Can Sessions Wage Holy War on Pot From Federal Prison?

Last month was pretty good for Jeff Sessions.  He was one of the deciding votes allowing anti-education billionaire Betsy Devos to be confirmed as Secretary of Education, teased the private prison industry by dangling some more federal funding, and breezed by Senate confirmation with 52 votes including a whopping one Democrat.

Would March turn out to be as much fun?  Not so much.

No sooner had Sessions started to let his hair down on his mission to eradicate pot (“there’s more violence around marijuana than one would think” and “‘Marijuana is a cure for opiate abuse.’ Give me a break“), and POTUS replaced his tanning bad with the blinding glow of pundits following his address to Congress, than the pesky mainstream media dropped the bomb: Jeff Sessions met with the Russian Ambassador twice in 2016.

Then-Sen. Jeff Sessions (R-Ala.) spoke twice last year with Russia’s ambassador to the United States, Justice Department officials said, encounters he did not disclose when asked about possible contacts between members of President Trump’s campaign and representatives of Moscow during Sessions’s confirmation hearing to become attorney general.

At his Jan. 10 Judiciary Committee confirmation hearing, Sessions was asked by Sen. Al Franken (D-Minn.) what he would do if he learned of any evidence that anyone affiliated with the Trump campaign communicated with the Russian government in the course of the 2016 campaign.

“I’m not aware of any of those activities,” he responded. He added: “I have been called a surrogate at a time or two in that campaign and I did not have communications with the Russians.”

Except that he did.

And it quickly blew up on Sessions.

Yesterday the newly-minted U.S. Attorney General was forced to recuse himself from law enforcement’s ongoing investigation into the Trump campaign’s contacts with Russia before and after the presidential election.  But we’re not done yet, folks.

Will there be a Special Prosecutor appointed a la Ken Starr?  Not yet – for now it has been assigned to a DOJ Obama appointee and Acting Deputy Attorney General.

Will Sessions resign?  Doubtful, as so far only Democrats are demanding his resignation.

Did Sessions commit perjury when testify to Congress under oath?  I’m not a criminal lawyer, but I know you need to prove specific intent on this one, so it’s probably a bit of hyperbole to daydream about Jeff Sessions praising the KKK and shunning pot with a picture like this:

Image result for jeff sessions prison

Still, I am certain the marijuana industry (even recreational) is much safer with Sessions on his heels than on his toes.  Can’t wait to see what happens next.

*Photo credit: Bill Palmer

Don’t Fret Jeff Sessions and Marijuana – Fret Sessions and Everything Else

While it is still early, we now have some indication of how Jeff Sessions will handle marijuana as Attorney General.

My suggestion is that we are headed for DOJ status quo with marijuana enforcement… but you damn well better be worried about things like civil rights enforcement, Supreme Court cases, and keeping the Trump Admin as lawful as possible.

Here’s why I’m relatively confident on the marijuana front:

  1. A majority of Congress will continue to vote to defund DEA marijuana enforcement;
  2. Public pressure from the 89% of the country supporting medical marijuana is noticed by all politicians of all parties; and
  3. Jeff Sessions is no dummy (though may have other personal flaws).

The evidence holds two competing narratives about Sessions: his years of public service, and his confirmation hearings.

Image result for jeff sessions marijuana

His public statements on marijuana are certainly worrisome.

[Sessions] added that lawmakers and leaders in government needed to foster “knowledge that this drug is dangerous, you cannot play with it, it is not funny, it’s not something to laugh about . . . and to send that message with clarity that good people don’t smoke marijuana.”

And who could forget:

Sessions thought the KKK “were OK until I found out they smoked pot.”

Sure, that looks bad.  In context I’m sure he only meant the KKK sucks because they smoke nasty skunk weed, not because they smoke any weed.  Right?

But seriously, here’s where pragmatism outweighs 70-years of racism and Reefer Madness.

Here is what he stated in follow-up questions from his confirmation hearings:

Q: At your confirmation hearing, in response to a question of mine on whether you would use our limited federal resources to prosecute sick people who followed their state laws with regards to medical marijuana, you said “I won’t commit to never enforcing federal law, Senator Leahy, but absolutely it’s a problem of resources for the federal government.” Does this mean you would consider arresting and prosecuting patients who follow their 37 state medical marijuana laws?

