Canna Law Blog ™

Canna Law Blog

LEGAL SUPPORT FOR THE CANNABIS BUSINESS COMMUNITY SINCE 2010

Marijuana Edibles: Bans, Halloween Concerns, and Common Sense Packaging and Labeling

Posted in Business Basics, Colorado, Legal Issues

Colorado has recently been getting media attention regarding a proposed ban on edibles and concern for kids being given “pot candy” for Halloween. The talk of a proposed ban on edibles in Colorado came after the Colorado Department of Revenue’s Marijuana Enforcement Division work group met last week to discuss House Bill 14-1366, which was introduced in April of this year. The subheading of this Bill is “Concerning Reasonable Restrictions on the Sale of Edible Retail Marijuana Products.” At their meeting, Jeff Lawrence of the Colorado Department of Public Health and Environment recommended that retail marijuana edibles be limited to lozenges and tinctures, eliminating the vast majority of edibles now available in Colorado. If signed into law, this Bill would take effect in 2016. Colorado already has new regulations slated to take effect in February of 2015 that will limit the dose of THC in edibles to 10 milligrams per serving and require child-resistant packaging for many products.

Colorado’s talk of eliminating most edibles came at about the same time as the release of a Denver Police Department video highlighting the need for parents to make sure that their children’s halloween candy does not contain cannabis. The Denver Police video and the overall fear of cannabis-tainted Halloween candy gained considerable media traction when The New York Times ran a article on the subject.

And who can forget Maureen Dowd’s New York Times piece on her experience eating too much cannabis?

We are not surprised by all the commotion regarding edibles as this is the first Halloween since recreational marijuana became legal in any US state, though we are skeptical regarding the Halloween candy risk. We are convinced, however, that there will be an overall tightening of regulations regarding cannabis candies and that we can expect to see a spate of product liability lawsuits stemming from edibles.

If you are involved with marijuana edibles, we advise that you act now to protect yourself and your customers by using effective and safe packaging and labeling. Your packaging should be child-safe and your labeling should clearly list ingredients are and serving sizes. For more on this, we urge you to check out the following:

Cannabis Legalization: Law Enforcement Who Favor It

Posted in Legal Issues, Oregon, Recreational Marijuana

Yesterday multiple law enforcement officers, including police officers, sheriffs, prosecutors, and judges, stated their personal and professional support for legalizing marijuana in Oregon. In a brief letter, they argued that prohibiting marijuana is too expensive for the taxpayer and wastes of community resources.

Their letter states that instead of wasting time, money, and resources, “police resources should be focused on violent criminals, thieves, and criminal cartels.” These law enforcement personnel cited to how legalization in Colorado and Washington had reduced marijuana use by teens, decreased traffic fatalities, and led to a decline in violent crime. If we legalize marijuana, law enforcement officers and judges can “direct their time towards serious crimes, in accordance with their communities’ wishes.” They went on to say that “treating marijuana as a crime has failed.” The current Seattle Police Chief and a former Colorado judge were among the signatories

Law enforcement officials are not the only government officials favoring Oregon’s legalization measure. Oregon’s governor, John Kitzhaberh, also supports Oregon Measure 91 for legalizing marijuana. In the state’s estimate of financial impact, the Oregon Liquor Control Commission (OLCC) wrote that the approximate revenue from cannabis taxes will range between $17 million and $40 million. This revenue will cover start-up costs incurred by the state and OLCC, with 10% remaining for cities’ law enforcement and an additional 10% to counties’ law enforcement.

These cops and judges and the governor want the Oregon legal system to focus on finding and prosecuting violent and dangerous criminals, and stop wasting time with recreational marijuana users.

That only makes sense. Don’t you agree?

Legal Cannabis Use Can Still Get You Fired

Posted in Business Basics, Legal Issues, Medical Cannabis

Where cannabis consumption is legal, employers can no longer drug test for THC, right? Wrong.

Even in states where medical or recreational marijuana is legal, employers are free to perform drug tests on their employees. They also are free to insist on a drug-free work place.

Recent court decisions in Washington, Oregon and California, among other states, have upheld the employer’s right to deny employment to cannabis users and to discipline or terminate employees for marijuana use, even if the employee is using medical marijuana under state law. Employers may not only test for impairment on the job; they also may test for marijuana use, even if that use occurred weeks prior and has zero impact on job performance.

After Washington legalized cannabis, the City of Seattle notified its workers that it would maintain a drug-free workplace. The city justified this stance by noting that it receives federal funding and under federal law, marijuana is still illegal. The city does not want to put its federal funding at risk. Many employers, particularly companies and governmental bodies in the public safety, transportation and manufacturing industries, are doing the same.

