Cannabis Industry Daily News

New Jersey recreational cannabis bill advances, but differences remain

Two key New Jersey legislative budget committees advanced a recreational cannabis implementation measure, but differences in the Assembly and Senate versions must be resolved before a full-floor vote.

New Jersey lawmakers are moving rapidly since residents overwhelmingly voted to legalize adult use on Election Day, setting into motion the formation of a billion-dollar market.

But the differences could delay passage. Lawmakers had hoped a bill would be passed next week and sent to Gov. Phil Murphy’s desk.

Lawmakers said they must get a measure signed before the constitutional amendment passed by voters takes effect Jan. 1.

Here are some of the key differences between the measures passed Thursday by the Assembly Appropriations Committee and the Senate Budget Committee, according to the Associated Press:

  • Cultivation licenses: The Senate version would eliminate caps, while the Assembly bill would set limits at 37, up from 28 in an earlier version. Regardless, experts are generally bullish on the grower opportunities in New Jersey.
  • Transition period: The Assembly bill would lengthen the transition to a full, recreational marijuana market from 18 months to two years.
  • The Senate measure seeks to allocate 70% of the sales tax revenue to community programs, according to NJ.com.

Lawmakers have agreed to add a small, one-third of a 1% tax on top of the state’s 6.625% sales tax, according to the Associated Press.

The Cannabis Regulatory Commission also could implement an optional additional excise tax on growers to support social equity programs aimed at narrowing racial disparities stemming from the war on drugs, according to media reports.

However, some social justice advocates say the excise tax should be required.

The original bill also called for the state regulatory cannabis commission to give licensing priority to businesses owned by minorities, women and disabled veterans.

Utah marijuana business licensing process biased, audit shows

A state investigation into the Utah agency that regulates the state’s medical marijuana program turned up problems with the process for selecting cannabis growers.

According to The Salt Lake Tribune, a report by the Office of the State Auditor took issue with how the Utah Department of Agriculture and Food handed out eight cultivation licenses last year and recommends the state reevaluate the permits.

Former Commissioner Kerry Gibson is at the heart of the investigation after having chosen six members for the evaluation committee that selected the eight license winners.

The audit found two of the members selected by Gibson scored the roughly 80 applications in close fashion, ranking the top seven applicants in similar order, the Tribune reported.

According to the audit, the likelihood of that happening by accident is less than 5%, raising the possibility that Gibson’s choices were working together.

After the initial application evaluations, the audit found, the other committee members’ scores were adjusted to reflect the tallies of the two aforementioned members.

Three of the winning cultivators wouldn’t have succeeded without those adjustments, according to the report.

CBD not a narcotic, EU court says, potentially opening new market

(A version of this story first appeared at Hemp Industry Daily.)

The European Union’s top court ruled that CBD derived from the entire industrial hemp plant is not a narcotic, paving the way for new business opportunities for low-THC marijuana producers to sell outside the highly regulated pharmaceutical channels in Europe.

The ruling, handed down Thursday by five judges at the EU Court of Justice in Luxembourg, included a landmark interpretation of the 1961 U.N. Single Convention on Narcotic Drugs that cited “the purpose and general spirit” of the treaty in excluding CBD from its jurisdiction.

The milestone ruling, which focuses on cannabidiol extracted from the entire plant, comes as the EU cannabis industry awaits the European Commission’s final decision on whether flower-derived CBD should be regulated as a narcotic.

The judges had been asked to weigh in on a yearslong dispute over the marketing of a CBD vape product in France, where the law prohibits the production or sale of CBD products derived from the hemp flower or entire cannabis plant.

The case centered on the Kanavape electronic cigarette, which contained CBD derived from the entire hemp plant and was lawfully made in the Czech Republic. The case was forwarded to the EU court to determine whether France’s CBD ban violated European Union law that protects the free movement of goods between member states.