A: As I testified before the Committee, I will not commit to never enforcing Federal law. Whether an arrest and investigation of an individual who may be violating the law is appropriate is a determination made in individual cases based on the sometimes unique circumstances surrounding those cases, as well as the resources available at the time.” [Emphasis added]

Bear with me, it gets less foggy.

Q. Would this congressional prohibition prevent the DEA from raiding medical marijuana dispensaries that are compliant with state law, or from shutting down banks or other businesses that work with dispensaries?

A: The Ninth Circuit case you referenced is relatively recent, and I am not familiar with how other courts may have interpreted the relevant appropriations language or the Ninth Circuit’s opinion. As an emerging issue, that is one that will need to be closely evaluated in light of all relevant law and facts. I am fortunate enough to be confirmed as Attorney General, I will conduct such a review. Of course, medical marijuana use is a small part of the growing commercial marijuana industry.

What’s that you say?  That doesn’t sound good, you’re thinking?  Fine, it’s not roses and chocolate.  It’s not “I will respect the will of Congress with regards to marijuana enforcement.”  It’s not “I recognize 80% of the country has legalized recreational, medical, or CBD-only marijuana laws, and I’ll respect that.”  But here’s the thing – neither did our former AG Loretta Lynch, or our former former AG Eric Holder.  They pledged to enforce the laws, and review each situation on a case-by-case basis.  Same as Sessions.

Of course, this offers no solace to anyone who cares about civil rights, voting rights, immigrant rights, separation of church and state, and …well you get the picture.

So worry about proliferation of hate crimes and the need for an AG that will stop the President from breaking the Constitution.  I think DOJ marijuana enforcement is going to stay the course as we’ve seen since the Ogden and Cole memos.  Of course, I also was sure Hillary Clinton was about to become President, so maybe we keep a dose of healthy skepticism??

2017 Predictions – One step forward, half step back

The best part about New Years predictions is no one ever remembers failed predictions.  People only remember 1-in-a-billion guesses like the ones that accurately predicted the Cubs winning the World Series (and accompanying apocalypse).

Despite this, I will take my shot at predicting what 2017 will bring to the world of cannabis:

  1. Attorney General-to-be Jeff Sessions will come out to be a closet cannabis user.  I make this prediction purely because if I am correct, I could end up on Real Time with Bill Maher!
  2. More likely, Jeff Sessions will annoy and instill fear, but not destroy, the cannabis industry as we know it.
  3. Maybe, just maybe, the U.S. Congress will muster a majority in both chambers to fix the cannabis banking problem.
  4. The DEA will continue to defy Congressional mandates by shutting down medical cannabis businesses in California and Michigan, drawing more smack-downs of the DEA in federal court.
  5. Cannabis oil-based Epidiolex will be approved by the FDA for Dravet Syndrome and Lennox-Gastaut, simultaneously marking a significant step in cannabis research while also highlighting how far we are from FDA-approved cannabis for the vast majority of the country.
  6. Pennsylvania will close a competitive merit-based selection process, and Florida will grow into a much bigger medical cannabis program than most expect.  Hawaii and Maryland will find a way past ongoing delays and litigation and see initial medical cannabis sales.  Nevada will be the first of the new recreational use states to get off the ground, and California will struggle just to organize its medical program – let alone recreational-use.
  7. Texas will be Texas – keep an eye on it.
  8. Cannabis consolidation will continue – will we see the first $1 billion cannabis company?
  9. Some Southeastern state will outlaw cannabis use on a hoverboard and/or while flying a drone (Kidding/not-kidding?).
  10. No one will die from cannabis, hundreds of thousands of people will find pain relief from its use, and millions will still believe it to be a “Gateway Drug.”

What are your predictions for pot in 2017?? 

What On Earth is Up With CBD Oil and the DEA?

If you were distracted this week by Donye West, you missed a major US DEA action.   Image result for trump kanyeIt appears that the DEA just declared war on hemp-based CBD oil.

Why does that matter?  It is not as big as their refusal to reschedule marijuana to Schedule II, but…

It matters for medical cannabis cancer patients in Kentucky who need to order CBD oil online and have it shipped to them from California or Colorado.