Even residual amounts of marijuana in your system can be grounds for job termination if your employer takes a hardline stance with its drug policy. If you consume marijuana in your home in accordance with state law, you can still be fired if your employer maintains a drug-free workplace. Take a look at your employer’s HR policies. If you plan to keep your job, marijuana consumption may not be an option.

Sorry.

NFL Eases Its Pot Rules, But Not Enough

Posted in Legal Issues

The National Football League recently went from 15 nanograms of carboxy THC per milliliter of urine to 35 nanograms as the amount that they will tolerate in one of its players. As USA Today commented: “That’s not science-speak for one free joint a week.” To put the NFL’s threshold in perspective, Major League Baseball tolerates 50 nanograms while the Olympics allows 150 nanograms.

The Executive Director of the National Organization for the Reform of Marijuana Laws (NORML), Allen St. Pierre, explained that the NFL’s policy increase is hardly measurable or effective as “we’re talking the difference between 15 parts per billion and 35 parts per billion.” St. Pierre further clarified that a cannabis user does not really start to receive “any margins of use unless you have a threshold of 50 [nanograms].”

The NFL’s previous threshold for marijuana was so low that secondhand smoke often caused a THC concentration to exceed its 15 nanograms limit. The current theory is that the NFL Management Council and the NFL Players Association increased the allowable concentration to 35 nanograms to prevent players from testing positive from secondhand smoke.

NFL players are tested for marijuana, opiates, amphetamines and other illegal drugs once a year. If a player tests positive, the league places them in an intervention program where they are tested more frequently and potentially face penalties, like suspension.

Though the NFL claims that substance abuse may diminish job performance and lead to “personal hardship,” cannabis has proven a different story than abuse of opiates and amphetamines. Cannabis relieves stress and helps players recover from their injuries faster. Former NFL player Ricky Williams, spoke of marijuana in the NFL and commented, “It was better for my body. It wasn’t necessarily better for my career.”

Why can’t cannabis be good for both?

Top Ten Misconceptions in the Marijuana Industry

Posted in Business Basics, Legal Issues

We previously listed out the top ten red flags in the marijuana industry. It’s now time to discuss the top ten myths in the marijuana industry. The below are the most common myths we have been hearing in multiple states regarding marijuana businesses:

1. The Cole memo from August 29, 2013 changed federal marijuana laws. False. Though helpful in showing states how they should be regulating marijuana within their borders, it does nothing to change or nullify federal marijuana laws. Marijuana is still federally illegal and the Cole memo has had no impact on that. For more on this, check out Marijuana and the New Attorney General: Why You Should Care.

2. My marijuana business can take regular business tax deductions. Not true. Since marijuana is a Schedule I controlled substance, marijuana businesses are illegal. This means that IRS code 280e allows marijuana businesses to deduct the costs of good sold, but that marijuana businesses are prohibited from deducting all other business expenses.

3. I can take my marijuana company public. This idea demonstrates ignorance of federal and state laws. Though there are some publicly traded “marijuana” companies, all of those companies provide either ancillary products or ancillary services. None of them cultivate, manufacture, and/or distribute marijuana. The Securities and Exchange Commission has made clear that businesses handling marijuana cannot go public. Most state laws also prohibit marijuana companies from going public.

4. Investors cannot be held criminally liable for investing in marijuana businesses. This one makes so little sense we are not even sure how it got started, but it is particularly prevalent (along with a whole host of other misconceptions) in Florida and Nevada. The federal Controlled Substances Act is vast, aggressive, and all-encompassing when it comes to those involved with illegal drugs, including marijuana. Under the federal Controlled Substances Act, investors can be arrested and prosecuted by the Department of Justice by virtue of their financial contribution to a marijuana business — in any state, whether regulated or not.

5. My marijuana business can locate anywhere, in any city or county, in a state that has marijuana laws on the books. False. Cities and counties have the power to regulate activities taking place within their jurisdiction unless their state has removed that power, which it seldom does. Marijuana businesses must comply with both state and local laws if they want to survive. For more on this, check out Cities and Counties Banning Cannabis: Why Not Let The People Decide?

6. Marijuana businesses cannot obtain bank accounts. Though once true, this is no longer always the case, as things are slowly changing in states with “robust” regulatory regimes. FinCEN issued a memorandum in February 2014 that provided guidance to financial institutions wanting to bank with the marijuana industry. As a result of that memo, some banks and credit unions in Colorado, Nevada, and Washington are quietly providing marijuana banking services. For more on this, check out Marijuana Banking. Still Very Much Alive.