The EU provision on the free movement of goods applied to the Kanavape product, the judges said, because the CBD it contained – “extracted from the cannabis sativa plant in its entirety and not solely from the seeds and leaves of that plant, to the exclusion of its flowering or fruiting tops” – is not a narcotic.

The judges acknowledged that CBD, as an extract of cannabis, could be considered a narcotic using a “literal interpretation” of the 1961 UN treaty.

The judges pointed to official U.N. commentary on the treaty, which showed that the definition of cannabis “is intrinsically linked to the state of scientific knowledge in terms of the harmfulness of cannabis-derived products to human health.”

“Since CBD does not contain a psychoactive ingredient in the current state of scientific knowledge … it would be contrary to the purpose and general spirit of the Single Convention to include it under the definition of ‘drugs’ within the meaning of that convention as a cannabis extract,” the judges wrote.

“The CBD at issue in the main proceedings is not a drug within the meaning of the Single Convention.”

– Monica Raymunt

Court rules in favor of California’s statewide cannabis delivery policy

A California judge threw out a legal challenge to a controversial policy enacted in 2018 by marijuana regulators that allows cannabis products to be delivered anywhere in the state, regardless of local bans on the industry.

In a ruling issued late Wednesday, Fresno County Superior Court Judge Rosemary McGuire sided with the California Bureau of Cannabis Control (BCC).

The agency set the statewide delivery policy more than two years ago, and 25 local governments decided to sue, arguing that the policy violated their right of home rule when it came to regulating marijuana businesses inside their borders.

“The regulation states what the BCC, for its purposes, permits,” McGuire wrote in her ruling.

“It commands or prohibits nothing of the cities, and therefore is not necessarily in conflict with (state law) … pursuant to which plaintiffs contend they retain authority to regulate and/or ban cannabis delivery within their jurisdictions.

“The court finds that this matter is not ripe for adjudication, and dismisses the action as to all plaintiffs.”

The ruling, which follows a Monday hearing, is certain to bring a giant sigh of relief from California marijuana businesses.

If the policy had been overturned, the delivery consumer base would have been greatly reduced because most of the state’s cities and counties still maintain bans on cannabis commerce.

Legal observers have said they expect the case to be appealed, likely all the way to the state Supreme Court.

An attorney for the plaintiffs did not immediately respond to a Marijuana Business Daily request for comment Thursday morning, and the BCC declined to comment.

– John Schroyer

New Jersey medical marijuana applicants seek to break legal impasse

Learn more about state programs at MJBizCon 2020.  

A group of unsuccessful medical marijuana license applicants is trying to compel New Jersey officials to settle a case that continues to stall program expansion in advance of an adult-use market in the state.

The seven applicants, who are doing battle in state courts over alleged licensing application system issues, recently sent a letter to the state attorney general urging the suit to be settled, according to Law360.com.

Their suggestion: The state agree to reevaluate their applications and grant licenses based on merit. It was unclear whether the state would go for that.

“With the prospect of millions of eligible customers being added as a result of adult use, the current lack of licenses and resulting monopoly means that prices for cannabis will skyrocket, the black market will remain robust, patients will not be able to receive critical medicine and the state will miss valuable tax revenue,” the letter noted, according to Law360.com.

Industry experts have expressed concern that New Jersey will find it difficult to transition quickly to adult use because of its limited MMJ program.

State regulators requested applications in 2019 for 24 new licenses for vertically integrated and stand-alone businesses, including cultivators and retailers.

But a court halted the review of those applications after a lawsuit alleged that the system had technical glitches.

Regulators said they investigated the issue and determined there was no problem with the system.

The plaintiffs countered that the investigation had flaws and was “self-serving.”

To date, New Jersey has issued only 12 vertically integrated medical marijuana licenses, and only nine are operational, according to the state’s website.

Two more lawsuits filed over L.A.’s social equity cannabis licensing

Get in-depth analysis from MJBizCon’s Passholder Days about how 2020 local elections in California might impact the marijuana industry as well as financial insights into recent hurdles affecting MJ operators in the state. It’s all available to you on demand. Access price increases $50 after Nov. 19.