It matters for the families shelling out hundreds of dollars to buy the ubiquitous “Charlotte’s Web.”

It matters to beauty supply giant, Ulta, who has their own line of hemp-seed oil products.

It matters to hundreds (maybe thousands) of gas stations around the country now selling “CBD oil” products on the same shelves they used to sell K2 bathsalts before they were outlawed.

And maybe, just maybe it matters to the dreaded “Big Pharma.”

What Just Happened?

So what the heck did the squirrelly DEA do?  They published a new “Administration Controlled Substances Code Number for “Marihuana Extract,” Effective January 13, 2017.  In their own words of what this is about:

“Because the definition of marihuana in 21 U.S.C. 802(16) includes both derivatives and preparations of marihuana, the DEA until now has used drug code 7360 for extracts of marihuana. This final rule finalizes a July 5, 2011, Notice of Proposed Rulemaking (76 FR 39039) in which the DEA proposed that a new drug code 7350 be used for extracts of marihuana.”

In plain English, this means the DEA is creating a new category for tracking Schedule 1 marijuana extracts and infused products, separate from Schedule 1 marijuana flower.  But why is that news?  Because for the last few years an undercurrent industry of hemp-based CBD oil products have been sold on the internet and across state lines and many thought it was legal.

Why would they ever think that selling marijuana (particularly “no-THC hemp” marijuana) across state lines was legal?  Because of the U.S. Congress.  The U.S. Farm Bill has carved out industrial hemp from the U.S. Controlled Substances Act for the last two years (See Sec. 7606).  To be clear, industrial hemp was defined as marijuana with less than .3 percent THC, and was only permitted for research through state-legal programs (take note: that’s something wholly different than selling CBD oil extracted from hemp in the Emerald Triangle of California and shipping it to my house in Chicago’s suburbs).  This .3% THC cap was seen as the key to circumvent national distribution of CBD oil.  The DEA just stepped up to say “ohhh, no you di’ n’t!!!”

Who Cares?

Who does this effect?  After Jan. 13, it could affect a lot of folks.  To me the biggest impact is on the thousands of people in Southeastern states like Georgia and Alabama that have adopted “CBD oil laws” allowing truly sick and suffering patients to get a “Get out of jail free” card if they are caught with CBD oil that is below small limits of THC.  Those laws don’t allow the patients to grow their own, or buy from a state-licensed grower or dispensary.  Those patients have to somehow get the products out of state, across state lines, which the DEA is now saying triggers a violation under the Controlled Substances Act.

Truth be told this is consistent for the DEA – while Congress continues to chip away at the DEA’s enforcement authority and enforcement funding, the DEA has largely shrugged their shoulders and maintained their authority to crack down on Schedule 1 marijuana – including hemp-based CBD oil.  This rule just formalizes what they’ve always implied.

Other than patients, you have hundreds of businesses extracting oils from domestically- and internationally-grown hemp, and shipping the products across the country.  As you read this they are on the phone with their respective lawyers and investors.

You better believe that Congress cares, with a significant hemp champion found in Senate Majority Leader Mitch McConnell (R-KY).  You also have to wonder how states rights play into all of this when over 80% of the country lives in a state where hemp-based CBD oil or outright medical marijuana is legal.

Keeping Lawyers Employed

So why would the DEA do this?  And why now?  As noted by Vice: “The weed extract CBD doesn’t even get people high — but the DEA continues to treat it like heroin.”

I’ve read a number of legal analyses of this, and there are many theories about what’s going on here.  NC attorney Rod Kight thinks:

“…the DEA has explicitly placed CBD squarely in its crosshairs. Not only does the Rule go to pains to define marijuana extract as an “extract” that “contains cannabinoids”, a category into which CBD unqualifiedly falls, it goes on to address CBD specifically in the Comments section of the Rule. I won’t mince words. The DEA clearly contends that CBD is a Schedule I drug (the most restrictive schedule) under the Controlled Substances Act (“CSA”), regardless of its source or whether it comes in isolate form or in combination with other cannabinoids.

