United States: Cannabis Group Weekly Alert - Week Of July 16, 2019

In this week’s edition:

  • FDA expedites its efforts to develop rules for CBD and plans to report on its progress by late summer/early fall.
  • Florida appellate court strikes down the state’s vertically integrated business model and current cap on medical cannabis operators.
  • Iowa takes hard stance against CBD, stating that all products containing the chemical compound are illegal in the state, with the exception of FDA-approved drugs and Iowa’s medical CBD program.
  • Ohio regulator claims two multi-state operators violated the state’s rules by inappropriately transferring ownership interests and misrepresenting information in license applications.
  • Several well-known individuals recently entered the cannabis industry, including: Jay-Z (serving as Caliva’s chief brand strategist); former Chicago Tribune CEO Tony Hunter (joined Revolution Enterprises); former Home Depot CEO Bob Nardelli (as strategic advisor to GrowGeneration Corp.); and former Kellogg CFO Fareed Kahn (as Surterra Wellness’ next finance chief)

Federal

A group of experts testified before the House Subcommittee on Crime, Terrorism, and Homeland Security in favor of federal legislation to allow for the legal sale of cannabis. Rep. Steve Cohen (D-TN) described the Capitol Hill hearing, entitled “ Marijuana Laws in America: Racial Justice and the Need for Reform,” as “historic” and Rep. Ted Lieu (D-CA) expressed optimism for the bipartisan support for reform, stating “I believe we can get this done.” However, lawmakers and witnesses differed on how to end federal prohibition with some favoring an incremental approach and others calling for full de-scheduling and comprehensive federal reform.

House consideration of the  SAFE Banking Act may be delayed until after the August recess.  David Quam, Dentons Counsel and member of the public policy team, reports that earlier plans to move the SAFE Banking Act in early July were put off after the House included similar language in its Financial Services Appropriations bill.  The House is scheduled to adjourn the end of next week and return September 9.

A new Marijuana Justice Coalition has been formed to advocate for the inclusion of social equity provisions in cannabis legalization legislation. Leading civil rights and criminal justice reform group members include the ACLU, Center for Law and Social Policy, Drug Policy Alliance, Human Rights Watch, Immigrant Legal Resource Center, Lawyers’ Committee for Civil Rights Under Law, Leadership Conference on Civil & Human Rights, NORML and Students for Sensible Drug Policy.  The Coalition calls for measures that focus on investing in communities disproportionately harmed by prohibition, encouraging participation by impacted individuals, expunging the records of those with prior convictions, and ensuring that work in a legal market does not impact citizenship applications.

The US government plans to grow 2,000 kilograms of cannabis at the University of Mississippi for research purposes,  the government’s largest crop in the past five years. The University of Mississippi is the only establishment authorized by the federal government to cultivate cannabis for research purposes.  More than two dozen grower applications are pending before the US Drug Enforcement Administration.  The National Institute on Drug Abuse states that cannabis demand for research has not increased significantly and that the number of researchers receiving government cannabis has ranged from eight to 21 since 2010.

Rep. Alexandria Ocasio-Cortez (D-NY) and Sen. Kamala Harris (D-CA) introduced companion bills that would prohibit public housing providers from turning away people with low-level drug convictions and inquiring about their current drug and alcohol usage.  The legislation would repeal the US Department of Housing and Urban Development’s (HUD’s) one-strike policy, which allows public housing owners to evict tenants for engaging in illicit drug use or other crimes.

The US House of Representatives approved an amendment to end a current Department of Veterans Affairs policy that denies home loan applications to military veterans who have worked in the cannabis industry.

States

Alaska regulators wrestled with how to interpret regulations regarding on-site consumption, rejecting the first application for on-site consumption because of concerns as to whether the site was located in a “freestanding” building.  While the applicant was “all by itself in the middle of a field,” it was not the only business at the address.

