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

Illinois is poised to begin licensing scores of new dispensaries now that the General Assembly has voted to legalize the possession of recreational cannabis effective January 1, 2020.

On May 31, after rounds of spirited debate in both houses, the House of Representatives passed House Bill 1438 by a 66-47 margin. Championed by Sen. Heather Steans (D-Chicago) and Rep. Kelly Cassidy (D-Chicago), it mirrored a bill passed by the Senate earlier in the week that legalized recreational cannabis by persons 21 and older.

The bill sets up a framework for licensing recreational cannabis dispensaries and new cultivation and processing facilities, and contains a number of social justice provisions such as expungement of arrest records for possession of small amounts of cannabis and community investment funds to be supported by license fees and other fees under the bill.

Initially, dispensaries and cultivation centers licensed under the Illinois Compassionate Use of Medical Cannabis Pilot Program will be able to apply for early approval licenses in order to begin supplying and selling recreational cannabis on January 1, 2020. Following those early approval licenses, up to 75 new dispensary licenses will be available for issuance in mid-2020.

Applications for those new licenses will be available no later than October 1, 2019, and will be due by January 1, 2020. Up to 110 additional dispensary licenses will be issued by January 1, 2021.

No additional cultivation licenses are specified in the bill, however, the Department of Agriculture has the discretion to issue additional cultivation licenses if needed, up to a maximum of 30. The new law also creates a new type of limited cultivation license called a “craft grower,” and up to 40 craft grower licenses will be issued by July 1, 2020, with additional licenses to be issued in 2021.

The full text of the bill can be found here.

Today, the New Jersey Department of Health Division of Medical Marijuana announced that it is seeking applications to operate up to 108 new Alternative Treatment Centers:  up to 38 in the northern region of the state, up to 38 in the central region and up to 32 in the southern region.  Three types of endorsements will be available for ATCs: cultivation, manufacturing and dispensary broken down as follows:

  • up to 24 cultivators
  • up to 30 manufacturers
  • up to 54 dispensaries

Permit application forms for ATCs will be available on July 1 at http://www.nj.gov/health/medicalmarijuana.  The Department of Health will accept written questions up to July 5.  There will be a pre-application webinar on July 16 to review the process and the most commonly submitted questions.  As was done with the July 2018 RFA a set of Frequently Asked Questions and responses to those questions will be posted following the webinar.  Applications are due August 15.  There was no mention of the timeline for announcing awards instead noting that it depends on the volume of applications received.

More can be found here:  https://www.nj.gov/health/news/2019/approved/20190603a.shtml

Peter F. Kelly

Fox Rothschild’s Princeton, NJ Office

pkelly@foxrothschild.com

While many states sprint towards the legalization of cannabis—at least nine states and the District of Columbia have legalized it for recreational use—Texas, a state often associated with conservative values, continues to take baby steps.  Still, progress is progress, even if at a snail’s pace.

Under the Texas Compassionate Use Act, enacted in 2015, patients living with intractable epilepsy (a seizure disorder that is difficult to control with treatment) are allowed to possess low-THC (up to 0.5%), high-CBD (more than 10%) oil that is prescribed by a qualified, registered physician.  This is one of the narrowest medical marijuana provisions in the United States.

Recently, however, on May 15, 2019, Texas legislators indicated they might be softening their stance on cannabis by unanimously approving, at the Senate level, House Bill 1325, which makes it legal for Texas farmers to grow industrial hemp.  The bill also legalizes hemp and hemp-derived extracts, like CBD oil, and removes hemp from Texas’ controlled substances list. Assuming the House approves the Senate’s amendments to the bill, which is anticipated, the bill will become law.

To be clear, hemp is not marijuana—hemp and its by-products contain no more than 0.3% of THC, which produces the “high” in marijuana—and marijuana is still illegal in Texas under House Bill 1325.  In fact, it seems Texas lawmakers sought to clarify that the bill should not be viewed as a step towards marijuana legalization by including a provision that outlaws the manufacturing of hemp for the purpose of smoking.

Relatedly, the Texas House also recently approved House Bill 63, which reduces the penalties for possession of marijuana.  For example, under the bill, possession of one ounce or less of marijuana would be reduced from a Class B to a Class C misdemeanor—the equivalent of a traffic ticket.  However, the bill is expected to die in the Senate.

Overall, the new law allowing farmers to grow hemp is a step in the right direction, but Texas still seems a long way off from legalizing marijuana, whether for expanded medical use or recreational use.

The Pennsylvania Medical Marijuana Act was signed into law in April 2016, and the state’s medical marijuana program was fully operational by early 2018. The law provides that Pennsylvania’s program shall be run by a Director of Medical Marijuana, who is supported by a 15-member Advisory Board.

The purpose of the Medical Marijuana Advisory Board is to monitor the progress of the medical marijuana program and those of other states, accept comments from the public and industry stakeholders, and to periodically report to the Governor, the Department of Health, and the Director of Medical Marijuana on proposed changes to the Commonwealth’s Medical Marijuana Program.