Some experts don’t even think what the DEA did was legal and within their authority.  Colo. cannabis attorney Bob Hoban writes:

“The feeling is that this is an action beyond the DEA’s authority and we believe this is unlawful and we are taking a course of action for our clients. This Final Rule serves to threaten hundreds, if not thousands, of growing businesses, with massive economic and industry expansion opportunities, all of which conduct lawful business in reliance upon the Federal Government also acting pursuant to law, and as ordered by the Ninth Circuit in 2003 and 2004. We will see the Federal Government in court.”

No one is mincing words.  If you want a deeper-dive on the legal side of the ledger (including discussions of Federal law, Federal court cases, and the International Drug treaties, check out those links).  I don’t necessarily agree with all of the arguments, but my final result is the same: this action is likely to be overturned through lawsuits.

Chess Versus Checkers

If the action is so flawed, if Congress is likely to intervene, if the courts are likely to strike this down, if it offends so many state laws and lawmakers, why do this?  Good question.

Anyone reading this blog knows that the DEA has not been an honest broker with regards to this industry, so we have no reason to take them at their word.  Why would they create this new category now, just weeks from a new President, five years after the rule was first proposed?

This was not a benign DEA action, but we don’t know their end game.  Will they start arresting business owners of the biggest hemp-based CBD oil companies?  Maybe.  Will this cause Southeastern states to rethink and expand their low-THC cannabis oil laws?  Ideally.  But who really benefits from this?  Maybe, just maybe, this makes sense in the distorted realities of the cannabis industry.  When you combine the potential FDA approval of GW’s Epidiolex (a “marihuana extract”), and the unenforced proliferation of “CBD oil” knockoffs, perhaps this DEA move is anticipating the next step: FDA-approved marijuana.  Maybe the DEA is looking to shore-up it’s enforcement authority before Congress pushes rescheduling of marijuana.

Maybe the DEA was just going through the motions and a low-level staffer realized that marijuana extracts should have their own DEA code for bureaucratic reasons?  No, no, and no.  This was deliberate, and now we will all wait to see what the DEA’s next move will be.

NY adds chronic pain, MN adds PTSD, Will Illinois Keep Up?

The biggest medical cannabis news since the Nov. 8 elections has been the expansion this week of two of the country’s most restrictive medical cannabis programs: New York and Minnesota.

New York has been on a bender lately, expanding (and improving) their small medical cannabis industry.  Last month New York’s Department of Health added registered nurse practitioners to the list of who can certify medical cannabis patients, and now they will be moving forward with adding physician assistants to the authorized medical professionals that can add a patient to the NY program.  That’s significant, but the move that will propel New York into the category of robust medical cannabis states is the decision to add chronic pain as a stand-alone qualifying condition:

“Medical marijuana is already helping thousands of patients across New York state, and adding chronic pain as a qualifying condition will help more patients and further strengthen the program,” state Health Commissioner Howard Zucker said in a statement.

The health department said it developing a proposed regulatory amendment to the law that took effect in January that legalized medical marijuana in New York in non-smokeable forms and for specific medical conditions.

As many of you know, a defining feature of a robust versus struggling medical cannabis states is the inclusion of chronic pain to the list of qualifying medical conditions.  Chronic pain accounted for over 85% of medical cannabis patients in Colorado before it became recreational-use (almost 130,000 patients in 2013), there are nearly 90,000 medical marijuana patients in Arizona.  Compare that to a state like Illinois with the population of CO and AZ combined, where we have only 12,000 medical patients.  New York has just broken the 10,000 patient mark, but adding chronic pain will exponentially grow their program.  Way to go, NY!

Minnesota’s Department of Health also made the decision this week to add PTSD to their small medical marijuana program.

Minnesota veterans and other residents suffering post-traumatic stress disorder will be allowed to use medical marijuana starting in August, the state’s Department of Health announced Thursday as it expanded the slim list of conditions that qualify for the program.

The state will also loosen its restriction on how medical marijuana can be taken, allowing manufacturers to sell topical patches, creams and lotions come August, in addition to the oils, capsules and vapors that are currently sold. The law passed in 2014 explicitly bans smoking or using the full plant.

This change is welcome news for the two businesses authorized to cultivate and sell the cannabis there, and will help expand the program to those who might medically benefit from cannabis use.  But it won’t blow the doors open like NY’s chronic pain decision.