Lawsuits filed by two former social equity applicants brings the total to at least six that have been lodged against Los Angeles regulators over the city’s social equity licensing for cannabis businesses.

The suits, filed by applicants Karla Benavides and Judith Contreras in Los Angeles County Superior Court, both name the same three defendants:

  • The city of Los Angeles.
  • The L.A. Department of Cannabis Regulation (DCR).
  • Accela, the software firm responsible for the program that ran the DCR’s license application system last September.

The parallel suits, filed Nov. 9, make the same claims: The plaintiffs were applicants who lost out on the opportunity for a marijuana retail permit last fall because of “general negligence” on the part of the city and Accela.

Specifically, the lawsuits claim that the two plaintiffs were unable to submit their applications at the required start time of 10 a.m. PT because of delays caused by the Accela-run software and, by extension, the DCR and the city.

Both plaintiffs allege they spent more than $25,000 renting retail space in the hopes of winning a permit and are suing to recoup those costs.

Other lawsuits L.A. faces over the licensing process include:

  1. One filed in April by Madison Shockley III and the Social Equity Owners and Workers Association, which was settled in July and resulted in an increase in the number of storefront permits, from 100 to 200.
  2. Another filed in September by three applicants from last fall, ARMLA One, ARMLA Two and Gompers SocEq, all requesting damages and that each be issued a permit.
  3. One filed in October by longtime marijuana delivery operator Zach Pitts and two trade groups – Southern California Coalition and California Cannabis Couriers Association – aiming to overturn a new ordinance that devotes all MJ delivery permits to social equity applicants until 2025.
  4. Another filed in late October by eight companies and individuals – led by Angel City Partners – who attempted to apply for retail permits in September 2019 but claim their applications were ignored by the DCR. The suit requests an emergency injunction to halt the licensing process and a do-over of the entire licensing process if their applications aren’t considered.

Marijuana MSO Curaleaf posts record revenues, discloses CEO change

Learn more about the state of the industry at MJBizCon 2020.

Marijuana multistate operator Curaleaf Holdings on Tuesday announced record quarterly sales and an impending CEO change to a consumer packaged goods veteran.

Joseph Bayern, who joined Massachusetts-based Curaleaf in December 2019, will replace Joseph Lusardi as the company’s CEO, effective Jan. 1, 2021.

Bayern previously served as president of Indus Holdings, a vertically integrated cannabis company in California, and has management and operations experience with Dr. Pepper Snapple Group and Cadbury.

Lusardi, who guided Curaleaf from a single medical cannabis dispensary in New Jersey to an MSO with operations in 23 states, will become the company’s executive vice chair of the board.

In a statement, Boris Jordan, Curaleaf’s executive chair and one of its prime financial backers, praised Lusardi’s “unique vision in growing Curaleaf to be (the) leading, vertically integrated, multistate cannabis company it is today.”

Jordan characterized Bayern as an “outstanding leader with a proven track record of success.”

Curaleaf became bigger in July when it completed its acquisition of Illinois-based Grassroots Cannabis.

The Wakefield, Massachusetts-based company posted total revenue of $182.4 million for the third quarter ended Sept. 30, nearly triple the $61.8 million in the same period of 2019.

Losses totaled $9.3 million in the quarter, compared with $6.8 million in the same period of 2019.

Curaleaf is well-positioned for new and potential adult-use markets, with operations in Arizona, New Jersey, New York and Pennsylvania among its 23-state footprint.

Curaleaf trades on the Canadian Securities Exchange under the ticker symbol CURA, and on the U.S. over-the-counter markets as CURLF.

Illinois cannabis industry seeks end to MMJ-recreational retail relocation rule

Learn more about state programs at MJBizCon 2020.  

Cannabis industry insiders in Illinois are calling on state lawmakers to allow certain existing medical marijuana dispensaries to relocate without losing the ability to add an adult-use sales license.

