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Since joining Harris Bricken in 2010, Hilary has earned a reputation as a fearless advocate for local businesses. Hilary’s clients—start-ups, entrepreneurs, and companies in all stages of development—value her bold approach to business strategy.

Cannabis bankingThere has been a ton of speculation about what President-elect Donald Trump and his nominee for U.S. Attorney General, Jeff Sessions, will do about state-legal marijuana in the next four years. Some industry and political experts think a renewed War on Drugs is coming, while others believe neither Trump nor Sessions will undertake the politically unpopular task of undoing state-by-state cannabis legalization and some version of the status quo under the Cole Memo will prevail. What is likely to happen with access to banking for cannabis businesses under this new administration?  Next to 280e, the inability to secure and maintain a bank account is probably the biggest business problem for marijuana entrepreneurs.

Marijuana businesses and ancillary service providers (those businesses that provide services to the industry but that are not cultivating, manufacturing, or distributing marijuana) often cannot get bank accounts or bank financing because marijuana is federally illegal. Regulations issued by the Financial Crimes Enforcement Network (FinCEN) dealing with money laundering are what make it so tough for cannabis businesses to secure banking. The Bank Secrecy Act FinCEN enforces requires banks investigate their customers and neither negligently or knowingly do business with bad actors. State-legal marijuana businesses and even many ancillary businesses are viewed as bad actors for banks and so they generally avoid those businesses and the potential fines that can come with them.

Nonetheless, in 2014, FinCEN finally issued some guidance that allows financial institutions to at least provide bank accounts to marijuana businesses — no mention was made in this guidance about access to banking for ancillary service providers. Under these FinCEN marijuana guidelines, banks are expected to:

  • Verify with state authorities that a marijuana business is duly licensed and registered.
  • Review state license applications and related documentation the marijuana business used to obtain its state license to operate its marijuana-related business.
  • Request from the state licensing and enforcement authorities available information about the business and related parties.
  • Develop an understanding of the normal and expected activity for the business, including the types of products to be sold and the types of customers to be served.
  • Monitor publicly available sources for adverse information about the cannabis business and related parties.
  • Periodically refresh information obtained as part of customer due diligence using methods and timetables commensurate with the risk.
  • File Suspicious Activity Reports (SARs) with FinCEN for all of their marijuana business customers. Banks use SARs to notify regulators that someone may be using their services for an illegal purpose. There will be no direct consequences arising from these SAR filings, but this means the federal government knows exactly who you are as a marijuana business, and with whom you are banking.
  • File SARs if they believe one of their cannabis business customers has violated a state law or has failed to act in accordance with the Cole Memo.

With these guidelines FinCEN essentially dragooned banks into acting as on-the-ground investigators to snitch on marijuana businesses that are not being as compliant or careful as the federal government believes they should be. These guidelines do not change federal banking laws and they are pretty onerous, but they were a positive step towards alleviating the marijuana banking epidemic.

With eight states, including California, electing to legalize/”medicalize” marijuana this past November, I questioned in a recent blog post what FinCEN/the Department of Treasury will do with the 2014 FinCEN guidelines, especially with Trump soon to be our President. In December, Senator Elizabeth Warren (and several other senators) sent a letter to FinCEN requesting it issue increased guidance to banks, given we now have 29 states with some form of legal marijuana and no federal resolution of the banking issue. Specifically, Senator Warren and the other senators wrote that more guidance is necessary to address how ancillary services providers can secure financial services as the 2014 FinCEN guidelines are silent on this issue. The senators’ letter specifically stated that:

The 2014 FinCEN guidance did not distinguish between state-sanctioned marijuana businesses and the [ancillary] businesses that service the marijuana industry, leaving it up to individual financial institutions to determine how to classify and treat [ancillary] businesses. Limitations on access to financial services have become increasingly problematic for legal businesses and will only present a larger problem as more states legalize marijuana . . . since FinCEN’s 2014 guidance was released, less than 3% of the nation’s 11,954 federally regulated banks and credit unions have chosen to serve the cannabis industry.

The senators’ letter also accurately noted that an inability of cannabis businesses to bank promotes tax fraud and creates a public safety issue due to the large amounts of cash marijuana businesses must handle.

If Congress will not adjust the banking laws to accommodate state-legal marijuana businesses, pressuring banking regulators to change their enforcement policies is the logical next step and we need to see more congressional representatives and senators from marijuana-friendly states standing up for marijuana banking. If we expect the state-by-state democratic experiments with cannabis to succeed, we need to equip marijuana and ancillary businesses with the tools for success, including access to banking.

Cannabis litigation lawyerThough we are hoping 2017 will bring you nothing but prosperity when it comes to your cannabis business. But if you are headed to court in 2017 or even if you are just just sensing a company dispute stirring, the following five tips will help you avoid or mitigate the negative impact of a business dispute.

  1. Make your business relationships crystal clear from the start. The days of handshake deals regarding ownership in a cannabis business are over. You should do no deals of any real size without first getting everything in writing. Operating agreements, bylaws, and shareholder agreements exist to ensure that your company structure and the relationship between its owners is abundantly clear. When starting a company together, you and your fellow owners should have at least some understanding on how your company will be operated and on how such things like equity versus debt, voting rights, sweat equity, preferred returns, owner employment will be navigated. Most of the ownership disputes our cannabis litigation lawyers have handled have been because of badly done initial company contracts and filings.
  2. Perform due diligence on your partners. If you want to increase your odds of avoiding a dispute with your cannabis business partners, the most important thing you can do is to choose your partners wisely. What never ceases to surprise us is how often we are told by a party locked in a life or death ownership dispute regarding a cannabis business is that they barely knew their business partner before they started the business with them. If you are going to start a cannabis business (or any business for that matter), the first thing you should do is find out as much as you can about your putative partner’s financial and business history. You should do this before you sign away your soul and money to joining with this person on a business project. It’s neither rude nor unexpected to ask your potential partners for documentation showing their financial and criminal history–the state licensing regulators will ask for this information anyway. It is even more important to conduct thorough due diligence if you are buying into an existing cannabis business. At minimum, this due diligence should include investigating and analyzing the assets and liabilities of the company and its current owners. Your due diligence should also include confirming the appropriate standing of the company with state and local government regulators, and determining that the company and its principals understand how to comply with state and local laws as well as the Cole Memo. This is routine in every other industry and it must become routine in the cannabis industry as well.
  3. Get your own attorney from the start to protect yourself. More often than not, the company has an attorney looking out for the company’s interests. But it is important to realize that the company attorney is not your personal lawyer and that lawyer will almost certainly be conflicted out of any dispute between you and your business partners and/or investors. For this reason (and many others) you need your own lawyer providing you with your own counsel and protection regarding your role in the company and your ownership rights. This lawyer should also make sure that the written agreements work for you and not against you. This lawyer will also be an asset for you personally if any dispute arises. For more on how to avoid a dispute relating to your cannabis business, check out Five Tips on How to Avoid Cannabis Litigation and How to Avoid Costly Marijuana Business Disputes. For more on how to choose the right lawyer for your cannabis business check out How To Choose Your Cannabis Business Lawyer.
  4. Know your dispute resolution options. Well drafted corporate documents and contracts should cover most possible breakdowns in the business or the relationship and set out the options for handling internal strife. If there is a fight or a tie on a vote, what happens? How are problems resolved and when? Who makes what decisions and how? What about liquidating the business? What about selling an ownership interest and for how much? Can you sell just your membership interest or shares without going through a vote of the members? Can you keep running the business free of your partners if there’s a fight? What about dissolving the company and winding down? What happens if there is a contract breach? All of these things can and usually should be covered in your corporate governing documents or in any other contract you sign, and by doing so, you greatly minimize your likelihood of destructive problems down the road. Your company documents and contracts should also make clear exactly how disputes are going to be handled. Are you going to want your dispute made public in a court, or kept quiet in an arbitration or mediation? It is a lot easier to reach agreement on such things when you are starting your business or your relationship than when you are already in the midst of a hard fought dispute with costly lawyers.
  5. Make sure your lawyer knows what he or she is doing. When hiring a lawyer to help protect you when getting into a cannabis business, you should be sure to hire a law firm with lawyers who know both business law and cannabis law. And when confronted with a dispute involving your cannabis business, you need to be sure to hire a law firm with lawyers experienced in civil litigation (criminal litigation experience does not count here) and cannabis law, if possible. For more on choosing your cannabis lawyer, check out How To Choose Your Cannabis Business Lawyer.

