Investors and lenders could be seeing more green from cannabis. Considering that more than 30 states have approved medical marijuana and about a third of those have also legalized its recreational use, this rapidly expanding industry presents a range of new funding and traditional banking opportunities. We help financial institutions prepare for that.

Our Banking Opportunity Checklist identifies the key issues that financial institutions should address when crafting an investment and compliance strategy for delivering services to marijuana-related businesses. This outline of critical questions will guide the planning, due diligence and operational decisions behind the effort to bank with or lend to businesses in budding cannabis markets.

Download the Banking Opportunity Checklist: Marijuana-Related Businesses.

Back in May, I blogged about a recommendation from the Pennsylvania Medical Marijuana Advisory Board to add Anxiety and Tourette Syndrome as “serious medical conditions” covered under the Pennsylvania Medical Marijuana Act. At the time, the Department of Health (DOH) stated a decision on whether to formally approve this recommendation would be made by this Summer, and the Department kept this deadline. On July 11, 2019, the Secretary of DOH, Dr. Rachel Levine, announced that the two will be approved as qualifying conditions effective July 20, 2019.

The PA Medical Marijuana Act originally identified 17 “Serious Medical Conditions,” and in 2018, the Advisory Board expanded that list to include four additional conditions. This announcement brings the total number of qualifying conditions to 23 (which can be found here).

Medical marijuana in jar lying on prescription form

In May, Dr. Levine noted that she wanted to review medical research in anticipation of making a final decision. The official press release from the DOH stated that the medical literature supported the decision to approve these conditions, but added a few caveats from Dr. Levine regarding the use of medical marijuana to treat Anxiety and Tourette Syndrome:

  • “marijuana is not first line treatment and should not replace traditional therapies [like counseling and therapy] but should be used in conjunction with them, when recommended by a physician”
  • “medical marijuana with low THC and high CBD content are more effective for treatment of anxiety disorders and is recommended for short-term use”
  • “medical marijuana is not recommended to treat children and adolescents with anxiety disorders, as their brains are still developing”
  • “pregnant women with any of the approved serious medical conditions should not use medical marijuana as the impacts on the fetus are unknown”

Dr. Levine provided additional information about the announcement and her decision via her Twitter account:

As always, patients, caregivers, doctors, and other members of the public can find out more about Pennsylvania’s Medical Marijuana Program through the PA DOH website.

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

On January 1, 2017, Nevada became the fifth state to legalize the recreational use of marijuana.  Since then, Nevada employers have denied employment to prospective job candidates if they test positive for marijuana on a pre-employment drug test. This will soon become a statutory unlawful employment practice.

On June 5, 2019, Nevada’s Governor, approved Assembly Bill No. 132 (“AB132”), which prohibits employers from denying employment to a prospective job candidate because of the presence of marijuana on a pre-employment drug test. AB132 becomes effective on January 1, 2020.

AB132 does not provide protection for select employment positions wherein the safety of others may be compromised, such as firefighters, emergency medical technicians, or a position requiring the operation of a motor vehicle. Moreover, the provisions of AB132 do not apply when:

  • Federal or state law requires the prospective candidate to submit to a drug screening test;
  • The provisions conflict with an employment contract or collective bargaining agreement;
  • The provisions conflict with the provisions of federal law; or
  • The employment position is funded by a federal grant.

Nevada is making strides on the acclimation of the legalization of medicinal and recreational use of marijuana. We await to see how employers in Nevada’s top industries (such as hospitality and gaming) will respond to the passing of AB132.

The Illinois law that legalized recreational cannabis weighs in at 610 pages and charts a course for licensing businesses of every type in the cannabis space.

Our 16-page summary provides a convenient outline of the essential details of the law, with an emphasis on the licensing of recreational cannabis dispensaries and new cultivation and processing facilities, as well as licensing craft growers, infuser organizations and transportation organizations.

For ease of use, our guide links directly to a page-numbered copy of the law and tracks its numbering system, noting the precise pages where key info can be found.

Download our Cannabis Regulation and Tax Act summary.

