal marijuana businesses from federal interference, most recently under the 2020 federal appropriations rider.

If passed, the Act would allow state-legal medical and recreational marijuana businesses to take advantage of the multi-trillion dollar stimulus packages designed to help small businesses harmed by COVID-19.

As we previously discussed,[1] marijuana businesses harmed by COVID-19 remain ineligible to receive federal financial assistance due to their engagement in “federally illegal” activities. Consequently, marijuana businesses cannot receive assistance from the Small Business Administration (“SBA”) thereby making them ineligible to receive Paycheck Protection Program (“PPP”) loans and other SBA financial assistance, including Economic Injury Disaster Loans (“EIDLs”), traditional 7(a) loans, 504 loans, and microloans.

To provide the industry with much needed economic relief, the legislation states that marijuana businesses would no longer be prohibited from (i) participating in the PPP, (ii) receiving EIDL loans, or (iii) receiving emergency EIDL grants purely on the basis that the business is a “cannabis-related legitimate business” [2] or “service provider.”[3]

Additionally, the Act clarifies that the SBA and its officers, directors, and employees would “not be held liable pursuant to any Federal law or regulation solely for providing a loan or a loan guarantee to a cannabis-related legitimate business or a service provider.”

Even though states have varied in their approach to continue medical and retail marijuana operations amid the coronavirus outbreak, a majority of states that allow some form of sale and consumption of marijuana have designated the cannabis industry as “essential” and open for operation. [4] Some states have gone as far as allowing home delivery, curbside pick-up, and telemedicine consultations.

Nonetheless, despite the cannabis industry’s designation as “essential,” marijuana businesses (including those who service the marijuana industry) will continue to be precluded from receiving federal financial assistance until the Emergency Cannabis Small Business Health and Safety Act, or similar legislation, is passed.  It is important to note that, even if passed, the Emergency Cannabis Small Business Health and Safety Act would likely provide little relief, as the majority of the funds to be administered by the SBA have already been accounted for.

What does this mean to you?

Although the COVID-19 pandemic has highlighted the need for the heavily-taxed and financially burdened marijuana industry to receive assistance under the stimulus packages, the Act, even if passed by Congress, faces an uphill battle in the Republican-held Senate.

Contact Us

To learn more about the impact of the COVID-19 outbreak on your cannabis businesses, please contact Steve Levine, Meghan Brennan,  Megan Herr or your Husch Blackwell attorney.

Husch Blackwell will continue to provide updates upon additional information. Husch Blackwell has launched a COVID-19 response team providing insight to businesses as they address challenges related to the coronavirus outbreak. The page contains programming and content to assist Colorado Marijuana Industry clients and other interested parties across multiple areas of operations, including labor and employment, retailing, and supply chain management, among others.

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[1] Marijuana Businesses Harmed By COVID-19 Remain Ineligible To Receive Federal Financial Assistance

CARES Act – Stimulus Package Won’t Aid the Marijuana Industry

[2] The term “cannabis-related legitimate business” means a manufacturer, producer, or any person that – (A) engages in any activity described in subparagraph (B) pursuant to a law established by a State or a political subdivision of a State, as determined by such State or political subdivision; and (B) participates in any business or organized activity that involves handling cannabis or cannabis products, including cultivating, producing, manufacturing, selling, transporting, displaying, dispensing, distributing, or purchasing cannabis or cannabis products.”

[3] The term “service provider” (A) means a business, organization, or other person that – (i) sells goods or services to a cannabis-related legitimate business; or (ii) provides any business services, including the sale or lease of real or any other property, legal or other licensed services, or any other ancillary service, relating to cannabis; and (B) does not include a business, organization, or other person that participates in any business or organized activity that involves handling cannabis or cannabis products, including cultivating, producing, manufacturing, selling, transporting, displaying, dispensing, distributing, or purchasing cannabis or cannabis products.”

[4] State-by-State COVID-19 Announcements Impacting Marijuana Businesses.

Different glass bottles with CBD OIL, THC tincture and cannabis leaves on yellow background. Flat lay, minimalism. Cosmetics CBD oil.

