In this week’s edition:

• Biden Has ‘Always Supported The Legalization Of Marijuana For Medical Purposes,’ White House Says
• Senate Banking Committee Chairman Predicts “Imminent” Bipartisan Agreement on SAFE Banking Bill
• US District Court Enjoins Arkansas From Enforcing Ban on THC Isomer Hemp Products
• California Bill Legalizing Amsterdam-style “Cannabis Cafes” Awaits Governor’s Signature
• Cresco Labs Launches Spotify Ad Campaign
• Study Finds "Striking Contrast" in Safety Between Legal and Illegal Cannabis Products

Federal

Biden Has ‘Always Supported The Legalization Of Marijuana For Medical Purposes,’ White House Says - During a White House briefing that took place shortly after the Food and Drug Administration (FDA) recommended placement of cannabis on schedule III of the Controlled Substances Act (CSA), Press Secretary Karine Jean-Pierre stated that President Joe Biden has been “very clear” that he’s “always supported the legalization of marijuana for medical purposes.” Should the Drug Enforcement Administration (DEA) agree with the FDA to transfer cannabis to schedule III, the move would have significant implications for the state-legal cannabis market, including most prominently with regards to IRS code section 280E. Lesser known impacts include changes to US Postal Service rules on cannabis advertising and mailability as well as the federal drug-free workplace program. Meanwhile, with regard to the “letter” that the President was claimed to have sent to Secretary of Health and Human Services Xavier Becerra regarding rescheduling, it now turns out that DEA Administrator Anne Milgram “misspoke” when mentioning it during a House judiciary subcommittee hearing last July.

Senate Banking Committee Chairman Predicts “Imminent” Bipartisan Agreement on SAFE Banking Bill – Senators involved in negotiating the Secure and Fair Enforcement (SAFE) Banking Act have expressed growing optimism that Congress could vote on the bill soon. Indeed, with Sen. Steve Daines (R-MT), SAFE’s top Republican sponsor, acknowledging that “we’re moving in the right direction,” Sen. Sherrod Brown (D-OH) has stated that he intends to advance the bipartisan measure by October. Fellow leading proponent, Senate Majority Leader Chuck Schumer (D-NY), also wrote in a “Dear Colleague” letter that “safeguarding cannabis banking” is among the “critical issues” he wants to prioritize for the rest of this year. Meanwhile, in a public letter sent to Sen. Tommy Tuberville (R-AL), various lobbying groups argued, among other things, that the senator’s support for the SAFE Banking Act would “send a dangerous message to young people who look up to [him] as a role model.” According to the letter’s proponents, which included Smart Approaches to Marijuana Action, the bill would also allow “addiction-for profit corporations and Wall Street hedge funds to invest billions” in an industry “at odds with the goals of public health.” Sen. Tuberville has historically supported cannabis banking legislation though he has yet to officially co-sponsor the SAFE Banking bill.

New STATES Act Expected To Be Introduced – Rep. David Joyce (R-OH) has revealed that he intends to introduce a new version of the Strengthening the Tenth Amendment Through Entrusting States (STATES) Act in the upcoming weeks. Eric Berlin also heard this directly from Rep. Joyce this week. Originally introduced in the 115th Congress, in 2018, the Act would exempt from federal enforcement entities or persons who are in compliance with state, territory or tribal law regarding cannabis. 

State

AL – Earlier this month, the Alabama Medical Cannabis Commission (AMCC) formally voted to suspend the licensing award process again, in line with a local Montgomery County court order enjoining the process. The licensing process has been upended by constant litigation with the AMCC now nearing a potential third round of license awards following two court-ordered stays. The AMCC is presently in negotiations with the lawyers for the companies that have sued on how to proceed. The AMCC meets next on September 19.

CA – A proposed bill (AB 374) legalizing Amsterdam-style “cannabis cafes” is now before Gov. Gavin Newsom (D). If passed, the bipartisan supported bill would allow cannabis consumption lounges in the state to offer food and beverages as well as host live music events. The bill’s author, Assemblyman Matt Haney (D-SF), has stated that the bill should help struggling operators generate increased tax revenue for the state.

IL – Last week, Illinois hosted the two-day “Miracle in Mundelein festival” which was the first concert in the state to allow on-site cannabis consumption. The festival featured complimentary rolling papers, lighters and grinders, as well as dab bars and rolling stations for use by attendees. According to Gov. J.B. Pritzker (D), the cannabis industry has brought in almost $450 million to state and local governments since recreational cannabis was legalized in 2019.

LA – Republican state representative Richard Nelson, who is currently running for governor of Louisiana, has voiced his support for legalizing cannabis. Speaking at a Louisiana Travel Association conference in August, Nelson said legalizing adult use cannabis sales would benefit the state because it would attract more visitors, particularly if Louisiana were the only state in the region to do so, and create a new tax base for increased revenues.

MO – A Missouri judge denied Delta Extraction’s attempt to stop the recall of 62,000 products containing its THC concentrate, which the state deemed a “potential threat to health and safety.” The state suspended Delta Extraction’s cannabis manufacturing license in August after alleging that the company sourced untested cannabis or converted hemp from outside of a Missouri licensed cultivation facility. Cole County Circuit Judge Cotton Walker ruled that Delta Extraction did not have grounds to challenge the recall because it has not exhausted the administrative appeal process.

