In this week’s edition:

• Secretary Becerra: Decision on Cannabis Rescheduling “Hopefully” in 2023
• SAFE Banking Remains on Target for a Senate Banking Committee Vote
• Alabama Approved Initial Medical Cannabis Licenses
• Colorado Legalizes Online payments for State-legal Cannabis
• Majority of Truckers Reportedly Support Cannabis Legalization
• Proposed Bill Legalizing Cannabis Faces Final Vote in Colombia

Federal

Federal Government Aiming at Cannabis Rescheduling Decision “This Year” – Regarding the potential rescheduling of cannabis, US Department of Health and Human Services’ Secretary Xavier Becerra informed reporters yesterday that the agency—along with other agencies such as the Drug Enforcement Administration—“are working together to try to see if we can give the president an answer that’s based on the science and the evidence. Stay tuned. We hope to be able to get there pretty soon—hopefully this year.”

Senate Banking Committee Poised to Vote on SAFE Banking Act In Coming Weeks  – Chair Sherrod Brown (D-OH) reportedly intends to hold a vote on the bipartisan Secure and Fair Enforcement (SAFE) Banking Act later in June, pending negotiations with Sen. Tim Scott (R-SC). The committee held an initial hearing on the reintroduced legislation last month.

New Coalition Pushes for Scheduling Reform – The Coalition for Cannabis Scheduling Reform, made up of major cannabis companies, advocacy organizations, and subject matter experts, launched its campaign on June 6th. The coalition will work with lawmakers, administration officials, and other stakeholders to provide information and analysis in support of reform efforts. According to a press release, the group is preparing to release a report that will detail the benefits of descheduling cannabis or rescheduling to Schedule III, IV, or V.

Lawmakers Introduce Bill to Fund Cannabis Research – The Higher Education Marijuana Research Act, introduced by Reps. Dina Titus (D-NV) and Joe Neguse (D-CO), would provide $150 million in federal funding to eligible universities for cannabis research over a five-year period. The legislation would also remove roadblocks for research institutions to obtain legal cannabis for their studies by establishing partnerships with state regulatory agencies and law enforcement. 

State

State Regulators Increase Enforcement Against Licensees Over Past-Due Taxes and Fees – Licensed cannabis companies nationwide are seeing an uptick in enforcement from state regulators over past due taxes, fees, and other business expenses. In early June, New Jersey officials reportedly revoked the cultivation and manufacturing licenses of one company that owed the state $700,000 in licensing fees. Other states, including California, Michigan, Nevada, New York, and Oregon have been adopting new policies or otherwise ramping up enforcement to address issues with tax compliance, ranging from civil penalties to denials (or revocations) of licenses. Businesses cite overproduction and decreasing wholesale prices, in addition to compliance costs, competition from unlicensed businesses, high taxes, and the inability under federal law to deduct ordinary business expenses, for the failure to pay down debt that is reaching hundreds of thousands to millions of dollars for some large companies.

State Action on Tax Deductions – Lawmakers in Illinois and Minnesota approved bills to eliminate conformity with the Internal Revenue Service (IRS) Code Section 280E, which prohibits cannabis businesses from deducting ordinary business expenses. Under the new state laws, licensed cannabis businesses will be permitted to deduct ordinary business expenses from state taxes. The New York Senate recently passed a bill that would provide similar local tax relief to licensed cannabis businesses in New York City.

AL – The Alabama Medical Cannabis Commission approved licenses for 21 businesses (out of a total of 90 applicants) to cultivate, process, transport, test, and sell cannabis. The Commission is scheduled to meet on July 10, 2023 to issue licenses in each license category after applicants pay the required licensing fees.

CA – Cannabis sales in California totaled $1.25 billion in the first quarter of 2023, the lowest sales total since the onset of the COVID-19 pandemic in the second quarter of 2020. If the lower sales remain, cannabis sales in the state would fall for the second consecutive year.

CO – Colorado Gov. Jared Polis (D) signed a bill legalizing online payments for state-legal cannabis purchases. Under the new law, individuals must still be physically present on the retail cannabis store’s licensed premises to take possession of cannabis products purchased online.

MD – Maryland’s Marijuana Cannabis Administration released draft regulations just weeks ahead of the launch of the state’s adult-use market on July 1. The regulations provide for the adult-use conversion of medical cannabis licenses and set forth requirements relating to delivery services, THC limits, and online ordering.

MI – Michigan government officials are considering dropping pre-employment cannabis testing requirements for certain state employees. “Ending this pre-employment testing for marijuana would not affect the availability of reasonable suspicion or follow-up testing for marijuana of classified employees.”

NC - The North Carolina House’s Health Committee is scheduled to discuss a medical cannabis bill, signaling a potential path towards legalization in the state, which is one of the few remaining states without medical cannabis. While no vote is planned at this stage, the legislation, known as Senate Bill 3 or the Compassionate Care Act, has already passed the Senate and may undergo alterations in the House. If approved, the bill would establish rules for patients, such as obtaining state-issued cards, implementing restrictions on consumption, and specifying acceptable medical conditions for medical cannabis use.

NV – Nevada lawmakers have passed a comprehensive cannabis reform bill that is now awaiting the governor’s approval. The bill would increase the personal possession limit for cannabis, consolidate licensing rules, and expand market access for individuals with prior felony convictions. It also proposes revisions to the state’s cannabis laws, including the elimination of separate licenses for medical and recreational retailers and reduced fees for licensing application and renewals.

