E-Book Cover: Employment Compliance in the Age of Legalized MarijuanaThough cannabis is illegal under federal law, at least 30 states and the District of Columbia have legalized cannabis for medical use and nine states, as well as D.C., have legalized it for recreational use—a dichotomy that presents a unique and complex challenge for employers. In a new e-book, Fox attorneys Joseph A. McNelis III, Lee Szor, William Bogot and Joshua Horn provide an overview of federal and state marijuana laws, discuss specific aspects of the employment relationship affected by the legalization of marijuana in certain states, and offer practical guidance for employers on how to navigate this new and developing area of the law.

We invite you to download a PDF of the e-book.

Entrepreneurs looking to enter Massachusetts’ newly minted recreational marijuana market can sleep a bit easier tonight after a statement from U.S. Attorney Andrew Lelling (the top federal prosecutor for the state) regarding his enforcement priorities surrounding marijuana sales.

Cannabis and the law
Copyright: jirkaejc / 123RF Stock Photo

As many in the industry are aware, federal prosecutors for years were guided by the “Cole Memo,” which endorsed a hands-off approach to enforcement against businesses operating where marijuana had been legalized under a state-sanctioned program. But this January, Attorney General Jeff Sessions rescinded the Cole Memo and issued his own Memorandum instructing federal prosecutors to “follow well-established principles that govern all federal prosecutions” in actions involving cannabis-related businesses.

While this announcement initially sent shockwaves through the industry, we counseled companies to cautiously continue business as usual and keep a lookout for statements from individual U.S. Attorneys regarding their enforcement priorities. Massachusetts got such a statement last week. In his Statement, U.S. Attorney Lelling noted that while he cannot, “immunize the residents of the Commonwealth from federal marijuana enforcement,” his office’s resources will be focused on the following:

(1) unauthorized out-of-state marijuana sales

(2) targeted sales to minors

(3) organized criminal groups which use illicit drug sales to fund their activities

According to MassLive, the Chairman of the Massachusetts Cannabis Control Commission, Steven Hoffman, said the statement from the U.S. Attorney was “good news” for the industry and provided “clarity” for businesses entering the market. You can review the full Statement from U.S. Attorney Andrew Lelling here.


Joseph McNelis works in Fox Rothschild’s Blue Bell, PA office and focuses his practice on labor and employment matters. Joe also tracks legal developments in the cannabis industry in Pennsylvania and nationwide. Joe can be contacted at 610-397-2332 or jmcnelis@foxrothschild.com.

Nevada legalized the recreational adult-use of marijuana on July 1, 2017 and the state has generated millions in tax revenue as a result. Nonetheless, the Nevada Regulation and Taxation of Marijuana Act (the “Act”) provides that until November 2018, only registered marijuana certificate holders may apply for recreational retail marijuana establishment licenses. The Nevada Department of Taxation (the “Department”) ceased accepting applications at 2017 year’s end.

Nevada state flag on cannabis backgroundThe Act further provides that at least once a year, the Department will determine whether additional marijuana establishments are necessary to support the demand in the state. It was anticipated the Department would begin accepting recreational retail marijuana establishment licenses again in November 2018.

On July 6, 2018, the Department issued a notice of its intent to begin accepting applications for recreational retail marijuana establishment licenses. The notice came sooner than expected, but there’s a catch! The Department is accepting applications under two (2) conditions: (1) the applicant must be a registered medical marijuana establishment certificate holder; and (2) the applicant must be in “good standing” with the Department. The plus side is that such applicants may apply for one (1) or more recreational retail marijuana establishment licenses.

For those prospective applicants meeting the two (2) foregoing conditions, they must act fast. The application acceptance period lasts only ten (10) days – from September 7-20, 2018 (excluding weekend days).

In addition, prospective applicants should not expect to be open for business anytime soon. The application review period begins September 7, 2018 and extends to December 5, 2018. The Department will award conditional licenses no later than December 5, 2018.

There’s another catch! Conditional license holders must be fully operational no later than twelve (12) months following the issuance of a conditional license. If the establishment is not fully operational after twelve (12) months following the issuance of a conditional license, the establishment must surrender the license to the Department, unless an extenuating circumstance applies.

The application can be found on the Nevada Department of Taxation website.

