Cannabis Client Alert – Week of May 27, 2024

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Cannabis Client Alert – Week of May 27, 2024

Cannabis Client Alert – Week of May 27, 2024

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May 29, 2024

In this week’s edition:

AG Initiates Cannabis Rescheduling Process
Farm Bill Amendment is Adopted by House Committee and Could Ban Delta-8, Delta-9, and THCA
Study Finds Daily Cannabis Use Outpaces Daily Drinking in US
Louisiana Bill Could Disrupt Legal Hemp Market in the State
Legislation to Legalize Medical Cannabis Introduced in the Bahamas

Federal

AG Publishes Proposal to Reschedule Cannabis to Schedule III – The Attorney General has proposed reclassifying cannabis from a Schedule I to a Schedule III controlled substance, initiating the public comment period. This follows the recommendation from the Department of Health and Human Services, which acknowledged cannabis’ accepted medical use. Our article on the administrative process provides further insight regarding timing and procedure. The Justice Department is inviting public comments specifically regarding the economic impacts of its proposal to reschedule cannabis. In its rescheduling notice published last week in the Federal Register, the DOJ acknowledged rescheduling’s potential impacts on federal taxes, cannabis research, and investment in the pharmaceutical industry and displayed a particular interest in feedback on the economic effects for small entities.

House Committee Advances Defense Bill with Cannabis and Psychedelics Provisions, Signals Shift in Military Policy – The House Armed Services Committee has approved the 2025 National Defense Authorization Act (NDAA), which includes provisions related to cannabis and psychedelics, such as prohibiting cannabis testing for military recruits and requiring updates on psychedelics clinical trials. Additionally, amendments were passed to demand reports on the number of service members discharged due to cannabis use and to require a briefing on sentencing for cannabis-related offenses under the Uniform Code of Military Justice. These developments signal a growing interest in exploring alternative treatments for veterans, including the therapeutic potential of psychedelics, within the military.

Clear Majority of Registered Voters—Including Republicans—Support Cannabis Legalization – A recent Fox News poll reveals that nearly 70 percent of U.S. voters, including a majority of Republicans, support the legalization of cannabis. The survey, released after President Joe Biden's announcement to reschedule cannabis, shows 69 percent of registered voters favor ending prohibition, with 45 percent strongly supporting the reform. Support spans across political and demographic lines: 81 percent of Democrats, 55 percent of Republicans, and 65 percent of independents endorse legalization. Majorities across all ages, races, income levels, education levels, and regions back the policy, with the exception of "very conservative" individuals.

SAFER Banking Act Faces Continuing Opposition from Prominent Senate Banking Committee Member – Despite his support for cannabis industry reforms generally, Sen. Raphael Warnock (D-GA) expressed his opposition to the SAFER Banking Act again during a recent MSNBC interview. Sen. Warnock, the lone Democrat to vote against the legislation in a Senate Banking Committee hearing last September, has criticized the Act for not addressing injustices inflicted by historically stringent cannabis laws, particularly on certain minority communities. The stance underscores the broader debate within the cannabis reform movement about balancing economic opportunities with addressing past harms.

State

CO – Colorado cannabis stores will soon be allowed to sell food and beverages, thanks to a bill approved by state lawmakers. The measure, SB 24-76, permits cannabis retailers to sell non-cannabis consumable products, provided sales do not exceed 20 percent of their overall revenue. Additionally, the bill allows businesses to renew licenses biennially instead of annually, enables operators with multiple licenses to use a single application process, and empowers the state Marijuana Enforcement Division to eliminate the RFID tag requirement by 2027. The bill is now awaiting the expected signature of Gov. Jared Polis (D).

DE – As Delaware prepares to launch its adult-use cannabis market, lawmakers introduced a bill to allow existing medical cannabis businesses become dual licensees, serving recreational consumers starting this year, ahead of the current timeline. Sponsored by Rep. Edward Osienski (D) and Sen. Charles Paradee (D), HB 408 would establish a "conversion license" category, with specific requirements for medical cannabis businesses, including demonstrating continued patient demand, supporting social equity programs, and entering labor peace agreements. The bill’s chances of becoming law remain unclear.

FL – While proponents of cannabis legalization in Florida believe that the announcements around rescheduling of cannabis will help their advocacy efforts, critics argue that a change at the federal level would not mitigate the risks associated with high potency cannabis and cannabis products. A former Republican state senator, Jeff Brandes, criticized his party for opposing the cannabis legalization initiative on the November ballot saying, “I think that amongst Republicans – which is supposed to be a party of limited government and personal responsibility – the Republican Party of Florida took the absolute opposite approach in this case, and wanted to be the nanny-state that still tells people what they can and can’t do. At some juncture, we need to let adults be adults and I think that this is a symbol of that.”

