Cannabis Client Alert – Week of November 26, 2024

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Cannabis Client Alert – Week of November 26, 2024

Cannabis Client Alert – Week of November 26, 2024

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November 26, 2024

In this week’s edition:

Uncertainty Reigns for Federal Cannabis Legalization With Trump Election
DEA ALJ Rules on Rescheduling Hearing Participants
GOP House Representative Proposes New FDA Powers Over Hemp Products
Delaware Releases List of Applicants Selected for Cannabis Licenses in Lottery
Kentucky Proceeds With Lotteries, but Sales to Patients on January 1 Are Unlikely
Massachusetts Cannabis Control Commission Appoints David Lakeman as New Executive Director
Psychedelics Legalization Ballot Measure Fails in MA

Federal

Uncertainty Reigns for Federal Cannabis Legalization With Trump Election – As President-elect Donald Trump unveils his cabinet picks. The cannabis industry faces uncertainty about whether the administration will support change or uphold historical restrictions. Robert F. Kennedy Jr., nominated for Secretary of Health and Human Services, has spoken for federal cannabis decriminalization and safe banking for cannabis businesses while Elon Musk and Vivek Ramaswamy, both appointed to lead the Department of Government Efficiency, have advocated for cannabis and psychedelic legalization. On the other hand, President-elect Trump’s nominee for attorney general, Pam Bondi, reportedly has an anti-cannabis record, including as an opponent of cannabis legalization while serving as Florida’s attorney general.

DEA ALJ Rules on Rescheduling Hearing Participants – Drug Enforcement Administration (DEA) Administrative Law Judge (ALJ), John Mulrooney, ruled last week that organizations will be allowed to participate in the upcoming cannabis rescheduling hearing and also set forth the procedures for cross-examination between pro- and anti-rescheduling speakers. Some proposed participants withdrew their participation while others were deemed ineligible, with the ALJ clarifying that standing for the hearing is based on a different standard than federal court requirements. The majority of participants oppose rescheduling. The preliminary hearing on rescheduling is scheduled for December 2 with in-person testimony to begin no earlier than January. The ALJ’s order also rebuked a motion filed last week stating that the DEA itself should be removed from the hearing due to alleged statutory violations, including “unlawful” communication with the prohibitionist group “Smart Approaches to Marijuana”. The ALJ found the critique “wholly unpersuasive.”

GOP House Representative Proposes New FDA Powers Over Hemp Products – Rep. Morgan Griffith (R-Va.) is drafting new legislation to grant the FDA authority to regulate hemp-derived products, including setting labeling and manufacturing standards. Griffith, collaborating with Republican staff from the House Energy and Commerce Health Subcommittee, is seeking to become the top GOP member on the subcommittee that oversees food and drug regulation.

State

DE – The Office of the Marijuana Commissioner has released a public list of applicants selected for cannabis business licenses in Delaware, including manufacturing, cultivation, and testing, but not retail licenses, which will be decided through a lottery in December. The speed of the marijuana industry's launch depends largely on cities deciding on zoning ordinances. Meanwhile, background checks are being conducted on selected applicants, and medical cannabis centers are advancing toward obtaining conversion licenses to sell recreational products, with retail sales expected to begin in March 2025.

FL – A Florida ballot initiative to legalize recreational cannabis failed to gain the required 60 percent voter support, despite endorsements from a range of political figures, including the Florida Democratic Party and President-elect Trump. The state currently permits cannabis use for medical purposes, but recreational use remains illegal. The ballot’s defeat is a victory for Gov. Ron DeSantis (R), who vociferously campaigned against the measure. In the midst of the defeat, state Rep. Alex Andrade (R) has reportedly floated the idea of legalizing home cultivation for personal consumption.

IL – Seven minority (and women) -owned cannabis transport companies are suing the Illinois Department of Agriculture, alleging that its licensing process has disproportionately favored the larger and Caucasian male-owned companies. The lawsuit claims that the Department’s 2021 transporter license application process unfairly prioritized the larger companies with medical licesnes, which are owned by a majority of Caucasian males, resulting in financial harm to these minority and women-owned businesses.

ID – Cannabis proponents are aiming to bypass medical cannabis and push for adult-use legalization with a proposed 2026 ballot initiative, which requires gathering 70,000 signatures by April 2026. Despite Idaho's prohibitionist stance on cannabis, including strict laws against THC in hemp products, a 2022 poll showed 68% support for medical cannabis, though previous campaigns for medical cannabis in the state have failed.