Under the current administration’s interpretation of Illinois’ marijuana law, relocation prevents medical cannabis dispensaries from also having a recreational license at the same site.

Former Illinois state senator Pam Althoff, who is now executive director of the Cannabis Business Association of Illinois, told the Chicago Sun-Times that resolving the issue should be a priority, and she pointed out a benefit to state and local governments.

“Allowing dual licensees to move will not only increase tax revenues for the state and local municipalities but will permit the industry to hire more people and allow communities to maintain local control as to where in their community they wish these new cannabis operators to operate,” Althoff told the newspaper.

Pro-legalization lawmakers asked Illinois Gov. J.B. Pritzker last August to reconsider the interpretation of the law.

A response letter from Pritzker, posted to Illinois political news website Capitol Fax, said the administration’s interpretation of the law was meant to “balance … early growth for existing medical dispensaries with our commitment to bringing in new applicants through the social equity program.”

Illinois state representative Kelly Cassidy, a sponsor of the legalization law and a signatory of the letter to Pritzker, told the Sun-Times that it will take time to resolve the issue and noted that legislators could address it before the next session begins in January.

New Mexico panel supports raising medical marijuana purchase limits

Learn more about state programs at MJBizCon 2020.  

New Mexico’s medical marijuana advisory board recommended that purchase limits be nearly doubled to 15 ounces over 90 days, a move that likely would boost sales in the fast-growing program.

The board on Monday also recommended expanding the list of qualifying conditions to include anxiety, attention deficit orders, Tourette’s syndrome and some substance-abuse disorders, according to the Associated Press.

Such an expansion also would bolster sales, but approval of that recommendation is seen as less likely.

Meanwhile, the CEO of New Mexico’s leading medical cannabis operator complained that the state still hasn’t adequately addressed supply and product pricing issues caused by an “archaic” plant limit.

The state health secretary will make the final decision on the advisory board’s recommendations. In the past, state health officials have been resistant to expanding qualifying conditions for medical cannabis.

The panel’s vote came after hearing complaints that New Mexico lags behind other states in providing patients with adequate access to medical cannabis.

Considering ways to expand and strengthen the state’s program comes at a time when state officials reported that 100,000-plus patients have qualified for the state’s MMJ program, a jump of nearly 30% in the past year.

That figure doesn’t include out-of-state patients allowed to purchase in New Mexico.

Duke Rodriguez, the CEO of Ultra Health, the state’s largest MMJ operator, petitioned the board to recommend eliminating the plant limit or at least allow licensed growers to cultivate more plants. He said that would resolve price and variety issues that are currently hurting the state’s program.

“It’s the same issue we’ve had over and over again,” Rodriguez said, according to the Associated Press. “If you want to give patients choice, if you want to provide patients access, if you want to do all the good things medical cannabis should do, you must recognize that the primary central problem to our entire model is the plant count.”

Judge hears arguments in California cannabis delivery case

Learn more about state programs at MJBizCon 2020.  

A Fresno County Superior Court judge heard oral arguments Monday in a long-awaited case that could have major ramifications for California’s legal cannabis businesses.

At issue is a policy enacted by the state Bureau of Cannabis Control (BCC) in July 2018 that allows state-licensed marijuana delivery businesses to deliver MJ products anywhere they wish, regardless of city or county restrictions on commercial cannabis operations.

Many licensed delivery companies say the policy has been key to their success to date, so if the policy were overturned, it would greatly reduce the legal consumer base.

In April 2019, 25 local governments filed suit against the BCC, arguing that the policy violates state laws that guarantee cities and counties the right to prohibit marijuana commerce within their boundaries.

The case went before Judge Rosemary McGuire on Monday, with Deputy Attorney General Ethan Turner representing the BCC and Steven Churchwell and J. Scott Miller representing the local government plaintiffs.

Churchwell and Miller told the judge that the BCC’s policy is incompatible with both Proposition 64 – the ballot measure that voters approved in 2016 to legalize adult-use marijuana – and state laws guaranteeing that cities and counties could regulate cannabis businesses as they see fit.