Where does that leave my home state of Illinois and it’s fledgling medical cannabis program?

We’ve covered the continuing lawsuits from patients trying to add new conditions in Illinois.  Currently, Chronic Post-Operative Pain and Irritable Bowel Syndrome are pending review in Illinois appellate courts, with a number of other conditions awaiting renewed IL Department of Health review after judicial orders.  PTSD was added to Illinois’ program this Fall after agreement by the state legislature and Governor, despite being earlier denied by the IDPH Director following a recommendation by the IL Medical Cannabis Advisory Board to add it.  So what the heck is going to happen?

The obvious part of the answer is that IDPH and IL Governor Rauner are all but certain to oppose expansion of the medical cannabis program.  Unlike MN and NY, there is no reason to think IDPH will voluntarily add new medical conditions, or expand the category of medical professionals that can certify new medical cannabis patients.  The Rauner Administration has been consistent in their opposition (Guv probably dislikes marijuana just a tick less than he hates unions), but I would expect the legislature to push new bills this coming Spring that would address some of these issues.  The Appellate court decisions will be interesting, and I wouldn’t be surprised to see the courts rule in either direction.  As always, stay tuned, keep pushing for change, and thanks for setting a great example, New York and Minnesota!

 

President Trump and Marijuana – Oil and Water, or a Match Made in Heaven

Whew.  What a wild and painful ride.  President-elect Donald J. Trump, and at 4 states (CA, NV, MA, ME) have legalized recreational marijuana.  Only Arizona failed to get enough votes.  Arkansas (yes, Arkansas!), Florida, North Dakota, and Montana all passed their medical marijuana initiatives yesterday.

If you had bet me $1,000,000 on Monday that this would have been the outcome, I might have taken the bet against you.  I would have lost.

So what does this mean for cannabis?  There’s some that we know, and plenty that we don’t know.

With 8 states having adopted legalized adult-use cannabis, we have a whole new ball game.  California alone will dramatically expand the industry (think Colorado, Washington, Oregon combined, and then some), and Massachusetts and Maine put the East Coast on the map for recreational use.

But as always, the expansion of the industry comes against the backdrop of the federal government and the tenuous non-enforcement of the Controlled Substances Act against state-legal cannabis programs.  Over time we learned what the Obama administration policy was in terms of allowing the states’ experiments of democracy – will Trump do the same?  I bet he will.

Absolutely no one knows how Trump will govern.  He has flip-flopped more than most Presidential candidates making it difficult to pin down precisely what he thinks on the issue and how he’ll address managing cannabis laws.   Here’s what he has said:

“In terms of marijuana and legalization, I think that should be a state issue, state-by-state,” Trump said while taking a handful of questions during a political rally at a casino outside Reno on Thursday afternoon.”

And:

“I do want to see what the medical effects are. I have to see what the medical effects are and, by the way — medical marijuana, medical? I’m in favor of it a hundred percent. But what you are talking about [Colorado adult-use], perhaps not. It’s causing a lot of problems out there.”

In many ways this is a similar approach to what Hillary Clinton proposed on the trail.

We also know some of the folks he is likely to surround himself with:

Potential U.S. Attorney General: Rudy Giuliani.  Not ideal for the cannabis industry given his history of marijuana criminalization and “Law & Order” shtick.

Potential Department of Homeland Security Secretary Chris Christie: About the worst-of-the-worst among state governors regarding medical marijuana.

Vice President Mike Pence: Still believes marijuana is a gateway drug, so…um…yeah.  Also pretty funny that Trump almost forgot to mention him in his victory speech.

That’s the bad news.  What’s the good news?

First of all, the national cannabis industry is an unstoppable sector with extraordinary public support in polls.  And we know how Donald Trump likes polls.

Second, Trump is first and foremost a businessman.  Could he be swayed by the economic potential of legalizing marijuana, or at least easing federal law restrictions on research, banking, interstate commerce, etc?  In some ways we have tested this hypothesis in Illinois where a businessman became governor and had the chance to dramatically expand cannabis laws in order to raise millions in state taxes.  He did the opposite, and has deliberately discarded any potential economic boon to the state.  So there are limits to what a non-ideological political figure will do to raise government revenue.

