In this week’s edition:

• DEA Reportedly Considers Banning Hemp-Derived Delta-8 THC Products
• Minnesota Is Legalizing Recreational Cannabis Within Days
• New York’s Recreational Cannabis Sales Disappoint
• Washington Enacts Bill To Protect Job Applicants From Anti-Cannabis Discrimination
• US Hemp Production Declined Precipitously in 2022
• Global Legal Cannabis Market Forecasted To Hit $100 Billion by 2029

Federal

Senators Call for Expungements To Be Added to SAFE Banking – Sens. Chuck Schumer (D-NY), Cory Booker (D-NJ) and Ron Wyden (D-OR) released a joint statement applauding “key improvements” to the Secure and Fair Enforcement (SAFE) Banking Act that would ensure “small and minority-owned businesses can access the capital they need to start and maintain successful cannabis-related businesses.” However, the Senators also called for “additional improvements” to the SAFE Banking Act, including the incorporation of provisions of the Harnessing by Pursuing Expungement Act, “which would support states that want to expunge cannabis records with grants.”

DEA Considers Banning Delta-8 THC – An official with the US Drug Enforcement Administration (DEA) indicated at a recent conference that the DEA will propose changes to federal drug control laws to target delta-8 THC and other intoxicating cannabinoids derived from hemp. It appears the DEA is considering a new rule clarifying that synthetically manufactured THCs are prohibited controlled substances – even if the manufacturing process starts with cannabinoids that are found naturally in hemp. As much of the current market is comprised of THC products created from the chemical conversion of hemp-derived CBD, the changes would effectively ban most hemp derivative products. The DEA is also reportedly intending to deschedule synthetic CBD with less than 0.1 percent delta-9 THC.

States

FL – Shortly after advocates announced that they had collected enough signatures to qualify a legalization ballot initiative for the state’s 2024 election, Florida Attorney General Ashley Moody (R) filed a petition with the state Supreme Court claiming that the “Adult Personal Use of Marijuana” ballot initiative violates the state constitution’s single subject requirement, which requires ballot initiatives to be narrowly focused on a single issue. Moody made a similar argument against a 2022 recreational cannabis ballot initiative, which the state Supreme Court ultimately invalidated.

MD – Maryland’s Gov. Wes Moore (D) signed a bill that will protect parents (and other guardians responsible for supervising a child) that legally use cannabis from being prosecuted for child “neglect” on that basis alone. If the caretaker’s cannabis use results in harm or substantial risk of harm or mental injury to the child, the individual can still be found liable for neglect. Another bill (HB 1071), enacted without the governor’s signature, will prevent police from using the odor or possession of cannabis as the sole basis for a search. These measures will go into effect on July 1, 2023, the date on which retail sales of adult-use cannabis are expected to begin.

MI – The Michigan Civil Service Commission released proposed amendments to the state government’s employment code that would end pre-employment cannabis testing for most government jobs. The potential changes, which are subject to public comment, would also allow individuals to request the recission of any active sanction based on a prior positive test result.

MN – Gov. Tim Walz (D) of Minnesota has indicated that, next week, he will sign the cannabis legalization bill that is currently on his desk. The state has already launched a website for the to-be formed Minnesota Office of Cannabis Management, which provides a general overview of the legislation in advance of its anticipated enactment. While retail sales are unlikely to launch until next year, the new law’s possession, personal cultivation and expungements provisions would take effect in August.

NH – The New Hampshire Senate voted to establish a commission to examine potential models for the legalization of cannabis, with Gov. Chris Sununu (R) reportedly stating that he expects legislators to take up his plan to create a state-run cannabis market next year. The twenty member Commission to Study State-Controlled Sales of Cannabis will be required to submit its findings and recommendations to the state legislature by December 1, 2023.

NY – Adult-use cannabis sales in New York have surpassed $16.5 million, which while reflecting growth in the state’s legal market, are still a small portion of the state’s illicit market.  The slow growth in legal sales is attributed to various factors, including limited retail availability due to zoning and municipality restrictions, high taxes and ongoing competition from the illicit market. Despite the current challenges, industry experts anticipate that as the market matures, regulatory improvements and expanded access will help bridge the gap and facilitate the transition from the illicit to legal market.

OK – Oklahoma Gov. Kevin Stitt (R) signed a bill extending the moratorium on new medical cannabis licenses until August 1, 2026. The decision to prolong the moratorium is intended to control the growth of the state’s cannabis industry and address concerns related to oversaturation and potential market instability. The law provides some stability for existing businesses, which currently include 6,675 registered growers in the state, according to the Oklahoma Medical Marijuana Authority.

