Cannabis Client Alert – Week of November 15, 2021 | Dentons – JDSupra – JD Supra

In this week’s edition:

  • Rep. Mace introduces bill to legalize cannabis
  • New York approves regulations for CBD products
  • Springbig earns $500M valuation, prepares to list on Nasdaq
  • Verano enters Connecticut cannabis market in $132M deal
  • And more…

Federal

Rep. Mace introduces States Reform Act – Rep. Nancy Mace (R-SC) has introduced a bill that would remove cannabis from the Controlled Substances Act and regulate it at the federal level like alcohol. The legal age for using cannabis would be set at 21 and each state would be allowed to set its own rules around production and distribution, including prohibiting sales and use of cannabis in a state. The bill would impose a 3 percent federal excise tax and allow cannabis businesses to access the financial system. One of the biggest difference between Rep. Mace’s bill and bills like the MORE Act or the comprehensive package being drafted by Sens. Schumer (D-NY), Wyden (D-OR) and Booker (D-NJ) is the lack of social justice language. The bill would release and expunge the records of those convicted of nonviolent, cannabis-only crimes, but falls short of other social justice measures favored by many Democrats.

Biden nominates Califf to head FDA – President Biden nominated Robert M Califf, who held the position of Commissioner of the US Food and Drug Administration at the end of the Obama administration, to resume his position as Commissioner. Califf’s nomination is not without controversy. Sen. Joe Manchin (D-WV) opposes the nomination, citing Califf’s previous connections to the pharmaceutical industry and pharma’s link to the ongoing opioid epidemic that continues to plague West Virginia.

New infrastructure law allows researchers to study link between legal cannabis and driving safety – Under the new law, the Department of Transportation, the Justice Department, and the Department of Health and Human Services have two years to make recommendations relating to establishment of a national clearinghouse of retail cannabis that can be used to study impaired driving.

New report explores Biden’s options to push cannabis towards legality – A new report by the Congressional Research Service concludes that the President and his administration can grant amnesty to people who have been convicted of cannabis-related violations and legalize cannabis nationally without legislation. The report finds that while the President himself cannot deschedule cannabis, he can encourage executive agencies to consider rescheduling cannabis or change their enforcement practices to effectively decriminalize the industry. While advocates for legalization welcomed the report, it may also discourage congressional action by decreasing the need for legislation.

HUD stands firm against cannabis users – The Department of Housing and Urban Development says it has no choice but to deny federally assisted housing to those who use cannabis, even in states where it is legal. HUD cites federal law that prohibits it from providing housing assistance to those who illegally use a controlled substance. The letter was in response to an inquiry from Rep. Eleanor Holmes Norton (D-DC) asking that assistance be provided to those using cannabis in compliance with state law.

Adult use legalization still supported by majority of Americans – The most recent Gallup poll tracking support for cannabis legalization found that 68 percent of all Americans support legalization—the same percentage as last year. Support among Democrats (83 percent) and independents (71 percent) is higher than Republicans (50 percent), but a majority of all parties do favor legalization.

States

Gubernatorial coalition – A recent letter signed by 23 governors and the Washington, DC, Mayor Muriel Bowser urged top lawmakers in the US House and Senate to attach the Secure and Fair Enforcement Banking Act to the must-pass National Defense Authorization Act. The SAFE Banking Act “will allow cannabis businesses to access normal banking services, which will transition fully cash-based cannabis transactions into the financial system where they belong.” However, lawmakers and advocates continue to debate the appropriateness of advancing a banking initiative before Congress comprehensively ends prohibition.

CA – Social equity programs have failed to produce results in California. These programs were intended to help people of color and those formerly incarcerated for cannabis crimes get licensed to run cannabis businesses. One emerging problem is that the programs’ intended beneficiaries have limited access to venture capital, and the social equity programs do not include any financial training or assistance. California officials say that local regulators need to commit to supporting such local equity programs.

CO – Colorado voters rejected a ballot initiative seeking to increase sales tax on retail cannabis to 20 percent from 15 percent by 2024. Any revenue from the proposed tax increase would have gone toward funding new educational initiatives, including tutoring and after-school programs.

IL – Recreational cannabis sales in Illinois generated revenue of $1.12 billion in the first 10 months of 2021. July 2021 saw the highest monthly revenue ($127.8 million) generated from recreational cannabis sales, and from July through October 2021 recreational cannabis generated more than $120 million in revenue per month. Recreational cannabis use for those 21 and older was legalized in the state in January 2020.

MD – A new rule in Maryland allows cannabis business owners to use their licenses as collateral for financial loans, and establishes a framework for a lender to obtain a security interest in the proceeds from a cannabis commission-approved sale of a grower, processor or dispensary license.

MS – Lawmakers in Mississippi are not planning to return for a special session to discuss medical cannabis legislation. Successful passage of any cannabis-related legislation appears to hinge on the amount of cannabis allowed per person, and the perception that any such legislation will allow recreational cannabis use. The regular legislative session will begin in January 2022.

NJ – New Jersey is inching closer to opening cannabis dispensaries for recreational sales. The application period for cannabis growers, processors and testing labs will open on December 15, 2021, and for dispensaries on March 15, 2022. While there is no deadline to file applications, the number of cultivation licenses will be capped at 37 until February 2023. Existing medical cannabis dispensaries and growers can begin selling to the public by paying a license expansion fee and certifying that they have enough cannabis to meet the demands of both patients and the general public.