A main topic of discussion and debate within the Advisory Board is the list of qualifying medical conditions (known as “Serious Medical Conditions” in the Act) that are approved for the use of medical marijuana in Pennsylvania. The law originally identified 17 serious medical conditions, and in 2018, the Advisory Board expanded that list to include four additional conditions. The current list of serious medical conditions approved in Pennsylvania can be found here.

At its most recent meeting on May 15, 2019, the Advisory Board again discussed the addition of serious medical conditions. Specifically, the Advisory Board discussed the addition of Anxiety and Tourette’s Syndrome. These two conditions were already approved earlier this year through a vote of the Advisory Board, but have yet to be approved by the Commonwealth’s Department of Health. At the May 15 meeting, DOH Director Dr. Rachel Levine said she expects to make a final decision this summer on whether to approve these conditions under the law, but would like to conduct further study on how patients with these conditions would be affected by the use of cannabis.

The next quarterly meeting of the PA Medical Marijuana Advisory Board will occur on August 14, 2019. For more information on the Advisory Board’s activities, you can check out the PA Department of Health’s website, or check back here for more updates.

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.

Get ready, Las Vegas… Within a matter of months, residents and visitors to Las Vegas, Nevada will be able to consume marijuana in City approved “social use venues” (the “SUVs”).

On Wednesday, May 1, 2019, the Las Vegas City Council approved Bill Number 2018-61 (the “Ordinance”), which allows the consumption of marijuana SUVs that have been approved and issued requisite SUV business licenses. While there are restrictions applicable to the SUVs, the passing of the Ordinance is nonetheless a welcome addition to the Las Vegas marijuana scene.

Before the Ordinance was passed, recreational and medicinal users of marijuana were restricted to consuming marijuana in the privacy of their own homes. This restriction posed an issue for tourists, as there was no place for the tourists to consume their marijuana purchase. The Ordinance now allows the consumption of marijuana in social venues, further demonstrating Las Vegas’ acceptance of marijuana, making Las Vegas that much more attractive to its residents and tourists.

Notwithstanding the foregoing, and pursuant to the Ordinance, the following limitations apply to SUVs:

  • The City of Las Vegas must approve and issue an SUV business license following application submission. Thereafter, the yearly cost for such license is approximately $5,000.00.
  • For the first year, only licensed dispensaries located within the City of Las Vegas are able to apply for the SUV business license. Moreover, SUVs cannot be located inside of a Las Vegas licensed dispensary.
  • SUVs must meet specified odor standards and must have an approved security, training, fire safety, air quality, and sanitation plan.
  • Each SUV must be set at least 1,000 feet from a school or casino, and set at least 300 feet from certain protected institutions, including but not limited to churches.
  • As marijuana is prohibited from being consumed in public, the SUVs must restrict their view from the public.
  • Alcohol is prohibited from being sold or consumed at SUVs.
  • No one under 21 years of age will be granted admission to SUVs.

On the flip side, non-alcoholic beverages and food can be sold and consumed on-site. There is also buzz that some SUVs will feature arcade games and other recreational activities, making the SUVs akin to bars, and that much more appealing to its patrons.

The Ordinance will certainly add more joints to the City of Las Vegas…pun intended.

This weekend, Illinois’ governor announced a proposed bill, planned for filing in the hopper today or very soon, which will allow for the cultivation and retail sale of adult-use (i.e., recreational) marijuana in Illinois.  The bill will allegedly be several hundred pages long, so the Governor’s office has provided us with a summary of the provisions, available here: https://assets.documentcloud.org/documents/5988612/Cannabis-bill-summary-from-Gov-Pritzker-s-office.pdf.  The bill proposes to allow existing medical marijuana licenses to have a head start selling adult-use cannabis on January 1, 2020, with additional licenses to be made available in “waves” thereafter in May and July, 2020, and again in December 2021.

Feel free to call me if you have any further questions about the proposed bill – William Bogot

Illinois finally issued its industrial hemp applications and final regulations in accordance with the new Illinois Industrial Hemp Act. https://www2.illinois.gov/sites/agr/Plants/Pages/Industrial-Hemp.aspx. These is no limit on the number of licenses, which are to be issued to qualifying applicants within 30 days of application. Applications are available for growers and processors, with fees ranging from $100 – $1000. The application is unlike the one for medical marijuana, in that it is not merit/point based, and it can easily be completed in a short amount of time. Those individuals with a controlled substance felony conviction in the last 10 years are ineligible for licensure.

The regulations provide that the minimum land area for industrial cultivation shall be ¼ acre of contiguous land for outdoor cultivation and 500 square feet for indoor cultivation. No land area used for industrial hemp shall produce a plant with more than .3% THC concentration on a dry weight basis. The regulations allow for the sale of marketable hemp products to members of the general public both within and outside the State of Illinois, and there is no restriction on the transportation of any such product following retail sale to a member of the public.

Please feel free to contact me if you have any additional questions – William Bogot