We will soon be learning more about the governing style of the Trump Administration, but my best guess is that while we might see a slightly more conservative approach to cannabis in the White House, the combined economic benefits, Congressional support, and popular opinion will ensure at least a clear runway for our newest members of the recreational and medical cannabis states as of Nov. 8, 2016.

Hillary Clinton’s feelings on marijuana? We’ll know soon enough.

Wow – it’s been a while.  Apologies to everyone for the slowdown in blog posts, things should return to normal after the Presidential Election.

The last few months have been exciting for the industry – with Ohio and Pennsylvania ramping up its medical cannabis program, Illinois adding PTSD, terminal illnesses, and extending its Pilot Program, New York laying the groundwork to expand its medical cannabis program, and five states seemingly on the way to adding adult-use cannabis to their states (CA, NV, AZ, MA, ME for those keeping score) on November 8.

But of course the biggest news centers around the next U.S. President to be elected November 8 – whoever she happens to be.

It’s increasingly clear that barring a Noah’s Ark-level world event, Hillary Clinton will be the next POTUS.

So – what on earth does this mean for cannabis?  The truth is, we don’t know with certainty, but we have a few clues.

Hillary wants to reschedule cannabis to Schedule II under the U.S. Controlled Substances Act.

“As president, Hillary will build on the important steps announced today by rescheduling marijuana from a Schedule I to a Schedule II substance. She will also ensure Colorado, and other states that have enacted marijuana laws, can continue to serve as laboratories of democracy.” [said Maya Harris, Clinton campaign policy advisor].

Hillary is opposed to legalizing cannabis (as of March ’14):

URSULA BURNS: So long means thumbs up, short means thumbs down; or long means I support, short means I don’t. I’m going to start with — I’m going to give you about ten long-shorts.

SECRETARY CLINTON: Even if you could make money on a short, you can’t answer short.

URSULA BURNS: You can answer short, but you got to be careful about letting anybody else know that. They will bet against you. So legalization of pot?

SECRETARY CLINTON: Short in all senses of the word.

Hillary’s campaign prepared opposition research against those falling short on drug reform policy (i.e. Martin O’Malley):

“Gov. O’Malley opposed decriminalizing marijuana until the day he signed it into law,” reads a suggested talking point in an email sent last October by Tony Carrk, the Clinton campaign’s research director. “The Frederick News-Post called him an ’11th hour convert.’”

They also prepared opposition research against those going further than her on drug policy reform (i.e. Bernie Sanders):

A document called, “Top Hits” outlines several lines of attack top Clinton aides thought might be effective against U.S. Sen. Bernie Sanders. In a section titled, “Sanders Past Extreme Positions,” under the headline “Legalizing All Drugs,” the former secretary of state’s research team dug up the Vermont senator’s pro-reform comments stretching back to 1971:

This all points to something short of full cannabis legalization, but pushing the federal government further on cannabis research and banking reform than President Obama did.

Only time will tell, and in the meantime what do YOU think she should do as President with regards to cannabis?

Is Michigan Med Cann About to Join the 21st Century?

For those of you tracking the development of cannabis regulations across the country, you know that regulations continue to get more restrictive and onerous with only a few exceptions.

The “few exceptions” have been whittled down to California and Michigan – both notorious for their “Cannabis Version 1.0” approach to regulating the plant, which is to say they had little statewide regulation whatsoever.

California recently “upgraded” from their 1996 ballot initiative that was well known for its local enforcement and total absence of statewide regulations.  Cali is in the midst of developing rules for their mammoth new law, MMRSA, that creates an extensive infrastructure for statewide licensure and enforcement.

That left Michigan, with its 180,000 medical marijuana patients and absolutely no statewide grower or dispensary licensing system.  We have friends operating excellent collectives in places like Lansing and Ann Arbor – but it is a far different situation with constant threats of municipal crack-downs on their businesses.

It looks like Michigan is about to join California in the 21st Century:

State lawmakers could sign off as soon as this week on legislation to establish a statewide oversight and licensing system for MMJ businesses.

That’s something Michigan has lacked since voters legalized medical cannabis in 2008. Michigan’s freewheeling MMJ industry has been technically illegal since a 2011 ruling from the state Supreme Court. Instead, the MMJ market is composed of a patchwork of regulations that vary by municipality.

