Cannabis

On November 10, 2022, in the matter Variscite NY One, Inc. v. State of New York, et al., the U.S. District Court for the Northern District of New York granted the plaintiff’s a motion for a preliminary injunction against the State of New York (“NYS”), the New York State Office of Cannabis Management (“OCM”), and the Executive Officer of the OCM, Christopher Alexander issuing any cannabis licenses under NYS’s conditional adult-use retail dispensary (“CAURD”) application program in 5 of the state’s 14 geographic regions.
Continue Reading Federal Judge in NY Issues Preliminary Injunction to Block Retail Cannabis Licenses on Constitutional Grounds

This article was originally published in the November/December issue of ELFA’s Equipment Leasing & Finance magazine.

In mid-July 2022, the United States House of Representatives passed provisions that would allow legitimate cannabis-related businesses to access federally regulated financial services. This marks the seventh time the House has approved a version of the Secure and Fair Enforcement (SAFE) Banking Act. The original version of federal cannabis banking reform was introduced nine years ago by Rep. Ed Perlmutter (D-Colo). The passage of the SAFE Banking Act, either as stand-alone legislation or as amendments attached to must-pass bills, would prohibit federal banking regulators from
Continue Reading Federal Cannabis Banking Reform: What Happened?

California Safe Drinking Water and Toxic Enforcement Act of 1986 (Health & Safety Code § 25249.5 et seq.) (“Prop 65”) is a California law that prohibits any person in the course of doing business from “knowingly and intentionally expos[ing]” individuals to listed carcinogens and reproductive toxins without adequate warning. Recently, in Environmental Health Advocates, Inc. v. Sream, Inc., 83 Cal. App. 5th 721 (2022), the First District Court of Appeal had the opportunity to interpret the word “expose” as used in Health & Safety Code § 25249.6, concluding that possible indirect contact with a listed Prop 65 chemical, depending on
Continue Reading Up In Smoke – CA Court of Appeal Dismisses Prop 65 Case Against Water Pipe Manufacturer Narrowly Construing The Term “Expose”

In a historic move, today, President Joe Biden announced a three-step program to bring broad changes to federal cannabis policy. As an initial step towards reform, President Biden will pardon all federal offenders convicted of simple marijuana possession. According to administration officials, the pardons will be issued through an administration process overseen by the Department of Justice. Those eligible for the pardons will receive documentation showing they were officially forgiven for their crime.
Continue Reading BREAKING NEWS: Biden to Pardon Federal Marijuana Possession Convictions

Acting in one fell swoop, on September 18, 2022, California Governor Gavin Newsom signed 10 cannabis-related legislative bills into law. These bills, which touch on issues that run the gamut of the cannabis industry, are intended to “strengthen California’s cannabis laws, expand the legal cannabis market and redress the harms of cannabis prohibition.” Senate Bill 1326 is the most widely recognized bill of the group, and authorizes the Governor the power to sign cannabis trade agreements with other states where cannabis is legal. Other bills address employment protection, labelling, use of cannabis in veterinary medicine and taxation. In his press release,
Continue Reading In One Day, California Governor Signs Into Law Ten Cannabis Bills, Including Authorization for Interstate Commerce

Virtually all California employers with five or more employees are covered by the Fair Employment and Housing Act (FEHA), the state’s most noteworthy civil rights law. FEHA protects and safeguards the right and opportunity of all persons to seek, obtain, and hold employment free from discrimination by establishing a comprehensive scheme to combat employment discrimination.
Continue Reading California Expands FEHA to Include Off The Job Cannabis Use

The Illinois Cannabis Regulation and Tax Act (“CRTA”), which was enacted in 2019, legalized recreational adult use cannabis in Illinois. The CRTA also created a Social Equity Program intended to offer disadvantaged people, communities of color, and those disproportionately impacted by the war on drugs an opportunity to benefit from the cannabis industry. Pursuant to the Social Equity Program, the Illinois Department of Agriculture (“IDOA”) awards points to applicants for cannabis licenses based on factors such as residing in an area disproportionately impacted by prior laws criminalizing cannabis and veteran status.[1] The program was widely praised and seen by
Continue Reading New Litigation Continues to Challenge the Social Equity and Scoring Process of the Illinois Cannabis Regulation And Tax Act

Help for California’s fledgling cannabis industry finally appears to be on the way. For years, the industry has shouldered heavy taxes – a 15% state-wide excise tax, sales and use taxes up to 10.75%, and local business licenses taxes up to 15% in some jurisdictions. And, to top it off, California imposed a cultivation tax on cannabis flowers of $161.28 per dry-weight pound. While growers could sustain this tax burden when business was good, wholesale prices plummeted in the fall of 2021 and left growers unable to turn a profit.
Continue Reading California Governor Signs into Law Cannabis Tax Relief Bill

