In this week’s edition:

• Ninth Circuit Finds 2018 Federal Farm Bill Legalized Some Delta-8 THC Products
• New York Awards Additional Adult-Use Licenses, Issues Proposed Regulations
• Rhode Island becomes the 19^th US State to Legalize Adult-Use Cannabis
• Cannabis MSOs to Sue US Government Over Cannabis Prohibition
• Brain Motor Function Reportedly Not Impacted by Heavy and Chronic Cannabis Use

Federal

Cannabis MSOs to Sue US Government Over Cannabis Prohibition – A number of cannabis MSOs (multistate operators) are joining forces to sue the US government for violations of the Constitution, including impeding intrastate cannabis commerce, as well as over 280E of the US tax code, which blocks cannabis companies from taking tax deductions available to other businesses. Abner Kurtin, founder and CEO of Ascend Wellness Holdings, has characterized the suits as an “industry-wide effort,” with at least six major cannabis operators “favorably disposed” to joining.

Multi-State Banking Org Tells Congress to Keep SAFE Banking in COMPETES Act – The Conference of State Bank Supervisors (CSBS) is urging lawmakers to include SAFE banking language in a federal manufacturing bill, the COMPETES Act, that is currently being finalized. The House included the language in its version, but the Senate removed it. Meanwhile, the standalone Senate version of the SAFE Banking Act currently has 42 co-sponsors.

CBP Doesn’t Consider Foreign Cannabis Workers Inadmissible – A recently disclosed 2018 US Customs & Border Patrol memorandum suggests that foreigners working in a legal cannabis business are not inadmissible to the US. This memorandum would apply to foreigners working abroad in jurisdictions where cannabis is federally legal, such as Canada. However, non-citizens seeking to enter the US to engage in the cannabis business are still considered inadmissible, even if state regimes authorize such business, due to the federal illegality of cannabis. This memorandum contrasts with statements previously made by CBP officials regarding the admissibility of those employed by the legal cannabis industry. CBP did not offer a comment on the newly disclosed memorandum.

States

CA – At the close of the first quarter of 2022, cannabis tax revenue for the state of California was just over $293 million, down slightly from 2021 Q4 tax revenues of $316 million. A new study in Science Direct found that California-licensed dispensaries were 100 percent compliant in checking youth for identification and keeping underage patrons from purchasing cannabis at their stores. California cannabis licensees must begin CEQA compliance as the state begins to transition out of provisional licensing, though additional time is permitted for those who show they are “actively and diligently” working toward annual licensing.

DE – Delaware Governor John Carney (D) vetoed a cannabis reform bill after it was passed by the state legislature. The Governor stated that he continues to support the state’s medical cannabis program as well as decriminalization of cannabis but remains concerned about the impact on youth that legalizing adult-use cannabis would have.

IL – After almost a year of delays, a judge finally ended the court order that was preventing the state of Illinois from granting 185 new adult-use cannabis retail licenses. Companies that had been waiting for the court order to be lifted—many of which were forced to continue renting real estate without being able to realize any revenue—can now resume taking steps toward opening. However while additional pending lawsuits could again jeopardize the program, three corrective lotteries will be held in June to grant additional licenses. 

MS – The Mississippi Department of Revenue released a checklist for parties interested in applying for a medical cannabis dispensary license. The checklist was developed in collaboration with the Mississippi State Department of Health and provides information required to be submitted with the license application, which will be available online no later than July 2022. The Department of Revenue also issued new proposed regulations for excise and sales taxes on medical cannabis.

NY – New York State cannabis officials approved proposed regulations for packaging, labeling, testing and marketing of cannabis products in the new adult-use market, including a universal symbol for cannabis that must appear on licensed retail products. Regulators also approved an additional 16 adult-use cannabis cultivation applications. They said their goal is to have licensed adult-use cannabis sales begin in New York in late 2022 or early 2023. Additionally, New York Attorney General Letitia James has noted that only one complaint was filed in response to a press release issued in October 2021 warning parents of cannabis products that look like candy. Health officials in the state, however, still maintain that edible products can “oftentimes be confused,” particularly when the product looks like candy.

OK – During the 2022 session of the Oklahoma Legislature, which adjourned on May 27, 2022, Gov. Kevin Stitt (R) signed into law more than a dozen cannabis-related bills. The new laws impose various requirements on cannabis businesses, such as employee credentialing and changes in packaging; bolster the authority of the Oklahoma Medical Marijuana Authority (OMMA); and restructure the licensing process.

OK – Pursuant to a new law signed at the end of May, the Oklahoma Medical Marijuana Authority (OMMA) will stop processing applications of cannabis business licenses beginning August 1. The moratorium will remain in effect for two years, until August 1, 2024, or earlier if OMMA can complete all pending license reviews, inspections and investigations. Current grower, dispensary and processor licenses will not be affected unless the licensee surrenders its license or allows the license to expire without submitting a renewal application.

RI – Gov. Dan McKee (D) signed into law the Rhode Island Cannabis Act, making Rhode Island the 19th state to legalize recreational adult-use cannabis for individuals. The law, which permits adult-use sales to begin as early as December 1, 2022, also makes “numerous investments in the creation of an equitable, accessible cannabis retail market” and requires automatic expungement of past cannabis convictions by July 1, 2024.

SD – A new ballot initiative has been certified by South Dakota officials, giving voters in the state another chance to vote on legalization of adult-use cannabis. South Dakota voters had approved a constitutional amendment in 2020 that would have legalized adult-use cannabis, but that amendment was struck down by the state Supreme Court. In contrast to the constitutional amendment, the new initiative would let the legislature establish a tax and regulatory structure for the new operations.