In our previous post, we touched on the fact that state-legal medical and recreational marijuana businesses (including indirect marijuana businesses) could not receive federal financial assistance due to marijuana’s continued Schedule I status under the Controlled Substances Act (“CSA”).  While state-legal medical and recreational marijuana businesses have been adversely affected due to government imposed shelter-in-place restrictions across the United States, they are unable to take advantage of the multi-trillion dollar stimulus packages that are designed to help small businesses because they are engaged in “federally illegal” activities.  As described below, applicants applying for federal loans must certify, under penalty of perjury, that they are not engaged in “illegal” activity.

While it is our view that state-legal medical and recreational marijuana businesses should be entitled to assistance as they are hurting like every other business, we explain why such businesses cannot receive financial assistance under the Paycheck Protection Program and the SBA’s Economic Injury Disaster Loan Program due to the facts that these businesses do not comply with federal law.

CARES Act

 As previously discussed, Section 1102 of the Coronavirus Aid, Relief, and Economic Security Act (“CARES Act” or the “Act”) directed $349 billion to the Small Business Administration (“SBA”) to administer to small businesses harmed by COVID-19. As a result, businesses can apply for Paycheck Protection Program (“PPP”) loans and other SBA financial assistance, including Economic Injury Disaster Loans (“EIDLs”), traditional 7(a) loans, 504 loans, and microloans, and can also receive investment capital from the Small Business Investment Company program.

Paycheck Protection Program (“PPP”)

Generally, the following businesses are eligible to receive loans under the PPP:

  • Any business, 501(c)(3) nonprofit organization, 501(c)(19) veterans organization or Tribal business with not more than 500 employees whose principal place of residence is in the United States;
  • Any business that meets the SBA employee-based size standards for the industry in which it operates (if applicable);
  • Any business that is a “small business concern” as defined in Section 3 of the Small Business Act, 15 U.S.C. 632, and meets the SBA employee-based or revenue-based size standards corresponding to its primary industry; or
  • Any business that is a “small business concern” under the SBA’s “alternative size standard” as of March 27, 2020, which standard is met if the business has not more than:
    • (i) maximum tangible net worth of $15 million, and
    • (ii) an average net income of $5 million (after Federal income taxes, excluding any carry-over losses) for 2 full fiscal years before the date of application.

Importantly, to apply for PPP, an applicant must make a good faith certification that the applicant is eligible to receive a PPP loan. An applicant must certify, under penalty of perjury, that it “is not engaged in any activity that is illegal under federal, state or local law.” (Borrower Application Form, page 2).

Consequently, because state-legal marijuana businesses (including indirect marijuana businesses) are operating in violation of federal law, applicants cannot make such certification, they remain ineligible to participate in the PPP.

 Economic Injury Disaster Loans (“EIDLs”)

 The CARES Act also provided a slew of changes to the SBA’s pre-existing EIDL program, which provides small businesses with working capital loans of up to $2 million to assist to help overcome the temporary loss of revenue as the result of a declared disaster.

The Act set out new rules making it easier for small businesses harmed by COVID-19 to receive loans quickly and efficiently; the Act added $30 billion to the EIDL loan fund, with an additional $10 billion added for the EIDL Grants connected to the EIDL loans.

The CARES Act also expanded eligibility to include businesses with no more than 500 employees, any individual operating as a sole proprietor or an independent contractor, and tribal businesses, cooperatives and ESOPs with no more than 500 employees. Small business concerns and small agricultural cooperatives who meet the SBA’s applicable size standards are also eligible, as well as most nonprofits.

However, to receive an EIDL loan, applicants must make a good faith certification that the applicant is eligible to receive an EIDL. An applicant must certify, under penalty of perjury, that it “is not engaged in any illegal activity (as defined by Federal guidelines).” (COVID-19 Economic Injury Disaster Loan Application).

The SBA has clarified that the limitation on applicants “engaged in any illegal activity” (13 CFR § 120.110 (h)) refers to all applicants engaged in “illegal activity under federal, state, or local law.”

In a Statement of Position issued on April 1, 2019 (the “SOP”), the SBA clarified that “illegal activity” includes “[a]pplicants that make, sell, service, or distribute products or services used in connection with illegal activity, unless such use can be shown to be completely outside of the Applicant’s intended market.” (SOP 50 10 5(K))

The SOP indicated that both (i) Direct Marijuana Businesses[i] and (ii) Indirect Marijuana Businesses[ii] cannot receive SBA assistance due to the limitation on applicants “engaged in any illegal activity.”