Last Friday the Agriculture Committee of the NC House of Representatives passed an amendment to the NC Farm Act of 2019 that could have a severe impact on hemp farmers.  The previous version of the bill, passed by the NC Senate on June 17 in a 31-14 vote, contained a provision that would ban smokable hemp starting December 2020.  The amendment that the House Agriculture Committee approved moved the starting date for the ban on smokable hemp up to December 1, 2019. Also as part of the amendment, smokable hemp will now be classified as marijuana, and a Schedule VI controlled substance under NC law.  This classification under the NC Farm Act is in contrast with the 2018 Federal Farm Bill which explicitly removed hemp and hemp products, including smokable hemp, from the Federal Controlled Substance Act and the Federal definition of marijuana.

Concerns of law enforcement were the driving force behind the Agriculture Committee’s decision to vote in favor of the amendment.  Several law enforcement officials stated that without the ban marijuana would effectively be legalized in NC due to smokable hemp’s similarity in look and smell to it.  The opinion repeatedly voiced by law enforcement officials at the hearing was that the similarity in look and smell of smokable hemp to marijuana makes probable cause for marijuana searches hard to establish, which in turn they argued makes the arrest and prosecution of marijuana possession almost impossible.

The ban poses a major financial issue for farmers seeking to participate in the booming hemp market.  Smokable hemp is much more profitable for farmers to grow as opposed to growing hemp that is only used for CBD extraction.  Hemp industry insiders at the hearing informed the committee that smokable hemp can sell for as much as $800-$1000 a pound whereas hemp used for CBD extract sells closer to $40 a pound.  Some farmers testified to the committee that growing hemp has become a viable and profitable alternative to more traditional crops such as tobacco, but the ban would detrimentally impact farmers’ ability to profit off the lucrative new cash crop.  As a result, there was a concern voiced by hemp growers that the ban will take back the progress they have madField of Hempe.

The amended NC Farm Act does not only affect farmers but also retailers, manufactures, advertisers, and processors.  The current version of the NC Farm Act mandates that before anybody can hold, process, manufacture, package, label, or sell cannabinoid-related compounds, including CBD products, they must apply for a license to do so and be approved by the Commission. The bill also authorizes for regulations on how CBD products are labeled, packaged, delivered, and stored.

The bill will now go to the House’s Judicial Committee and will still have to go through more committees after that before the Senate and House will have to agree on a version of the NC Farm Act before it can be signed and become law.

For updates on the bill as it moves forward be sure to check back here.

Ellis Martin

On June 25, 2019, Illinois Governor JB Pritzker made good on his campaign promise to sign an adult-use marijuana law. Pursuant to the Cannabis Regulation and Tax Act (the “Adult-Use Cannabis Act”), adult-use (i.e., recreational) marijuana will be legal and available starting January 1, 2020. The Adult-Use Cannabis Act is 610-pages, and this article briefly focuses on the dispensaries.[1] For a more comprehensive analysis of all 610 pages, Bill Bogot and Donna More from our firm put together a Cannabis Law Alert and we are available to answer any questions.

I. Dispensaries under the Illinois Medical Cannabis Act and the Adult-Use Cannabis Act.

On August 1, 2013, Illinois enacted the Compassionate Use of Medical Cannabis Pilot Program Act, 410 ILCS 130/1 et seq. (the “Medical Cannabis Act”), which legalized medical marijuana for persons diagnosed with certain qualifying medical conditions. Under the Medical Cannabis Act and related Medical Cannabis Administrative Rules and Regulations, there are 43 “Dispensing Organization Districts” or “Districts” where one or more medical dispensaries may be located and there are a total of 60 medical dispensary licenses available.

  1. There are 55 licensed medical marijuana dispensaries in Illinois.

    Under the Medical Cannabis Act, although there are 60 available licenses, Illinois only has 55 licensed medical dispensaries. These medical dispensaries are dispersed throughout Illinois in the following cities (these are not the 43 Dispensing Organization Districts under the Medical Cannabis Act):

    Addison (2 dispensaries)

    Anna

    Arlington Heights

    Buffalo Grove

    Canton

    Champaign

    Chicago (11 dispensaries)

    Collinsville

    Deerfield

    East Peoria

    Effingham

    Elmwood Park

    Evanston

    Fulton

     