Kentucky – Gov. Andy Beshear (D) said it is unlikely that medical cannabis products will be available for patients on January 1. It will take time for businesses to become operational, and cultivator and processor licenses were not issued until after a lottery that took place on October 28. The first dispensary licenses will be issued after the lotteries on November 25, and December 16. During the November election, more than 100 cities and counties voted to approve measures to allow medical cannabis businesses into their communities. All 53 counties and 53 cities with a medical cannabis referendum on the ballot approved the measures, but dozens of local jurisdictions also passed bans on medical cannabis businesses prior to the election.

GA – Georgia will allow more medical cannabis dispensaries now that the number of enrolled medical cannabis patients now exceeds 25,000. The six existing licensees will receive an additional license with every increase in the registry of 10,000 patients (with 13 dispensaries currently operational across the state).

MA – The Massachusetts Cannabis Control Commission (CCC) has appointed David Lakeman, a former employee and current head of the Division of Cannabis Regulation at the Illinois Department of Agriculture, as its new executive director. The CCC recently voted to pass long-awaited regulatory changes that could boost profitability of cannabis delivery companies, including eliminating a rule that required two people in the vehicle for all cannabis deliveries.

MN – The process for granting cannabis licenses in Minnesota has led to frustration among applicants due to the lack of a clear schedule. Initially, the first legal sales were predicted for the first quarter of 2025. To expedite the supply chain, lottery winners for cultivator, mezzo business, and micro business licenses can start growing cannabis under existing medical cannabis rules before the new regulations are finalized. Additionally, the Minnesota Office of Cannabis Management (OCM) has filed its first lawsuit, against Zaza Cannabis, a dispensary in St. Paul, for selling products with THC levels up to 30 times the legal limit. If the state wins, Zaza Cannabis could lose its license for five years.

MO – In less than two years, Missouri's legal recreational cannabis market has grown to $1.4 billion, surpassing states with longer histories of cannabis legalization like Arizona, Colorado, and Nevada. The market's success is driven primarily by millennial men, who make up a significant portion of consumers, with flower products being the most popular. The Missouri cannabis industry has maintained steady monthly sales of around $120 million and now employs over 20,000 people. The state's top five cannabis brands account for nearly 27% of total sales, and the market is expected to continue its rapid growth. In other news, the Missouri Court of Appeals Eastern District ruled this month that local governments cannot stack cannabis industry sales taxes. The ruling reversed a lower court’s decision from May 2024 that allowed the city of Florissant and St. Louis County to impose a 3% sales tax on adult-use cannabis sales.

NE – A legal challenge in Nebraska seeks to invalidate the recent election results that legalized medical cannabis, citing allegations of systemic fraud and malfeasance in the petition process. Former Republican and state senator, John Kuehn, and Nebraska Secretary of State, Bob Evnen, (R) argue that tens of thousands of petition signatures were tainted by circulator fraud or notarial malfeasance. The lawsuit claims that the pervasive fraud undermines the validity of the signatures collected. If the court accepts these arguments, the election results could be voided and the ballot sponsors may be required to prove the validity of the signatures.

NH – The recent election results in New Hampshire, including the victory of Republican gubernatorial candidate, Kelly Ayotte, and expanded GOP majorities in the House and Senate, are expected to hinder cannabis reform efforts in the state. Ayotte, who opposes adult-use legalization, won the governor's race with 53.5% of the vote, while Republicans also increased their control in the state Senate.

NY – A state judge has ruled that the law enforcement crackdown on illicit cannabis shops in New York City, known as Operation Padlock, is unconstitutional. The ruling jeopardizes the city's efforts to close unlicensed cannabis sellers, with Mayor Eric Adams stating that the city will appeal the decision, which questioned the New York City Sheriff's Office's authority to unilaterally keep stores closed despite hearing officers' recommendations. Meanwhile, New York regulators have extended the timeline for provisional Conditional Adult Use Retail Dispensary (CAURD) licensees to open their recreational cannabis stores by six months, addressing delays from the Social Equity Fund, ongoing litigation, and new relocation policies. Under the new policy, CAURD provisional license holders will have 30 months from the date of approval to launch their businesses, with only 234 licensed retailers currently operational statewide.