NC – On September 7th, Eastern Band of Cherokee tribal members voted to legalize adult use cannabis on their reservation. This comes after the tribe decriminalized possession of small amounts of cannabis and created a medical cannabis program that would make it the first and only place to legalize purchase cannabis in North Carolina. The Tribal Council has indicated support for drafting legislation to implement adult use sales, while U.S. representative Chuck Edwards (R - NC) has introduced what he calls the "Stop Pot Act." His bill would withhold ten percent of federal highway funds from any jurisdiction that legalizes to purchase or possession of adult use cannabis.

NY - This week, the New York State Cannabis Control Board voted to finalize the Office of Cannabis Management’s proposed regulations for adult-use cannabis. Among other things, the approval allows all comers, beginning October 4, 2023, to apply for cultivator, processor, distributor, microbusiness, and retail dispensary licenses. Medical operators will also be permitted to expand into the adult-use market. In addition, currently-operational Adult-Use Conditional Cultivators (AUCCs) and Conditional Processors (AUCPs) will also be able to apply for full, non-conditional licenses. Mired by lawsuits, the state has seen only 23 conditional retail licensees open, although the state awarded hundreds of such licenses after signing off on adult-use legalization in 2021.

NY – The New York Senate Cannabis Committee is set to hold its first public hearing next month. The committee, chaired by Sen. Jeremy Cooney (D-56th Sen. Dist.), aims to address the many challenges faced by the state's cannabis program, which has been slow to launch and characterized by the proliferation of illicit cannabis businesses and temporary halts in licensing due to lawsuits. The hearing is primarily meant to be part of a "fact-finding" process, but Cooney expects to identify specific public policy needs and legislation in the hearing process.

NJ – State regulators voted recently to relax regulatory limits on edibles. THC-infused beverages and brownies are soon expected to be available in dispensaries across the states. When recreational cannabis sales started in April 2022, the state only permitted the sale of non-perishable edibles, including lozenges and gummies.

OK – Over the past two years, the Oklahoma Bureau of Narcotics has shut down over 800 illegal cannabis farms under the state's medical cannabis law, leading to over 200 arrests and the seizure of nearly 7,000 pounds of cannabis. The agency's enforcement actions have reportedly been focused on "out-of-state" illegal operations allegedly linked to international crime networks, including Russia, Bulgaria, Armenia, and Serbia, that also harm legitimate medical cannabis businesses by driving prices down and leading to closures and bankruptcies.

Hemp

Study Finds Widespread Mislabeling Of Hemp-Derived THC Products – A recent study on the potency and safety of hemp-derived delta-9 THC products published in the Journal of Cannabis Research found that the majority of the products had inaccurate information about their potency and dosage on the label. The study included a selection of the most popular products found online from different brands. While 96.2 percent of products were under the legal delta-9 THC limit of 0.3 percent, 66.0 percent differed from their stated dosage by more than 10 percent. Although 84.9 percent provided a lab report to customers, 71.1 percent of these did not check for impurities.

US District Court Enjoins Arkansas From Enforcing Ban on THC Isomer Hemp Products – Last week, US District Judge Billy Wilson preliminarily enjoined the state from enforcing its recent statutory ban on THC isomer hemp products after four cannabis-related companies filed a lawsuit challenging the ban on US constitutional grounds. The at-issue law, Act 629, banning such products was signed by Gov. Sarah Huckabee Sanders (R) earlier this year. The ban’s enforcement will likely remain stayed until at least the bench trial, scheduled for Aug. 27, 2024.

Delta-8 Industry Participants Sues Indiana Attorney General on Opinion Criminalizing THC Hemp Isomers - Last month, delta-8 industry members filed suit in federal court challenging the state Attorney General’s Official Opinion 2023-1 purportedly reclassifying THC hemp extracts as schedule I controlled substances under state law. The industry suit follows growing local enforcement against delta-8 and other hemp-derived products in line with the opinion by Attorney General Todd Rokita (R).

Hearing Proceeds in Texas on Delta-8 – A Texas judge heard arguments on the state’s restrictions on delta-8 THC products. In 2021, the Texas Department of State Health Services categorized delta-8 as a Schedule I controlled substance. Currently, an injunction issued by the judge allows the sale of delta-8 products in the state while the legal challenge proceeds.

Virginia Businesses Face Fines under Hemp Law – Businesses selling hemp products in Virginia are beginning to face fines for noncompliance with the state’s new hemp law. The new law, which went into effect July 1, set the maximum amount of THC in hemp products at 0.3 percent concentration and two milligrams per package, making hundreds of products illegal and subject to fines if sold. Two hemp businesses and a private citizen have challenged the new law in federal court, arguing it causes financial harm to businesses and interferes with interstate commerce.

