What’s Happening: Industry Developments

National & International News Developments

By Roger Fillion

Judge Throws Out National Cannabis Legalization Lawsuit

A lawsuit against the federal government on which several cannabis legalization advocates had pinned their hopes has officially lost – at least its first legal battle, anyway.

Judge Alvin Hellerstein, of the U.S. District Court for the Southern District of New York, ruled that the plaintiffs “failed to exhaust their administrative remedies” and granted a motion by the U.S. Justice Department to dismiss the case.

The suit argued that the Controlled Substances Act of 1970 is unconstitutional and asked that marijuana be removed from the schedule of controlled narcotics. A victory would have effectively legalized marijuana on a national level by “de-scheduling” the plant.

New Rules Open Door to Fresh Funding, M&A for Canadian Cannabis Companies in US

The flow of financing and acquisitions involving cross-border marijuana companies is expected to pick up after new risk-disclosure rules were unveiled that provide greater clarity for Canadian companies with U.S. operations, said analysts and executives.

The updated requirements from the Canadian Securities Administrators were anticipated after the regulatory group said in January it would review whether its disclosure-based guidelines were appropriate following U.S. Attorney General Jeff Sessions’ decision to revoke the Cole Memo, a key marijuana safeguard.

The CSA’s new rules more or less allow companies to continue operating as they had been, but with stricter disclosure standards.

US Senator Gives Ground in Fight Over Sessions Memo, Marijuana Policy

Colorado’s junior senator, Republican Cory Gardner, blinked first in a standoff with U.S. Attorney General Jeff Sessions.

Gardner said he will stop blocking appointees from the Department of Justice in retaliation for Sessions’ revocation last month of several nonbinding cannabis-related policy memos. But according to a press release from Gardner’s office, the senator will continue to block other DOJ nominees “as discussions continue.”

After the Sessions Memo roiled the MJ industry, Gardner delayed confirmation votes on more than two dozen appointees for posts as U.S. marshals and U.S. attorneys. Gardner’s press secretary, Casey Contres, said in mid-February three nominees were still being blocked, and that number would likely increase as more appointments are made by Sessions.

State News Developments

Alaska

Police in Juneau have changed their policy on the transportation of legal cannabis, saying they’ll allow licensed marijuana businesses to take cannabis on commercial flights within the state. Police Chief Ed Mercer wrote in a letter to Alaska’s U.S. attorney general and the local Transportation Security Administration office that marijuana businesses with “proper documentation” will be allowed to transport cannabis via air across the state. The move could help local cannabis entrepreneurs conduct business in areas accessible only by plane.

Arkansas

Regulators announced the five companies the state intends to license to grow medical marijuana under a voter-approved amendment that legalized MMJ for certain patients. The growers approved by the Medical Marijuana Commission will provide cannabis for the 32 MMJ dispensaries the state will license. The five are: Natural State Medicinals Cultivation, Jefferson County; Bold Team, Woodruff County; Natural State Wellness Enterprises, Jefferson County or Jackson County; Osage Creek Cultivation, Carroll County; and Delta Medical Cannabis Company, Jackson County.

California

More than a month after California launched recreational marijuana sales, less than 1% of the state’s known growers were licensed, a trade group said. According to a 38-page report from the California Growers Association, 0.78%, or 534, of an estimated 68,150 marijuana growers were licensed by the state as of Feb. 7. The association cited cost and regulatory barriers. If more of the state’s smaller, independent growers don’t get licensed, the black market will continue to flourish, according to the report.

Colorado

Despite falling marijuana prices, annual sales in one of America’s oldest regulated recreational cannabis markets have yet to plateau and instead continued to break records last year. Colorado’s marijuana stores rang up a record $1.5 billion in sales of medical and recreational cannabis, edibles and concentrate products in 2017, according to data released by the state. That’s up 15% from 2016, when retailers sold $1.3 billion, which was the previous record. In 2015, the state registered $996 million in sales.

Illinois

The Illinois Department of Public Health appealed a decision to add severe pain as a qualifying condition for medical marijuana in a case that could greatly expand access to the drug in the state. The appeal came after a Cook County judge ordered the health department to add “intractable pain,” or severe and constant pain with no cure, to the state’s list of more than 40 qualifying medical conditions. The ruling stems from a lawsuit filed by a 58-year-old woman who petitioned the agency to add the condition.

Louisiana

The first medical cannabis sale in the state could take place by the end of summer. That’s the proposed timeline for the opening of an MMJ pharmacy in the southern state, about two years after Gov. John Bel Edwards signed into law a new but very restrictive medical cannabis program. The pharmacy, Rx Greenhouse, obtained preliminary approval from the state and aims to be operational by Sept. 1. Rx Greenhouse was chosen from a pool of eight applicants to run an MMJ pharmacy in the New Orleans area.

Maine

Following the lead of a key legislative committee, Gov. Paul LePage halted implementation of new regulations for the state’s medical marijuana market. The rules would have gone into effect Feb. 1, but LePage delayed them until May so the Health and Human Services Committee can draft a new law implementing the changes. The new rules would have been directed at caregivers, allowing for surprise inspections and closing a regulatory loophole under which cannabis processors have made and sold infused products.