NM – New Mexico lawmakers are considering a proposal to create a "Compliance Bureau" within the state's Regulation and Licensing Department to investigate and enforce actions against unlicensed or noncompliant cannabis operators. This proposal, which would grant the state's Cannabis Control Division new law enforcement powers including conducting searches, seizures, and arrests related to illegal cannabis activities, aims to better combat the illicit market.

ND – A ballot initiative to legalize recreational cannabis in the state failed (52.5% voted against the measure).

SD – A ballot initiative to legalize recreational cannabis in the state also failed (55.5% voted no).

PA – A bill that would create an adult use cannabis program in Pennsylvania is unlikely to pass, as little movement has been seen and the last day of the current legislative session is November 30. Representatives Aaron Kaufer (R-Luzerne) and Emily Kinkead (D-Allegheny) introduced the legalization bill, House Bill 2500, on September 19.

Hemp

USDA Extends Deadline for Mandatory Testing of Hemp by DEA-Approved Labs – The U.S. Department of Agriculture announced another one-year delay in the enforcement of a rule requiring hemp products sold in the country to be tested by a laboratory registered with the Drug Enforcement Administration. It is the third year in a row that officials have delayed enforcing the rule.

CA – California Attorney General Rob Bonta issued a consumer alert about industrial hemp-infused edibles products that contain high levels of THC and are being sold in packaging that is nearly identical to packaging used by popular brands such as Cheetos, Fruity Pebbles, and Sour Patch Kids. “Industrial hemp-infused products designed to resemble popular brands appeal to our most vulnerable – children and teens – and pose serious adverse health risks that we must shield them from,” said Attorney General Rob Bonta. “At the California Department of Justice, we continue to protect our youth from harm. I urge all Californians to examine the packaging carefully and report any product that seems suspicious.”

CO – Colorado-based Bee’s Knees CBDs agreed to pay a settlement of $225,000 to the state attorney general after an investigation found the company had misrepresented the source of its products, claimed false partnerships with nonprofit conservation groups, and failed to verify customers’ ages.

IL – Representatives of hemp businesses are urging lawmakers to reject an Illinois Department of Agriculture proposed rule that would criminalize the sale and transport of hemp products not purchased through a licensed cannabis dispensary.

OH – State Sen. Steve Huffman (R – Tipp City) introduced a bill that would ban the sale of intoxicating hemp products in Ohio (Senate Bill 326). The bill defines intoxicating hemp products as containing more than 0.5 of a milligram of delta-9 THC per serving, two milligrams of delta-9 THC per package, or 0.5 of a milligram of total non-delta-9 THC per package.

NJ – Regulators in New Jersey indicated that they will enforce a state ban on hemp products containing THC or derivatives that are “not naturally occurring.” A federal judge previously ruled that portions of the state law “violate the Farm Bill’s express preemption provision and the dormant commerce clause.” State lawmakers have said they plan to address the constitutional issues identified in the ruling through subsequent legislation.

International

Argentina – Rolando García Bernado and Nicolás José Rodríguez published the report “The Other Way to Go Legit: The Impact of Cannabis in Argentina” highlighting the significant economic and social benefits the authors argue this market could offer to the country. The report was prepared in collaboration with the Cannabis Observatory at the National University of José C. Paz and the Interdisciplinary Cannabis Studies Laboratory at the University of Quilmes and estimated that regulating cannabis could yield up to $441 million annually in tax revenue.

Canada – Beena Goldenberg published an opinion piece regarding the regulation of legal cannabis in Canada. Goldenberg wrote that the country’s legalization of cannabis was supposed to help progress the industry, but it has instead halted its progress due to factors such as high excise duties, restrictive limits on edibles, and curbs on consumer education. The illegal cannabis industry in Canada still accounts for 30 percent of sales, according to a 2023 Stats Can survey.

Czech Republic – The government of the Czech Republic approved a comprehensive reform of its criminal law system, including relaxed rules for cannabis cultivation and possession. Minister of Justice Pavel Blažek stated the current rules were outdated compared to the rest of the European Union. The new law permits the cultivation of up to three cannabis plants for personal use and possession of up to 50 grams outside the home, and 25 grams inside the home.