More specifics about the law:

HB 4209 is the centerpiece of the package, and lays out most of the regulations. Together, the five bills would:

  • Establish five license types – grower, processor, dispensary, transporter, and testing lab.
  • Create three subcategories for cultivation licenses – one with a 500-plant limit, one with a 1,000-plant limit, and one with a 1,500-plant limit.
  • Set no statewide cap on the number of licenses that could be issued.
  • Mandate an unspecified annual licensing fee for MMJ businesses.
  • Institute a requirement that local governments must adopt ordinances to specifically permit MMJ companies, and give their blessing to those that want to set up shop. Municipalities also could establish their own licensing fees of up to $5,000 a year, on top of the state fees.
  • Require businesses to secure “minimum levels of insurance.” It’s unclear what that would mean, but would be clarified during the rulemaking process.
  • Allow some vertical integration. While growers, processors and dispensaries would be allowed to overlap, they couldn’t hold transporter or testing lab licenses.
  • Mandate lab testing for MMJ product to ensure they aren’t contaminated. The testing also would determine potency levels.
  • Legalize edibles and extracts for the first time.
  • Establish a two-year residency requirement for MMJ business owners and investors that would expire June 30, 2018.
  • Require all MMJ businesses use a seed-to-sale tracking system.

Good luck, Michigan – Illinois would be happy to welcome you into the fold of Midwest Medical Cannabis States!

Marijuana’s Five-Year Plan: Aspirin or Alcohol?

Predicting where the country is headed with regards to marijuana is a fool’s errand.

There are too many unknowns: the next President, rescheduling vs. descheduling, FDA approval of cannabis-based drugs, recreational ballot initiatives, cannabis research studies, and so many other factors that will decide what 2021 cannabis looks like.

But one thing is clear.  We need to collectively decide whether we want to treat cannabis like aspirin or liquor.

aspirin liquor-store

There are pro’s and con’s to each approach.

If we treat cannabis like aspirin, we head down a highly-regulated, nearly-perfect manufacturing process that ensures consistent product.  We can expect the involvement of doctors, pharmacists, pharmacies, and yes, even pharmaceutical companies.  Sour Diesel in Oregon will look, taste, and feel like Sour Diesel in Colorado, or like Sour Diesel in Massachusetts.  With a pharmaceutical approach we strip away both the heavy metals and the terpenes.  We lose mom & pop growers but gain repeatable health benefits (and risks).

If we regulate cannabis like alcohol, cannabis loses the stigmatization and over-regulation.  Cannabis-as-alcohol will democratize access to the plant, and welcome business moguls and neighborhood cannabis shop-owners alike.  Cannabis-as-alcohol will organize significant federal and state lobbying initiatives, adopt the loved/maligned alcohol distributor model, permit public consumption for social use, and pose greater risks for over-consumption and other health risks.

If we do not choose a path, the government will choose for us.  Left to its own devices, government is sure to choose the pharmaceutical model, and there are legitimate reasons for, and against, this approach.

Which way do you think is better?

 

 

What Maryland Tells Us About the Future Of Competitive Cannabis Licenses

Several weeks ago the Maryland Medical Cannabis Commission finally announced the top scoring applicants for the state cannabis grow and processor licenses.  These coveted licenses were awarded after an unusually long selection period that left many wondering if the wait would ever end.  For a great breakdown by the Washington Post of the companies selected for licenses, check out more information here.

Maryland’s decisions reflect one of the last competitive application processes as we have come to know them.  Both Ohio and Pennsylvania are on the horizon for a competitive medical cannabis application, and Arizona is shuffling through the 750 lottery applications they received for 31 licenses, but we most certainly are at the beginning of the end.

On the heels of similar decisions in Hawaii, Florida, New York, Minnesota, and others before them, what commonalities can we see in the results?