California’s Legislature has adjourned for summer recess to reconvene on August 12.  A number of cannabis and CBD related bills are still pending, including A.B.228.  In the past week, A.B. 127 was enacted, allowing persons under the influence of alcohol or drugs to operate a vehicle under the supervision of the California Highway Patrol for purposes of research on impaired driving.

Florida’s appellate court struck down the state’s vertically integrated business model and current cap on the number of medical cannabis operators in the state. The First District Court of Appeal’s decision holds that the current system requiring vertical integration is unconstitutional and the limit on the number of licenses available is unreasonable. In 2016, 71 percent of Floridians voted to amend the state’s constitution and legalize medical cannabis. The 2017 statute implementing the medical cannabis model was found to impermissibly amend the constitutional definition of “medical marijuana treatment centers” to require vertical integration.  Florigrown sued the Department of Health, which regulates cannabis in Florida, after being denied a license. The appellate judges, stating that it is not in public interest to immediately open up the licensing model, directed the Department of Health to come up with a different regulatory structure that would allow for a reasonable number of licenses.

Hawai`i decriminalized the possession of three grams or less of cannabis, effective January 11, 2020. Governor David Ige (D) vetoed separate bills to allow inter-island medical cannabis transportation and to create a hemp licensing program.  Of the former, Gov. Ige stated that because cannabis remains illegal at the federal level—and “airspace and certain areas of water fall within the exclusive jurisdiction of the federal government”—that enacting the bill could lead travelers to “erroneously believe they are immune from federal prosecution.” On the latter, he stated that he wants to make sure that any hemp laws passed in Hawaii are aligned with the still-unpublished USDA rules.

Ohio’s Board of Pharmacy claims that two medical cannabis companies violated state rules: Greenleaf Apothecaries LLC (dba The Botanist) transferred ownership to Acreage without state approval and Harvest of Ohio LLC inaccurately represented on its application that is an “economically disadvantaged group.” Acreage Holdings announced a management agreement with Greenleaf Apothecaries in December 2018 and Greenleaf agreed to sell all interests to Acreage when allowed by the state.

Oklahoma’s Medical Marijuana Authority has announced that it is taking steps to implement state’s medical cannabis program, including rule promulgation, information technology changes, application developments and operational planning. The changes will be implemented through November with permanent rules expected in 2020.

Pennsylvania has added, effective July 21, anxiety and Tourette’s syndrome to its list of ailments that qualify for treatment with medical cannabis.

Rhode Island increased the number of possible medical cannabis compassion centers from three to nine, while also increasing the licensing fee to $500,000 per center.

HEMP/CBD

FDA Acting Chief Information Officer Amy Abernethy tweeted that the “FDA is expediting its work to address the many questions about cannabidiol (CBD),” reflecting that it is an important issue with many stakeholders, including American hemp farmers. She said the FDA is “enthusiastic about research into therapeutic benefits of CBD products but also need to balance safety.” The FDA plans to report on its progress by the end of summer or early fall. 

Iowa’s Attorney General’s Office released guidance clarifying that under the state’s current law, any product containing cannabidiol is illegal with the exception of FDA-approved medications and Iowa’s medical CBD program.  When the Iowa Hemp Act becomes fully effective, “CBD products containing no more than 0.3% THC will no longer be controlled substances under Iowa law.” The Attorney General’s Office cautioned that “this does not mean that all such products will become legal.”

South Carolina Department of Pesticide Regulation approved a list of pesticides for use on hemp crops.  All of the approved pesticides are classified as 25(b) pesticides, meaning the US Environmental Protection Agency considers them minimum-risk pesticides. To date, the SC Department of Agriculture has approved 114 growers under the state’s hemp-farming program for 2019.

Guam Customs and Quarantine Agency seized air cargo shipments of CBD products and is awaiting further direction from the US Food and Drug Administration regarding disposition of the goods. Customs seized the goods because of concerns with labeling compliance.

American Eagle will start selling, in October, CBD-infused personal care products developed and supplied by Green Growth Brands. American Eagle views CBD as the next big trend in lifestyle focused on health, appealing directly to its mainly millennial audience.