7. I can get a federal trademark for my marijuana products and marijuana-related activity. This is a troubling myth because there are many lawyers new to cannabis and to trademark law who believe this. You cannot obtain a trademark for direct marijuana activity like strain names or dispensary names so long as marijuana remains illegal under federal law. Marijuana businesses can, however, typically secure state trademarks for their marijuana related products and services. For more on this, check out Marijuana Trademarks.

8. My marijuana business can file for bankruptcy. Wrong. Bankruptcy is controlled by federal law and marijuana’s federal illegality prevents the federal courts from liquidating and re-structuring marijuana businesses. In turn, marijuana businesses (and their creditors) need to contemplate different exit strategies (perhaps state law receivership) if they cannot meet their debts. For more on marijuana bankruptcy, check out Marijuana Bankruptcy? Think Again.

9. Finding property for my marijuana business is going to be a breeze. Though we wish this were true, it simply is not. Finding a landlord who will rent property to a marijuana business is still staggeringly difficult. This is because federal prohibition means that landlords can be prosecuted and lose their property just for renting their property to a marijuana business. In addition, with seemingly ever-changing local land use laws, along with onerous state distance laws (typically, marijuana businesses must be 1,000 feet as the crow flies from schools, playgrounds, and day cares (at a minimum)), finding eligible property is usually very difficult at best. For more on marijuana real property, check out Marijuana Commercial Leaseholds: Any Resemblance to Regular Leaseholds is Purely Coincidental.

10. Decriminalization and legalization are the same thing. They are not. Legalization is the mechanism that produces lawful marijuana businesses under a lawful marijuana system. Decriminalization only dictates that criminal penalties no longer apply to certain activities, like possession of marijuana. For more on this, check out Marijuana Decriminalization Versus Legalization: A Difference That Matters.

California Cannabis: Escape From L.A.

Posted in California, Legal Issues, Medical Cannabis


In an unfortunate but inevitable turn of events the DEA raided two medical marijuana dispensaries in  Los Angeles that appear to have complied with state and local laws and paid their taxes. We see these two federal government raids as the federal government making clear its unhappiness with California’s failing (yet again) to enact statewide regulation over marijuana businesses. Los Angeles has not done its marijuana business community any favors by constantly changing its mind about its marijuana regulations (its most recent flavor being Proposition D) and by failing to consistently enforce its existing regulations.

These raids come on the heels of former U.S. Deputy Attorney General James M. Cole issuing an explicit warning to California to regulate its marijuana industry. As Cole bluntly put it: “If you [California] don’t want us prosecuting [marijuana users] in your state, then get your regulatory act together.” Looks like Cole meant what he said and, apparently, local regulation of California’s medical marijuana industry is not going to cut it.

Indeed, even if local laws (as opposed to the statewide regulation the federal government has consistently requested) could somehow satisfy the Cole memo, Proposition D would still not cut it.

We say this because Proposition D does not regulate dispensaries and marijuana businesses to the extent the federal government demands. Instead, it is a zoning and licensing measure meant to control the number of dispensaries in Los Angeles, not a measure that would lead to real oversight of how these businesses operate. As such, it flies in the face of the Cole memo and serves only to promote gray market activity. The federal government wants to see regulations that help prevent youth access to cannabis, reduce crime, and ensure cannabis safety.

California needs real statewide marijuana regulation by 2016 and before then, industry participants and marijuana business owners should be lobbying for strict regulation in their communities if they want to hold the Feds at bay. In the meantime, rest assured that the Feds are not done with hassling California dispensaries.

For more on California marijuana laws, check out the following:

They Said it on Marijuana, Quotable Saturday, Part XXXV

Posted in General

Our marijuana quote of the week this week comes from renowned travel guru, Rick Steves, who has been hosting meetings in Oregon (and elsewhere) to promote legalizing marijuana. This week, Mr. Steves had the following to say about marijuana:

I’m not pro-marijuana. I’m anti-prohibition and pro-smart-law. I think when our society reconsidered the laws against alcohol back in the ‘30s, they weren’t saying booze is good. They were saying the laws against the alcohol were causing more problems than the alcohol problems they were trying to address. And I see that perfectly parallel today in the prohibition of marijuana. The most dangerous thing about marijuana to me is that it’s illegal.