It is the SBA’s position that, “because federal law prohibits the distribution and sale of marijuana, financial transactions involving a marijuana-related business would generally involve funds derived from illegal activity.”

Consequently, because state-legal marijuana businesses (including indirect marijuana businesses) are operating in violation of federal law, applicants cannot certify that they are “not engaged in any illegal activity,” they are not eligible to receive EIDLs.

Contact Us

To learn more about the impact of COVID-19 outbreak on your cannabis businesses, please contact Steve Levine, Megan Herr or your Husch Blackwell attorney.

Husch Blackwell will continue to provide updates upon additional information. Husch Blackwell has launched a COVID-19 response team providing insight to businesses as they address challenges related to the coronavirus outbreak. The page contains programming and content to assist Marijuana Industry clients and other interested parties across multiple areas of operations, including labor and employment, retailing, and supply chain management, among others.

 

[i] “Direct Marijuana Business” mean “a business that grows, produces, processes, distributes, or sells marijuana or marijuana products, edibles, or derivatives, regardless of the amount of such activity. This applies to recreational use and medical use even if the business is legal under local or state law where the applicant business is or will be located.”

[ii] “Indirect Marijuana Business” means “a business that derived any of its gross revenue for the previous year (or, if a start-up, projects to derive any of its gross revenue for the next year) from sales to Direct Marijuana Businesses of products or services that could reasonably be determined to aid in the use, growth, enhancement or other development of marijuana. Examples of Indirect Marijuana Businesses include businesses that provide testing services, or sell or install grow lights, hydroponic or other specialized equipment, to one or more Direct Marijuana Businesses; and businesses that advise or counsel Direct Marijuana Businesses on the specific legal, financial/ accounting, policy, regulatory or other issues associated with establishing, promoting, or operating a Direct Marijuana Business. However … [the] SBA does not consider a plumber who fixes a sink for a Direct Marijuana Business or a tech support company that repairs a laptop for such a business to be aiding in the use, growth, enhancement or other development of marijuana. Indirect Marijuana Businesses also include businesses that sell smoking devices, pipes, bongs, inhalants, or other products if the products are primarily intended or designed for marijuana use or if the business markets the products for such use.”

The below discussion is an analysis of the current legal environment in light of the recent COVID-19 pandemic. This analysis highlights the ability of both medical and retail marijuana businesses to continue operating in light of several emergency orders from the State of Illinois and emergency variances from regulatory agencies. This summary is not a legal opinion, but rather, a perspective and analysis of such emergency rules and orders. The content provided herein is subject to change as the laws and interpretation of such laws change.

STATE ANALYSIS

Below is a summary of the current status of Governor Pritzker’s Executive Orders, regulatory variances, and guidance updated as of March 31, 2020.  For convenience, a link to all referenced information can be found at the end of this summary.

Licensing

On January 7, 2020, the Illinois Department of Agriculture (IDOA) released applications for three types of Adult Use Marijuana operational licenses. Applications for Craft Growers, Infusers, and Transporters were scheduled to be accepted in person in Chicago or Springfield from February 14, 2020 through March 16, 2020. This deadline for submission was previously extended through March 30, 2020.

On March 28, 2020 Governor JB Pritzker issued an Executive Order extending this deadline through April 7, 2020 – the last day of the current Gubernatorial Disaster Proclamation. This deadline may be extended through April 30, 2020 upon renewal of the Gubernatorial Disaster Proclamation.[1]

The Executive Order further directed the IDOA to accept applications by mail. Importantly, applications must be post marked by April 30, 2020.[2]

Applications for Adult Use Dispensing Organizations were accepted by the Illinois Department of Financial and Professional Regulation (IDFPR) through January 2, 2020. As of now there is no indication that the IDFPR’s May 1, 2020 scoring deadline to issue these licenses will be extended.

Renewals

On March 20, 2020, licensed medical cannabis businesses were granted a renewal variance by the IDPFR Acting Director.[3] All medical cannabis license renewals due from March 1, 2020 through July 31, 2020 are entitled to an extension under this variance. Licensees with renewal deadlines that fall within this period have through September 30, 2020 to complete these renewals.