In November 2018, the Department may open up the applicant pool to all persons interested in submitting an application to operate a recreational marijuana establishment – emphasis on may.

Florida’s citrus industry has been ailing and declining for years.  Florida’s recent medical marijuana regulations were designed to help, in part, by providing two medical marijuana licenses for the citrus industry to switch from growing oranges to marijuana.

As I’ve posted before, Florida medical marijuana licensing regulations have been the subject of repeated litigation challenges.  See posts herehere and here.  Now, the most recent challenge involves this citrus preference rule.

Louis Del Favero Orchids (“Orchids”) is challenging the rule.  The orchid company argues that the rule fails to carry out the law, which gives preference for up to two medical marijuana licenses to applicants who own “facilities” that were used to process citrus.

Orchids claims that the rule actually gives preference to applicants who simply own “property” that was once used for citrus-processing which is different than the requirement set forth in the law that preference be given to applicants who own “facilities” that were once used for citrus processing.

Orchids bought Florida property that included a facility once used to process orange juice in an effort to increase their chances to obtain a Florida medical marijuana license.

However, Florida’s Department of Health’s position is that there’s nothing in the law that requires a “facility” to be a structure.


Dori K. Stibolt is a West Palm Beach, Florida based partner with Fox Rothschild LLP.  She focuses her practice on litigation and labor and employment issues and has taken a special interest in the cannabis business.  You can contact Dori at 561-804-4417 or dstibolt@foxrothschild.com.

Jack Praetzellis writes:

Green California Vector IllustrationOn July 1, 2018, California’s Cannabis “transition period” ended for manufactured cannabis products (i.e., edibles).  All manufactured cannabis products must now meet California’s (very) specific labeling and packaging regulations.

California Cannabis Label SymbolAmong other things, the packaging must include THC and CBD content in milligrams along with the Cannabis “universal symbol” (and no, you can’t change the color).

The “don’ts” are more interesting than the “dos”.  Among other things, packaging cannot:

  • Include the name of a county in California unless all of the cannabis in the product was grown there.
  • Imitate candy packaging or labeling and cannot use the terms candy or candies, or otherwise appeal to those under 21.
  • And, in a typically California move, packaging must identify all potential allergens (shellfish, peanuts, etc.).

Manufacturers should take (or, well, should have already taken) a close look at these detailed labeling and packaging requirements.  Although some of these regulations may seem excessive, there are high stakes here.  Failure to comply with any of the host of California’s Cannabis regulations subjects a licensee to discipline (which may include suspension or revocation of the license).  See Cal. Bus & Prof Code §§ 26030-26031.


Jack Praetzellis is an associate in the Litigation Department, resident in the San Francisco office.

The Treasury Department’s Financial Crimes Enforcement Network (FinCEN) has released updated quarterly statistics showing a continuing increase in the number of depository institutions that actively bank U.S. marijuana businesses. As of March 31, 2018, a total of 411 banks and credit unions provided services to marijuana-related businesses, up from 365 one year ago. FinCEN’s data reflects a slight decrease following the Attorney General’s announcement in January 2018 that he was rescinding the Cole Memorandum, but the numbers quickly went back up, ending the quarter at their second-highest level since December 31, 2017. FinCEN’s data is based upon Suspicious Activity Reports (SARs) required to be filed by financial institutions on activity involving a marijuana-related business.

In guidance issued in February 2014, FinCEN required financial institutions providing services to marijuana businesses to file the following types of SARs depending upon the type of services being provided:

  • A “Marijuana Limited” filing, which means that the financial institution’s due diligence indicates that the marijuana-related business does not raise any of the red flags as defined in the Cole Memo and is compliant with the appropriate state’s regulations regarding marijuana businesses. In this category, the financial institution is providing banking services to the marijuana-related business.
  • A “Marijuana Priority” filing, which means the financial institution’s due diligence indicates that the marijuana-related business may raise one or more of the red flags as defined in the Cole Memo or may not be fully compliant with the appropriate state’s regulations regarding marijuana-related businesses. In this category, the financial institution is providing banking services to the marijuana-related business while further investigation is being conducted.
  • A “Marijuana Termination” filing, which means the financial institution decided to terminate its relationship with the marijuana related business for one or more of the following reasons:

– The financial institution’s due diligence indicates that the marijuana-related business raises one or more of the red flags as defined in the Cole Memo.