Be careful out there, and have a happy 2017.

Cannabis moratoriumIt’s always a slap in the face to get blindsided by your local government at the 11th hour. And of course the same holds true in the cannabis industry. You’ve worked incredibly hard to secure your cannabis license from the state. You’ve spent a ton of money getting into compliance with state cannabis regulations (that keep on changing and affecting your bottom-line). And you’re likely paying sky-high rent to lease a space that for any other business would be less than half of what you pay. This is all while having to deal with federal marijuana laws that make it difficult to bank and jack up your tax rates. Then to run up against a local moratorium on cannabis businesses or a drastic change in local cannabis regulations after months of operation is yet another bitter pill to swallow.

When I-502 first passed in Washington State, there were debates and lawsuits over what Washington cities and counties could do when it came to opting out of I-502 altogether. I-502 was silent on this point and industry folks argued that cities and counties couldn’t ban marijuana businesses while local governments (and the state attorney general) argued that they could. Ultimately, with passage of HB 2136, the game of chicken between local governments and marijuana businesses came to an end since the legislature decided that cities and counties were free to ban marijuana businesses, though those that did would cease to receive marijuana tax revenues.

The issue of how cities and counties in Washington State may regulate marijuana businesses remains less than clear. Given the local government police powers and the fact that there is no right to have a marijuana business in Washington State, cities and counties see themselves as able to regulate marijuana businesses as they see fit, so long as their regulations are lawful and constitutional and comport with a local government’s duty and power to protect the health and welfare of its citizens.

Because of this, Washington State licensed marijuana businesses are finding themselves in situations where their local governments are re-thinking local regulations or just deciding to get rid of certain (but not all) marijuana businesses. Already this year, Douglas County banned and then re-regulated its cannabis producers and processors because of odor and neighbor complaints. Also this year, Chelan County opted to ban all marijuana producers and processors that were not actively operating on or before September 29, 2016.

Now Spokane County joins this list with its November 29 emergency moratorium on any new or expanded outdoor cannabis cultivation, citing multiple odor complaints received by the Spokane Regional Clean Air Agency and claiming that its existing outdoor marijuana producer rules and zoning do not “adequately mitigate the impacts associated with the outdoor production of marijuana.”

So long as Spokane County holds a public meeting on this emergency moratorium within 60 days of its passage, due process (i.e., notice and a hearing) challenges to this change are not likely to be viable. Spokane County can even extend this outdoor production moratorium to one year so long as it develops a working plan in that time leading up to final resolution of the issue.

The sad reality is that cities and counties in Washington State can usually get away with using well established laws to preserve the integrity of their zoning plans through interim zoning or via a moratorium and by pointing to allegations of immediate threats to public health and safety. If Spokane County eventually decides to attack existing outdoor cultivation, the chance of a legal attack against the County isn’t made any better due to the law of non-conforming uses.

We would like to see Spokane County go the way of Douglas County and find a way to keep new or expanded outdoor cannabis cultivation alive while balancing the interests of irritated neighbors. In some ways, an even bigger concern for these outdoor cannabis cultivators may be private legal action by their neighbors to stop all outdoor cannabis farming. For more on NIMBY and marijuana odor cases, go here, here, and here.

In any event, be sure to stay tuned to see what Spokane County does with outdoor cannabis cultivation.

In our California Cannabis Countdown, Tiffany Wu (of our San Francisco office) regularly analyzes the various local city and county ordinances governing California’s ever-changing cannabis industry (see here, for example). Local cannabis laws have always been important in California, but they’ve become even more important now that the Medical Cannabis Regulation California Cannabisand Safety Act (“MCRSA“) requires local government approval before you can get a state medical cannabis license. And though you don’t need that local approval before getting a state license under Proposition 64, you will have to be in compliance with local law before you can open and operate your adult use cannabis business in California.

Some California cities and counties have gone back and forth for months over what their local marijuana market should look like, with some even banning marijuana businesses altogether. Mendocino County, part of the famous Emerald Triangle, is no different, though it is getting closer to some form of comprehensive regulation even if it only addresses medical cannabis cultivation for now.

Mendocino County codifies its current medical cannabis regulations under Section 9.31 of its county code, which it amended in May of this year with an urgency ordinance. The County basically has two standards for current growers: growers cultivating no more than 25 plants per parcel, and growers cultivating more than 25 plants per parcel because they are authorized to do so by the County and/or the Sheriff as a result of having registered with the County by June 3 of this year.

Section 9.31 may end up being moot though since the County is looking to pass two new ordinances: one having to do with regulations and permitting for cannabis cultivation sites and the other having to do with zoning for the same. Copies of both proposed ordinances can be found here. Let’s start with the Medical Cannabis Cultivation Ordinance (“MCCO”).

Under the MCCO, should it pass, to be considered by the Agricultural Commissioners Office for a cultivation site MCCO permit, you will need to prove to the County that you had an existing, Proposition 215 and Section 9.31-compliant medical cannabis cultivation site prior to January 1, 2016. To prove the existence of such a site , the County will require the following:

  1. Photographs of any cannabis cultivation activities that existed on a legal parcel prior to January 1, 2016, including: ground level views of the cannabis cultivation activities and aerial views from Google Earth, Bing Maps, Terraserver, or other comparable services showing the entire legal parcel and the cultivation area in more detail. The date these images were captured must be noted.
  2. Photographs of any cannabis cultivation activities that currently exist on a legal parcel, including: ground level views of the cultivation activities from at least three different vantage points, and aerial views from Google Earth, Bing Maps, Terraserver, or other comparable services showing the entire legal parcel and the cannabis cultivation area in more detail. The date these images were captured must be noted.
  3. At least one additional document demonstrating proof of cannabis cultivation prior to January 1, 2016. A list of examples of the type of documentation that will meet this requirement are found in Appendix B to the application. Any reliable documentary evidence similar to that found in Appendix B which is deemed satisfactory to the Agricultural Commissioner, which establishes that medical cannabis was planted and grown on a parcel to be permitted prior to January 1, 2016, will likewise be accepted.