ME – Maine’s Office of Cannabis Policy is accepting applications to serve on the state’s Cannabis Hospitality Task Force, which will review how other states regulate cannabis hospitality establishments and draft policy recommendations for regulating those establishments in Maine. The application period closes on May 31. The legislature required that the task force include representatives with expertise in public health and safety, cannabis policy, cannabis culinary arts, and hospitality, while also including representation from the Maine cannabis industry and consumer side. There will be one individual on the task force to represent the interests of municipal governments, as well as a representative of the 2016 cannabis legalization ballot measure.

MN – Minnesota lawmakers finalized changes to the state’s cannabis laws, many of which were made at the request of regulators. Notable changes include selection by lottery for a limited number of licenses, as opposed to a points-based system. Social equity applicants will be eligible for pre-approval of their licenses this summer and some will have the ability to start cultivating cannabis early, allowing them to sell product as soon as stores open. Under the new law bars will be able to sell both THC and alcoholic beverages to the same person so long as the individual is not visibly intoxicated. The legislature also passed a bill, pending the governor’s signature, that would allow all veterans to qualify as social equity applicants (as opposed to only allowing disabled veterans, current and former National Guard members and veterans who had lost honorable status due to cannabis offenses to qualify for this status).

NE – Medical cannabis legalization advocates in Nebraska report that they are confident they have met one of two significant hurdles to get their petitions on the ballot for the third consecutive election year. Campaign representatives stated they have collected at least 55,000 signatures on each, with volunteers now focused on obtaining at least 87,000 verified voter signatures on each petition before July 3.

NH – the New Hampshire Senate has passed a cannabis legalization bill but made a number of changes to the House Bill in order to do so. Now, members of the House are speaking out against the changes and threatening to halt the bill.

NJ – A New Jersey appeals court ruled federal law does not preempt state cannabis law, finding “[i]t is not impossible for New Jerseyans to comply with the CSA after the enactment of CREAMMA” because state law “does not require any business to sell marijuana, or any municipality to adopt, as here, an ordinance to allow marijuana dispensaries within its borders.” The panel, however, warned that “residents and marijuana businesses of this state act at the risk that their activities might be prosecuted by federal authorities.” The judges also concluded that the plaintiffs provided no evidence that the New Jersey adult cannabis use law has impeded the enforcement of federal law.

NY – New York’s Dormitory Authority is no longer issuing loans to open cannabis stores through its $200 million Social Equity Cannabis Investment Fund, following allegations of predatory lending practices. Under upcoming regulatory overhauls to the state’s adult use cannabis program, the head of the Office of Cannabis Management will step down in the next two weeks. Additionally, two pending bills in NY would allow individuals to file lawsuits against unlicensed cannabis businesses.

OH – By June, medical cannabis dispensaries in Ohio will be able to apply for a dual license in order to sell adult use cannabis. There will also be applications available for companies that only want to sell adult use cannabis. This development comes after the Joint Committee on Agency Rule Review approved regulations from the Division of Cannabis Control on May 13. The regulators have until September 2024 to begin issuing adult use licenses.

PA – A Pennsylvania appeals court found that an employer violated the state’s workers’ compensation law by refusing to reimburse an employee for out-of-pocket costs for medical cannabis. The employer argued successfully in lower administrative hearings that paying these costs would expose it to potential criminal liability, given that cannabis remains federally illegal. However, the appeals court found that the state’s Medical Marijuana Act does not prohibit reimbursement of cannabis or expose the employer to criminal prosecution.

SD – South Dakotans for Better Cannabis Laws, an advocacy group, submitted to the state’s Secretary of State all of the required signatures to place adult-use legalization on the ballot in November. This would be the third time in four years adult-use legalization has appeared on the ballot. The first attempt was approved by voters, but struck down by the state’s Supreme Court on technicality. Voters rejected the second attempt.

WA – The Washington State Liquor and Cannabis Board (LCB) posted summaries of cannabis legislation enacted this session, which includes legislation addressing limits on the sale and possession of retail cannabis products (SHB 1249) and high THC cannabis products (2SHB 2320).

Hemp

Farm Bill Miller Amendment Which Would Ban Delta-8 Adopted by House Committee – An amendment to the 2024 Farm Bill, known as the Miller Amendment, would make intoxicating hemp-derived products like delta-8 THC illegal under federal law. Approved by the U.S. House Committee on Agriculture, the Amendment redefines "hemp" to prohibit intoxicating and synthetically derived products. The Amendment has not yet made it to a House Floor vote.

