United States: Cannabis Group Weekly Alert - Week of August 20, 2019

This week:

  • The National Credit Union Administration affirms that credit unions may provide financial services to hemp businesses.
  • Ballot initiative campaigns to approve adult-use and medical cannabis, respectively, moved closer to appearing on the 2020 ballot in Arizona and Idaho, while a similar effort to put the issue of adult-use cannabis to Ohio voters has met with legal challenges from the State Election Board.
  • Australia may soon become a leading cannabis exporter after Greenfield MC and Emerald Plants Health Source announced they will form a joint venture to provide cannabis to the Asia-Pacific market.

Federal

The US Department of Agriculture (USDA) has released new data indicating a substantial increase in the growth of US hemp production.  Since the passage of the 2018 Farm Bill, industrial hemp production has increased by 368 percent among US farmers as demand for CBP products has drastically risen.   

US Senator Mike Crapo (R-ID), chairman of the Senate Committee on Banking, Housing and Urban Affairs, expressed interest in addressing banking issues facing cannabis businesses operating legally in their states.  This is a turnaround from earlier statements Crapo made in opposition to any pro-cannabis legislation.  The SAFE Banking Act (H.R. 1595, S. 1200), which would prevent federal banking regulators from punishing banks for working with cannabis-related businesses operating legally in their states, passed out of committee in the House and is awaiting a floor vote.  The Senate version is pending before Crapo's committee.

Five federal financial regulatory agencies replied to a request for clarification from Senator Michael Bennet (D-CO) regarding the availability of banking services to hemp businesses.  The responses came from the Federal Reserve, Federal Deposit Insurance Corporation, Office of the Comptroller of the Currency, Farm Credit Administration and the National Credit Union Administration.  Each agency acknowledged the changed circumstances with regard to hemp following the 2018 Farm Bill, but also stressed that final decisions regarding the provision of financial services rest with the individual institutions.

The National Credit Union Administration released interim guidance on Monday clarifying that credit unions may provide financial services, including loans, to hemp businesses.  The guidance will be updated once the US Department of Agriculture finalizes its hemp regulations and guidelines. 

House Judiciary Chairman Jerrod Nadler (D-NY) wrote to NORML members asking for grassroots support for his cannabis legislation, the MORE Act.  The MORE Act calls for the descheduling of cannabis and provides a process for the expungement and resentencing of prior convictions.  Companion legislation was introduced in the Senate by presidential hopeful Kamala Harris (D-CA).  The House Judiciary Committee has jurisdiction over the criminal aspects of the federal prohibition on cannabis.

The National Institute on Drug Abuse published a grant notice to encourage research on the effects of changing US cannabis laws and policies on public health.  Areas of interest include developing standards for measuring cannabis dose, intoxication and impairment; determining the impact of federal, state and local cannabis policies and their implementation on use and health outcomes; and developing effective roadside tests for cannabis impairment.

An FBI spokeswoman asked listeners of a podcast to contact local FBI field offices with tips regarding illegal dispensaries or public corruption linked to the awarding of state cannabis licenses.  Specifically, the FBI is reviewing reports of corruption in California and possible pay-to-play scenarios in the awarding of business licenses.

States

Americans for Safe Access released its 2018-2019 State-of-the-State report examining state laws and regulations surrounding Patient Rights and Civil Protection from Discrimination, Access to Medicine, Ease of Navigation, Functionality of the Programs, and Consumer Safety and Provider Requirements.  Of the 47 states reviewed, only Oregon received a grade in the "A" range, while 17 states received failing grades.

An Arizona ballot measure to legalize cannabis for adult use was filed with the Arizona Secretary of State last week, which begins the ballot process for 2020.  The measure has the backing of several national dispensary chains, including MedMen, Harvest Health and Recreation and Curaleaf Holdings.  Dubbed the the "Smart & Safe Arizona Initiative," supporters of the effort must collect more than 237,645 valid signatures from voters by July 2, 2020, for the measure to be on the 2020 ballot.  Governor Ducey (R-AZ) opposes legalization.

Fairbanks became the first city in Alaska to adopt a resolution allowing the on-site consumption of cannabis.  The city council unanimously approved a resolution allowing consumers at The Fairbanks Cut to consume cannabis on-site as part of the state's recreational cannabis program.

California's Department of Finance has published an analysis highlighting the severe risks legislation to establish a banking system for cannabis-based businesses poses to the state's financial regulatory system.  The Department is opposing the bill on grounds that it will create significant problems by bringing the state into conflict with federal laws designed to prevent money laundering.

D.C. Mayor Muriel Bowser (D) announced that the district's medical cannabis program will expand as licensed dispensaries will accept medical cannabis cards from eight new states (New York, Vermont, New Mexico, Nevada, California, Arkansas, Arizona and Alaska).

Iowa's Medical Cannabidiol Board  formally approved a measure to add chronic pain to the list of conditions that qualify a patient for medical cannabis.  The measure was the first expansion of Iowa's medical cannabis program since Governor Kim Reynolds (R) vetoed a proposed expansion earlier this year.

Idaho cannabis advocates have launched a campaign to place a medical cannabis initiative on the ballot in 2020.  Advocates have until April 30, 2020, to collect more than 55,000 signatures.

A Michigan working group tasked with overseeing implementation of the state's recreational cannabis law has begun producing recommendations.  The commission, comprised of law enforcement officials, legal experts, and cannabis industry stakeholders, will present its findings to the state legislature once recommendations have been finalized.  Preliminary reports indicate that the Commission will seek to address inconsistencies such as the lack of penalties for certain violations of the new law such as public consumption of cannabis. 