  1.  $$$.  For starters, there is no doubt these hyper-competitive processes require significant cash.  Non-refundable application fees of $25,000 and annual licensing fees of up to $200,000 set the stage for the kinds of resources that are required.  But these fees pale in comparison to the costs of establishing large-scale cannabis growing operations that can exceed $10,000,000 per facility.  If your team scrounges up the bare minimum financial backing required by regulators, chances are you will not be awarded a license.
  2. White Males.  There is no disputing that the competitive medical cannabis states have been sorely lacking in racial and gender diversity among their leadership.  As someone that helped create scoring systems to incentivize minority ownership among applicants in Illinois, it is an issue that I care deeply about.  There is no arguing that, so far, we have collectively failed to create industry ownership that recognizes and empowers those communities most harmed by the decades-old War on Drugs, let alone reflect the populations these medical cannabis businesses serve.  Kudos to Pennsylvania for including a mandatory diversity plan in their medical cannabis law and draft regulations.  For more context about minority leadership in the cannabis industry, check this out.  Hopefully this will not reflect a long-term trend (no disrespect intended for my fellow white guys out there).
  3. Local Ownership and Local Support – Regardless of whether your core team is born and raised locally, a recurring theme across these competitive states is that local investors and local community support are mandatory.  Some states have delegated a virtual veto-power to local towns that do not want cannabis businesses in their backyard (see Massachusetts).  Hawaii was an unusually residency-centric application process, and Florida set the eligibility bar by requiring floral nurseries with 30+ years experience growing plants.  As Ohio and Pennsylvania develop their regulations, expect explicit and implicit requirements for local support.  Any applicant struggling with local zoning needs to find a new town to hang a shingle.
  4. Selection Processes Work, But Are Messy – A fundamental question government regulators face when there is a limited number of licenses to award: “how do we pick winners and losers?”  If there is a better way than a merit-based, competitively-scored selection process, I’ve never seen it.  I take issue with the lottery system used in Arizona (trust me, watch this video), which means someone, somehow has to pick something approaching 1 winner for every 10 applicants.  Others have suggested an auction to the highest bidder (see #1 and #2 for why that’s problematic).  The odds vary depending on the state, region, type of license, etc., but ultimately a process must be created for licensees to be chosen.  The best selection processes have transparency (the public is informed about the process, clear articulation of the point system, criteria are plainly identified) and do absolutely everything imaginable to protect against actual or appearances of impropriety at a time when the public automatically distrusts government and assumes shady dealings.  Each selection process going back to Massachusetts and Connecticut have drawn criticism and lawsuits, but they have also generally identified the better (if not best) applicants in the pool.
  5. Building the Most Experienced Team – One trend that has received less attention is the increasing premium placed on an exceptional team of experts.  Consider, if you will, an applicant with $5 billion in assets and billions in debt (let’s call him Blonald Lump).  Mr. Lump has a decent grower from a recreational cannabis state who has been growing cannabis “for 30 years” (you do the math) and several former Wall Street bankers.  If Mr. Lump is facing a team with $7.5 million cash on hand, deep and longstanding ties to the local community, a cultivation and processing team that has years of experience in legal markets and an unblemished record, a nationally-recognized former law enforcement officer, and business executives from multiple industries, Mr. Lump loses even though he is used to “winning.”  Applicants are increasingly becoming more sophisticated in writing a great application narrative that appeals to regulators – and it is starting to all blend together.  The narrative itself is not a great way to choose licensees – it is the substance behind the applicant, and the experience of the team members that states are increasingly using to pick the best of the best.
  6. There Is No Guarantee, No Silver Bullet – If anyone ever guarantees you a license prior to a competitive merit-based selection, run in the other direction.  Applicants that were very successful in previous medical states often fail to get a license in future states.  Consultants that work with 10 teams in a state that issues 5 licenses is not likely to win any licenses for their clients.  Each state has been unique, and you need to take the time to understand the culture of the state, the intentions behind the regulations, and the goals behind the selection criteria.  Each new state looks to those that came before them for best practices, and traps to avoid.  I spent time speaking with every single medical cannabis program that came before Illinois, and I guarantee you new regulators in developing states will do the same.  Each state puts its own stamp on their program, and what worked in one state 6 months ago very well could hurt you in the next application.

If you are looking to apply in Ohio or Pennsylvania, or any future competitive state – study the regulations, focus on your real estate, and build the strongest team that you can.  It is an exhilarating process competing for a medical cannabis license in an industry that is truly helping people, and I wish you all the best.

 

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