    Grandview

    Harrisburg

    Highland Park

    Homewood

    Joliet

    Justice

    Litchfield

    Marion

    Milan

    Mokena

    Morris

    Mount Prospect

    Mundelein

    Naperville

    Normal

    North Aurora

    Oak Park

    Ottawa

    Peoria

    Posen

    Quincy

    Rockford (2 dispensaries)

    Rolling Meadows

    Romeoville

    Sauget

    Springfield

    St. Charles

    Urbana

    Worth

     

  2. Section 15-15. Early Approval Adult Use Dispensing Organization License.

    Pursuant to Section 15-15 of the Adult-Use Cannabis Act, any currently licensed medical dispensary under the Medical Cannabis Act, may, within 60 days of the effective date of the Adult-Use Cannabis Act, apply for an Early Approval Adult Use Dispensing Organization License (“Early Approval Dispensing License”). An Early Approval Dispensing License allows currently licensed medical dispensaries to sell both medical and recreational cannabis at their medical dispensaries. If approved for an Early Approval Dispensing License, the medical dispensaries may begin selling recreational cannabis and related items on January 1, 2020.
  3. Section 15-20. Secondary site for licensed medical dispensaries.

    Pursuant to Section 15-20 of the Adult-Use Cannabis Act, any currently licensed medical dispensary under the Medical Cannabis Act, may, within 60 days of the effective date of the Adult-Use Cannabis Act, apply for an Early Approval Dispensing License “to operate a dispensing organization to serve purchasers at a secondary site not within 1,500 feet of another medical cannabis dispensing organization or adult use dispensing organization.” Therefore, a currently licensed medical dispensary, if approved for an Early Approval Dispensing License, will be able to sell recreational marijuana at its current medical dispensary as well as a secondary site.Pursuant to Section 15-20 of the Adult-Use Cannabis Act, the permissible locations for secondary sites “shall be within any BLS region that shares territory with the dispensing organization district to which the medical cannabis dispensing organization is assigned under the administrative rules for dispensing organizations under the [Medical Cannabis Act].” So, currently licensed medical dispensaries need to know their Districts under the Medical Cannabis Act Administrative Rules (i.e., where their dispensary is located) and then cross-check the 17 BLS Regions under the Adult-Use Cannabis Act. The 17 BLS Regions are defined and listed below in the following section. A medical dispensary’s secondary site can thus be located in any BLS Region that shares territory with the medical dispensary’s District, so long as the secondary site is not within 1,500 feet of another dispensary.

  4. 75 new Conditional Adult Use Dispensing Organization Licenses to be issued before May 1, 2020.

    This is where new applicants/entrants come into play. Under the Adult-Use Cannabis Act, Illinois is broken down into 17 separate “BLS Regions.” A BLS Region is defined as a region in Illinois used by the United States Bureau of Labor Statistics to gather and categorize certain employment wage data. Pursuant to Section 15-25 of the Adult-Use Cannabis Act, the Illinois Department of Financial and Professional Regulation (“IDFPR”) will issue 75 Conditional Adult Use Dispensing Organization Licenses on or before May 1, 2020. These 75 Conditional Adult Use Dispensing Organization Licenses will be awarded in each BLS Region as follows:

    BLS Region No.

    BLS Region Name

    (the counties that make up each Region are listed in bullet point)[2]

    		 Number of the 75 Licenses to be issued before May 1, 2020
    1.

    Bloomington

    ·         De Witt County

    ·         McLean County

    		 1
    2.

    Cape Girardeau

    ·         Alexander County

    		 1
    3.

    Carbondale-Marion

    ·         Jackson County

    ·         Williamson County

    		 1
    4.

    Champaign-Urbana

    ·         Champaign County

    ·         Ford County

    ·         Piatt County

    		 1
    5.

    Chicago-Naperville-Elgin

    ·         Cook County

    ·         DeKalb County

    ·         DuPage County

    ·         Grundy County

    ·         Kane County

    ·         Kendall County

    ·         Lake County

    ·         McHenry County

    ·         Will County

    		 47
    6.

    Danville

    ·         Vermilion County

    		 1
    7.

    Davenport-Moline-Rock Island

    ·         Henry County

    ·         Mercer County

    ·         Rock Island County

    		 1
    8.

