Week in Review: CDC Weighs in on Edibles, High-Profile CA Raid + More Lawsuits on Horizon

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By John Schroyer and Tony C. Dreibus

The Center for Disease Control issues what could prove to be an influential statement on marijuana edibles, a business run by a board member of California’s main cannabis industry association is raided, and lawsuit activity ramps up.

Here’s a closer look at several notable developments in the marijuana industry over the past week.

CDC Weighs In

Another federal agency is wading into the ongoing debate over cannabis industry regulations: the U.S. Center for Disease Control. And with that entrance comes another likely indicator of how future states will regulate edibles companies when it comes to labeling and dosages.

In a statement released this week, the CDC broke down the factors that led to the death of an exchange student who visited Colorado from Wyoming last March, consumed a cookie with 65 milligrams of THC, and subsequently jumped off a hotel balcony to his death.

The CDC didn’t assign blame to anyone in the incident. But it did conclude that the occurrence warrants consideration by regulators in states where marijuana may be made legal in the future, which could lead to the replication of rules that Colorado adopted after the man’s death. It also suggested that edibles companies should be required to pay for more precise warning labels on their products.

The agency lauded Colorado for passing a requirement that edibles products either contain only 10 milligrams apiece, or be clearly labeled with 10 milligram servings.

That position, said two industry consultants, will almost certainly play a role in future laws governing the marijuana trade.

“I would say definitely,” said Matt Karnes, managing partner at GreenWave Advisors. “Regulators are going to look to Colorado as the bellwether, and it’s not just in this regard with edibles, but also with everything else. That would expand to lab testing and what Colorado’s doing on every other type of regulatory oversight.”

Sara Gullickson, a consultant with MariMed Advisors, said proper dosing should be a concern for all edibles companies, whether they’re producing for medical customers or recreational.

“Even good news or bad news is progression. The more people we can have looking at this, then the more quality control we can get for the products,” Gullickson said. “The way that we’re going is everything is getting stricter, and it is an issue that edibles aren’t dosed properly.”

California Raiding

One way in which the cannabis industry is unique: Law enforcement actions against a company often don’t indicate a death knell for the business.

That very well may be the case for Lakisha Jenkins, a board member and former president of the California Cannabis Industry Association (CCIA) who owns three stores, one of which was raided by city police in Merced late last week. The cops claimed that the shop, Kiona’s Farm’acy, was violating a local ban on MMJ dispensaries.

It’s not a dispensary, Jenkins said, but a holistic health center that sells more than 500 herbs, teas and other treatments, along with cannabis. The State Board of Equalization reportedly contacted police on suspicion that Jenkins evaded taxes, a charge she denies, saying the business is exempt from state and federal taxes because it operates as a non-profit.

While a raid in another industry would likely spell doom for a company, many dispensaries and MMJ businesses that have been targeted by law enforcement in this manner eventually reopened, and often charges are not even filed. So Jenkins’ professional reputation might not be in any real danger.

“Some of the biggest, most notable people, from (Harborside Health Center co-founder) Steve DeAngelo on down, have had run-ins, if not arrests or convictions, with the authorities,” said James Slatic, another CCIA board member and the CEO of MedWest, a San Diego extraction company. “It’s like that line from The Godfather, ‘This is the business we have chosen.’ It comes with the slings and arrows with the lack of banking and 280E and everything else.”

Slatic noted that major dispensaries such as Berkeley Patients Group and Harborside have been fighting court battles for years.

Legal disputes between dispensaries and police will persist until California lawmakers pass definitive laws governing the MMJ industry, Jenkins said. Her business operates well within the bounds of state and local laws and should be considered a model for other California companies that sell medical cannabis rather than a public nuisance, she said.

“California needs to get its house in order,” she told Marijuana Business Daily. “Our particular business model is built off the attorney general’s guidelines, and we have an optimal business model according to these guidelines.”

California lawmakers are again trying to craft laws governing the state’s medical marijuana industry. Still, California has tried time and again to pass a regulatory framework for the industry, but has failed year after year. Which means raids like these may not stop any time soon.

So Sue Me

With great success comes…a host of lawsuits?

That’s increasingly the case in states that implement medical marijuana programs these days, with more companies filing – or threatening to file – suit over the application process.

That’s been the case in Massachusetts, Illinois and Nevada, where multiple suits were filed after license winners were announced. Some companies argued that the licensing process was corrupt or unfair, or that their applications weren’t properly considered, and so on.

Even in Florida, which hasn’t even legalized a full regular MMJ system, there seem to be indicators that legal action may be forthcoming once the state announces the winners of its five CBD licenses.

Observers expect the same outcome in New York, which is expected to announce its five licensees today.

And this week, a Nevada dispensary went on record saying that it’s considering filing suit against Clark County because regulators have allegedly been stalling its opening – highlighting the increasingly litigious nature of the industry in general.

There are some common threads in states that have seen these lawsuits: there are only a limited number of business permits available, there’s a good amount of competition for the licenses, and a lot of money is spent preparing in the application phase.

As the industry grows and starts to resemble traditional sectors, lawsuits will certainly become even more common.

John Schroyer can be reached at johns@mjbizmedia.com

Tony C. Dreibus can be reached at tonyd@mjbizmedia.com