OR – Oregon’s largest private sector union has initiated a recall effort against one of the top-ranking democrats in the state legislature, Rep. Paul Holvey. The union’s decision to target Holvey stems from perceived dissatisfaction with his stance on cannabis-related legislation, including disagreements over key issues such as taxation, regulation and social equity in the industry. The recall campaign highlights the complexity of navigating cannabis policy within the state and the various perspectives within the Democratic Party on how to best approach cannabis legislation.

WA – Governor Jay Inslee of Washington State signed a bill into law that safeguards job applicants from discrimination based on their past or current cannabis use. The newly enacted legislation prohibits employers from using cannabis consumption as the sole grounds for denying employment opportunities and aims to protect the rights of job seekers while reducing unnecessary barriers to employment in industries where cannabis use does not directly impact job performance. This development represents a significant step towards fairer hiring practices and acknowledges the growing acceptance and normalization of cannabis use.

Hemp/CBD

US Hemp Production Declines Precipitously in 2022 - Hemp plantings in the United States were nearly cut in half in 2022, with 28,400 acres (or 44.4 square miles) dedicated to growing the plant – slightly more than the acreage set aside for Christmas trees. By contrast, retail sales of hemp-derived CBD products are still growing. Retail CBD sales are projected to bring in $4.5 billion in 2024.

States Across US Continue To Introduce Restrictions on Intoxicating Hemp Products – A number of states have joined what appears to be a growing nationwide movement to rein in what once was a largely unregulated market. The state measures vary widely in impact, however.  For example, Arkansas decided to prohibit intoxicating hemp products entirely under newly enacted SB 358.  In Tennessee, the state governor recently signed a new bill (SB 378) expressly setting forth a comprehensive regulatory regime for the intoxicating hemp product market.  Meanwhile, Connecticut appears on its way to passing a number of new laws (including for example, HB 6699) that, among other things, would define all high-THC hemp products as “cannabis” to be sold only at licensed dispensaries. Dentons is closely monitoring state legislative activity regarding the intoxicating hemp market across all 50 states.

International

Global Legal Cannabis Market Forecasted To Hit $100 Billion by 2029 – The global market for medical and recreational cannabis is projected to grow at a CAGR of 28.4 percent, as measured over the forecast period (2021 to 2029). The market was valued at $17.48 billion in 2021, with North America and Europe accounting for more than half the world market.

Germany – The German government is preparing a draft law that would highly regulate so-called cannabis clubs. In April, the government announced a scaled-back plan for the legalization of adult-use cannabis after discussions with the European Union Commission. Under the draft law, nonprofit cannabis clubs will be allowed to cultivate and distribute cannabis to their adult members for recreational use – up to a maximum of 50 grams per month per person. On-site consumption will reportedly not be permitted.

Switzerland – Earlier this month, the Federal Office of Public Health greenlighted additional randomized controlled trials in various cities across the country to assess the impact of cannabis legalization. The trials, under the auspices of the University of Bern, seek to investigate the health and social effects of a highly regulated nonprofit approach to the sale of cannabis and will take place in the cities of Lucerne, Biel and Bern.

Business

Section 280E Forces State-Legal Cannabis Industry To Pay Close to $2 Billion Extra in 2022 Federal Taxes – Last year, cannabis companies were on the hook for an additional $1.8 billion in federal taxes compared to non-cannabis companies as a result of US Internal Revenue Code Section 280E. For 2023, the excess tax bill is expected to increase to approximately $2.1 billion. Blaming the extra tax burden, only 24.4 percent of surveyed cannabis businesses reported making a profit in 2022.

Medical/Health

Declines in Adult Tobacco Use Associated with State Legal Cannabis – The study, as published in the Journal of Health Economics, found that legalization of recreational cannabis led to a reduction in adult cigarette smoking as well as a decline in the use of electronic nicotine delivery systems. The study authors thus concluded that the introduction of recreational cannabis may generate tobacco-related health benefits.

Breathalyzers Still Unreliable for Detecting Recent Cannabis Use – A federally funded study, posted by the Journal of Breath Research, indicates that accurate cannabis breathalyzers remain far in the future. Findings “do not support the idea that detecting THC in breath as a single measurement could reliably indicate recent cannabis use.”

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

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