    Decatur

    ·         Macon County

    		 1
    9.

    Kankakee

    ·         Kankakee County

    		 1
    10.

    Peoria

    ·         Marshall County

    ·         Peoria County

    ·         Stark County

    ·         Tazewell County

    ·         Woodford County

    		 3
    11.

    Rockford

    ·         Boone County

    ·         Winnebago County

    		 2
    12.

    St. Louis

    ·         Bond County

    ·         Calhoun County

    ·         Clinton County

    ·         Jersey County

    ·         Macoupin County

    ·         Madison County

    ·         Monroe County

    ·         St. Clair County

    		 4
    13.

    Springfield

    ·         Menard County

    ·         Sangamon County

    		 1
    14.

    Northwest Illinois nonmetropolitan area

    ·         Bureau County

    ·         Carroll County

    ·         Jo Daviess County

    ·         La Salle County

    ·         Lee County

    ·         Ogle County

    ·         Putnam County

    ·         Stephenson County

    ·         Whiteside County

    		 3
    15.

    West Central Illinois nonmetropolitan area

    ·         Adams County

    ·         Brown County

    ·         Cass County

    ·         Christian County

    ·         Fulton County

    ·         Greene County

    ·         Hancock County

    ·         Henderson County

    ·         Knox County

    ·         Livingston County

    ·         Logan County

    ·         Mason County

    ·         McDonough County

    ·         Montgomery County

    ·         Morgan County

    ·         Moultrie County

    ·         Pike County

    ·         Schuyler County

    ·         Scott County

    ·         Shelby County

    ·         Warren County

    		 3
    16.

    East Central Illinois nonmetropolitan area

    ·         Clark County

    ·         Clay County

    ·         Coles County

    ·         Crawford County

    ·         Cumberland County

    ·         Douglas County

    ·         Edgar County

    ·         Effingham County

    ·         Fayette County

    ·         Iroquois County

    ·         Jasper County

    ·         Lawrence County

    ·         Marion County

    ·         Richland County

    		 2
    17.

    South Illinois nonmetropolitan area

    ·         Edwards County

    ·         Franklin County

    ·         Gallatin County

    ·         Hamilton County

    ·         Hardin County

    ·         Jefferson County

    ·         Johnson County

    ·         Massac County

    ·         Perry County

    ·         Pope County

    ·         Pulaski County

    ·         Randolph County

    ·         Saline County

    ·         Union County

    ·         Wabash County

    ·         Washington County

    ·         Wayne County

    ·         White County

    		 2

    The map below further illustrates the 17 BLS Regions and corresponding number of Conditional Adult Use Dispensing Organization Licenses available in each BLS Region. This article and map do not analyze the various zoning issues that may arise under the Adult-Use Cannabis Act.

    Illinois Map
    Click to view full map

    The selection criteria for these 75 Conditional Adult Use Dispensing Organization Licenses is spelled out in Section 15-30 of the Adult-Use Cannabis Act and the IDFPR will also issue administrative rules and regulations with more details about the selection criteria.

  5. 110 Conditional Adult Use Dispensing Organization Licenses to be issued after January 1, 2021.

    In addition to the (i) Early Approval Dispensing Licenses, (ii) Early Approval Dispensing Licensesecondary sites and (iii) 75 Conditional Adult Use Dispensing Organization Licenses, by December 21, 2021, pursuant to Section 15-35 of the Adult-Use Cannabis Act, the IDFPR shall issue up to 110 Conditional Adult Use Dispensing Organization Licenses.The future is impossible to predict, but there is no doubt that the Illinois market is about to boom and many licenses will be available. There will be intense competition for these licenses, so if you plan to apply, be prepared to spend some quality time on the application. Our firm has helped many businesses apply for and obtain various medical and recreational marijuana licenses throughout the country, and the application process is always more difficult and takes more time than you would expect. Please reach out if you want to discuss or are considering applying for any type of medical or adult-use license (e.g., dispensary, cultivation center, craft grower, infuser organization, transporting organization, etc.). Good luck!!

 

[1] Dispensaries are where you can purchase medical and/or recreational marijuana.

[2] According to the US Department of Labor, Bureau of Labor Statistics’ May 2018 Metropolitan and Nonmetropolitan Definitions, available at https://www.bls.gov/oes/current/msa_def.htm#1700001 (last visited June 24, 2019).

