Cannabis: In Focus

  • SAFE Banking Updates
  • New Hampshire Senate Rejects Legalization Bill for Adult-Use Cannabis
  • Sixth Circuit Reverses Dismissal of Suit Brought by CBD Shop Owner
Continue Reading Cannabis Legal Report—Week of May 22, 2023

Cannabis: In Focus

  • SAFE Banking Gets a Senate Hearing
  • Representative Nancy Mace Is Promised a Hearing on her Descheduling Bill
  • CLAIM Act Reintroduced in Congress
  • Hawaii Federal Judge Says 11th Amendment Protects State’s Choice to Define Hemp
  • Maryland Governor Signs Cannabis Regulation Bill
Continue Reading Cannabis Legal Report—Week of May 8, 2023

Cannabis: In Focus

  • Tenth Circuit Upholds Licensing Agency’s Discretion When Awarding Cannabis-Related Licenses
  • Delaware Becomes Latest State To Legalize Recreational Cannabis
  • Cannabis Legislative Updates
Continue Reading Cannabis Legal Report—Week of April 24, 2023

Rep. Earl Blumenauer (D-OR) introduced the Small Business Tax Equity Act (H.R. 2643) on April 17, 2023, a bill that will allow cannabis businesses to obtain tax write-offs for ordinary business expenses.

Currently, cannabis businesses are not able to deduct business expenses under a provision of the tax code known as Section 280E, which prohibits such deductions for Schedule I or Schedule II controlled substances. The bill would amend Section 280E to allow ordinary business expenses to be deducted when the company’s business consists of sales of cannabis conducted in compliance with state law.

The proposed bill has bipartisan cosponsors including Reps. David Joyce (R-OH), Brian Mast (R-FL), Nancy Mace (R-SC), Barbara Lee (D-CA), and Danny Davis (D-IL). The bill has been referred to the House Committee on Ways and Means for further consideration.

Of course, the congressman’s bill would be moot if the President Biden’s administrative rescheduling process moves cannabis to Schedule III, IV, or V. Rescheduling to Schedule III, IV, or V would solve the 280E tax issue without the need for an additional legislative fix. Congressman Blumenauer has asked for more transparency around the president’s process.

Cannabis: In Focus

  • US Sentencing Commission Seeks Amendment To Allow for More Lenient Treatment for People With Prior Cannabis Convictions
  • Second Circuit Narrows TRO Affecting New York State Cannabis Retail Licensing
Continue Reading Cannabis Legal Report—Week of April 17, 2023

As a consequence of cannabis’ federal illegality, cannabis companies are generally locked out of the nation’s federal bankruptcy courts. Perkins Coie’s Cannabis industry group’s Tommy Tobin recently sat down with Billy Organek, a program fellow at the Harvard Law School Bankruptcy Project, to discuss the effects of current bankruptcy laws on cannabis companies in the United States.

Cannabis companies can run out of money, but they are generally unable to declare bankruptcy. While company leaders and investors still have options, these opportunities remain largely untested. Harvard’s Organek discussed several options, including:

  • State-level receiverships running a distressed cannabis company while winding down its affairs.
  • Out-of-court restructuring negotiations between the debtor and its creditors to attempt to reach resolution regarding amounts owed.
  • Foreclosures to allow those with security interests in property to enforce their rights to that property.

As with so many aspects of cannabis law, there are countervailing pressures and untested solutions to novel problems. Of course, having smart, appropriate contracting on the front end is vital when working with cannabis companies, including provisions that will help mitigate risk in the absence of federal bankruptcy protections.

Listen to “Distressed Cannabis Companies: Considering Options Amid Bankruptcy Limitations – Episode 20” on Spreaker.

Note that all episodes are available on Apple, Google, and Spotify.

Cannabis: In Focus

  • Two Bipartisan Bills Introduced to Regulate CBD
  • Congressional Letter Circulated Regarding Biden Administration’s Cannabis Scheduling Review
  • Alcohol Industry Group Issues Open Letter Supporting Cannabis Legalization
  • SEC Charges Cannabis Company With Securities Fraud
Continue Reading Cannabis Legal Report—Week of March 27, 2023

Cannabis: In Focus

  • Attorney General Garland Testifies Before Senate Judiciary Committee
  • Ninth Circuit Affirms Ruling that California County May Deny Licenses to Cultivate Cannabis
  • Oklahoma Recreational Cannabis Measure Fails
  • Medical Cannabis Patient Sues Arkansas Company for Inflating THC Levels
Continue Reading Cannabis Legal Report—Week of March 20, 2023

Our democracy is driven by both laws and fundamental freedoms. Americans expect governmental oversight that balances freedom of choice with protection of public health and safety. Sometimes these two imperatives that are emblematic of a free society do not align perfectly. In this op-ed published by Bloomberg Law, Perkins Coie Senior Counsel Andrew Kline and attorney Pamela Epstein of Terpene Belt call on Congress to modernize the 2023 Farm Bill to regulate all intoxicating cannabinoids and protect the safety of businesses and consumers.

To read the op-ed, please visit Bloomberg Law here.

Cannabis: In Focus

  • DEA Classifies Two Lab-Derived Cannabinoids as Schedule I
  • Washington Federal Judge Dismisses Suit Challenging Residency Requirements

DEA Classifies Two Lab-Derived Cannabinoids as Schedule I

The U.S. Drug Enforcement Administration (DEA) determined that two lab-derived cannabinoids— delta-8 THC acetate ester (delta-8 THCO) and delta-9 acetate ester (delta-9 THCO)—do not meet the federal definition of “hemp” and are therefore considered controlled substances.

Delta-8 THCO and delta-9 THCO do not naturally occur in the cannabis plant. The DEA issued its letter in response to an inquiry received from a North Carolina law firm.

Because the DEA considers delta-8 THCO and delta-9 THCO controlled substances, these substances are subject to the same federal controls applicable to marijuana, which is classified as a Schedule I substance.

The cannabis industry took note because there has been significant debate about the legality of delta-8 THC. This response solidifies that the DEA does not consider hemp-derived delta-8 THC to be a controlled substance. Of course, the U.S. Food and Drug Administration (FDA) has taken a different view when the popular, yet unregulated, cannabinoid has been added to a food or beverage.

Washington Federal Judge Dismisses Suit Challenging Residency Requirement

In an order dated February 7, 2023, a Seattle federal court dismissed a suit brought by an investor attempting to enter Washington state’s cannabis market. At issue was whether the state’s residency requirements for commercial cannabis licenses violated the U.S. Constitution. Specifically, the Dormant Commerce Clause (DCC) would ordinarily prohibit a state from placing undue burdens on out-of-state residents to favor in-state residents.

Judge Benjamin Settle ordered that the Washington residency requirements did not violate the DCC because the DCC protects a national market for goods, and there was no interstate commerce of cannabis, given its federal illegality. According to the court, even though a state may have legalized cannabis, it remains a Schedule I controlled substance at the federal level.

Last year, the U.S. Court of Appeals for the First Circuit came to the opposite conclusion. The appellate panel struck down residency requirements applicable in Maine that were similar to those applicable in Washington. The panel reasoned that Maine’s residency requirements violated the DCC and were therefore unconstitutional. Perkins Coie lawyers have written about this issue here and here. Watch this space for further developments.