United States: Weekly Cannabis Alert

This week:

  • Cannabis sales expand throughout the South, with Arkansas dispensaries offering delivery services and Louisiana dispensaries making their first medical cannabis sales; New Mexico and Washington D.C. increase access to medical cannabis for out-of-state patients; hopes for recreational legalization in New Jersey are revived.
  • On the international front, Luxembourg may be the first European country to legalize cannabis, while Mexico and Zimbabwe also move forward with legalization plans.
  • CBD products are popular but off limits for Navy servicemen and NASA employees.

Federal

National Credit Union Administration Chairman Rodney Hood stated that credit unions will not be punished simply for working with cannabis businesses, adding that financial institutions must still follow existing federal guidance and ensure that their customers are not violating anti-money laundering laws.  The NCUA further signaled reform by proposing revised rules that would allow individuals with prior low-level drug convictions to work at credit unions.  The US Department of Justice still maintains authority to prosecute credit unions that bank cannabis proceeds.

Former FDA Chairman Scott Gottlieb opposes cannabis legalization but thinks “we ought to look at decriminalizing it.”  Gottlieb said he was opposed to legalization because of the “rapid rise in youth use of THC” (although recent studies indicate that youth consumption has actually decreased in states where cannabis is legal).  He supports decriminalization because too many people develop significant criminal records for small possession charges.

States

Arkansas dispensaries are beginning to offer delivery. Greenlight Dispensary plans to make deliveries within 100-mile radius of their facility in Helena. Green Springs Medical, in Hot Springs, also offers delivery within a 15-mile radius, with plans to establish longer routes.  These developments are significant for patients in Arkansas because only a few of the 32 licensed medical cannabis dispensaries are already operating.

California’s Department of Justice has clarified the state’s laws governing medicinal cannabis in the wake of significant revisions to the state’s cannabis laws and regulations over the past three years.  The DOJ’s Office of the Attorney General released the “Guidelines for the Security and Non-Diversion of Cannabis Grown for Medicinal Use.” The Guidelines summarize the conditions, issued by the Medical Board of California, that physicians should follow when recommending medicinal cannabis (which conditions mirror those for prescribing pharmaceutical medication).  While state law prohibits punishing a physician for recommending cannabis for treatment of a serious medical condition, disciplinary action may be taken against physicians who fail to comply with the conditions.  The Guidelines also identify a verification database (www.calmmp.ca.gov) that can be used to verify state medical cannabis identification cards.  The Guidelines acknowledge that oral recommendations are permitted under state law but recommend that patients should carry written proof of their physician recommendations to help avoid fines or seizures of medicinal cannabis. State identification cards are preferred, followed by city- or county-issued patient identification cards, or a written recommendation from a physician.  Officers are not obligated to accept a person’s claim of having a physician’s oral recommendation unless that claim can be readily verified with the physician at the time of detention.

San Francisco’s Office of Cannabis granted the city’s first temporary sales permit to the Outside Lands music festival, allowing on-site cannabis sales and consumption in a closed-off area named “Grass Lands.” Attendees may purchase up to seven grams of non-concentrated cannabis and two grams of concentrates from about twelve vendors at the event.

Florida regulators have agreed to allow Surterra to open six more dispensaries, exceeding the statutory limit of storefronts, after Surterra sued the Department of Health for allowing a competitor, Trulieve, to exceed the statutory cap.  Curaleaf had filed a similar suit against the Department of Health. 

Florida industry leaders “with deep deep pockets” who want to legalize cannabis fully in the state approached John Morgan, the personal injury attorney who was a key supporter of Florida’s successful medical cannabis legalization ballot initiative campaign in 2016, to help launch a ballot initiative for full legalization.  Morgan has agreed to join the effort. Sixty percent of voters will have to vote in favor of the measure. A recent poll shows that sixty five percent of Floridians support cannabis legalization.