CT – The Connecticut House of Representatives passed a bill to regulate and restrict hemp products and will allow for hemp based drinks to be sold at liquor stores. Among other changes, the proposed bill would amend the definition of high-THC products to include all products containing 1 milligram of THC per serving and remove the differentiation of THC potency limits for different products. The bill would also remove hemp-derived products from many places of business, including grocery stores and pharmacies. The bill now heads to the state Senate for consideration.

GA – Gov. Bill Kemp (R) signed a bill to prohibit sales of hemp-derived products to individuals under the age of 21 and to regulate the manufacture and sale of such products. The law provides a licensing and permit framework for manufacturers, wholesale consumable-hemp, and consumable hemp retail establishments.

IA – Gov. Kim Reynolds (R) signed into law HF 2605, which “prohibits the sale and possession of consumable hemp products that contain greater than 4 mg total THC per serving and greater than 10 mg total THC per container.” Registered card holders within the state’s medical cannabis program have an affirmative defense for possession of any of these products if they are in a form and quantity allowed under the state program.

LA – Louisiana lawmakers are close to dismantling the state’s consumable hemp industry, just two years after legalizing it. Senate Bill 237 cleared the House Committee on May 14; the bill would make it illegal to manufacture or sell products that contain any amount of THC. The House committee members heard Tuesday from several business owners who testified that the bill would effectively destroy the consumable hemp industry and kill jobs. There are more than 2,000 licensed hemp businesses in Louisiana, according to data from the state Office of Alcohol and Tobacco Control. Proponents of the bill have cited a concern about people “getting high.”

NJ – New Jersey lawmakers are weighing whether retailers should be required to get certain licensing and if the state’s Cannabis Regulatory Commission should oversee hemp products. A new bill would regulate the production and sale of “intoxicating hemp products” that include less than 0.5 milligrams of THC per serving. Under the bill, hemp products would only be sold in licensed dispensaries alongside cannabis products. It would also amend the New Jersey Hemp Farming Act to set limits on how much THC can be sold in hemp products, a cap that some critics say is far too low. The bill calls for the cannabis agency to regulate the sale of all hemp and cannabis products, and put new regulations in place for retailers. The Department of Agriculture would continue regulating the cultivation of hemp, and the Attorney General’s Office would enforce the law against those selling hemp items without a license, similar to cannabis. The bill still faces the Senate Budget Committee before heading to the Senate floor.

TX – Austin, Texas-based Hometown Hero on Monday announced the launch of the Texas Hemp Business Council (THBC), a nonprofit trade association focused on advancing and protecting hemp-derived products in Texas. Cynthia Cabrera, chief strategy officer at Hometown Hero and THBC founding board member, noted that “Sales of hemp-derived cannabinoids in Texas generate more than $8 billion annually, and the industry employs 50,000 workers and contributes to a $22 billion supply chain.” The THBC says the group’s formation comes amid potential bans and overregulation of hemp-derived cannabinoids, including delta-8 and delta-9 THC products in Texas.

International

Morocco Could Hold 15% Share of Europe's Medical Cannabis Market by 2028 – Morocco could capture a 10-15% share of the European market, translating into significant revenue gains for the country, according to Mohamed El Bouhmadi, president of the Moroccan Federation of the Pharmaceutical Industry and Innovation (FMIIP). Speaking to a report from Le360, El Bouhmadi highlighted the economic potential of this emerging sector during a workshop on the medicinal benefits of cannabis. The country's medical cannabis industry is expected to generate annual revenues between MAD 4.2 to 6.3 billion ($420 million to $630 million) by 2028. The landmark law which legalized cannabis, Law No. 13-1, governs the lawful use of cannabis for medical purposes, and represents a significant opportunity for investment and improving the livelihoods of those involved in cannabis cultivation. “Medical cannabis is emerging as a new hope in the health field,” El Bouhmadi said. “It offers a wide range of therapeutic virtues and brings a new dimension to patient care, providing alternative and complementary solutions to conventional treatments.”

76% of Thailand Residents Agree with the Government’s Plan To Classify Cannabis as a Narcotic – A survey by the National Institute of Development Administration (NIDA Poll) found that 60.38% per cent of the respondents “totally agreed” with the plan and 15.27% “rather agreed” with it. The survey was carried out nationwide among 1,310 respondents, at least 15 years old, on May 14-15. Cannabis was decriminalised in Thailand on June 9, 2022 with a direction of the Public Health Ministry removing it from the Category 5 drug list as recommended by the Office of Narcotics Control Board. However, Public Health Minister Somsak Thepsutin said on May 20 that cannabis would be put back on the Category 5 drug list within this year.

