Last week, Leon County, Florida Circuit Judge Charles Dodson granted a temporary injunction sought by Columbus Smith regarding a portion of the Florida law passed last year to implement Amendment Two (medical marijuana).  I posted before about Smith’s lawsuit.

The law implementing Amendment Two called for an overall increase of 10 licenses for Medical Marijuana Treatment Center (Florida has a vertical integrated license structure which means licensed Medical Marijuana Treatment Centers grow, distribute and sell medical marijuana) by October 3, 2017.  But, the law also provided that one (1) of those licenses go to a black farmer who had been a party to settled lawsuits (known as Pigford I and Pigford II) regarding discrimination by the federal government against black farmers.  The law also said that the black farmer who receives the medical marijuana license would have to be a member of the Black Farmers and Agriculturalists Association-Florida Chapter.  Mr. Smith had been a member of Pigford I and Pigford II, but the Black Farmers and Agriculturalists Association had closed their membership and would not issue a membership to Mr, Smith.

The Florida Constitution bars “special” laws that relate to a “grant of privilege to a private corporation.”  Mr. Smith’s lawsuit alleged the medical marijuana law violated that part of the Constitution.

In issuing the temporary injunction, Judge Dodson ruled that Mr. Smith has a substantial likelihood of success of proving that the law is unconstitutional.

Plaintiff will likely suffer irreparable harm if this court does not enjoin the department from issuing the black farmer license because the law only applies to members of the association and plaintiff … will not be able to apply or qualify for such a license, because he is not a member of the association.

Judge Dodson’s Court Order also asked both sides to come up with a plan to resolve the issue by June, 2018.

Senate budget chief Rob Bradley, a Fleming Island Republican, said the Legislature will likely strip out the part of the law requiring membership in the association for an applicant to be eligible for the black-farmer license.


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.

As a follow-up to yesterday’s post regarding the status of FinCEN’s 2014 marijuana banking guidance in light of the Attorney General’s policy reversal on marijuana enforcement at the federal level, we have received written confirmation from FinCEN that its 2014 guidance remains in place.  In response to our inquiries, FinCEN provided us with the following statement:

“The SAR reporting structure laid out in the February 14, 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.”

In addition, the two U.S. Senators from Colorado, Michael Bennet (D) and Cory Gardner (R), announced that they have sent a letter to FinCEN urging the agency to retain its 2014 marijuana banking guidance.  In their press release, the senators warned that “repealing the guidance could increase the amount of cash used by marijuana businesses, raising public safety issues and reducing the oversight and transparency of marijuana transactions.”  A copy of their letter is available here.

We are closely monitoring this area and will provide timely updates as to any developments.

Reuters is reporting today that the Treasury Department’s Financial Crimes Enforcement Network (FinCEN) was caught off guard by Attorney General Jeff Sessions’ announcement last week that the Justice Department was reversing its policy regarding enforcement of federal marijuana laws.  A FinCEN spokesman said in a statement that his agency’s prior pronouncement regarding marijuana banking nevertheless “remains in place,”  referring to guidance issued in February 2014 to clarify Bank Secrecy Act expectations for financial institutions seeking to provide services to marijuana-related businesses.  That guidance described how financial institutions could provide banking services to marijuana businesses consistent with their BSA obligations despite the fact that the manufacture, distribution, and dispensing of marijuana is illegal under federal law.  And as we recently reported, 400 banks and credit unions were actively serving the marijuana industry prior to the Attorney General’s announcement.

Reuters reports that FinCEN received no advance warning of the Attorney General’s announcement, according to sources, and a Justice Department spokesman declined to comment about whether his agency had coordinated with FinCEN prior to the announcement.  The Justice Department’s policy reversal has understandably sowed confusion among financial institutions as to whether they can continue to do business with marijuana businesses, and FinCEN’s confirmation that its 2014 guidance remains in place should provide some measure of comfort to affected banks and credit unions.

It is worth noting that FinCEN’s current director – Kenneth A. Blanco, who assumed the role just last month — spent the last 28 years of his career as a Justice Department prosecutor, most recently serving as Acting Assistant Attorney General of the Criminal Division.  During his tenure at the Justice Department, he was the chief of numerous sections, including the Money Laundering and Asset Recovery Section, the Narcotic and Dangerous Drug Section, and the Organized Crime and Gang Section, among others.  We have yet to see whether Mr. Blanco will implement major policy changes at FinCEN, and whether his agency maintains its marijuana banking stance, or aligns with his former agency’s policy shift, may well be one of the first major policy decisions he has to confront.