International

Bahamas Considers Cannabis Reform – Government officials from the Bahamas introduced several new bills aimed at legalizing cannabis for religious or medical use and decriminalizing the possession of up to 30 grams of cannabis. The proposal comes shortly after Antigua and Barbuda became the first Caribbean nation to permit Rastafari to cultivate and consume cannabis.

High Ranking Belgium Government Official Endorses Adult-Use Legalization – In a recent interview, Belgium’s Deputy Prime Minister and Minister of the Economy and Employment Pierre-Yves Dermagne supported reform to legalize adult-use cannabis. Minister Dermagne advocated for “end[ing] the hypocrisy,” reasoning that “[t]here is no point in using state resources to combat cannabis” when “there are types of crimes that are far more serious and have a far greater impact on societal life.”

Australia and Israel Top Markets for Canada Medical Cannabis Exports – New data from Health Canada shows that a vast majority of the country’s medical cannabis exports go to just three countries – Australia, Israel, and Germany. Of the country’s exports, almost 80 percent went to Australia and Israel in the last fiscal year, with an additional 16 percent to Germany. Exports increased by 48 percent from the last fiscal year, representing an increase in $118USD.

Business

Cannabis Stock Indices Discontinued – A spokesperson for S&P Dow Jones Indices confirmed that the S&P/TXS Canada Cannabis Index was decommissioned earlier this year, though no official reason was given for the discontinuation. The index – which was first launched in January 2020 – measured the performance of a basket of cannabis companies on two Canadian stock exchanges. A similar cannabis index, the S&P/MX International Cannabis Index, was decommissioned in November 2021.

Cresco Labs Launches Spotify Ad Campaign – Chicago-based multistate operator Cresco Labs is launching a new ad campaign on the Spotify audio streaming platform to promote its Illinois cannabis chain. The new campaign comes as other platforms, like Facebook and Twitter, have also slightly eased restrictions for cannabis and hemp advertising.

Green Thumb Industries to Repurchase Voting Shares – The Board of Directors of Green Thumb Industries – a Chicago-based multistate operator – authorized a share repurchase program that would allow the company to spend up to $50 million in the next year to repurchase up to 5% of its subordinate voting shares. According to the company’s announcement, the share buyback program “was in the works before last week’s announcement from the U.S. Department of Health and Human Services, which called for cannabis to be reclassified to Schedule III.”

U.S. Cannabis Companies Show Improved Profit Margins in Second Quarter – Second quarter financial statements reflect improved profit margins among U.S. cannabis companies. While these margins are largely due to enhanced cost management, several companies, including TerrAscend and Ascend Wellness Holdings, also experienced significant revenue growth from the second quarter of 2022.

Medical

Study Finds "Striking Contrast" in Safety Between Legal and Illegal Cannabis Products - A recent study highlights a significant safety gap between legal and illegal cannabis markets in Canada. The research reveals that 92 percent of unregulated cannabis samples tested positive for multiple pesticides, compared to just six percent of regulated products. The legal cannabis sector in Canada has made notable improvements in product safety, with mandatory testing reducing contamination rates from around 30 percent to just six percent, affirming the importance of regulating cannabis sales for consumer safety.

Study Finds Young MJ Consumers With Psychosis Risk Saw Symptom Improvement - A recent study focusing on teens and young adults at risk of psychotic disorders found that regular cannabis use over a two-year period did not lead to the early onset of symptoms associated with mental illness. Instead, the study saw modest cognitive improvements and reduced use of other medications among users. While not advocating for youth cannabis use or endorsing cannabis as a therapy for psychosis risk, the research contributes to the growing body of scientific literature on the relationship between cannabis and psychosis, countering arguments that high-THC cannabis triggers psychosis.

Study Finds Cannabis Users Have Elevated Levels of Heavy Metals in their Blood, Urine - A recent study conducted at Columbia University's Mailman School of Public Health has revealed that cannabis users have elevated levels of heavy metals in their blood and urine compared to non-users. The research, which analyzed data from over 7,200 participants, found that marijuana users had higher levels of lead in their blood and urine. The study's authors noted that because the cannabis plant can absorb metals from its environment, cannabis appears to be a source of cadmium and lead exposure, both of which can have serious health consequences, especially for children.

Dentons Speaks

Benzinga Webinar on Cannabis Rescheduling – On September 14, 2023, Dentons Partner and Co-Head of the Cannabis Practice, Eric Berlin, participated in a webinar with other industry leaders on the multifaceted implications of cannabis rescheduling.

The Dales Report – On September 11, 2023, Eric Berlin sat down for an interview with Shadd Dales, CEO and Founder of the Dales Report, for an in-depth discussion on cannabis rescheduling. 

Law360 quoted Chicago Cannabis partner Eric Berlin discussing the Department of Health and Human Services’ recommendation to move marijuana to the less restrictive Schedule III tier.

Law360 published an article by Chicago Cannabis partner Amy Rubenstein and Margo Smith on PFAS regulations.

Benzinga Chicago – the Dentons Cannabis Team will be at Benzinga Chicago and is available for meetings.

Please click here for more information on the Dentons US Cannabis group.

Authored by associates Malina Dumas, Lauren Estevez, Jacob Raver, and Margo Wilkinson Smith.