On June 14, 2019, Governor Greg Abbot signed into law a bill (House Bill 3703) expanding access to medical marijuana products in the State of Texas.

Effective immediately, qualified physicians can prescribe medical marijuana products to treat epilepsy, seizure disorders, multiple sclerosis (commonly known as MS), spasticity, amyotrophic lateral sclerosis (commonly known as ALS or Lou Gherig’s disease), autism, terminal cancer, and incurable neurodegenerative diseases.  The patient must be a permanent resident of Texas.  Under the prior version of the law, medical marijuana was available only to patients with intractable epilepsy, a seizure disorder that is difficult to control with treatment.

Texas’ medical marijuana law, known as the Texas Compassionate Use Act, is limited to low-THC products (up to 0.5%).

The passage of House Bill 3703 comes on the heels of Texas passing a law legalizing the production of industrial hemp and hemp-derived extracts, like CBD oil, which we wrote about last month.

Texas is slowly becoming more accepting of marijuana, but compared to those states that have legalized cannabis for recreational use, it continues to approach with caution.  For an overview of how expansion of the Texas Compassionate Use Act might affect your business, read this or contact Lee Szor at LSzor@FoxRothschild.com.

Fox Rothschild recently participated in the MGO | ELLO Cannabis Private Investment Review, the first comprehensive report covering investment in the cannabis industry. The report covers a number of topics, including the state of venture capital and private equity investments in the cannabis industry, as well as the burgeoning M&A market. With a wealth of data including the sizes and stages of investments, valuation metrics, exit strategy and geographic data, the report will be useful for investors, entrepreneurs and other industry players.

In a prior post we discussed the approval of marijuana consumption lounges or “social use venues” (“SUVs”) in the City of Las Vegas, Nevada.

However, on June 7, 2019, the Nevada Legislature halted the implementation of the SUV ordinance by approving Amendment 942 to AB 533 (the “Amendment”), which sets a two-year moratorium of the SUVs.

The Amendment provides for the creation of a “Cannabis Compliance Board” (the “Board”), and following the appointment of Board members, the Board would conduct a two-year study on the feasibility, approval, and implementation of SUVs.

The study will evaluate the following:

  • Setting of distances of SUVs from certain businesses, such as gaming and child care establishments;
  • Liability of a patron under the influence of marijuana after leaving a SUV;
  • Limitations on the number of SUV licenses;
  • Taxation of SUVs; and
  • Creation of regulations for the SUVs, and the adoption of such regulations by the Nevada Department of Health and Human Services.

The initial high of impending SUVs has now worn off and Nevada must wait before residents and tourists will have a communal place to legally consume marijuana.

Yesterday a bill containing a proposed ban on smokable hemp passed the NC Senate Agricultural Committee.  The bill still has to pass through three other committees before it reaches the floor for a vote.  It has also been amended to delay the proposed ban on smokable hemp until 12/1/2020.

The bill has seen opposition from NC hemp farmers who believe it could detrimentally impact their ability to participate in the fast growing hemp industry. For some farmers hemp is a viable new cash crop alternative in an agricultural industry where it has become increasingly difficult to make a living.  Because smokable hemp products have been profitable there is a concern the bill poses a business risk to farmers growing smokable hemp flowers.

Hemp and it derivatives like CBD oil became federally legal to cultivate, manufacture, and sell when the President signed into law the 2018 Farm Bill this past December.  The State Bureau of Investigation however, has advocated for the proposed ban on smokable hemp.  Because hemp contains .3% or of less of THC it doesn’t have a psychoactive effect like marijuana and doesn’t give users a “high.”  Nevertheless, law enforcement has sought to limit legal hemp cultivation arguing hemp can be easily confused with marijuana.

This confusion was demonstrated recently when police charged a North Carolina woman for smoking legal hemp flowers despite her showing officers the store packaging for the flowers.  A North Carolina high school student was also arrested after a resource officer discovered a marijuana-like residue in her backpack even though the student told the officer that it was a legal CBD product.

A full copy of the proposed bill may be found here: https://www.ncleg.gov/BillLookUp/2019/S315