As part of his recent guidance regarding federal Marijuana Enforcement, U.S. Attorney General Jeff Sessions indicated he would place more discretion in the hands of individual federal prosecutors in enforcing the Controlled Substances Act. As we noted in our initial analysis of this decision, businesses would be wise to gain an understanding of the serving U.S. Attorney in their federal district, and whether he or she has made any statements regarding their position on medical or recreational cannabis.

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

While some in the industry are still reeling from the announcement, statements by U.S. Attorneys have given some comfort to licensed business in states where cannabis is legal. The Huffington Post has a good rundown of many such statements, including from federal prosecutors in Alaska, California, Colorado, Maine, Massachusetts, Oregon, and Washington. (Marijuana Industry Not Freaking Out Over Threat Of Federal Crackdown, via Huffington Post).

PennLive also posted a piece highlighting the reactions of several Pennsylvania politicians to the announcement and its effect on the Commonwealth’s Medical Marijuana Program, including that of David Freed, U.S. Attorney for the Middle District of Pennsylvania. Freed stated:

“Having been involved as a state prosecutor in the drafting of that legislation, I believe that there are sufficient safeguards in the law to ensure that the products will be used as intended under the supervision of medical professionals…While I cannot state that there will never be an issue in this area meriting federal involvement, my office has no intention of disrupting Pennsylvania’s medical marijuana program or related financial transactions.”

(While feds say states can’t legalize marijuana anymore, Pa. will leave medical pot alone, via PennLive)

While it is yet unclear how the announcement of Attorney General Sessions, or individual statements referenced above, will affect any future enforcement actions, business should cautiously continue business as usual while always ensuring that all operations remain strictly compliant with the law of your state.


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.

Last Thursday, Attorney General Jeff Sessions issued a policy Memo regarding Marijuana Enforcement that effectively rescinded the 2013 “Cole Memo” guidance, which endorsed a more “hands off” approach in states where marijuana had been legalized. The January 4, 2018 Memo instructed that with regard to marijuana-related enforcement actions, federal prosecutors should “follow well-established principles that govern all federal prosecutions.”

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

This announcement has important implications for licensed cannabis businesses across the country, and attorneys from Fox Rothschild’s Cannabis Practice Group were among the first to provide legal and practical advice for those in the industry. Links to selected publications and interviews can be found below:

AG Sessions Issues Cannabis Policy Reversal. What Does It Mean for the Industry?

First Lawyer Comments Come Through on Sessions Decision To Rescind Cole Memo (via Cannabis Law Report)

Cannabis Law Practices Brace for Impact of Sessions Memo (via Law.com)

Sessions takes aim on marijuana enforcement (via NJBIZ.com)

Bethlehem company gets green light to dispense medical marijuana (via Allentown Morning Call)

 

The Treasury Department’s Financial Crimes Enforcement Network (FinCEN) has released updated statistics showing a steady increase in the number of depository institutions that actively bank U.S. marijuana businesses. As of September 30, 2017, a total of 400 banks and credit unions provided services to marijuana-related businesses, up from 334 as of December 31, 2016. 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.

As of September 30, 2017, FinCEN has received more than 39,000 SARs involving marijuana-related businesses since issuance of the February 2014 guidance. The vast majority of those SARs – nearly 29,000 – were “Marijuana Limited” filings, indicating that the financial institution was providing ongoing banking services to the marijuana business in question. FinCEN has received approximately 2,800 “Marijuana Priority” SARs, and just over 9,400 “Marijuana Termination” SARs, during the same time period.

An analysis of FinCEN’s SAR filing data shows a positive and encouraging trend for marijuana businesses, which have typically struggled to find financial institutions willing to provide banking services. For the first three quarters of 2017, the number of “Marijuana Limited” SAR filings increased every month by an average of 1,258 filings. In comparison, the number of “Marijuana Priority” and “Marijuana Termination” SAR filings increased by an average of only 332 and 118, respectively.

Las Vegas Strip, Las Vegas, Nevada

Approximately 43 million tourists visit Las Vegas annually, and of those tourists, some undoubtedly consume marijuana during their visits.