You can also re-locate your existing cannabis cultivation site if you can prove the above, but you will then be treated as a “new” grow, which really just means increased property setback restrictions. In addition to proof of a prior grow (and a bevy of other regulations relating to fencing, security, grow lighting, and track and trace requirements), MCCO permit applicants will be limited to two cultivation permits, one per legal parcel. There are ten different types of cannabis cultivation permits that vary by size and growing medium, including a nursery permit.

For all MCCO permit applicants, the following will be required by Mendocino County as part of the MCCO permit application:

  1. The name, business and residential address, and phone number(s) of the applicant.
  2. If the applicant is not the record title owner of the legal parcel, written consent from the actual owner allowing cultivation of medical cannabis on their property by the applicant with original signature of the record title owner.
  3. Written evidence that each person applying for the permit and any other person who will be engaged in the management of the collective is at least twenty-one (21) years of age.
  4. A site plan showing the entire legal parcel, including easements, streams, springs, ponds and other surface water features, and the location and area for cannabis cultivation on the legal parcel, with dimensions of the area for cultivation and setbacks from property lines. The site plan shall also include all areas of ground disturbance or surface water disturbance associated with cultivation activities, including: access roads, water diversions, culverts, ponds, dams, graded flats, and other related features. The site plan must include dimensions showing that the distance from any school, youth oriented facility, church, public park, or residential treatment facility to the nearest point of the cultivation area is at least 1,000 feet.
  5. A cultivation and operations plan which includes elements that meet or exceed the minimum legal standards for the following: water storage, conservation and use; drainage, runoff and erosion control; watershed and habitat protection; and proper storage of fertilizers, pesticides and other regulated products to be used on the legal parcel. Any fuel, fertilizer, pesticides, or other substance toxic to wildlife, children, or pets, must be stored in a secured and locked structure or device. The plan must also provide a description of cannabis cultivation activities including, permit type, cultivation area, soil/media importation and management, the approximate date(s) of all cannabis cultivation activities that have been conducted on the legal parcel prior to the effective date of this ordinance, and a schedule of activities during each month of the growing and harvesting season.
  6. A copy of the statement of water diversion, or other permit, license or registration filed with California Water Resources Control Board, Division of Water Rights, if applicable.
  7. An irrigation plan and projected water usage for the proposed cultivation activities, as well as a description of its legal water source.
  8. A copy of a Notice of Intent and Monitoring Self-Certification and any other documents filed with the North Coast Regional Water Quality Control Board (NCRWQCB), demonstrating enrollment in and compliance with (or proof of exemption from) Tier 1, 2 or 3, North Coast Regional Water Quality Control Board Order No. 2015-0023, or any substantially equivalent rule that may be subsequently adopted by the County of Mendocino or other responsible agency.
  9. If any on-site or off-site component of the cultivation facility, including access roads, water supply, grading or terracing impacts the bed or bank of any stream or other water source, you must show proof that you have notified the California department of Fish and Wildlife pursuant to Section 1602 of the Fish and Game Code and provide a copy of the streambed alteration permit obtained from the Department of Fish and Wildlife.
  10. If the source of water is a well, a copy of the County well permit, if available.
  11. A unique identifying number from a State of California Driver’s License or Identification Card for each person applying for the permit and any other person who will be engaged in the management of the cultivation operation.
  12. Evidence that the applicant or any individual engaged in the management of, or employed by, the cultivator has not been convicted of a violent felony as defined in Penal Code section 667.5 (c) within the State of California, or a crime that would have constituted a violent felony as defined in Penal Code section 667.5 (c) if committed in the State of California and is not currently on parole or felony probation. A conviction within the meaning of this section means a plea or verdict of guilty or a conviction following a plea of nolo contendere.
  13. A statement describing the proposed security measures for the facility sufficient to ensure the safety of members and employees and protect the premises from theft.
  14. If the applicant is organized as a non-profit collective, the applicant shall set forth the name of the corporation exactly as shown in its Articles of Incorporation, and the names and residence addresses of each of the officers and/or directors. If the applicant is organized as a partnership, the application shall set forth the name and residence address of each of the partners, including the general partner and any limited partners. Copies of the Articles of Incorporation or Partnership Agreement shall be attached to the application.
  15. The applicant shall provide proof of either a physician recommendation that the amount of cannabis to be cultivated is consistent with the applicant’s medical needs, the needs of the patients for whom the applicant is a caregiver, or a written agreement or agreements, that the applicant is authorized by one or more medical marijuana dispensing collectives or processors to produce medical marijuana for the use of the members of said collective(s) or processor(s).
  16. The Agricultural Commissioner is authorized to require in the permit application any other information reasonably related to the application including, but not limited to, any information necessary to discover the truth of the matters set forth in the application.
  17. Apply for and obtain a Board of Equalization Seller’s Permit and collect and remit sales tax to the Board of Equalization if applicant intends to sell directly to qualified patients or primary caregivers.
  18. Written consent for an onsite pre-permit inspection of the legal parcel by County officials at a prearranged date and time in consultation with the applicant prior to the approval of a permit to cultivate medical cannabis, and at least once annually thereafter.
  19. If applicable, clearance from CalFire related to compliance with the requirements of Public Resources Code Section 4290 and any implementing regulations.
  20. For activities that involve construction and other work in Waters of the United States, that are not otherwise exempt or excluded, include a copy of a federal Clean Water Act (CWA) Section 404 permit obtained from the Army Corps of Engineers and a CWA Section 401 water quality certification from the NCRWQCB.
  21. For projects that disturb one (1) or more acres of soil or projects that disturb less than one acre but that are part of a larger common plan of development that in total disturbs one or more acres, are required to obtain coverage under the State Water Resources Control Board General Permit for Discharges of Storm Water Associated with Construction Activity Construction General Permit Order 2009- 0009-DWQ. Construction activity subject to this permit includes clearing, grading and disturbances to the ground such as stockpiling, or excavation, but does not include regular maintenance activities performed to restore the original line, grade, or capacity of the facility.

If the Agricultural Commissioners Office approves you for an MCCO permit, you’ll then be kicked over to the Department of Building and Planning Services for zoning compliance. Under the County’s proposed zoning ordinance, cannabis cultivation of varying parcel and canopy sizes will be allowed in the following zones: RR 2, RR 5, RR 10, AG, UR, RL, FL, TPZ, I1, I2, and PI. And all permissible zoning will require either a zoning clearance, an administrative permit, or a minor use permit. Further, depending on the MCCO permit type, there are minimum lot size restrictions ranging from 5 to 10 acres. And also depending on whether you’re an existing cannabis grow or a “new” grow (based on whether you’re moving your existing grow), there are various property setback requirements you will have to follow to achieve compliant zoning.