Steves says that his travels have shown him that this country’s approach to marijuana is mistaken, especially when taking into account how enforcement has historically targeted the poor and minorities. He favors legalization because it will mean fewer arrests and more taxes.

Steves’ comments embody what is probably the best reason to vote for marijuana legalization despite flaws in the relevant initiatives and amendments on the table in Alaska, Oregon, Florida and Washington D.C.: prohibition simply does not work. The only groups that benefit from the illegality of marijuana are criminal organizations and those police forces that want to beef up their arrest records. Why should criminal cartels get this money rather than our states? Why not free up police resources to pursue violent criminals?

As Mr. Steves points out, better (and smarter) drug policy hinges on education and control, not ignorance and indifference.

 

The Great Oregon Pot Debate

Posted in Events, Licensing, Oregon, Recreational Marijuana

On Tuesday, Portland State University sponsored the first statewide televised debate addressing marijuana legalization in Oregon. If Measure 91 passes in November, it would allow Oregonians 21 and older to possess up to eight ounces of marijuana and up to four plants, and it would legalize the entire chain of manufacture and distribution of marijuana.

You can watch the debate here.

Richard Harris, former director of Oregon’s Addictions and Mental Health services division, and Inge Fryklund, former prosecutor, presented the arguments for legalization and in support of Measure 91. One of their primary arguments supporting legalization was that a tightly regulated system will divert demand from the black market, undermining drug cartels and other illegal activity. This argument is in line with the enforcement priorities of the federal government outlined in the Cole Memo.

Those who spoke in opposition to Measure 91 argued that the measure will not adequately regulate marijuana stores and took issue with product labeling and child proof packaging requirements.

What the opposition to 91 people seem not to understand is that Measure 91 does not purport to be the be all end all of marijuana regulation in Oregon, nor will it be. The Oregon Liquor Control Commission will be charged with developing specific additional rules and regulations to govern such things as security, advertising, licensing, labeling, and packaging. It therefore makes no sense to oppose Measure 91 because of alleged shortcomings regarding these things. Measure 91 will create a tightly regulated system that will undoubtedly look different from Oregon’s current medical regime.

Fryklund made the point that supporting Measure 91 does not mean condoning the use of marijuana. She explained, “the people who are supporting Measure 91 are not pro-pot, we are pro-regulation. You can’t regulate something that is illegal.” Legalization and strict regulation create a safer system for everyone, whether they consume cannabis or not. Legalization also generates tax revenue, diverting revenue from the cartels and depositing it into the coffers of the state.

Big issues, such as the disparity in marijuana arrest rates between African Americans and Caucasians were also raised. Fryklund noted that in Oregon, African Americans are twice as likely to be arrested for marijuana charges than Caucasians.

The debate was well-attended and the audience was dynamic and we applaud this sort of open debate and especially its being televised

The vote is on November 4.

Vote yes on 91.

Washington Cannabis: Liquor Control Board Proposes New/More Rules

Posted in Licensing, Recreational Marijuana, Washington

The Washington State Liquor Control Board gave notice to the public last Friday that it is proposing more (and clarifying some) regulations for Washington’s recreational marijuana industry. Some of these proposals will be a welcome relief (like expanding the current producer plant canopy from 2 million to 8.5 million square feet and finally defining “selling price”), while others will have licensees and applicants pulling their hair out (like additional restrictions on packaging and labeling of marijuana-infused goods).

The following are the highlights of the proposed rule changes:

1. The Board plans to define “employee” as any person performing services on a licensed premises for the benefit of the licensee. This is important since many I-502 applicants have had questions regarding the definition of employees, as opposed to independent contractors.

2. The “selling price” of cannabis will be defined as “the total amount of consideration.” Important to note is that the Board will mandate that “no deduction from the total amount of consideration is allowed for the following: (a) The seller’s cost of the goods sold; (b) The cost of materials used, labor or service cost, interest, losses, all costs of transportation to the seller, all taxes imposed on the seller, and any other expense of the seller; (c) Charges by the seller for any services necessary to complete the sale, other than delivery charges; and (d) Delivery charges.”

3. Transportation requirements will be amended to include transporting live plants. Specifically, live plants “may be transported in a fully enclosed, windowless locked trailer, or in a secured area within the inside body/compartment of a van or box truck. A secured area is defined as an area where solid or locking metal petitions, cages, or high strength shatterproof acrylic can be used to create a secure compartment in the fully enclosed van or box truck. The secure compartment in the fully enclosed van or box truck must be free of windows. Live plants may not be transported in the bed of a pickup truck, a sports utility vehicle, or passenger car.”