Maryland

A lawsuit that might have been disastrous for the state’s medical marijuana industry ended. The suit, filed by Alternative Medicine Maryland, was settled after 16 months, removing a case that aimed to scuttle existing MMJ cultivation licenses and begin the application process once again. The MMJ company, which was denied a cultivation license, sued the state in 2016, arguing Maryland regulators illegally disregarded racial diversity when selecting growers. African-Americans do not run any of the 15 cultivators that have received licenses.

Massachusetts

Regulators agreed to allow recreational marijuana shops to open in July, as scheduled, but also deferred licensing MJ delivery and onsite consumption businesses. Diversity proponents see the delay as a setback because delivery and onsite consumption businesses generally cost less to run and don’t require investor backing, which means such opportunities are more accessible to minorities who often don’t have the same capital or access to investors as do white entrepreneurs. Regulators voted to have regulations for delivery and onsite businesses ready within a year.

Michigan

Regulators released an official symbol to label medical marijuana products sold in the state and spelled out required label information. The symbol is an upside-down green triangle with an image of a green marijuana leaf in the middle. The words “CONTAINS THC” sit atop the symbol. The Department of Licensing and Regulatory Affairs also released details on how to label MMJ products under the state’s Medical Marihuana Facilities Licensing Act, including: date of harvest, other identifying information and THC potency levels.

Montana

The owner of one of two dispensaries in Billings sued the city to allow him to continue to sell medical marijuana. Shawn Palmer, owner of Montana Organic Medical Supply, ran into problems when the city refused to renew his business license near the end of 2017. It then sent him an order to close. In September 2017, Billings’ other dispensary went to court over the city’s attempted prohibition of MMJ businesses and won a preliminary injunction to stay open until a district court ruling.

Nevada

Lawmakers approved permanent rules for the state’s adult-use cannabis industry. Nevada began recreational cannabis sales under emergency rules in July 2017 after voters approved adult-use marijuana in 2016. Producers without retail licenses were some of the loudest critics of the new rules. They hoped to see the rules changed so they would have an equal chance at securing licenses to open retail businesses. Without that ability, company owners believe they might go out of business.

New Jersey

A state assemblywoman wants to create a tax credit program for cannabis businesses in urban enterprise zones if the state legalizes recreational marijuana. Democrat Annette Quijano, chair of the Assembly Judiciary Committee, got the idea for such legislation from Nevada lawmakers while she was on a recent marijuana industry fact-finding trip. The bill would create a five-year pilot plan. It would allow a “qualifying business” in an urban enterprise zone to claim credits against either its gross income tax bill or credits against the company’s corporate business tax bill.

Ohio

Six companies that lost in November when Ohio awarded 24 medical marijuana cultivation permits filed suit against the state’s Department of Commerce over what they allege was a “flawed scoring process.” The companies asked a judge to prevent the state from granting 12 large-scale cultivation permits. CannAscend Ohio filed the suit and was joined by Appalachian Pharm Products, CannaMed Therapeutics, Palliatech Ohio, Schottenstein Aphria and Trillium Holdings. The filing followed public critiques from state Auditor Dave Yost, who has said the grow licensing process contained a “critical flaw.”

Oregon

An audit of the top marijuana regulatory agency found that the state’s marijuana tracking system lacked proper safeguards, making it easier for cannabis businesses to hide violations such as illegal sales. The findings came less than a week after Oregon’s top federal prosecutor said the state has a “formidable” problem with marijuana overproduction that winds up on the black market. The Secretary of State’s office said in September it planned to audit the Oregon Liquor Control Commission.

Pennsylvania

The first days of medical marijuana sales were limited by a lack of product variety, but overall, business owners called the launch a success. Beginning Feb. 15, six dispensaries began selling MMJ concentrates and oils. Two weeks after sales began, however, some dispensaries ran out of product because of limited supply and unexpected demand. That news coincided with an announcement that the state had approved two more dispensaries to open their doors.

Rhode Island

The push to legalize recreational marijuana hit a snag when a state commission delayed until next year issuing a recommendation that could have advanced the adult-use issue. The commission – a group of medical marijuana patients, clinicians and law enforcement officials that was formed in June – won’t release a recommendation on whether to legalize recreational cannabis in the state until 2019. A spokesman for the House speaker said that even though the commission delayed making a recommendation, adult-use legalization isn’t officially dead for the year.

Washington state

The state’s new seed-to-sale marijuana tracking system is up and running, but complications with the program spurred regulators to extend a traceability contingency plan through March. The state’s traceability contract with Florida-based BioTrackTHC ended last year, and regulators switched to Denver-based MJ Freeway’s Leaf Data Systems on Nov. 1, 2017. But Leaf Data wasn’t ready to go live at that point, so the state rolled out a contingency reporting plan that allowed licensees to manually upload traceability data.

Note: Entries sourced from Marijuana Business Daily and other international, national and local news outlets. These developments occurred before this magazine’s March publication deadline, so some situations may have changed.

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