In this week’s edition:

• STATES (2.0) Act Presents Alternative Federal Regulatory Scheme
• DEA Sends Warning to Georgia Pharmacies Selling Cannabis
• 29 Former Federal Prosecutors Urge Biden Administration to Leave Marijuana in Schedule I
• New York Cracks Down on Illicit Market, Allows ROs to Commence Adult-Use Sales
• Ohio Legislative Session Likely to End Before Amendments to Issue 2, Keeping Adult-Use Sales in Limbo
• Federal Study Shows Highest Rates of Treatment for Cannabis Use in States Where Cannabis Remains Illegal
• FDA Receives MAPS Application for MDMA Treatment of PTSD as Pharmaceutical

Federal

STATES 2.0 Act – Rep. David Joyce and several other bipartisan lawmakers introduced a modified version of the Strengthening the Tenth Amendment Through Entrusting States (STATES) Act (known as the “STATES 2.0 Act”) to “ensure that each State has the right to determine for itself the best approach to cannabis within its borders.” Among other proposed changes, the STATES 2.0 Act would amend the Controlled Substances Act (CSA) to effectively deschedule under the CSA cannabis that is legal under state and tribal law, tax and track interstate trade through the federal Alcohol and Tobacco Tax and Trade Bureau, and further regulate “marijuana products” through the Food and Drug Administration. For a deeper dive on the STATES 2.0 Act, see our summary here.

DEA Sends Warning to GA Pharmacies – The Drug Enforcement Administration (DEA) sent a letter to pharmacies in Georgia—the first state to allow pharmacies to sell medical cannabis—warning them that dispensing THC is unlawful. According to the letter, sent by a DEA deputy administrator, a “DEA-registered pharmacy may only dispense controlled substances in Schedules II-V of the Controlled Substances Act. Neither marijuana nor THC can lawfully be possessed, handled, or dispensed by any DEA-registered pharmacy.” The letter does not address the Joyce Amendment, a congressional budget rider that prevents federal prosecutors from using federal funds to impede the implementation of state medical cannabis laws. The commission that oversees Georgia’s Medical Cannabis Commission held a special meeting on December 13, where one official called on supporters to contact Congress about the issue and another alluded to a potential lawsuit that the state may file against the DEA over the dispute.

Former Federal Prosecutors Urge Biden Administration to Leave Marijuana in Schedule I – A letter sent to the Department of Justice and the Drug Enforcement Administration by 29 former US attorneys last week argued that “marijuana has only become more dangerous, potent, and addictive” since the federal government last reviewed its scheduling in 2016. Among other effects of rescheduling, the group flagged that cannabis companies would no longer be subject to Section 280E of the Internal Revenue Code and would be able to deduct ordinary business expenses, which the former US attorneys claimed would allow cannabis companies to “deduct expenses for advertisements appealing to youth and the sale of kid-friendly marijuana gummies.” The letter also claims, without citing a source, that “[a]lmost no one has benefitted from legal weed,” with the exception of drug cartels that the former prosecutors claim have started growing cannabis in states with home grow laws to cut trafficking costs. 

State

AL – Alabama’s Medical Cannabis Commission (AMCC) issued 25 licenses for its medical cannabis program. Twenty of these licenses are for cultivating, processing, dispensing, transporting and testing, and the remaining five are for integrated facilities. This is the third time AMCC has issued licenses for the state’s medical cannabis program. The first two attempts prompted industry backlash and a number of lawsuits that prevented the state from moving forward on licensing cannabis businesses.

CA – The California Department of Cannabis Control announced a new cannabis transfer approval process that will begin on January 2, 2024. Among other changes, the new process will allow licensees to review and correct orders before they are placed on a manifest and “[s]treamline operations to support the transfer of compliant products in the supply chain.”

MN – According to the interim director of Minnesota’s Office of Cannabis Management (OCM), the state is on track to launch its adult-use program in early 2025. Under the current timeline, OCM would begin accepting license applications in the fourth quarter of 2024.

NY – The New York Office of Cannabis Management recently publicized its efforts to crackdown on unlicensed cannabis businesses. Working with the Department of Taxation and Finance, regulators reportedly inspected 71 unlicensed shops, confiscating 701 pounds of edibles, 812 pounds of cannabis flower and 61 pounds of concentrate, with a total value of more than $7 million. Additionally, earlier this month, state regulators approved six vertically integrated medical cannabis operators (known in the state as “registered organizations”) to enter the adult-use market on December 29, 2023. This comes nearly a year after the state launched cannabis sales for adult use in December 2022.