Right now, the County is still deciding on whether to adopt these proposed ordinances, and they’re talking public comment on them until January 4, 2017. I list all of the above though just to emphasize how difficult and time consuming and expensive it will be to operate a cannabis cultivation business in Mendocino County. But the bad news is that we expect many other California counties to initiate similar requirements.

Stay tuned to see if Mendocino County will embrace the heavy regulations set forth above or go back to the drawing board on cultivation.

California cannabis bankingNow that California will have significant regulation of both its medical and adult use cannabis industries under the Medical Cannabis Regulation and Safety Act and Proposition 64 (the Adult Use of Marijuana Act), respectively, questions are turning to what will happen with California cannabis banking. As the largest state, it’s hugely important California cannabis businesses be able to secure bank accounts (at a minimum). But will they be able to given the federal illegality of cannabis? Despite what we don’t know regarding how California will regulate cannabis businesses, if the FinCEN guidelines from 2014 hold up and if there are some enterprising financial institutions willing to experiment, we think the answer will be yes.

Because cannabis is federally illegal most banks and financial institutions want nothing to do with it. Not only is there potential criminal liability for banks under the federal Controlled Substances Act for aiding, abetting, and conspiracy for taking cannabis money, there may also be liability under the Bank Secrecy Act for money laundering. Until 2014, there was no real banking solution for the cannabis industry because of these federal criminal law issues; if you didn’t lie to get a bank account, it was likely only a matter of time before the bank would shut down your account after discovering that you were engaged in state-sanctioned cannabis cultivation, manufacturing or distribution.

Once Colorado and Washington legalized adult use cannabis in 2012 and the Department of Justice issued the Cole Memo in 2013, the DOJ and FinCEN finally provided some relief for cannabis businesses by developing guidelines for financial institutions wanting to bank the cannabis industry. Those guidelines essentially give a green-light to banks opening accounts for cannabis businesses in state-legal and highly regulated marijuana states so long as they conduct necessary due diligence and monitoring of their cannabis clients and file a Suspicious Activity Report whenever opening such an account.

Since California will have a ton of cannabis regulations under both the MCRSA and Proposition 64, we are confident some California financial institutions will take advantage of the 2014 FinCEN guidelines and open accounts for cannabis businesses. This means that if you receive a California cannabis license under either the MCRSA or Proposition 64 (or both), you will likely be a good candidate for getting a bank account in California.

The main obstacle right now is that bank regulators like FinCEN, the FDIC, and the NCUA will likely withdraw even silent acceptance of cannabis banking if potential U.S. Attorney General Jeff Sessions or President-elect Donald Trump orders the nullification of the Cole Memo. Without support from FinCEN and other federal regulators, state-legislated resolutions on cannabis banking will likely fail. Colorado already tried this with a state-mandated banking cooperative and failed and we do not expect the courts to help on this issue either because of the federal law conflict. And “solutions” like Bitcoin still face a ton of hurdles.

On December 2, California’s State Treasurer, John Chiang, wrote to President-elect Trump, seeking guidance on California cannabis and banking:

Conflict between federal and state rules creates a number of difficulties for states that have legalized cannabis use, including collecting taxes, increased risk of serious crime and the inability of a legal industry under state law to engage in banking and commerce . . . We have a year to develop a system that works in California and which addresses the many issues that exist as a result of the federal-state legal conflict . . . Uncertainty about the position of your administration creates even more of a challenge.

Chiang also wrote in his letter that California may “exacerbate” the banking problem because California’s cannabis economy is going to be so large.

The Department of Treasury has done a commendable job of preserving and defending its marijuana banking guidelines; Treasury Secretary Jack Lew has defended the guidelines to Congress based on public safety and transparency. But Lew isn’t going to be around much longer and last month Trump announced Steven Mnunchin as his nominee for Treasury secretary. I couldn’t find any quotes from Mnunchin on marijuana banking or the FinCEN guidelines, so it’s hard to know whether Mnunchin will support the cannabis banking status quo or not.

Like everything when it comes to Trump’s administration and cannabis, California will just have to stay tuned on the banking front.

California cannabis lawyers Since passage of the Medical Cannabis Regulation and Safety Act in California (“MCRSA”), our California cannabis attorneys have been getting calls nearly non-stop regarding what to do now to have a medical marijuana business later. Passage of Proposition 64, California’s legalization initiative, has only accelerated the questions on what to expect when California adds a comprehensive legal marijuana licensing system.

Though the three bills that comprise the MCRSA and Proposition 64 lay the foundation for California’s future medical and recreational marijuana licensing systems, these laws are only the beginning. California’s Bureau of Marijuana Control (“BMC”), and various other California state agencies granted governing authority under these new laws will be filling in the blanks on the actual substance of all medical and recreational rules and enforcement.

The below are the eight most relevant “blanks” for those planning on having a California marijuana business:

  1. Residency Requirements For Cannabis Licensees. The MCRSA does not include a residency requirement, but that could change with future rule making. However, Chapter 5, Section 26054.1(a) of Proposition 64 states that, “[n]o licensing authority shall issue or renew a license to any person that cannot demonstrate continuous California residency from or before January 1, 2015. In the case of an applicant or licensee that is an entity, the entity shall not be considered a resident if any person controlling the entity cannot demonstrate continuous California residency from and before January 1, 2015.” This residency requirement expires on December 31, 2019 unless the California state legislature renews it. If — as expected — California begins issuing cannabis licenses in 2018, California legal marijuana will at least at the start have a residency requirement. However, it is important to note that this residency requirement applies to “controlling persons”  and “controlling” is nowhere defined in the initiative. How the state eventually defines “controlling” will likely determine whether out-of-staters (including residents of foreign countries) can own a licensed California cannabis business.
  2. Cannabis Financing. California’s new laws do not address financing beyond Proposition 64’s residency requirement for ownership and “control.” This means it is not yet clear who can finance California’s marijuana businesses. In some states, residency requirements have essentially forced licensees to rely on money from family and friends (Washington State, for instance). In other states, rule makers have allowed financiers from anywhere to invest in their cannabis businesses. If California borrows from Washington, Colorado, or Alaska, financing for California cannabis businesses will likely be hamstrung by residency. If California takes its financing page from Nevada, Illinois, or Oregon (these are states which do not have residency requirements), cannabis investments in California will likely explode.
  3. For-Profit Cannabis Entities. Though still unclear, our California cannabis attorneys believe for-profit cannabis companies will be allowed under the MCRSA. The MCRSA defines a license “applicant” as an “[o]wner or owners of a proposed facility, including all persons or entities having ownership interest other than a security interest, lien, or encumbrance on property that will be used by the facility,” and defining a “person” as “an individual, firm, partnership, joint venture, association, corporation, limited liability company, estate, trust, business trust, receiver, syndicate, or any other group or combination acting as a unit and includes the plural as well as the singular number.” Proposition 64 has almost identical language for the terms “applicant,” “owner,” and “person.” Will California allow existing non-profit medical marijuana collectives to convert to for-profit companies or will it instead force its cannabis collectives to first wind down and then start brand new for-profit companies? This transition matters for things like the distributing assets upon dissolution, tax consequences, and using the non-profit’s already established goodwill. For more on our views regarding the California non-profit transition, go here.
  4. Priority Cannabis Licensing. Both the MCRSA and Proposition 64 contain priority licensing thresholds. Article 4, Section 19321 of the MCRSA states that “[i]n issuing licenses, the licensing authority shall prioritize any facility or entity that can demonstrate to the authority’s satisfaction that it was in operation and in good standing with the local jurisdiction by January 1, 2016.” Proposition 64 at Chapter 5, Section 26054.2(a) contains the following “priority” language similar to the MCRSA: “A licensing authority shall give priority in issuing licenses under this division to applicants that can demonstrate to the authority’s satisfaction that the applicant operated in compliance with the Compassionate Use Act and its implementing laws before September 1, 2016, or currently operates in compliance with [the MCRSA].” Proposition 64 also provides that “[t]he [BMC] shall request that local jurisdictions identify for the bureau potential applicants for licensure based on the applicants’ prior operation in the local jurisdiction in compliance with state law, including the Compassionate Use Act and its implementing laws, and any applicable local laws.” But none of this reveals much about what priority status will actually mean or the detailed standards for proving it. Does it put you first in line for a cannabis license? Does it get you a cannabis license that no one else can get? It will all depend on how the state defines it, which we likely will not know until it issues its initial rules.
  5. Number of Cannabis Licenses. The MCRSA mandates limiting the number of certain licenses, but it does not specify what those limitations will be. Limited licenses under the MCRSA include the “Manufacturing level 2” license “for manufacturing sites that produce medical cannabis products using volatile solvents,”  the Type 3 outdoor cultivation license, the Type 3A indoor cultivation license, and the Type 3B mixed-light cultivation license. Other than prohibiting large scale cultivation for the first five years of the program, Proposition 64 contains no licensing limitations, though that could change once California starts its rule making.
  6. Cannabis Distribution. The MCRSA mandates distributorships  and it defines “distributor” as “a person licensed . . .  to engage in the business of purchasing medical cannabis from a licensed cultivator, or medical cannabis products from a licensed manufacturer, for sale to a licensed dispensary.” Formerly, distributors were also the only channel through which cultivators and manufacturers could transport product to other manufacturers for further manufacturing, but this changed with this year’s passage of SB 837. Unlike in any other cannabis legal state, California cultivators and manufacturers must go through a licensed distributor to get their product to retail. We anticipate additional roles and responsibilities of the distributor will likely come from the governing state agencies through rule making. Though Proposition 64 requires all licensees use a distributor, that distributor does not have to be an independently-owned company, except for large-scale cultivators with a Type 5 license, which licenses won’t even become available until 2023. Expect future California rule making to clarify the role of distributors under Proposition 64.
  7. Cannabis Licensing Fees. Neither the MCSRA nor Proposition 64 reveal license fee amounts. Given how other recreational states have handled licensing and how California does not want to push out its existing MMJ operators, California likely will make its licensing competitive and its fees at least somewhat reasonable, though it may implement some sort of lottery system for the limited licenses under the MCRSA. In most recreational states, the license application fee has been $250 or less. In medical marijuana states however, license application fees have ranged from approximately $60,000 in Florida (non-refundable) down to $5,000 in Nevada. Both the MCSRA and Proposition 64 mandate license fees be on a “scaled basis” and cover the costs of administering the programs.
  8. Cannabis License Applications. Neither law reveals what California will require in its licensing applications. Even in less competitive cannabis licensing states (like Oregon and Washington) the state regulators want to see every detail of your proposed cannabis business from start to finish. And in the more competitive states (like New York and Maryland), the regulatory authorities usually want a thesis-level explanation of every arm of your business. Based on the experience of our cannabis lawyers in helping clients with cannabis licensing applications in more than a dozen states, we can tell you that, at minimum, you should expect California’s marijuana licensing applications to require the following:
    1. detailed financial and criminal background checks and disclosures for every owner and financier of the business,
    2. calculated start-up costs and annual budget,
    3. a detailed business plan and operational plan,
    4. a floor plan,
    5. proof of a lease agreement or right to use the proposed real property,
    6. buffer measurements,
    7. local law approval or compliance at some point,
    8. fingerprinting,
    9. proof of security measures,
    10. proof of environmental compliance (or capability of compliance),
    11. proof of insurance,
    12. a transportation plan including a planned transportation manifest,
    13. list of products to be cultivated, manufactured, and/or sold,
    14. a list of soil amendments or fertilizers to be used on plants if you’re a cultivator,
    15. the type of closed loop system you’ll work in if you’re a manufacturer, and
    16. how products will be stored and quarantined if you’re a retailer.

For more on what California’s new cannabis regime is going to look like, I urge you to check out our California cannabis page here.

Cannabis importsImporting cannabis into the United States is illegal since cannabis is a Schedule I controlled substance. But it’s not necessarily illegal to import smoking accessories into the United States, such as (pipes, grinders, rolling papers, etc.) so long as you’re not violating federal paraphernalia laws. Even though marijuana legalization is sweeping the U.S. and people are consuming cannabis in all shapes and forms, importers of smokers accessories still have to abide by all federal importation laws. Based on the large number of calls and emails we get from such importers with products being held up by U.S. Customs at the border, far too many do not realize this. For this reason, I asked Adams Lee, one of our firm’s international trade and customs lawyers, to write the below post with me.

U.S. Customs and Border Protection recently initiated an action before the U.S. Court of International Trade (“CIT”) to recover approximately $500,000 in civil penalties and unpaid taxes from two companies that imported cigarette rolling papers, mini hookahs, smoking pipes, and pipe screens from China. U.S. Customs alleged that Green Planet, Inc. and Token Group, LLC, both at the same address in Riverside, California, had imported various smoking products from China without including the correct amount of duties owed on the import entry declarations filed with Customs.

According to Customs, between June 2010 through February 2013, Green Planet made four entries (with an entered value of $407,308.71) and Token Group made five entries (with an entered value of $1,412,456.73) of imported products from China, but failed to pay Customs over $200,000 in applicable duties that should have been declared at the time of entry. U.S. Customs alleged that Green Planet and Token Group filed import entry declarations that contained material false statements and/or omissions and that their failure to exercise reasonable care in submitting information to Customs constituted negligence in violation of 19 U.S.C §1592(a).

After the entries had been made, Green Planet and Token Group (or their surety companies) paid Customs almost all of the outstanding duties that should have been paid. Though Green Planet and Token Group together now owed less than $30,000 in outstanding duties, Customs still decided to seek penalties of $432,975.86 against them for their having negligently filed material false statements on their Customs entry declarations. For negligent filing of entry declarations, Customs is entitled to collect civil penalties equal to twice the lawful duty amount that should have been collected at the time of entry.