Iowa Medical Cannabidiol Board rejected petitions to add anxiety disorder and opioid dependence to the list of qualifying conditions for high CBD oil, delayed a vote to add PTSD and approved chronic pain as a condition.  Medical CBD is currently available at five dispensaries in Iowa.

Louisiana allowed medical cannabis sales to commence this week at nine licensed dispensaries. Louisiana has two authorized growers, the Louisiana State University (grown by GB Sciences) and Southern University (grown by Ilera Holistic Healthcare).  Cannabis may be available in oils, pills, liquids, topical applications and an inhaler, but not in a smokeable form.  The first products available are tinctures.  Dissolving strips and topical creams are expected to become available later this year.

Maine City of Portland released proposed cannabis regulations that would limit the number of dispensaries to 20 on a “first-qualified, first-licensed” basis, prohibit delivery and require an annual fee of up to $10,000.

Massachusetts regulators fined Curaleaf Massachusetts Inc. $250,000, rather than suspend or revoke its licenses, for failing to obtain permission for parent company Curaleaf Inc.’s October merger with a Canadian company that allowed Curaleaf to go public on the Canadian Securities Exchange.  Curaleaf had submitted a request for the transaction to be approved in February—after the deal had closed—and had failed to disclose Curaleaf Inc. as the majority owner of its licenses.  The commission is working on tightening its rules and enforcement regarding cannabis license ownership and control.  The state’s Cannabis Control Commission also fined M3 Ventures $50,000 for its alleged use of banned pesticides.

Michigan Marijuana Regulatory Agency issued a notification that products tested by The Spott, a licensed safety compliance facility, may be labeled with inaccurate THC results.  The THC potency may be higher or lower than the results listed on the label.  The products affected were tested between May 3, 2019, and July 11, 2019. The regulators worked closely with The Spott to identify the affected products and to add additional safeguards to prevent future issues.

Nebraska Attorney General Douglas Peterson (R) published an opinion, at the request of state Senator Andrew La Grone (R), concluding that proposed legalization legislation would be preempted by the federal Controlled Substances Act—which would then also implicate the anti-money laundering statutes, the unlicensed money transmitter statute, and the Bank Secrecy Act.  Peterson relied on the 2005 US Supreme Court decision Gonzales v. Raich to support his position. A number of legal scholars disagree with representing Gonzales v. Raich as a case about preemption as the holding is limited to allowing federal officials enforce federal laws against people who are following state laws.  The Supreme Court chose not to hear a case about overturning Colorado’s cannabis regime and it has never ruled that state legalization regimes are preempted by federal law. A separate ballot initiative is underway in Nebraska.

New Hampshire Governor Chris Sununu (R) vetoed a bill that would allow patients to grow as many as six cannabis plants for medical use, citing concerns about diversion to the black market.  Five dispensaries in New Hampshire serve more than 7,000 enrolled patients.

New Jersey Senate President Stephen Sweeney (D) said there’s still a chance of legalizing recreational cannabis through legislation by the end of 2019, rather than through a voter referendum in 2020.  According to Sweeney, Governor Phil Murphy (D) and Assembly Speaker Craig Coughlin (D) also support legalization and have agreed on the final language in the bill.  Yet, even with the renewed hope, it may be difficult to sway the handful of votes required and a referendum remains the more likely scenario. Polls show a majority of residents support legalization.

New Mexico Santa Fe District Court Judge Bryan Biedscheid ruled that medical cannabis cards may be issued to individuals who qualify, regardless of where they live.  The relevant legislation had previously required qualified patients to be residents of New Mexico, but recent revisions changed the definition of a qualified patient to a “person.”  Judge Biedscheid explained that the Department of Health and the Medical Cannabis Program cannot override statute, regardless of individual interpretations of the wording.  A majority of out-of-state patients may come from Texas, which currently prohibits sale and possession of any amount of cannabis. Industry observers suspect that the New Mexico legislature may amend that language in the statute.