OH – With adult-use legalization already taking effect early December, state legislators continue to negotiate over potential changes to the ballot measure (Issue 2) that was passed by voters in November. The variety of bills that would change the voter-approved law are, however, unlikely to reach the governor’s desk before the legislature adjourns for the holidays. Recreational use is now legal, but there is no commercial avenue for consumers to purchase cannabis.

OK – In response to SB 1737, a bill enacted in 2022 that requires cultivators to post certain signage on the perimeter of their property, the Oklahoma Medical Marijuana Authority (OMMA) filed 165 petitions for license revocations against operators for failing to adequate follow the bill’s requirements. The action is one more example of OMMA’s ongoing clampdown on non-compliant licensees.

WI – The GOP-controlled state legislature reportedly intends to introduce a bipartisan bill that would, among other things, decriminalize low-level cannabis possession. The bill would also provide employers with greater discretion regarding cannabis workplace testing protocols and the police with added flexibility in handling cannabis possession cases.

Hemp

Hemp Cannabinoids as Potential Source of Natural Pesticides – According to a recent study reported in Hemp Today, researchers at Cornell University found that hemp leaves containing higher concentrations of cannabinoids showed comparatively less insect damage. “It has been speculated that [cannabinoids] are defensive compounds, because they primarily accumulate in female flowers to protect seeds, which is a fairly common concept in plants,” noted Larry Smart, the study’s senior author. The authors hope that further research into cannabinoids will lead to the development of new natural insecticides.

AR – A cannabis trade group is supporting the State of Arkansas in the Eighth Circuit, urging the reversal of an injunction blocking enforcement of a state law regulating hemp-derived intoxicating products. In the previous case, several companies sued Arkansas over a law regulating intoxicating products made from hemp. The group contends that allowing states to regulate these intoxicating products is within the US Farm Bill's intent and is necessary for safeguarding public health.

FL – In a dispute between Just Brands LLC and the Florida Department of Agriculture, a Florida magistrate judge recommended denying Just Brands' request to block stop-sale orders under Florida's updated hemp regulations, citing the company's failure to prove a likelihood of success and the state's legitimate interest in preventing sales of hemp products resembling candy to children. Just Brands argued that the state overstepped its authority by stopping out-of-state sales, but the judge found the company's lack of action to comply with amended regulations and ongoing business practices negated claims of irreparable harm.

IL – Chicago liquor stores are now selling hemp THC–infused drinks, allowing consumers to purchase these beverages outside of licensed dispensaries, signaling a potential shift in the way THC-infused beverages are sold. This change highlights evolving trends in hemp product sales.

MN – Chris Tholkes, who recently resigned as director of Minnesota’s Office of Medical Cannabis, highlighted gaps in the department’s regulatory authority that could permit the sale of higher potency cannabis flower by hemp retailers. During an episode of a national cannabis-related podcast, Tholkes explained that the department lacks express authority to regulate hemp flower, which limits the state’s oversight to processed cannabinoid products and leads to confusion among law enforcement about their role in monitoring and enforcing THC limits.

MO – In anticipation of the state’s 2024 legislative session, legislators have pre-filed a bill (HB 1781) that would introduce comprehensive regulations for hemp and hemp-intoxicating products. The bill would also impose the same strict safety requirements currently enforced against state-legal cannabis products.

OH – As lawmakers currently work to amend the voter-approved ballot measure Issue 2 (which legalized cannabis for adult use), the US Hemp Roundtable is raising the alarm that legislators may be taking advantage of the moment to insert language in proposed legislation that would ban full-spectrum hemp products (whether intoxicating or otherwise). One proposed bill (HB 86), for example, expressly bans the sale of hemp containing THC isomers such as delta-8 and delta-10.

OK – Oklahoma officials, including the state’s top medical cannabis regulator, are concerned about the unregulated rise of THC-altered products, like delta-8, exploiting “legal loopholes” in hemp laws, potentially misleading consumers and lacking oversight. The absence of clear regulations allows the sale of these products without standardized testing, packaging and labeling, raising potential health and safety concerns.

International

Canada Takes a Stance on "Intoxicating Cannabinoids" – Canadian health regulators issued guidance for cannabis producers regarding cannabis products containing intoxicating cannabinoids. The regulator identified several cannabinoids, including delta-8-THC, delta-10-THC and CBN, among others, as intoxicating and subject to similar restrictions and limits as delta-9-THC. The new guidance aims to standardize regulations, with any intentional inclusion of these cannabinoids requiring adherence to the same restrictions regarding total THC content in cannabis products, ensuring public health and safety. This comes after recent adjustments following industry feedback, particularly regarding the inclusion of CBN in the list of regulated intoxicating cannabinoids, impacting products already available in Canada.