It is not clear why Green Planet and Token Group did not pay the duties owed on their imported Chinese rolling papers and smoking products. Perhaps they sought to cheat Customs and purposefully tried to avoid paying lawful duties. Or perhaps they had a legitimate basis to claim the products should have been declared under a duty free tariff heading. Numerous cannabis related products have ambiguous or uncertain classification, particularly as new products are developing. Regardless of their intent, Green Planet’s and Token Group’s failure to properly file true and accurate Customs entry declarations was deemed to be negligence warranting the initiation of a Customs penalty action.

This case demonstrates how Customs will pursue penalty actions regardless of how small the amount of duties owed. We mention this because we often hear otherwise from our customs clients, many of whom wrongly believe there is some sort of minimum safe haven amount Customs will ignore. If you are an importer that makes any material false statement or omission on your entry declaration, you are at risk of a substantial Customs penalty action. Because the penalty for negligent Customs declarations is double the amount that should have been collected at the time of entry, under-reporting can have costly consequences.

If you catch your mistake on your customs entry declaration before Customs initiates a penalty action, you can make a prior disclosure to Customs of your error. This will help mitigate potential penalty actions, and could limit your exposure just to the amount of outstanding duties owed.

Importers need to take care to ensure that their import declarations are filed accurately. Although customs brokers file Customs entry documents on behalf of importers, they are only agents of the importers who bear ultimate responsibility for any Customs entry declaration. In fast developing industries (like cannabis), importers need to be especially mindful of the Customs reporting challenges to make sure their imported products are correctly declared to Customs so as to avoid potentially penalties.

Bottom Line: Let’s get real here. New President. New Republican Administration. Not China friendly. Not import friendly. Not cannabis friendly. If you do not realize that customs is going to be cracking down doubly hard on cannabis-related imports going forward, you are living in an alternate universe. What this means in this universe is that you need to handle everything related to customs right the first time and if you don’t you need to fix it quickly and appropriately.

Florida cannabis lawyerA great battle has been won in Florida for a more comprehensive medical marijuana program thanks to Florida voters overwhelmingly voting for Amendment 2. But the war still remains in that Amendment 2 is a very short piece of legislation that gives huge power to Florida’s Department of Health (DOH) to make rules tfor Florida Medical Marijuana Treatment Centers (MMTCs). Amendment 2 simply states that DOH must come up with regulations for, among other things, “[p]rocedures for the registration of MMTCs that include procedures for the issuance, renewal, suspension and revocation of registration, and standards to ensure proper security, record keeping, testing, labeling, inspection, and safety.” That’s it. After writing “Florida Legalizes Medical Marijuana, So Now What? Here’s the 4-1-1,” I’ve been getting many calls from Floridians who want a license to run an MMTC, but many questions remain about who can participate in Florida’s new medical cannabis industry and how participating businesses can be run and financed, because the Amendment is silent on these topics.

The only reference Florida has for previous DOH rule making on medical marijuana is its 2014 Compassionate Medical Cannabis Act (i.e., the “Charlotte’s Web law”), which has since been amended. Upon its passage by the legislature, that law contained way more detail than Amendment 2 on who could operate and own a Dispensing Organization, and it set forth qualification thresholds DOH could not change through rule making. The Charlotte’s Web “final” DOH rules can be found here, and you can read our analysis of DOH’s initial rules here.

Here is a run-down on some of what the Amendment does not cover and where DOH (and, more likely, the Office of Compassionate Use) will need to fill in the blanks for better or worse:

  1. Existing Charlotte’s Web nurseries. Since Amendment 2 pretty much puts DOH in full charge of the fate of Medical Marijuana Treatment Centers, the question becomes whether DOH will only allow the existing Charlotte’s Web nurseries to run all MMTCs or whether DOH will expand the program to allow for a more open medical cannabis market with a diverse range of Medical Marijuana Treatment Center operators. Because Amendment 2 does not say that this sort of exclusive situation cannot happen, and because we all know these nurseries have tremendous influence with the Office of Compassionate Use, it is at least possible that these very same nurseries will walk off with all of the licenses for Florida’s Medical Marijuana Treatment Centers. If DOH follows the path of Charlotte’s Web and engages in negotiated rule making for Amendment 2, you can bet these nurseries will at minimum have big seats at the table.
  2. Limitations on number of MMTCs and vertical integration. The Amendment doesn’t dictate that DOH must limit the number of MMTCs in the state, but I see DOH strictly limiting the number of MMTCs to ensure DOH control and oversight. There’s also the question of vertical integration and whether the DOH will DOH force Florida’s Medical Marijuana Treatment Centers to be vertically integrated. Or will DOH create and issue different kinds of cannabis licenses and registrations without tied-house restrictions for cultivation, manufacturing, and dispensing? If DOH opts for mandatory vertical integration, expect to see many would-be marijuana operators lose interest in Amendment 2 because the costs and the difficulties of vertical integration will prove impossible or undesirable for so many.
  3. Residency. The Amendment does not have an explicit residency requirement. The MMJ industry in many states has suffered much heartburn when marijuana operators have to prove (and sometimes fail to prove) that their financiers or fellow owners have spent a certain amount of time in the state. Florida’s Charlotte’s Web law has no explicit residency requirement, but since it mandated that only Florida-registered plant nurseries existing for thirty or more years with the capability of cultivating more than 400,000 cannabis plants could participate, it essentially did have a residency requirement. Assuming DOH doesn’t just turn over all new Medical Marijuana Treatment Centers to these nurseries as well, it remains to be seen as to whether Florida will allow out of staters to enter its cannabis market.
  4. Financing. The Amendment is also silent on financing for MMTCs and so we do not know whether Florida will cap financing or restrict certain kinds of financing.
  5. Criminal background checks. The Amendment does not tell us what kind of criminal history Florida Medical Marijuana Treatment Center owners and managers can or cannot have. In most marijuana states, a felony conviction within the past ten years (or, sometimes, at all), makes you ineligible to own or manage a marijuana business. Since Florida hasn’t been the friendliest state when it comes to marijuana-related crimes, I am expecting it will implement fairly aggressive criminal background standards.
  6. Corporate entities. There’s no mention in the Amendment as to whether Medical Marijuana Treatment Centers can be either for-profit or not-for-profit. Some states care about this distinction, but the trend is to allow marijuana businesses to be for-profit companies. Surely, when DOH defines “MMTC applicant,” it will tell us what kind of corporate entities can participate in its medical cannabis program, but we likely won’t know this before the first set of DOH rules comes out.
  7. Application, scoring, and application fees. We can only guess at what the application for a Florida Medical Marijuana Treatment Center will look like and the information it will require. Having helped clients with competitive licensing applications in New York, Minnesota, Maryland, and Nevada (and less competitive licensing applications in a host of other states), I can tell you that if DOH doesn’t hand all of the keys to Amendment 2 over to the Charlotte’s Web nurseries, its MMTC applications are likely to be pretty intense. The application for the Charlotte’s Web nurseries was no picnic and I don’t see DOH being any less restrictive or invasive for MMTC applications. There’s also the issue of how DOH will choose MMTC operators. In Charlotte’s Web, DOH first tried to implement a lottery system but got sued and lost. DOH then ended up going with an obtuse scorecard that allegedly ranked applicants based on merit (that also got them sued, but they prevailed on that system). Regarding any MMTC application fees, the Amendment says nothing. But you can be sure DOH will implement an application fee under Amendment 2. Charlotte’s Web applicants had to pay a $60,063 non-refundable application fee, but I anticipate the fee for Medical Marijuana Treatment Centers (hopefully) being lower since considerably more applicants will be involved. Florida might also institute other threshold financial requirements to create barriers to entry for MMTC applicants. For example, the Charlotte’s Web program required a $5 million performance bond prior to registration as a Dispensing Organization.
  8. Buffer requirements and “regional restrictions.” The Amendment is also slient on whether MMTCs have to be located a certain distance from sensitive uses like schools or playgrounds. The buffer for these things has varied from state to state (usually from around 500 to 1,000 feet as the crow flies) and cities and counties usually have a say on this also. At one point in the initial draft rules, Dispensing Organizations under Charlotte’s Web could not “be located within 500 feet of any public or private school that existed prior to the date of the dispensing organization’s application,” but that buffer requirement didn’t make it into the “final” rules. MMTCs may also see regional restrictions like nurseries saw with Charlotte’s Web where those nurseries are limited to serving the five regions of Florida. If the goal of Amendment 2 is to provide better and more convenient access to cannabis for medical use, the five-region plan of Charlotte’s Web will likely not be the way to go.

