Week in Review: San Diego cannabis lawyer off the hook, VT targets gifting & Sweet Leaf reprieve

Be at the forefront of cannabis and psychedelics science and innovation. Register today & Save $200 on tickets to The Emerald Conference by MJBiz Science, April 1-3 in San Diego.

(This story has been updated from an earlier version to reflect that Sweet Leaf’s marijuana licenses in three cities outside Denver were suspended Thursday.)

San Diego’s district attorney agrees to drop felony charges against a marijuana attorney, Vermont cracks down on “gifting” adult-use MJ, and Sweet Leaf wins a temporary reprieve from destroying $7.5 million worth of cannabis.

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

McElfresh case

California’s legal community elicited a collective sigh of relief after the San Diego district attorney’s office agreed to drop felony charges against Jessica McElfresh, a local marijuana industry attorney.

McElfresh was charged last year in connection with a case against one of her clients, the operator of a medical marijuana concentrate business in San Diego.

The DA’s decision to drop the case, however, doesn’t mean it’s the end of the story, two Golden State lawyers said.

“She was a victim of unfortunate circumstances that were beyond her control. If this starts to become a pattern, we need to band together and fight back, because every lawyer is in the same amount of jeopardy she was in this action,” said Henry Wykowski, a San Francisco lawyer, adding it’s “still an open question” as to whether other MJ lawyers could potentially face similar situations because of their ties to cannabis companies.

Lara DeCaro, another Bay Area attorney, said the McElfresh decision “will make some attorneys more comfortable with practicing in the cannabis space, but it is by no means a resolution.”

“We didn’t come away with a full exoneration or any real record that what Jessica was doing should not have subjected her to this ordeal,” DeCaro pointed out.

Furthermore, DeCaro noted, the state bar association “missed a golden opportunity to clarify the scope of representation for cannabis clients in its recent changes to our rules of professional conduct.”

Wykowski added that McElfresh’s case may not be considered a legal precedent that would offer protection for other attorneys working with marijuana businesses.

He also noted that “no other district attorney in the state has decided to go after attorneys in the industry.”

Giving up the goods

Vermont authorities are cracking down on the practice of “gifting” adult-use cannabis – essentially selling marijuana under the guise of giving it to a customer who purchases another item, such as a T-shirt.

As in other states like Maine, the issue often arises when regulators legalize the possession of recreational cannabis but drag their feet on licensing businesses to sell marijuana.

Until a legal market is up and running with licensed businesses, growers are motivated to find a way around the law. Allowing people to possess marijuana without having anywhere to purchase it creates these kinds of situations.

But that doesn’t mean such businesses can legally gift marijuana for profit, according to one industry analyst.

“This is very much a gray area at best,” said Kris Krane, president of 4Front Ventures. “It’s fairly transparent that this is meant to exploit a loophole and do something that’s really not within the intent of the law.”

He said it’s hard to say how many people may decide not to pay for a medical marijuana registration card because they know adult-use sales are coming.

Gifting has also become commonplace in Massachusetts, according to Krane.

If there were legal stores selling recreational marijuana in Maine, Massachusetts and Vermont, Krane said, it would be possible to argue that more people would buy from licensed retailers rather than secure supplies via gifting.

But those licensed markets haven’t developed, and in the case of Maine and Massachusetts, it’s been almost two years since voters approved the sale of adult-use cannabis.

If anything, Krane noted, gifting should motivate regulators to get legal sales up and running ASAP.

“There really isn’t a solution without an actual legal market,” he said.

On the block

Sweet Leaf is fighting Denver’s decision to revoke its 26 marijuana licenses in the city, but two of the company’s former locations already are up for sale or lease by their California owners.

Sweet Leaf, which maintains its innocence, won a legal reprieve from a city order to destroy its marijuana product while the company prepares to appeal the case in Denver District Court.

The vertically integrated MJ business said it has at least $7.5 million worth of inventory targeted for destruction, including product from its stores, cultivation facilities and a marijuana-infused manufacturing plant.

Sweet Leaf or its principals are listed as owners of eight of 13 buildings in Denver subject to the enforcement action, according to city property tax records and business filings with the Colorado Secretary of State.

Five buildings are owned by other individuals or entities, and at least two are up for sale or lease:

  • A Sweet Leaf retail store at 4400 E. Evans Ave. The property owner is listed as Evans Interplaza of Westlake Village, California.
  • A 60,000-square-foot warehouse at 1475 S. Acoma St. is owned by a private group of investors and Boychik of Oak Park, California.

Lee & Associates, a commercial real estate brokerage firm, is handling the listings.

Jeffrey Hallberg, a principal in the brokerage’s Denver office, gave a simple explanation for why the properties are up for sale or lease: The buildings don’t have a tenant.

“They’re done,” Hallberg said of Sweet Leaf, referring to the fact the company hasn’t been allowed to operate in the city since being accused of illegal sales practices in December.

Meanwhile, the Colorado Marijuana Enforcement Division on Thursday suspended the licenses of three Sweet Leaf stores in Denver suburbs for undisclosed violations. The stores have been closed while the state continues to investigate.

Sweet Leaf, which still has a location open in Portland, Oregon, didn’t respond to Marijuana Business Daily requests for comment.

John Schroyer can be reached at johns@mjbizdaily.com

Bart Schaneman can be reached at barts@mjbizdaily.com

Jeff Smith can be reached at jeffs@mjbizdaily.com