Recreational cannabis is now legal in 19 states and Washington D.C., driving the growth of legal cannabis sales estimated at $33 billion this year—up 32% from 2021—and expected to reach $52 billion by 2026.[1] This movement signals that financial investment in cannabis is not abating but accelerating notwithstanding the impact of the lingering COVID-19 pandemic. This growth in the cannabis industry, of course, also means that operators and their investment partners face commercial risk, including insolvency.
Continue Reading The Cannabis Conundrum: Can Cannabis Companies File Chapter 15?

Residents of California often complain about high taxes, but no one pays higher taxes than the cannabis industry.  In addition to the Federal 280E penalties, the cannabis industry in California is subject to a 15% state-wide excise tax, sales and use taxes that can reach up to 10.75%, and local business licenses taxes which are as high as 15% in some jurisdictions.  On top of these excise taxes, which combined can approach 40%, there is a state cultivation tax currently imposed on cannabis flowers at a rate of $161.28/dry-weight pound (and some local jurisdictions impose additional cultivation taxes).
Continue Reading California Cannabis Farmers May Finally Get Some Relief

On May 4, 2022, the Food and Drug Administration (FDA) issued warning letters to five companies it asserts are illegally marketing products labeled as containing delta-8 tetrahydrocannabinol (Delta-8 THC) in ways that violate the Federal Food, Drug, and Cosmetic Act (FDCA). Simultaneously, FDA issued a new consumer update “5 Things to Know about Delta-8 Tetrahydrocannabinol – Delta-8 THC.”  The consumer update and warning letters are a continuation and expansion of FDA’s efforts to warn the public about products that are not approved under the FDCA and to rein in the rapidly expanding market of products containing hemp-derived cannabinoids. 
Continue Reading Warning! FDA Issues Warning Letters for Products Containing Delta-8 THC

For many in the cannabis industry, April 1, 2022 is seen as a day of reckoning following the July 2021 passage of Assembly Bill 141 and Senate Bill 160 (collectively, the Cannabis Trailer Bill).  In an attempt to transition to an annual licensure program, April 1st marked the beginning of the end for provisional cannabis licensure.  It also ushered in significant changes to renewal process for previously granted provisional licenses.  These modifications now require applicants to comply with the California Environmental Quality Act (Pub. Res. Code §§ 21000 et seq.) (CEQA), a complex statewide policy of environmental protection fraught with
Continue Reading No April Fools: Starting April 1st, Cannabis Operators Face CEQA Compliance Requirements for State Licenses

Federal cannabis reform is once again on the move in Congress. On Friday, April 1, 2022, the U.S. House of Representative passed the latest iteration of the Marijuana Opportunity Reinvestment and Expungement (MORE) Act. This is Congress’s oldest comprehensive measure, and it aims to decriminalize cannabis on the federal level by removing it from the list of controlled substances while providing certain social reforms to address the detrimental repercussions of the War on Drugs.[1]
Continue Reading The House Does It Again: MORE Act Ready for Senate Action

On March 10, 2022, New York Governor Kathy Hochul, the Cannabis Control Board and Office of Cannabis Management (“OCM”) introduced the Seeding Opportunity Initiative (“SOI”).[1] This regulation would provide key opportunities for farmers, entrepreneurs and individuals that have been disproportionately impacted by the War on Drugs. Notably, the proposed regulation would give individuals with previous cannabis convictions and their family members, subject to certain limitations, the first opportunity to apply for a conditional adult-use cannabis licenses.
Continue Reading New York Regulators to Jumpstart NY’s Cannabis Industry by Giving Priority to Small Businesses and Individuals with Prior Cannabis Convictions

Canada legalized recreational cannabis in 2018, but the legal cannabis market continues to struggle even three years later. Observers blame overregulation by both federal and provincial regimes, high taxation, and a thriving black market that continues to sell cannabis at much lower prices. What has this meant for cannabis bankruptcies in Canada, and what lessons can the U.S. learn?  For an in-depth discussion, listen to Episode 3 of Sheppard Mullin’s Restructure This! podcast. We speak with Kathryn Esaw, partner in the Insolvency and Restructuring group at Osler, Hoskin & Harcourt LLP, and Susan Newell, partner in Osler’s Health Industry
Continue Reading Restructure This! Episode 3: Canada: Cannabis Boom or Bust?