Legislation to Legalize Medical Cannabis Introduced in the Bahamas – Health and Wellness minister Dr Michael Darville said the country was poised on the brink of a transformative movement in the history of health care as he tabled a compendium of bills to establish a medical cannabis industry in the House of Assembly on May 15. The Cannabis Bill 2023 establishes The Bahamas Cannabis Authority, a body that will oversee all aspects of cannabis regulation. In support of the bill, Dr. Darville stated “the compendium bills for medical cannabis is more than legislation, it is a beacon of hope for countless Bahamians whose voices often go unheard . . . many of us have to go abroad to access the proven effects of medical cannabis."

Business

Tilray Brands Ready “Strategic and Accretive” Expansion after U.S. Cannabis Announcement – Tilray Brands prepares to raise funds to fuel expansion in the US ahead of the possible rescheduling. Ontario-headquartered Tilray is conducting an at-the-market offering, a mechanism that allows companies to sell newly issued common shares through chosen agents. Tilray can sell up to $250m in common stock under its equity distribution agreement with shareholders. The cannabis seller will use the capital to fund "strategic and accretive" acquisitions, including the "potential" purchase of US and international assets. The group said it plans to "capitalize" on "expected regulatory advancements" in the US regarding the sale of cannabis.

Californian Maintains Maryland’s In-state Preference for Cannabis Licensing Is a Violation of Dormant Commerce Clause – Plaintiff Justyna Jensen, represented by her husband Jeffrey Jensen—who has litigated similar challenges in New York, California and Washington state—filed an appeal with the Fourth Circuit, arguing that a federal lower court erred when it declined to halt retail cannabis licensing in the state due to its alleged preference for in-state residents. Jensen claims the lower court incorrectly ruled that the dormant commerce clause to the U.S. Constitution, which largely prevents states from disfavoring out-of-state economic participants, does not apply to cannabis due to its federal illegality. Plaintiff’s brief highlighted the First Circuit's 2022 decision (Northeast Patients Group v. United Cannabis Patients and Caregivers of Maine), which found that the dormant commerce clause applied to Maine's medical cannabis market. Should the Fourth Circuit affirm, it would create a circuit split.

Federal Judge Skeptical of Cannabis Companies' Constitutional Challenge to Overturn Cannabis Prohibition – A federal judge in Massachusetts expressed skepticism regarding a constitutional challenge by four cannabis companies, to overturn federal cannabis prohibition. The plaintiffs aim to revisit the 2005 Supreme Court decision in Gonzalez v. Raich, arguing that the federal Controlled Substances Act now unconstitutionally harms their businesses due to the changed landscape of state-regulated cannabis markets. U.S. District Judge Mark Mastroianni asserted at that hearing that it is up to the Supreme Court to revise its prior rulings.

Medicine

Daily Cannabis Use Outpaces Daily Drinking in US, According to New Study – In 2022, an estimated 17.7 million people reported using cannabis daily or near-daily, compared to 14.7 million daily or near-daily drinkers, according to new research from the National Survey on Drug Use and Health.

AMA Research Indicates Cannabis Legalization does not Increase Youth Cannabis Use – New research published by the American Medical Association indicates that the legalization of cannabis for adults does not increase cannabis use among youths. The study, analyzing data from the Youth Risk Behavior Survey, found no correlation between states' legalization of recreational cannabis and higher rates of youth consumption.

New Research Highlights Therapeutic Potential of Cannabis's Entourage Effect – A study in the International Journal of Molecular Sciences reveals that the interaction between cannabis terpenes and cannabinoids could lead to innovative treatments. The findings suggest that the combined effects of whole-plant cannabis may offer more significant health benefits compared to individual components like THC or CBD alone.

Psychedelics

VA Health Official Supports Psychedelic Medical Advancements – Dr. Shereef Elnahal, Under Secretary for Health at the Department of Veterans Affairs, emphasized that there is an "unstoppable narrative" supporting the advancement of psychedelic medicine. Elnahal's statement reflects a growing recognition within the VA of the potential therapeutic benefits of psychedelics, particularly in treating conditions like PTSD, which is prevalent among veterans.

California Senate Committee Halts Psychedelic Service Centers Bill – The California Senate Appropriations Committee has rejected a bill that aimed to legalize psychedelic service centers where substances like psilocybin, MDMA, mescaline, and DMT could be accessed under supervision. This bill, which included provisions for the training and licensing of facilitators, was designed to create a regulated environment for the use of psychedelics but ultimately failed to pass the committee stage.