Licensed Businesses

Pursuant to Executive Order 2020-10 issued by Governor Pritzker on March 20, 2020, cannabis production, licensed medical and adult use cannabis dispensaries, and licensed cannabis cultivation centers were considered “Essential Businesses and Operations.”[4] As such, these businesses may continue operations and shall comply with Social Distancing Requirements where possible.[5] Executive Order 2020-10 requires the following Social Distances Requirements, where possible:

  1. Designate six-foot distances. Designating with signage, tape, or by other means six-foot spacing for employees and customers in line to maintain appropriate distance;
  2. Hand sanitizer and sanitizing products. Having hand sanitizer and sanitizing products readily available for employees and customers;
  3. Separate operating hours for vulnerable populations. Implementing separate operating hours for elderly and vulnerable customers; and
  4. Online and remote access. Posting online whether a facility is open and how best to reach the facility and continue services by phone or remotely.[6]

IDFPR inspectors will continue monitoring all dispensaries on camera to ensure compliance with Social Distancing Requirements and added the following requirements:

  • Any surfaces patients are required to touch, such as ordering tables or door handles, must be disinfected every 30 minutes.
  • All other surfaces should be washed throughout the day, including disinfecting at least once per day all countertops, computer screens/keyboards, door handles, railings and bathrooms.[7]

Although a March 16, 2020 IDPFR variance temporarily authorized businesses to conduct transactions outside the limited access areas, the variance expired on March 30, 2020 and has not been renewed.[8]

Delivery

Delivery is not authorized under Illinois laws and regulations governing medical or adult use cannabis. However, Illinois State Representative, Sonya Harper, introduced a bill in February 2020 that would allow marijuana businesses to deliver marijuana to both medical patients and recreational customers. The bill has been referred to the House rules committee.

Patients

Examinations by physicians for Medical Cannabis Certification are authorized to be conducted by telemedicine until further notice.[9] No in-person examinations will be required.

Contact Us

To learn more about the impact of COVID-19 outbreak on your cannabis businesses, please contact  Alyssa Samuel, Steve Levine, Megan Herr or your Husch Blackwell attorney.  Husch Blackwell will continue to provide updates upon additional information. Husch Blackwell has launched a COVID-19 response team providing insight to businesses as they address challenges related to the coronavirus outbreak. The page contains programming and content to assist Illinois Marijuana Industry clients and other interested parties across multiple areas of operations, including labor and employment, retailing, and supply chain management, among others.

RELEASES

Illinois Executive Order 2020-17

https://www2.illinois.gov/Pages/Executive-Orders/ExecutiveOrder2020-17.aspx

Illinois Executive Order 2020-10

https://www2.illinois.gov/Pages/Executive-Orders/ExecutiveOrder2020-10.aspx

IDFPR COVID Guidance for Cannabis Dispensaries, March 17, 2020

https://www.idfpr.com/News/2020/2020%2003%2017%20IDFPR%20Cannabis%20COVID%2019%20Guidance.pdf

Medical Cannabis Renewal Variance

https://www.idfpr.com/Forms/MC/med%20canna%20renewal%20variance.pdf

Medical Cannabis Limited Access Variance

https://www.idfpr.com/Forms/MC/SIGNED%20MED%20CANNABIS%20VARIANCE.pdf

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[1] Illinois Executive Order 2020-17

[2] Illinois Executive Order 2020-17

[3] Medical Cannabis Renewal Variance

[4] Illinois Executive Order 2020-10(12)and (7)

[5] Illinois Executive Order 2020-10(2)

[6] Illinois Executive Order 2020-10(15)

[7] IDFPR COVID Guidance for Cannabis Dispensaries, March 17, 2020

[8] Medical Cannabis Limited Access Variance

[9] http://www.dph.illinois.gov/topics-services/prevention-wellness/medical-cannabis/covid19-medical-cannabis-guidance

The below discussion is an analysis of the current legal environment related to the recent COVID-19 pandemic. This analysis highlights the ability of both medical and retail businesses to continue operating in light of several emergency orders from the State of Colorado and emergency rule changes from the Marijuana Enforcement Division (“MED”). This summary is not a legal opinion, but rather perspective and analysis on the current status of such emergency rules and orders. The content provided herein is subject to change as the laws and interpretation of such laws change.