Miller argued that the BCC’s policy “directly conflicts with local autonomy” and also said that allowing marijuana deliveries anywhere in the state – regardless of local bans or other industry regulations – “usurps that authority.”

“That’s why this case was brought … to challenge the BCC’s actions as overstepping its regulatory authority,” Miller added. “The injuries here are not hypothetical.”

But Deputy AG Turner argued that the BCC’s policy is permissive and doesn’t restrict local governments from banning deliveries.

Rather, he said, the onus is on local governments to enforce their regulations, whether those are bans on deliveries being conducted in a city from outside the jurisdiction or some other type of industry rule.

“The argument appears to be that the harm is that local jurisdictions have to enforce their own laws. I mean, that’s not harm. That’s not an injury. There’s no injury here,” Turner said.

He also argued that the Legislature repealed a prior prohibition on deliveries into jurisdictions with MJ bans when it merged the regulations for medical marijuana businesses and recreational cannabis companies in 2017 and created the Medical and Adult Use Cannabis Regulation and Safety Act (MAUCRSA).

So, Turner argued, the BCC was acting in line with what both voters and lawmakers intended.

But Churchwell called that argument “revisionist history.”

Judge McGuire chose not to rule immediately on Monday, taking the arguments under advisement. A ruling could take days, weeks or even months, but any decision is almost certain to be appealed by the losing side.

Legal observers expect the case to go all the way to the state Supreme Court, meaning a resolution could be several years away.

– John Schroyer

Investors awarded restitution of $2.5M in Colorado marijuana fraud case

Learn more about state programs at MJBizCon 2020.  

Four investors who were defrauded by an illicit marijuana scheme in which a Colorado businessman illegally distributed MJ into various states have been awarded a total of $2.5 million in restitution by a district court judge.

According to a news release from Colorado’s 18th Judicial District Attorney in suburban Denver, the restitution was ordered after businessman Scott Pack was found guilty of racketeering, securities fraud, and other crimes after a three-year criminal case. In July, Pack was sentenced to 12 years in prison.

Judge Michael Spear ordered restitution in the amounts of:

  • $199,935 to Christof Raygot.
  • $299,935 to Pierre Raygot.
  • $950,000 to Kyle Kolb.
  • $1,050,000 to James Hay-Arthur.

Before Pack was indicted in 2017, he ran a Colorado-licensed cover business called Harmony & Green, which prosecutors said was used to illegally distribute marijuana in at least five states but never paid state taxes or recorded any legal sales.

Pack “scammed investors out of millions of dollars” to fund the operation, according to the news release.

Michigan cannabis firm to expand footprint to four states after $45M raise

Learn more about state programs at MJBizCon 2020.  

C3 Industries, a vertically integrated multistate cannabis company based in Ann Arbor, Michigan, closed a funding round that will help the company launch operations in Massachusetts and Missouri.

The firm announced it has raised $45 million in total capital with the closing of the funding round, which will also help with expansion plans in Oregon and Michigan. 

In Massachusetts, C3 is building a 37,000-square-foot cultivation and manufacturing facility and plans to open a retail store in Berlin next year. The company has secured two other retail locations in Massachusetts.

In Missouri, C3 was awarded six licenses, including five retail locations and one manufacturing license. Construction on the full set of properties covered by the licenses will start by the end of the year, with operations slated to begin in the first half of 2021.

In Oregon, C3 has begun construction on an extraction and distillation lab. The company also recently acquired an existing Portland-area store and plans to reopen it in January 2021.

In Michigan, C3 plans to begin construction this winter on an additional 70,000-square-foot cultivation center adjacent to its Webberville facility.

As C3 expands its physical footprint, it also is bolstering its leadership team with the recent hire of Samip Shah as chief operating officer.

Shah formerly served as CEO of Ontario, Canada-based Clear Medical Imaging, where he was responsible for the overall management and growth of a network of retail health centers across the southwest portion of the province.