NY - New York marijuana regulators voted Tuesday to settle a federal lawsuit that has blocked them from granting dispensary licenses in the Finger Lakes region. The state had been sued by a Michigan resident claiming that the retail cannabis license selection process unconstitutionally favored New York residents. Now that the lawsuit has been settled, the injunction no longer impedes dispensary licenses from being issued. Also in New York, regulators have launched a crackdown on unlicensed marijuana operators in an effort to regulate the state’s adult-use market. Governor Kathy Hochul announced a multiagency enforcement effort, resulting in the seizure of products and the issuance of violations to seven stores in New York City. The crackdown is part of new legislation that criminalizes selling marijuana products without a license, with fines of up to $20,000 per day, and aims to protect legal businesses and enhance the state’s adult-use cannabis program.

TX – Texas bills aimed at decriminalizing cannabis, facilitating expungements, and allowing medical cannabis as an alternative for pain patients have died in the state’s Senate. Despite the House passing the bills, Senate leadership did not advance the measures for consideration, maintaining a longstanding blockade on cannabis legislation in the state. Advocates expressed disappointment but remain hopeful for future opportunities to pursue cannabis reform in the next legislative session, which does not begin until January 2025.

Hemp/CBD

Global CBD Oil Market Poised to Experience 31 Percent Growth Rate in Next Ten Years – According to market research by FMI, the rising demand for cannabis, increasing legalization, and the health benefits of cannabis-infused products will drive market expansion. The market is expected to reach a $389 million valuation in 2023 and $5.98 billion by 2033 with significant growth opportunities in the pet food and cannabis-flavored beverages sectors.

New Jersey Legislation Restricting Delta-8 Products Advances – State lawmakers are considering legislation (A5440) to restrict and regulate the availability of hemp-derived intoxicating THC products. Legislators recently heard testimony from parents of a 14-year-old boy who almost died from mistakenly ingesting delta-8 gummies. The legislation would ban such products along with other synthetically derived forms of THC unless produced and sold in accordance with existing state cannabis law.

International

Proposed Bill Legalizing Cannabis Faces Final Vote in Colombia – The legislation reportedly faces one last vote by the Senate before it is sent to the President’s desk for signature. While the President is well-known for his strong advocacy of cannabis legalization and is expected to sign any such legislation, proponents remain worried that the chamber’s final vote might not happen before the end of the country’s legislative session next week.

Report Estimates 25.75 Percent CAGR For Legal Cannabis From 2023 to 2032 – According to the Legal Cannabis Market research report, the Global Legal Cannabis Market was valued at $18.43 billion in 2022 and is projected to grow at a compound annual growth rate (CAGR) of 25.75 percent from 2023 to 2032.

Business

Labor Unions Score Recent Wins in Cannabis Industry – In the past month, prominent unions, such as the Teamsters, have achieved notable victories in contract negotiations with various multi-state operators. In the wake of a Teamster-organized strike in the Chicago area, employees at PharmaCann-locations in Chicago, for example, reported a union contract guaranteeing higher wages. In addition to labor strikes, observers note a growing number of complaints filed with the National Labor Relations Board.

Cronos Closes Down Operations in US Hemp Market – The Canadian-based company said the pull-out is intended “to improve its cash flow in the near term and position itself to directly enter the U.S. THC market when the necessary changes in U.S. regulatory conditions occur.” Back in 2019, Cronos acquired its US hemp assets from Redwood Holding Group for a reported $300 million.

Facing Ongoing Labor Shortage, Majority of Truckers Support Cannabis Legalization  – The American Transportation Research Institute reports that 70 percent of truck drivers and 62 percent of carriers support a change in policies to consider state-level cannabis legalization. In the last three years, a large number of drivers, upwards of 100,000, have been reportedly prohibited from operating after testing positive, for cannabis use even at negligible levels. The report claimed that “more than half of all positive trucking industry drug tests” were for “marijuana metabolite,” which remains detectable weeks after consumption. Most of the drivers taken off the road have opted to leave the industry altogether.

Dentons Speaks

The Green Rush Podcast – On June 8, 2023, Dentons Partner and Co-Head of the Cannabis Practice, Eric Berlin, joined the weekly podcast for a discussion of all things cannabis, including his career path to leading a celebrated cannabis practice, his pro bono work, the evolution of the cannabis industry and various cannabis trends and issues.

Key Case and Filing Trends in State and Private Litigation – On June 7, 2023, Dentons Partner Amy Rubenstein spoke at a panel hosted by the Food and Drug Law Institute. The panel discussed the increase in both government and private cannabis litigation and included, among other things, a review of recent filings and areas of focus for district attorneys seeking to enforce state laws.

Navigating Kentucky’s Medical Cannabis Market – On June 8, 2023, Dentons Partners Hannah King, David Tandy, and Kristin McCall hosted a webinar on navigating the emerging market landscape for medical cannabis in Kentucky. Because local governments will be able to impose restrictive zoning requirements or even prohibit any cannabis businesses from siting within their communities, the speakers encouraged prospective applicants to start engaging with the local process as soon as possible. While the new law allows for a citizen petition process to overturn a local prohibition on cannabis businesses, missing a key petition deadline could set a business back years.

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.