STATE ANALYSIS

Below is a summary of the current status of Governor Polis’ Executive Orders, Colorado Department of Public Health’s (“CDPHE”) Public Health Orders (“PHO”), Emergency Rules, and MED Guidance (the “Releases”) updated as of March 30, 2020.  For ease of reference, at the end of this summary is a link to all applicable Releases. Continue Reading HB Analysis of Recent COVID-19 Announcements by the State of Colorado and the Marijuana Enforcement Division

cannabis background

On Wednesday, March 25, 2020, the United States Senate approved an estimated $2 trillion dollar stimulus package in response to the economic impact of the COVID-19 outbreak. The legislation, formally known as the “Coronavirus Aid, Relief, and Economic Security Act” (or the “CARES Act”), was approved by the Senate 96-0 following days of negotiations.  One of the most highly anticipated provisions of the CARES Act, the “recovery rebates” for individuals, will provide a one-time cash payment up to $1,200 per qualifying individual ($2,400 in the case of eligible individuals filing a joint return) plus an additional $500 for qualifying children. (§6428.2020(a)).  The CARES Act, which remains subject to House approval, also prescribes an additional $500 billon in corporate aid, $100 billion to health-care providers, $150 billion to state and local governments, and $349 billion in small business loans in an effort to provide continued employment and stabilize the economy. The legislation further provides billions of dollars in debt relief on existing loans. Continue Reading CARES Act – Stimulus Package Won’t Aid the Marijuana Industry

Husch Blackwell’s Steve Levine is pleased to present at the 2020 Regional Conference in St. Louis for the Healthcare Compliance Association. Steve will serve on a panel discussing the state of medical marijuana. The conference provides attendees with a forum to interact with local compliance professionals, share information about compliance successes and challenges, and create educational opportunities to strengthen the healthcare industry.

Learn more about the education topics by viewing the program agenda.

cannabis background

President Trump is back at it again with his most recent inconsistent stance on marijuana.  “As part of his recently released fiscal year 2021 budget plan, Trump proposed ending an existing policy that protects state medical marijuana programs from Justice Department interference in addition to a provision that would continue to prohibit the District of Columbia from regulating the sale of marijuana for adult use.”  This comes on the heals of a December 2019 release concerning the medical cannabis rider that was part of Trump’s pending legislation stating the Trump administration “will treat this provision consistent with the President’s constitutional responsibility to faithfully execute the laws of the United States.”  While this statement was vague at the time, clearly the President was forecasting the recent removal from his proposed budget plan.

What does this mean?

This budget rider has been an important protection for the medical marijuana world for several years.  In fact, this was affirmed by the 9th Circuit when it concluded that §542 of the Consolidated Appropriations Act prohibits DOJ from spending money on actions that prevent medical marijuana states giving practical effect to their state laws that authorize the use, distribution, possession, or cultivation of medical marijuana including prosecutions against state-compliant medical marijuana operations.

If Congress is unable to add the rider as part of the appropriations process, the already challenging world of marijuana will be thrown into additional uncertainty.  The HB cannabis team will continue to monitor and provide updates.

Glass bottles with CBD oil, THC tincture and hemp leaves on a marble background. Flat lay Cosmetics cannabis oil.

With the legalization of industrial hemp, many are eager to jump into the booming market for cannabidiol (CBD) and hemp-infused products. However, for manufacturers and retailers of ingestible CBD products in particular, it is prudent to look before jumping headfirst onto the “green wave.”

Continue Reading Ride the “Green Wave” with Caution: Enforcement Against Companies Selling CBD Products Continues

hemp leaves on wooden background, seeds, cannabis oil extracts in jars

The U.S. Food and Drug Administration (FDA) issued a press release on the evening of Monday, November 25 concerning its recent enforcement actions and a regulatory decision concerning products that contain cannabidiol (CBD).  The Warning Letters follow FDA’s trend of focusing its CBD product enforcement on unapproved drug claims.  The regulatory decision stated in the press release concerns FDA’s decision that CBD is not generally recognized as safe (GRAS) for use as a food additive.

The fifteen (15) Warning Letters, each dated November 22, 2019, were issued to companies for marketing various CBD products. The products identified in the Warning Letters spanned conventional foods, dietary supplements and animal products.  FDA made specific mention in several Warning Letters about statements regarding the use of CBD products in infants and children. Continue Reading FDA States CBD Is Not GRAS for Use in Food, Issues More Warning Letters