The Netherlands Launches Legal Cannabis Sales – The Dutch “experiment” with regulated cannabis was initiated this month at coffee shops in Breda and Tilburg through a controlled supply chain. The process is set to last at least four years and will include 11 municipalities across the country in an effort to phase out a policy under which cannabis has been legal to buy and sell but illegal to produce and sell in bulk quantities.

Germany Delays Vote on Legalization Bill – A final vote to legalize cannabis that had been planned for early December was pushed back over concerns raised by the Social Democratic Party. It is possible the Bundestag will take up the measure as early as mid-January 2024. Following the bill’s final reading in the Bundestag, it will go to the Bundesrat, a separate legislative body that represents German states.

Japan Legalizes Medical Cannabis While Toughening Stance on Adult-Use Cannabis Consumption – Japan’s National Diet passed a bill that will lift a ban on medical products derived from cannabis while also increasing penalties associated with consuming adult-use recreational cannabis. Under the revised laws, individuals that are found to be using or possessing cannabis may face a prison sentence of up to seven years. The new rules are only intended to target THC and would leave CBD products unregulated. 

Business

Martin Luther King III Calls for Equity and Inclusion in Cannabis Industry – Martin Luther King III, son of the Rev. Dr. Martin Luther King, Jr., spoke at the annual MJBiz Conference in Las Vegas. King emphasized that supporting entrepreneurial opportunities and business ventures within the Black community creates a path toward broader social equity.

Scott’s Miracle-Gro – Scott’s Miracle-Gro is seeking a new strategy for its cannabis subsidiary, Hawthorne Gardening Co. The company is interested in entering into deals with undervalued cannabis companies to form a large company that could compete with larger companies from the tobacco, alcohol and pharmaceutical industries upon federal legalization. According to Scott’s CEO, “[w]e’re going to turn [Hawthorne] into something that’s even more important at a time of very high level of distress in the industry.”

Medical

Federal Study Shows Highest Rates of Treatment for Cannabis Use in State Where Cannabis Remains Illegal – Data published recently by the federal Substance Abuse and Mental Health Services Administration shows that states where cannabis sales remained illegal generally had higher rates of treatment admissions for the drug as compared to states that have legalized cannabis sales. The report presents findings from nearly 1.5 million admissions nationwide over the course of 2021.

Psychedelics

FDA Receives MAPS Application for MDMA Treatment of PTSD as Pharmaceutical –MAPS Public Benefit Corporation submitted an application to the Food and Drug Administration (FDA) to approve MDMA as a prescription medicine to treat post-traumatic stress disorder (PTSD). If approved, MDMA would become the first psychedelic in US history to be approved as a pharmaceutical. 

Petitioner Asks Ninth Circuit to Require FDA Input on Psilocybin Rescheduling Request – A Seattle physician, Dr. Sunil Aggarwal, has petitioned the Ninth Circuit for an explicit order requiring the federal Drug Enforcement Administration (DEA) to refer his rescheduling petition to the Food and Drug Administration (FDA) for its review. The petition follows a circuit court decision in October remanding the physician’s original request for rescheduling psilocybin back to the DEA, ordering the agency to fully explain its reasoning for why the substance should remain under Schedule I. The DEA had denied the rescheduling request in a simple two-paragraph denial letter. 

Washington State Advocates Push to Decriminalize Psychedelics Locally – While waiting for legislation to move forward at the state level, advocates are working to pass decriminalization measures in the state capitol of Olympia as well as in the cities of Bellingham, Spokane and Tacoma and in King and San Juan counties. Organizers are building off of successful efforts in other parts of the state earlier this year and in 2021. 

Dentons Speaks

ONE HEMP Presentation – Dentons partner Kelly Fair led a ONE HEMP coalition briefing on December 6 after meetings on Capitol Hill that focused on the need for Congress to regulate CBD products as dietary supplements. The recording and transcript are available here.

Dentons Presentation on Hemp Regulations in Kentucky – On December 12, Dentons partners Arin Aragona, Hannah King and Kristin McCall gave a webinar titled, "Kentucky’s New Regulations for Hemp-Derived Products: Navigating the Emerging Market Landscape.”

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.