South Dakota Attorney General provided an Attorney General Explanation for the November 2020 ballot initiative to legalize cannabis for medical use.  The Explanation is a required step in the initiative process under South Dakota law.

Texas prosecutors are struggling with cannabis possession cases following the legalization of hemp in the state.  Laboratory analyses undertaken to confirm THC content could be prohibitively expensive for many counties.  According to at least one source, prosecutors in the five most populous counties have said they will not prosecute any future cannabis possession cases.  State leaders and Governor Greg Abbott (R) sent a letter to prosecutors clarifying that the hemp bill did not decriminalize cannabis.  Currently, Department of Public Safety officers are instructed to issue a misdemeanor citation to those caught with low-level cannabis possession (up to four ounces).  If convicted, offenders could face jail time and a fine up to $4,000. At the time of publication, the counties were maintaining their course on decriminalization.

Utah Supreme Court rejected a challenge to the legislature’s decision to replace the medical cannabis ballot initiative.  Voters approved the ballot initiative, Proposition 2, in 2018, but the legislature replaced it with a “compromise bill” that was approved by a two-thirds supermajority without a referendum.  The Utah Constitution provides that legislation that passes by a two-thirds supermajority is not subject to a referendum.

The US Department of Health and Human Services replied to an inquiry from Utah Governor Gary Herbert (R), assuring him that the state is not at risk of losing federal health grants because local state health departments distribute medical cannabis. However, HHS clarified that federal funds may not be utilized directly or indirectly to support cannabis programs and that medical cannabis is not an allowable cost under HHS grants awards.

Washington State Liquor and Cannabis Board filed a pre-proposal statement of inquiry to consider establishing a voluntary compliance program for cannabis licensees.

Washington, DC, Mayor Muriel Bowser announced that the District of Columbia will accept medical cannabis cards from any state regardless of reciprocity. The Mayor explained that this expansion of the District’s medical program allows visitors “to obtain their medicine at one of the District’s six—soon to be seven—authorized dispensaries rather than forcing them to go without or patronizing the illegal market.” 

Hemp/CBD

One in seven adults report using some form of CBD in a Gallup poll of more than 2,500 adults.  The most popular use of CBD was for pain management (40 percent of respondents who use CBD), followed by anxiety (20 percent) and sleep (11 percent).

The US Navy banned sailors and marines from using CBD and hemp products regardless of the product’s THC concentration and whether it is legal under the law applicable to civilians.  Similarly, NASA warned its employees that the use of CBD products may trigger a positive drug test and that the use of illegal drugs by federal employees is not permissible under any circumstance.

Sales of Epidiolex were $68.4 million in the second quarter of 2019, bringing total sales for the first half of 2019 to $101.9 million.  Over 12,000 patients have received Epidiolex prescriptions since its launch.  Approximately 93 percent of all commercial, Medicaid and Medicare lives in the US have a coverage determination, of which 65 percent are PA to indication or less restrictive.  The FDA has confirmed seven years of orphan exclusivity and patents expire in 2035. 

Bogota-based Clever Leaves exported CBD products, branded ESENIA, to the United Kingdom.  Distribution is expected this fall. Clever Leaves is currently cultivating 1.5 million square feet of greenhouse under Good Agricultural and Collection Practices, with plans to expand to 2.5 million square feet by the end of 2019 and to 10 million square feet by 2021.

West Virginia will begin to accept applications for the 2020 industrial hemp season on September 1. All materials must be submitted by September 30.

International

Luxembourg announced plans to allow recreational cannabis use and sales within two years.  Draft legislation is expected later this year, but it will likely include a ban on non-residents buying cannabis to dissuade drug-tourism.  Luxembourg would be the first European country to legalize recreational cannabis.  Luxembourg’s Health Minister Etienne Schneider encourages other European Union member countries to follow Luxembourg’s example.