4. The Board plans to clarify that while processor to processor sales are exempt from the 25% excise tax, processors must pay tax on marijuana concentrates sold to retailers and retailers must pay tax on marijuana concentrates sold to consumers.

5. The Board is likely going to increase the plant canopy from 2 million to 8.5 million square feet. This could mean allowing producers to activate their additional licenses, potentially re-opening the licensing window, and allowing producers to go from the current 70% maximum production rate to full production capacity (i.e., tier 3 growers may be permitted to go from 21,000 square feet of plant canopy to the original 30,000 square feet).

6. There will be an added requirement that I-502 applicants must provide certification to the Board that their extraction equipment is a professional grade closed loop system commercially manufactured and built to codes of recognized and generally accepted good engineering practices.

7. Packaging and labeling requirements will now include marijuana concentrates. In addition, marijuana-infused products in solid form containing more than one serving must be packaged in a package and/or container that remains child resistant after opening.

The full drafts of the proposed rule changes can be found here, here, and here. If you’re an I-502 stakeholder, we urge you to review these proposed changes carefully and if you take any exception to any of them, let the Liquor Control Board know before the comment period ends on December 3, 2014.

 

California Cannabis: Get Your Regulatory Act Together

Posted in California, Federal law and policy, Legal Issues, Medical Cannabis, Recreational Marijuana

Whenever one of our cannabis business lawyers speaks on what the future of recreational marijuana legalization will look like in California, we usually start by directing everyone to the Cole Memo. The primary goal of any state attempting to legalize recreational marijuana should be to avoid federal intervention, and the best way to do that is to use the basic framework U.S. Deputy Attorney General James Cole provided in this memo.

Just last week, Cole spoke about California needing a strong regulatory system to govern the use and sale of marijuana. Cole was quoted as saying, “If you don’t want us prosecuting [marijuana users] in your state, then get your regulatory act together.” This should provide some serious incentive for California to get a comprehensive, well thought-out measure on the ballot to address marijuana regulation in 2016 at the latest.

In 1996, California became the first state to legalize medical marijuana by passing Proposition 215. In 2003, Governor Gray Davis signed Senate Bill 420, also known as the Medical Marijuana Protection Act, which established a medical ID card system administered by the Department of Health’s Medical Marijuana Program and allowed for the formation of patient collectives. Overall, however, this system is incomplete and fractured, leaving much of the California marijuana industry functioning in a legal gray area.

Particularly problematic is that California’s marijuana regulations vary widely from county to county and city to city, often making it difficult to determine the state of the law at any given time in any given location. If California wants to avoid federal government intervention it needs to establish a consistent, statewide regulatory system, supplanting the majority of regulatory power of counties and municipalities.

The Cole Memo contained eight major concerns of the federal government and made clear that states where these eight concerns are not adequately addressed will be targeted by the feds for intervention. Federal enforcement priorities detailed in the Cole Memo include preventing distribution to minors, preventing diversion of revenue from marijuana sales to criminal enterprises, gangs and cartels, preventing diversion of marijuana from states where it is legal under state law to other states, preventing marijuana activity that is a cover or pretext for the trafficking of other illegal drugs or other illegal activity, preventing violence and the use of firearms, preventing drugged driving, preventing grows on public lands, and preventing use and possession on federal property.

There are specific aspects of other recreational marijuana regimes that aim to address the concerns of the federal government. If you look at the regulations put in place by I-502 in Washington and Amendment 64 in Colorado, you will see that they were crafted with the guidelines from the Cole Memo in mind. For example, to prevent distribution to minors, I-502 requires that all marijuana businesses locate more than a thousand feet from certain restricted uses, like schools. There are minimum age requirements for consumption and tight advertising restrictions. To prevent revenue from going to criminal enterprises, gangs and cartels, I-502 mandates use of state-approved tracking software to track all inventory from seed to sale. The state also requires detailed financial reporting and auditing.

Going through each point of the Cole Memo, it is easy to see how both Washington and Colorado have implemented regulations to address the specific concerns of the federal government. Those eight points should provide the baseline for any marijuana regulatory framework California develops. Cole made it clear that the feds are specifically concerned with California’s lack of oversight and control over its marijuana industry. If California does not put in place an adequate regulatory framework for marijuana soon, the federal government is likely to intervene in a way that will not be good for either the recreational or the medical marijuana industry there.

Please note that one of our California licensed cannabis lawyers will be speaking at UC Irvine this Thursday about cannabis in California.