There are a whole host of other issues not covered in the Amendment with which DOH will have to wrestle, but the above are some of the most important, and they constitute plenty to get you started in planning for your application and your eventual cannabis business.

Be sure to stay tuned as DOH gears up for Amendment 2 rule making.

Florida legalizes cannabisAs most of you know by now, Florida voters yesterday passed the “Use of Marijuana for Debilitating Medical Conditions” ballot measure commonly known as Amendment 2. As a Florida-licensed attorney, I want to give a big congrats to my home state for finally saying yes to comprehensive medical marijuana program that should (hopefully) expand the monopoly on MMJ currently held by the Charlotte’s Web nurseries and provide more and better access to a variety medical cannabis for patients.

Nice going Ya’ll.

Under the ballot measure, the Department of Health has no more than six months from the law’s effective date to create regulations for registering Medical Marijuana Treatment Centers (MMTCs). Under Florida’s Constitution, the ballot measure should take effect “on the first Tuesday after the first Monday in January following the election unless otherwise specified by the amendment.” Amendment 2 has no specific effective dates for its various provisions, so this should mean we will be seeing a complete set of MMTC rules by June 2017 (assuming there are no legal challenges to these rules, but it’s Florida so there will be). An overview of the initial Department of Health Charlotte’s Web rules can be found here.

Leading up to this vote, Floridians have been calling our cannabis lawyers asking what they can do now to get ready for Department of Health MMTC registration in the future. Given the timeline above, my response was and is, “a lot actually.” I tell them that they can and should be doing the following, starting now:

  • Read the initiative and then read it again. The initiative is everything at this point and it’s imperative all prospective Florida MMJ operators read and thoroughly understand it because it provides the baselines for what’s going to be allowed for patients, physicians, and operators.
  • Figure out where you might want to operate and learn about the local government there.  The initiative is silent regarding whether local governments will be able to opt of the new law should it pass, which, in most states, has meant local governments are free to ban if they so wish. Some Florida cities have already prepared themselves for changing state marijuana laws by enacting municipal zoning and permitting laws. Other Florida cities and counties are (and will remain) opposed to MMJ businesses. Instead of spending dollars and time planning for a marijuana business in a Florida city that will never allow one, you should instead get a handle on friendly versus non-friendly local governments. As for those local governments without a clear idea on what to do about cannabis, this is your chance to step up and help educate the local authorities about what their local industry should look like. Our cannabis lawyers have done this in countless cities and counties in multiple states and believe me when I tell you that this can profoundly impact which way a city or county will go on cannabis commerce. I cannot stress enough the importance of your understanding the local situation where you will be locating.
  • Study other state regulatory models, including the super strict ones. You can learn a lot about what to expect from Florida by looking at other states’ regulatory models. Look at states like New York, Illinois, Nevada, and Minnesota, all of which have fairly limited and heavily controlled MMJ regimes. If Florida’s 2014 Charlotte’s Web law tells us anything (and it does), Florida’s new medical cannabis regime is going to be a lot more like these states than, let’s say, California, where (until the implementation of the MCRSA) the “cannabis friendly doctor is always in.” Our cannabis licensing lawyers area constantly comparing laws in the older states to get a better feel for what is likely to go down in the newer states. If State A interprets X provision a certain way, there is a good chance State B will do the same.
  • Review the Florida corporate structures available and figure out now which makes sense for you. MMTCs will be the “entities” that cultivate, process, and dispense cannabis to qualified patients. However, since MMTCs aren’t defined in the initiative beyond the term “entities,” that means we could be looking at either non-profits or for-profit entities. This means you should learn about the various corporate structures available to you, how they operate, and what you’ll need when you’re ready to file for your entity.
  • Start figuring out your budget and pace yourself. In anticipation of a fee-laden, probably very expensive application process for registering an MMTC, you need to start thinking now about your budget and from where you are going to get your funding. In all of the states in which our cannabis business lawyers have operated, one thing always holds true: those with secure funding before the application process starts have always had a huge advantage in competing for a cannabis business license over those still patching together their funding when the application window opens. You should plan for more than just start-up costs such as inventory, employees, operational costs, etc. You should also have a good idea of the funding you will need for the application process itself, which will require legal oversight, expert advisory input, contracting with architects for floor plans, and all sorts of other expert assistance. And again, speaking from experience, those with the best and most experienced team in place are the ones that get the licenses. And speaking just for lawyers, the best lawyers will charge a lot but not take on many clients. All of this means that you must budget accordingly and pace yourself. Just because the initiative mandates Florida’s Department of Health come up with all of the MMJ rules within six months of the effective date of the law doesn’t mean it will actually issue licenses or register MMTCs by that time. It’s Florida, people, and, that means there will likely be a whole host of lawsuits to delay this process. Get your budget in sufficient shape to weather these inevitable delays.
  • Choose your partners wisely. Consultants and so-called cannabis experts are a dime a dozen. Take your time in choosing who you will be using to help you navigate what is sure to be a complicated application process. Ask lots of questions, especially about whether they will require you to give them equity in your company and whether their relationship with you will be exclusive. For more on why this choice can be so important, check out Buyer Beware: Pot Colleges and Canna Consultants.
  • Choose your legal counsel wisely. Lawyers claiming to be marijuana business attorneys are also a dime a dozen and you need to proceed with caution in choosing your legal counsel as well. Make sure you choose a law firm with extensive experience in navigating robustly regulated application processes, the more states the better. Make sure your law firm also has corporate lawyers experienced in forming cannabis businesses and in dealing with state cannabis laws and regulations. Make sure to get clear on whether your law firm will be representing just you in seeking a particular license, or ten of your potential competitors as well. Make sure your law firm also has experience with commercial leaseholds for the cannabis industry. For why this matters, read Marijuana Commercial Leases: This Industry Is Different, You Know. And, given the wild west nature of this industry, no matter how regulated it is by a given state, make double-sure your attorney is an ethical one. And to put it bluntly, ethical lawyers do not take equity in cannabis businesses; they just don’t.
  • Don’t forget about federal illegality and get comfortable now with what that means. Those of us with years of experience in the state-regulated marijuana industry know all too well how the federal illegality of marijuana makes day to day business difficult and you need to start educating yourself on this as well. It’s not too early for you to start figuring out how you will deal with the difficulties of opening a bank account due to federal anti-money laundering laws or protecting your trade name and your brands without being able to register trademarks with the USPTO. It also makes sense to start navigating how you can best mitigate against federal income tax laws that prohibit all normal business deductions  under IRC 280e, and that bankruptcy isn’t a likely option in the event of failure. And, finally, how will you advertise your new cannabis business when Google and most major social media platforms will not allow you to do so?