New Jersey Governor Phil Murphy (D) signed legislation to expand the state's medical cannabis program by allowing up to 28 cannabis providers to participate in the program.  Additionally, the Governor and Senate President Stephen Sweeney (D) have called for the legislature to pass legislation legalizing recreational use of cannabis before the end of the year.

New Mexico Judge Bryan Biedscheid issued a landmark ruling allowing out-of-state residents to purchase cannabis through the state's medical cannabis program provided they have a reciprocal medical cannabis license.

Nevada Governor Steve Sisolak (D) signed into law new legislation aimed at addressing the cannabis industries' banking woes.  The legislation will establish an electronic token-based system to transfer cash into electronic token credits that can be transferred between the different components  of the cannabis supply chain.  A pilot project will test the system before it is adopted statewide by July 2020.

Ohio state officials received a favorable ruling in federal court upholding state efforts to block recreational cannabis measures from appearing on local ballots.  The US Court of Appeals for the Sixth Circuit ruled that the Ohio State Election Board has authority to bar recreational cannabis ballot initiatives on the grounds that the measures enact administrative changes in state law enforcement policy.

Hemp/CBD

Scientists at Virginia Commonwealth University are sounding alarms over alleged failures of federal and state oversight programs to regulate the CBD industry.  Forensic toxicologist Michelle Pearce discovered samples of a synthetic compound with known adverse health side effects in four of nine Diamond CBP product samples.  The report noted that a majority of consumers mistakenly believe that CBP products are subject to stringent federal and state health and advertising regulations.

Michigan's Department of Agriculture and Rural Development announced the implementation of testing standards for the state's first crop of industrial hemp.  Under the new testing standards, industrial hemp crops will be tested to ensure THC concentrations are below 0.3 percent on a dry weight basis.

New Jersey Governor Phil Murphy (D-NJ) singed new legislation into law allowing farmers to grow hemp.  State lawmakers praised the bill for offering farmers a new versatile and profitable plant to grow the state's rural economy.

International

Australia is poised to become a leader in cannabis cultivation with the announcement of a partnership between Sydney-based Greenfield MC and Emerald Plants Health Source.  The two companies will create a joint venture business, Greenfield MC Cultivation, which will develop a cannabis growing operation in Australia for export across the Asia-Pacific market.  The joint venture will seek to capitalize on the southeast Asian market, which is expected to be worth $5.8 billion by 2024.

Canada has launched a new public awareness campaign to inform cannabis users of the risks of operating motor vehicles while under the influence.  The campaign is designed to remind citizens that while cannabis use is now legal, operating vehicles while under its influence remains against the law and is a public safety issue.  Additionally, the Canadian regulator charged with supervising the nation's cannabis program has cited CannTrust Holdings for violations at a second facility.  The company's facility in Vaughan, Ontario, received a non-compliant rating from Health Canada, causing the company's stock to fall 62 percent in the last month.   

Kenyan politician Karen Nyamu faces a possible investigation into alleged use of cannabis at the annual Koth Biro tournament in early August.  Lawmakers in Nairobi, Kenya's capital city, have raised concerns over the use of a banned substance by a public official and have called for an investigation.  This scandal reflects the ongoing debate in Kenya over the possible passage of legislation to decriminalize cannabis use.

Mexico's government is continuing its ongoing efforts to implement a recreational cannabis program after recent decisions from the Mexican Supreme Court declared prohibition of cannabis unconstitutional.  The Mexican Senate held a series of roundtable discussions earlier this month to gather input on plans to legalize and regulate cannabis use.  Several bills are currently under consideration in the Mexican Congress to decriminalize cannabis use and provide amnesty to individuals with prior cannabis-related convictions.

United Kingdom politician Lib-Dem Siobhan Benita has made cannabis legalization a platform of her London mayoral campaign.  Benita has called for legalizing the recreational use of cannabis, citing recent surveys showing that 63 percent of London citizens support such a proposal.  Current laws in the UK carry a 5-year sentence for cannabis possession and 14 years for supply and production of cannabis.   

Business

Professional athletes are increasingly turning to cannabis as an alternative form of pain management treatment and as a business opportunity in retirement.  The NHL Alumni Association announced plans to pursue a research partnership with Canopy Growth to study the use of cannabis as a treatment for post-concussion brain diseases.  Additionally, the Big3 basketball league formally unveiled cbdMD as its official sponsor.  Retired MLB all-star Shane Victorino is the latest former athlete to announce a cannabis company.  Victorino's company, Legacy Ventures Hawaii, will grow, extract and sell hemp products throughout Hawaii beginning this year.

Green Peak Innovations and Short's Brewing Company have announced a business partnership to bring cannabis-infused edibles and beverages to Michigan consumers.  The two companies will partner to produce a line of non-alcoholic cannabis-infused beers and beer-flavored edibles with products expected to reach the market by the end of 2019. 

CB2 Insights recently published an infographic detailing the increased attention large multinational pharmaceutical companies are paying to the cannabis industry.  While large pharmaceutical companies have largely refrained from participating in the cannabis industry due to regulatory concerns, pharma industry players are slowly becoming more engaged through patents, business agreements and sponsored clinical trials.  For example, seven of Canada's ten largest cannabis patent holders are pharmaceutical companies.   

Medical/Health

Harvard recently announced a new partnership with former NFL players Calvin Johnson and Robert Sims to expand the university's work in cannabis medical research.  The partnership will focus on researching the effects of medical cannabis on treating chronic traumatic encephalopathy, or CTE, through the International Phytomedicines and Medical Cannabis Institute.

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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