– The marijuana-related business is not fully compliant with the appropriate state’s regulations.

– The financial institution has decided not to have marijuana-related customers for business reasons.

Following the Attorney General’s announcement in January 2018, FinCEN announced that its 2014 guidance would remain in place. And FinCEN’s latest publication of marijuana-banking statistics contains this important note:

Note: The SAR reporting structure laid out in the 2014 guidance remains in place. FinCEN will continue to work closely with law enforcement and the financial sector to combat illicit finance, and we will notify the financial sector of any changes to FinCEN’s SAR reporting expectations.

As of April 12, 2018, FinCEN has received 51,391 SARs involving marijuana-related businesses since issuance of FinCEN’s February 2014 guidance. The vast majority of those SARs – nearly 38,000 – were “Marijuana Limited” filings, indicating that the financial institution was providing ongoing banking services to the marijuana business in question. FinCEN has received approximately 3,800 “Marijuana Priority” SARs, and over 12,000 “Marijuana Termination” SARs, during the same time period.

An analysis of FinCEN’s SAR filing data continues to show a generally positive and encouraging trend for marijuana businesses, notwithstanding the Justice Department’s policy reversal on marijuana enforcement. For the first three quarters of 2018, the number of “Marijuana Limited” SAR filings increased every month by an average of 1,401 filings. In comparison, the number of “Marijuana Priority” and “Marijuana Termination” SAR filings increased by an average of only 480 and 173, respectively.

Few things are as bi-partisan as constructing a snazzy acronym for federal legislation, and Senators Elizabeth Warren (D-MA) and Cory Gardner (R-CO) did not disappoint with the “Strengthening the Tenth Amendment Through Entrusting States Act”  (“STATES Act”). As its name suggest, the goal of the STATES Act is to protect regulated cannabis businesses and users in states where cannabis has been legalized by amending the Controlled Substances Act.

U.S. Capitol Building
Copyright: mesutdogan / 123RF

The Controlled Substances Act, 21 U.S.C. §§ 801, et seq. (“CSA”) is the federal law that makes the manufacture, distribution, and use of marijuana illegal, and is the main source for the dichotomy between state and federal law concerning cannabis. The proposed legislation seeks to amend the CSA by adding several sections which would essentially exempt state-sanctioned marijuana from the CSA. While the STATES Act would not legalize cannabis on a nationwide level, it would and give states the freedom to legalize cannabis or keep it illegal.

The STATES Act has received so much attention not only because of the sweeping changes it proposes, but also because it has received tacit approval from President Trump, who was previously seen as a roadblock to cannabis legislation. That is due in part to a deal struck between Senator Gardner and the President, which ended with the following pronouncement from Gardner: “President Trump has assured me that he will support a federalism-based legislative solution to fix this states’ rights issue once and for all.”

The folks at Leafly have a great breakdown and explanation of the STATES Act, including the following bullet points on what the legislation proposes:

  • The act amends the Controlled Substances Act (CSA) so that as long as states and tribes comply with a few basic protections, its provisions no longer apply to any person acting in compliance with state or tribal laws relating to marijuana activities.
  • The act states that compliant transactions are not trafficking and do not result in proceeds of an unlawful transaction. This would go a long way towards ending the difficulties cannabis companies have in obtaining banking services.
  • The measure removes industrial hemp from the list of controlled substances under the CSA.
  • The following federal criminal provisions under the CSA continue to apply:
    • Prohibits endangering human life while manufacturing marijuana
    • Prohibits employment of persons under age 18 in drug operations
  • The act prohibits the distribution of marijuana at transportation safety facilities such as rest areas and truck stops.
  • The measure prohibits the distribution or sale of marijuana to persons under the age of 21 other than for medical purposes.

We will continue to monitor and provide updates on this important legislation, which has great implications for cannabis businesses throughout the country.


Joseph McNelis works in Fox Rothschild’s Blue Bell, PA office and focuses his practice on labor and employment matters. Joe also tracks legal developments in the cannabis industry in Pennsylvania and nationwide. Joe can be contacted at 610-397-2332 or jmcnelis@foxrothschild.com.