Mexico lawmakers are holding public hearings this week to inform plans to legalize and regulate cannabis. The government seeks to open up the cannabis regulatory discussion “with an approach of absolute transparency and free participation.” Individuals can register to attend the public meetings and submit input online.

Thailand Health Ministry received its first batch of legal medical cannabis for distribution in state-run hospitals this week. Public Health Minister Anutin Chanvirakul hopes that distribution will grow from the current 4,500 five milliliter bottles of extracted oil to one million bottles within five to six months.

Zimbabwe Information Minister Monica Mutsvangwa stated that Zimbabwe will repeal laws banning the cultivation of cannabis.  Zimbabwe views industrial hemp and cannabis, both currently illegal, as good substitute crops for its leading export crop, tobacco, which they fear is at risk of being banned globally.

Business

The Drager DrugTest 5000 allows police to detect the presence of cannabis through a mouth swab.  It has been employed at checkpoints in Los Angeles, San Diego, New York City, and parts of Arizona and Nevada.  The test can also detect the presence of cocaine, opiates, methamphetamine, amphetamine, methadone and benzodiazephines.

Cresco Labs announced that it has received regulatory approval to acquire Gloucester Street Capital, LLC, the parent entity of Valley Agriceuticals, LLC, which holds one of the ten vertically integrated cannabis business licenses granted in New York.

An investor lawsuit has been filed by a plaintiffs’ class action law firm against Curaleaf Inc. relating to a recent warning letter Curaleaf received from the Food and Drug Administration regarding its CBD marketing. The complaint alleges that Curaleaf made false or misleading statements or failed to disclose that its CBD marketing could result in a warning letter from the FDA. 

Thrive Capital Management, a venture capital firm founded by Josh Kushner, brother of President Trump’s son-in-law Jared, is leading a $35 million fundraising round for LeafLink, an online marketplace for wholesale buyers and sellers of cannabis.  LeafLink also has a partnership with Canopy Rivers, the venture arm of Canopy Growth Corp.

The leading US ice-tea brand by sales volume, Arizona Iced Tea, is entering into the US cannabis marketArizona Beverage Co. reached a licensing deal with Dixie Brands Inc. under which Dixie Brands will manufacture Arizona-branded THC-infused gummies and drinks in five US states and sell them through licensed dispensaries.

4FrontVentures announced the completion of its merger with Cannex Capital Holdings Inc. and began trading on the Canadian Securities Exchange

Credit Union 1 is discontinuing its pilot program that provided checking and savings accounts to cannabis businesses in Alaska.  The decision to terminate the program was made because critical insurance coverage is no longer available. The high burden of compliance also contributed to the program’s termination. 

SXSW (South by Southwest) is seeking votes to determine which of the 150 different cannabis-focused panel submissions will be featured in next year’s festival.  Voting ends August 23.  SXSW will feature a “Cannabusiness Track” to explore the “technological, cultural, financial, legal and political ecosystems that are defining the cannabis-focused enterprises of today and tomorrow.”

Medical/Health

A difference-in-difference analysis observed that cannabis access reduces opioid mortality rates.  The statistical analysis estimates that recreational cannabis laws reduce annual mortality in the range of 20 percent (for all opiates and prescription opioids) to 35 percent (for synthetic opioids), especially when recreational cannabis becomes widely available via dispensaries.

A study with 33 participants examined whether regular cannabis use alters the prefrontal cortex dopamine response to stress in subjects at clinical high risk for psychosis.  The study finds that subjects who are at clinical high risk for psychosis and who have used cannabis exhibited significantly lower dopamine release which was associated with the physiological stress response and symptom severity.

A population-based study found a higher prevalence of cardiovascular risk factors (hypertension, diabetes, obesity, tobacco smoking, human immunodeficiency virus, alcohol and cocaine abuse) among the cannabis user group.  The study also found that cannabis abuse may be associated with an elevated risk of myocardial infarction independent of other cardiovascular risk factors, with higher risks for women aged 40-44 years. 

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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