Florida has legalized. Now get cracking.

California Cannabis LegalizationWith four days to go until the Presidential election and with nine states voting on marijuana legal reform, it’s time to briefly visit each marijuana ballot initiative, especially since legalization or medical marijuana reform in one state can greatly impact other marijuana-friendly states and even federal marijuana policy. With a recent Gallup poll showing 60% of Americans favor cannabis legalization, come November, we expect to see a lot more legalized cannabis around the country.

Here are the nine marijuana ballot initiatives up for vote on November 8:

  1. Florida: Florida first tried passing a medical marijuana constitutional amendment by a vote of the people in 2014. Florida’s 2014 Amendment 2 took a strange and rocky road to the ballot box the first time around. The Florida State attorney general filed a challenge to strike it down, alleging it misled the public about its true intent and effect. The Amendment 2 campaign had to go before the Florida’s Supreme Court to keep Amendment 2 alive, which it did. Florida billionaire Sheldon 3 ponied up massive funds to fight against Amendment 2 through a well-funded group that claimed medical marijuana is the new “date-rape drug” and circulated a video that claimed Amendment 2’s main financial backer and supporter, lawyer John Morgan, was seeking total legalization of marijuana, not just medical. Amendment 2 made it to the ballot box but failed to get the votes needed to pass. Florida requires a 60% supermajority vote for constitutional amendments and Amendment 2 fell short by around 3%. What makes the 2016 Use of Marijuana for Debilitating Medical Conditions ballot amendment different from Amendment 2? Frankly, not much beyond clearer language this time regarding regulation and oversight of medical marijuana businesses, qualifying patients, and caregivers. That and the fact that recent polling indicates Floridians will pass the new Amendment 2.
  2. Montana: Montana has a tortured relationship with marijuana. It initially approved medical marijuana by ballot initiative in 2004 and the program survived a 2011 attempt to legislatively repeal it. Though Montana patients can still access marijuana, the cultivation to distribution chain in Montana is opaque and lacks any serious state oversight or regulation. Nonetheless, Montanans will vote on Initiative 182 this November in an effort to expand access to medical marijuana for patients and loosen restrictions created by the legislature as part of its 2011 appeal attempt. Initiative 182 will authorize the Montana Department of Public Health and Human Services to register, license, regulate, and oversee “providers” of medical marijuana who may cultivate, manufacture, and dispense medical marijuana. An October poll shows only around 44% of Montana voters support I-182.
  3. North Dakota: In our “State of Cannabis” series where we rank all of 50 states on marijuana laws and policy, North Dakota landed at an uninspiring 33 on the list. Yet North Dakota cannabis advocates were able to get a measure on the ballot to legalize medical marijuana and another measure to legalize recreational marijuana. A poll in late 2014 showed that 47% of North Dakota respondents support legalization of medical marijuana, but only 24% support legalizing recreational marijuana. Measure 5 proposes a program that “would create identification cards with specific criteria before they can be issued by the Department of Health for patients, caregivers, compassion centers and other facilities. The Act would create procedures for monitoring, inventorying, dispensing, and cultivation and growing of marijuana to be regulated and enforced by the Department of Health. A qualified patient could be dispensed up to three ounces of usable marijuana. For violations, the Act would authorize the Department of Health to provide for corrective action, suspension, revocation, appeal, hearings, and referral for criminal prosecution. The Act would require the Department of Health to submit an annual report to the legislature regarding program statistics.”
  4. Arkansas: Arkansas ranked number 40 in our State of Cannabis series, but that ranking will drastically change if Issue 6 passes this month. Until the Arkansas Supreme Court rejected Issue 7 earlier this month because of signature problems, it was looking like Arkansas would actually have two cannabis measures on its ballot this year. Issue 6, known as the Arkansas Medical Marijuana Amendment of 2016, would allow certain qualifying patients to access MMJ and create a regulatory system for cultivation, manufacture, and distribution of medical marijuana. Issue 6 is currently polling at around 45% voter support.
  5. California: California’s vote on Proposition 64 will likely be the most important cannabis vote our country will ever see. If Proposition 64 passes in California, California will regulate and tax recreational marijuana like alcohol. It is expected that California’s recreational cannabis economy will be at least ten times larger than Washington State, which currently has the highest legal recreational cannabis sales. If you want to know more about the ballot initiative, go here, here, here, here, here, here, and here. Recent polling indicates that Proposition 64 will handily pass.
  6. Arizona: Arizona has had a medical marijuana program since 2010, but its voters will soon get to decide on Proposition 205 to regulate marijuana like alcohol for adults 21 and older. Polling shows the initiative is at about 48% support.
  7. Nevada: Like California and Arizona, Nevada already has a heavily regulated medical cannabis regime but will now be voting on creating a recreational marijuana regime. Nevada’s Question 2 will allow adults over 21 to possess up to one ounce of marijuana flower or one-eighth of an ounce of concentrated marijuana with Nevada’s Department of Taxation regulate its legal cannabis market. The Initiative would create licenses for Cultivation Facilities (to cultivate, process, and package cannabis), Testing Facilities (to test cannabis and cannabis products), Manufacturing Facilities (to purchase, manufacture, process, and package cannabis), Distributors (to transport cannabis between cannabis establishments) and Marijuana Stores (to purchase from cultivation facilities, product manufacturing facilities, and other retailers and to sell cannabis and cannabis products to consumers). Question 2 is currently polls at about 50% support,
  8. Maine: Question 1 is Maine’s recreational marijuana initiative. Maine has had medical marijuana since 1999 but  Question 1 will legalize recreational cannabis for adults over 21 via “a tightly regulated system of licensed marijuana retail stores, cultivation facilities, product-manufacturing facilities, and testing facilities, and it [will] create rules governing the production, testing, transportation, and sale of marijuana and marijuana-related products (e.g. testing, labeling, and packaging requirements). Cities and towns will have the right to prohibit the operation of marijuana establishments.” March and September polls show 53% support for Question 1.
  9. Massachusetts: Massachusetts has had regulated medical marijuana only since 2013, but it’s already voting on legalizing adult-use marijuana through Question 4. Question 4 will regulate and tax marijuana like alcohol, creating a licensing system for cultivators, manufacturers, and dispensaries. An October poll has Question 4 at 55% support.