There is just one major issue: There is no place for the tourists to consume it. Pursuant to Nevada recreational use regulations, consumption is to be done privately, not publicly. Recreational use in gaming establishments, hotels, or concerts is strictly prohibited.

However, the City Council of Las Vegas has drafted a proposed ordinance to permit the operation of marijuana consumption lounges. Here are several key takeaways from the proposed ordinance:

  • Employees are prohibited from consuming marijuana in the establishment during business hours
  • Employees of the marijuana consumption lounge must be at least 21 years of age
  • Visitors of the marijuana consumption lounge must be at least 21 years of age
  • The establishment must be appropriately concealed as to not allow viewing by the general public
  • The establishment may obtain a nightclub license for live entertainment to be performed on the premises
  • The licensee must obtain a special use permit for the establishment to operate specific commercial, industrial, or hybrid commercial/industrial zoning districts.

The proposed regulation could take effect by March or April of 2018. Sooner rather than later, tourists and residents may be able to enjoy the consumption of marijuana in a more social setting. If the proposed ordinance passes, Las Vegas may experience an increase in annual tourists as a result.

On January 21, 2017, the Massachusetts Cannabis Control Commission announced that it had approved the first draft of Regulations which will govern the state’s recreational cannabis program, referred to as the “Adult Use of Marijuana Industry.”

Cannabis
Copyright: epicstockmedia / 123RF Stock Photo

These draft Regulations propose 8 different license categories (including Cultivator, Manufacturing, Retail, and Research), establish a robust application process, and set forth detailed requirements for the operation of each type of cannabis-related business. The Regulations can be viewed here.

The Cannabis Control Commission is the regulatory body tasked with implementing and administering Massachusetts’ medical and recreational cannabis programs. In November 2016, the voters of Massachusetts voted 53-46 in favor of a ballot initiative proposing to legalize cannabis for recreational use. Since that time, the five-member Commission has worked to craft Regulations and has sought input from members of the public and the Massachusetts Cannabis Advisory Board through public meeting and forums.

The Commission plans to hold public hearings on the draft Regulations in February and to issue final Regulations by March 15, 2018.

As I’ve posted before, here and here, Florida has struggled with its roll out of Amendment Two (medical marijuana) with delays in issuing licenses, processing patient i.d. cards, etc.

Now comes news that Tetra Health Company, a California based company which quickly opened several medical marijuana clinics in Florida, is now, just a few months later, closing up most of their Florida locations.  Tetra is not affiliated with a state licensed Medical Marijuana Treatment Center (Florida has a vertical integrated license structure which means licensed Medical Marijuana Treatment Centers grow, distribute and sell medical marijuana) but instead has a business model that provides medical marijuana certification doctors that guide patients through the Florida state registration process.  Once the patients receive their i.d. cards from the State of Florida they can go to any medical marijuana dispensary.

Tetra’s Tampa, Florida location will remain open.


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.

After California voted in favor of allowing the recreational use of marijuana, the entrepreneurial bug bit many California residents. Consequently, three licensing agencies were tasked with creating emergency cannabis regulations prior to the issuance of any commercial cannabis licenses.

Sunset at Manhattan Beach and Pier in Southern California, Los Angeles.The Bureau of Cannabis Control (BCC) licenses microbusinesses, distributors, testing laboratories, and retailers. The California Department of Public Health’s “Manufactured Cannabis Safety Branch” licenses the manufacture of cannabis edibles. The California Department of Food and Agriculture (CDFA) licenses cannabis cultivators and has been tasked with implementing a statewide track-and-trace system to account for the distribution of cannabis from the point of seed-to-sale.

On December 15, 2017, the BCC issued its first twenty commercial cannabis temporary licenses. The temporary licenses are valid for 120 days. Temporary licenses may be extended for additional 90-day periods; provided, however that an application for permanent licensure has been filed and is pending with the appropriate licensing agency. The process of obtaining a cannabis license is robust because of dual-licensing requirements – attaining city and or county approval is one of the conditions to obtaining licensing approval by the state.

Additionally, on December 18, 2017, the CDFA opened its portal to begin accepting applications for cultivation licenses.

The licensing agencies are ramping up for distribution of more licenses post January 1, 2018 when recreational use of marijuana takes effect.