United Kingdom – The Advisory Council on the Misuse of Drugs, a government-appointed advisory panel in the United Kingdom, suggested an increase in the amount of THC allowed in hemp. The current allowance for THC in hemp in the United Kingdom is 0.2%, but the council suggested an increase to 0.3% to bring the UK in line with the European Union, United States, Canada and China. The council wrote in its proposal that no health problems linked to the North American hemp market have been reported in the last 12 years.

Business

Gallup Poll: 15% of Americans Smoke Cannabis – Gallup released a poll regarding American’s cannabis use. The results showed that 15% of Americans said they smoke cannabis, a one percent increase from the 2021-2022 poll. The poll found that men are more likely than women to say they smoke cannabis, and adults 55 and older are more likely to report smoking cannabis than middle-aged and young adults. Along with other statistical results, the poll also showed that the highest rates of smoking cannabis are in the West, Midwest and East.

CT Residents Weigh In On Purchasing Cannabis Out of State – Residents in Connecticut stated they travel to other states within the U.S. to purchase cannabis. The reason is due to high costs and less potency. In states such as Massachusetts, the potency is legally higher than in Connecticut. The first retail shops began selling recreational cannabis in Connecticut, January 2023, and now more than 31 licensed cannabis shops sell in the state. Besides the numbers, residents also stated that the retail shop experiences have been less than positive. Connecticut laws require customers to make purchases either at home or at a designated kiosk in an official shop before speaking with a sales representative, which consumers do not prefer.

IL Launches Multi-million-dollar Cannabis Research Institute – Illinois Governor, JP Pritzker, University of Illinois System President, Tim Killeen, Illinois government officials, and cannabis researchers with Discovery Partners Institute (DPI) launched the Cannabis Research Institute (CRI). Governor Pritzker said the CRI will innovate research and data collection to deepen the understanding of cannabis, help progress the industry, and better inform the public. Pritzker also said the CRI will help leaders develop policies for consumer protection, economic and community development, and equity. The CRI received $7 million from the Illinois Department of Human Services (IDHS), and the money will be awarded over three years.

Millennials Buy More Cannabis Pre-Rolls Than Other Generations, Report Says – A study posted by Custom Cones USA showed that millennials purchase pre-rolls more than Gen X, Gen Z, or Boomers. Millennials are the largest generation in the United States and, as of September 2024, spent $103.9 million on pre-rolls, accounting for 44.6% of the total spending on cannabis products. This first-of-its-kind study combined survey data from more than 900 cannabis consumers with retail sales pulled from cannabis analytics firm Headset.io.

A Majority of American Consumers Seeing Increased Spending on Cannabis – NuggMD released a poll that showed people are spending more on cannabis now than they were in 2023. From the poll, 61% of respondents stated they are now spending either “much more” (41%) or “more” (17%) on cannabis compared to last year. The same results will more than likely show next year since around 45% of the respondents stated they are expected to spend “a bit more” (27%) or “much more” (18%) over the next year. NuggMD stated that the results of an increase in spending on cannabis reflects a combination of both market dynamics affecting the price of cannabis and an expended appetite for cannabis among consumers.

Medicine

Study Finds Patients With History of Cannabis Use Less Likely to Use Opioids – A study published in the National Library of Medicine found that patients with a history of cannabis use were less likely to be using opioids as early as two months postoperatively and had lower rates of high-dose opioid utilization in the immediate postoperative period. The study took results from patients who underwent transforaminal lumbar interbody fusion (TLIF) for degenerative spine disease involving one to three levels from 2012 to 2021. The researchers concluded that while effective pain management with opioids is crucial for restoring quality of life after a TLIF, knowledge of cannabis use patterns may allow physicians to cater to individual needs and provide appropriate dose titration over time, which could reduce opioid dependence and improve patient outcomes.

Psychedelics

Robert F. Kennedy Tweets About Veterans Deserving to Benefit From Psychedelic Therapy – Former presidential candidate and nominee to lead the U.S. Department of Health and Human Services, Robert F. Kennedy, Tweeted that “veterans are the most deserving of benefitting from psychedelic therapy.” With Kennedy being outspoken about psychedelic therapy, he could potentially advance the cannabis and psychedelic reform agenda through controlling the Food and Drug Administration and other critical agencies.

Psychedelics Legalization Ballot Measure Fails in MA – Massachusetts voters defeated a ballot measure to legalize psychedelics, rejecting the proposal that would have allowed adults 21 years of age and older to legally possess, grow and share certain amounts of substances such as psilocybin, ibogaine and DMT.