NY – New York will continue to work on social justice efforts by continuing to allocate half of its cannabis business licenses to people most prosecuted by the War on Drugs, encouraging people to move their pre-legal cannabis business into the legal sphere, and issuing social equity licenses for cultivation, retailing and other aspects of the cannabis business. There has been some discussion of regulating prices to avoid competition between legacy and legal businesses, and ensuring that social equity licenses remain within the impacted communities. 

NY – New York’s recreational cannabis laws are still being ironed out, especially with respect to cannabis in the workplace. The latest state laws prohibit employers from testing for cannabis use while hiring, or when an employee is suspected of being impaired. However, employers may establish rules for the workplace so long as such rules do not impinge on personal use outside the workplace.

NM – The New Mexico Cannabis Control Division began accepting applications for producer licenses in September 2021. Since then, the CCD has received 1,500 applications, including more than 1,000 for “microbusinesses,” which are permitted to produce up to 200 plants. There are no limits on the number of total licenses that can potentially be issued. Many applicants are from the medical cannabis sector and are looking to expand into the recreational sector.

Hemp/CBD

NY approves regulations for CBD products – New York state has approved the creation of new standards for processing, manufacturing, testing and packaging hemp products, including CBD. These new mandates take effect immediately, but businesses will have six months to comply with new requirements. Retail locations selling CBD products will need to apply for a license, and those with a provisional license will have those automatically converted to permanent status.

Delta-8 illegal again in Texas as state appeals injunction – Texas continues to ban Delta-8 products, as litigation over the ban continues. Initially, a judge granted cannabis company Hometown Hero’s temporary injunction against enforcing the Delta-8 ban in the state, but then the Texas Department of Health and Safety filed an appeal, which cancelled out the injunction. Hometown Hero has now filed an emergency motion to have the injunction reinstated.

Idaho plan for growing and transporting hemp gets federal OK – Idaho’s Agriculture Department received federal approval to license hemp producers and handlers. In Idaho, licensed operators can cultivate, produce, harvest and transport hemp with up to 0.3 percent THC and can sell hemp to licensed handlers in Idaho. Once hemp is manufactured into products, they must contain zero percent THC if they are being sold in the state.

International

Colombia – Colombian President Iván Duque Márquez is seeking to expand opportunities for medical cannabis, and he recently distinguished medical cannabis from cocaine, stating that cannabis production is more environmentally friendly than cocaine and can lead to inbound foreign investment. In July, Colombia lifted an export ban on dried cannabis flower. The country also distinguishes recreational cannabis use and medical use, and does not intend to legalize recreational drugs.

Germany – Consistent with public opinion that is shifting towards legalization, Germany is closing in on a deal to legalize recreational cannabis use. While no final decision has been made, legalization would substantially improve the European market, including increased tax revenue. Cannabis multinationals, such as Curaleaf Holdings Inc., have already established positions in the European market.

Thailand – Thailand has established an international medical cannabis research center to promote medical cannabis. The Public Health Ministry will focus on promoting Thai research to create jobs, generate revenue and improve patient’s quality of life. The Department of Medical Services will be expanding research using international doctors, scientists, pharmacists and cannabis experts.

Business/Technology

Verano enters Connecticut cannabis market – Verano Holdings Corp. signed an agreement on Wednesday to acquire a cultivation facility and two dispensaries in the state of Connecticut in an all-stock deal worth approximately $132 million. Verano acquired 100 percent of the equity interest in the two dispensaries, Willow Brook Wellness LLC and Caring Nature LLC, and 100 percent equity in the cultivation facility, Connecticut Pharmaceutical Solutions Inc., which boasts a large cultivation site. With these acquisitions, Verano now has 89 active dispensaries in 12 states, and over 1 million square feet of total cultivation capacity.

Springbig to list on NASDAQ, hits $500M valuation in SPAC deal – Springbig, a platform that provides automated marketing and loyalty programs to cannabis companies, announced a merger on Tuesday with Tuatara Capital Acquisition Corp., or TCAC, a SPAC backed by Tuatara Capital, a cannabis-focus private equity firm. The merger gives Springbig, which offers a loyalty marketing platform for its 1,000+ clients, a roughly $500 million valuation. The combined company will be listed on the Nasdaq stock market under the symbol “SBIG” once the transaction closes in the first fiscal quarter of 2022.

JPMorgan reportedly blocks trading of some US cannabis stocks – JPMorgan Chase & Co. sent a letter to its prime brokerage clients stating that it may restrict the trading of certain US cannabis-related stocks starting November 8. Mentioning compliance with US money laundering laws and regulations as the reason, this restriction will apply to OTC traded stocks.

Medical

Delta-9 THC can restore working memory and locomotor function, study finds – A recent study concluded that administering Delta-9 THC can help those with traumatic brain injury make significant recoveries with respect to their working memory and locomotor function. The study treated mice with Delta-9 THC, and the treated mice markedly improved their performance on a Y-maze, demonstrating that this phytocannabinoid can help with short-term memory.

Study finds cannabinoids can help with insomnia – A recent study found that medical cannabis users observe significant improvements with insomnia after cannabinoid use. This study, which was done by collecting data through the Strainprint app, a program where cannabis users can log the conditions of their cannabis use, also suggests that there might be an advantage with predominant indica strains over predominant sativa strains and CBD for those with insomnia.

Cannabis studies using animals to continue as research expands – A 1973 study seeking to learn whether one could die from an overdose of cannabis administered massive doses of cannabis to monkeys and rodents. While the doses consistently killed the rodents, the rhesus monkeys survived the excessive quantities, showing the differing effects on mammals and other species. More research is expected to be done on cannabis in the coming years, as the US moves to expand opportunities for cannabis researchers.

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