International

CannTrust Holdings Inc. announced that it has ceased sale and shipment of all cannabis products following Health Canada inspections that revealed the existence of several unlicensed grow rooms at an Ontario facility.  Health Canada seized more than five metric tons of CannTrust’s inventory.

Costa Rica’s Ministry of Health is considering allowing medical cannabis production operations in its free trade zone industrial parks. Colombia is similarly considering whether to allow the exportation of flower into free trade zones for further processing.

Czech Republic lawmakers have moved legislation forward that would allow insurance to cover 90 percent of medical cannabis costs. The bill has been approved by the Chamber of Deputies and now must be approved by the Senate.

French officials approve medical cannabis trials to study the therapeutic effects of cannabis in patients who suffer from certain forms of treatment resistant epilepsy, neuropathic pain (resulting from nerve damage), multiple sclerosis or other central nervous system pathologies.

Israel’s Health Ministry announced steps to make it easier for medical cannabis consumers to access their medications, including a plan to supervise and fix pricing to keep costs low.  Some patients are concerned that the steps will not alleviate the issues, which are caused primarily by an “extreme shortage” in supply.

New Zealand’s Ministry of Health released draft medical cannabis rules, following the passage of a law last year that broadened the legality of cannabis for medicinal purposes. A Medicinal Cannabis Agency would be set up by the first quarter of 2020 to oversee the regulatory scheme.

Business

Jay-Z has entered the cannabis industry by partnering with Caliva as a chief brand strategist. He will also focus on advocacy and job training programs to empower formerly incarcerated individuals to enter the legal cannabis industry.

MJBizDaily is working with cannabis data analytics company Headset to give MJBizDaily access to retail data from the cannabis industries in the US and Canada.  MJBizDaily and Headset will work together to develop exclusive content as part of their Annual Marijuana Business Factbook

Surterra Wellness hired former Kellogg Company executive Fareed Khan.  Khan brings experience as the multinational food brand’s chief financial officer, in which position he helped drive the adoption of a new corporate strategy that included revitalizing key brands and transforming the company’s portfolio through mergers and acquisitions. Surterra has vertical operations in Florida, Texas, Nevada and Massachusetts. 

GrowGeneration Corp., an owner and operator of specialty retail hydroponic and organic gardening stores, has appointed Bob Nardelli, a former chief executive officer of Home Depot, as a senior strategic advisor.

Anonymous Analytics, a “faction” of the global Anonymous activist movement, has initiated a buy rating on Turning Point Brands Inc (TPB.N). Turning Point Brands sells periphery products, including rolling papers, chewing tobacco and vapes, and has a network of 1.5 million online customers and 155,000 stores.

Revolution Enterprises, a multi-state operator in Illinois, Florida and Arkansas, has named Tony Hunter, former chief executive officer of the Chicago Tribune, chairman of the board.

Medical/Health

The National Institutes of Health is funding a study to identify gut-brain endocannabinoid signaling pathways that control feed behavior and become impaired in obesity.

An assistant professor at the University of Saskatchewan has secured funding for preclinical research to explore the effects of cannabinoids on natural neurotransmitters to regulate wakefulness and appetite. The Natural Sciences and Engineering Research Council (NSERC) is funding the study for five years. NSERC is also funding research into other cannabis-related areas, including the chemistry of cannabis and its detection, improving growing techniques, and the impact of cannabis on human health and veterinary medicine. 

About Dentons

Dentons is the world's first polycentric global law firm. A top 20 firm on the Acritas 2015 Global Elite Brand Index, the Firm is committed to challenging the status quo in delivering consistent and uncompromising quality and value in new and inventive ways. Driven to provide clients a competitive edge, and connected to the communities where its clients want to do business, Dentons knows that understanding local cultures is crucial to successfully completing a deal, resolving a dispute or solving a business challenge. Now the world's largest law firm, Dentons' global team builds agile, tailored solutions to meet the local, national and global needs of private and public clients of any size in more than 125 locations serving 50-plus countries. www.dentons.com.

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