VT – After missing its May 1 deadline, the Vermont Cannabis Control Board has issued four adult-use cultivation licenses. All four licenses were granted to social equity applicants.

Hemp/CBD

Ninth Circuit Finds Delta-8 THC Products Legal in Early Stages of Trademark Case – The US Court of Appeals for the Ninth Circuit found that e-cigarette and vaping product manufacturer AK Futures had a legitimate trademark claim on its products containing Delta-8 THC because such “products are not prohibited by” the 2018 Farm Bill or other federal law. The appellant pointed to congressional intent and the Drug Enforcement Administration’s interpretation of the 2018 Farm Bill to support its arguments that the Farm Bill does not extend to Delta-8 THC. Rejecting these arguments in its decision upholding the preliminary injunction, the Ninth Circuit reasoned that the “[p]lain statutory text” of the 2018 Farm Bill “compels the conclusion that AK Futures’ products are lawful.”

FDA Issues Warning Letters for Illegal Sales of CBD Products – The US Food & Drug Administration issued warning letters to four companies selling CBD products that “are intended for use in food-producing animals.” According to the FDA, such sales are concerning “not only because CBD could pose a safety risk for the animals themselves, but also because of lack of data about the safety of human food products (meat, milk and eggs) from the animals that have consumed these CBD products.”

Minnesota Bill on Cannabinoid-Infused Food and Drink Products Heads To Governor’s Desk – A new bill passed by the Minnesota Legislature would make it legal to sell products containing all hemp-derived cannabinoids as long as such products contain less than 0.3 percent of any THC (including, for example, delta-8 and delta-10 THC). The new measure is intended to permanently correct a drafting problem in prior legislation, which was intended to align Minnesota’s hemp policy with the 2018 Farm Bill.

International

Argentina – Last month, Argentina enacted legislation intended to improve the country’s lackluster medical cannabis industry, with provisions for boosting cannabis exports around the world. In 2017, lawmakers passed a medical cannabis measure that turned out to be mostly symbolic. The new law aims to increase productivity and generate new exports for a country that is currently facing a deep economic crisis.

Bermuda – Bermuda Governor Rena Lalgie “reserved assent” (i.e., vetoed) the island’s Cannabis Licensing Bill 2022. In Bermuda, a British overseas territory, bills must first pass the island’s parliament and then obtain “assent” by the governor (who is appointed by the British monarch). It is highly unusual for the governor to withhold such assent. Governor Lalgie stated that the bill, as written, would breach Bermuda’s—and the UK’s—obligations under international law, including the 1961 Single Convention on Narcotic Drugs.

Italy – The Ministry of Defense issued an “expression of interest” in companies qualified and willing to grow medical cannabis. The ministry is looking to increase the domestic production of cannabis for medical use with the aim of achieving self-sufficiency.

Japan – The Ministry of Health is seeking to legalize cannabis for medical use. An expert panel at the ministry met last week to discuss revising a 1948 law, the Cannabis Control Law, which prohibits the possession and cultivation of cannabis as well as the manufacture of cannabis-derived medications. The ministry intends to draft proposals for the revision of the law this summer.

Business

Report Suggests Price, Convenience Underpin Cannabis Black Market – A new report in the Journal of Studies on Alcohol and Drugs suggests that higher prices and inconvenience associated with legal sources is encouraging consumers to seek out illegal providers. Investigators at the University of Waterloo in Ontario reviewed data from earlier studies where participants indicated the reasons for their black market purchases.

Ongoing Legal Dispute Between MedMen and Ascend Ends with $88M Settlement – MedMen Enterprises Inc. and Ascend Wellness Holdings Inc. announced a settlement agreement to end their bitter dispute that will see MedMen complete the sale of its New York operations to Ascend for $88 million. Ascend will pay MedMen approximately $73 million upon closing and an additional $15 million upon the first consummated sale of recreational cannabis at a former MedMen dispensary in the state.

Medical/Health

Various Cannabinoids Exhibit Anti-Inflammatory Activity, Study Reports – In multiple experimental models, both in vitro and in vivo, several phytocannabinoids, including Δ9-THC, CBD and cannabigerol (CBG), exhibited activity against inflammation. Such phytocannabinoids may ameliorate various inflammatory-related diseases by activating several signaling pathways.

Study Results Suggest Use of Medical Cannabis to Treat Cancer Symptoms Is Generally Safe – The use of medical cannabis to treat cancer-related symptoms is on the rise but clinical trials assessing the benefits and safety of such treatments lags far behind. Although reported adverse effects were common in the study, most were non-serious, indicating that the medical use of cannabis can help with those symptoms commonly associated with cancer (such as pain, anxiety, depression and insomnia) without any serious adverse effects.

Brain Motor Function Not Impacted by Heavy and Chronic Use of Cannabis – An article published in the journal CNS & Neurological Disorders – Drug Targets reported on a study looking at the impact of cannabis addiction on brain functional control, reorganization and plasticity through BOLD-fMRI mapping technology. With non-users as a control group, the study showed, among other things, no comparative loss in functional motor control for users heavily addicted to cannabis (i.e., smoking 15 joints a day).

1500mg Daily Dose of CBD Has No Impact on Driving Skills – University of Sydney-led research finds that 1500mg, the highest daily medicinal dose of CBD allowed in Australia, has no impact on people’s driving or cognitive abilities. CBD is a cannabis component widely used for medical as well as “wellness” purposes in the country, such as to induce sleep or boost energy. It is often consumed orally, in oil form. The study is the first to confirm that CBD, when consumed on its own, is safe for driving.

Please click here for more information on the Dentons US Cannabis group.

Authored by associates Lauren Estevez, Margo Wilkinson Smith and Jacob Raver.