Washington State cannabis delivery serviicesAre cannabis delivery services legal in Washington State? 

Strong demand for home-delivery cannabis services in Washington – and particularly Seattle – is apparent, as demonstrated by the numerous delivery services operating in plain sight, as revealed by a simple Google or Yelp search. Yet, such operations remain illegal following the passage and implementation of I-502. In 2016, Seattle proposed a law to permit a pilot project for legal delivery in Seattle (which failed in the state legislature). This year, Seattle officials are pushing for similar legislation, with certain modifications, that they hope will open the door to cannabis delivery throughout the state.

What’s the status quo in Washington State?

Cannabis delivery services are as old as old-school weed dealing itself. The common trope is of the marijuana dealer who delivers late (and stays past their welcome) – and only after multiple calls or texts. Today’s pot delivery services, particularly in states with legal medical or adult-use cannabis, are exponentially more professional operations – yet, in large part, they remain illegal under both state and federal law. Such is the case in Washington State.

What happened with the 2016 proposal?

Last January Seattle city officials supported Washington State House Bill 2368, which would have authorized a pilot plan for home cannabis delivery in Washington in cities with 650,000 or more people – effectively just Seattle.

HB 2368 was seen by as “Seattle-centric” and lawmakers outside Seattle and greater King County did not vote for the bill because it would not directly benefit their constituents. Also, Washington can be a deceptively conservative in general and in terms of cannabis, especially on outside its urban centers and especially on the East side of the mountains. Ultimately, HB 2368 did not become law.

How does the new proposal differ?

MyNorthwest.com reports that Seattle City Attorney Pete Holmes intends to broaden support for the 2017 bill by allowing home cannabis delivery statewide. Such marijuana delivery services would still be subject to county and municipal regulations and prohibitions.

Will it pass?

The bill’s ultimate fate is unclear. City Attorney Pete Holmes said in January that the bill was in the early stages of finding a bill number and sponsor, though he was optimistic going forward. Ultimately, only time will tell if this or a different bill authorizing cannabis delivery eventually becomes law in Washington State. Though it is far from certain, I think pot delivery services will within the next few years become legal in Washington and I say this because the longer Washington legalization goes on without the sky falling down (and I do not foresee the sky falling down), the more Washingtonians will come to realize it is no big deal and the less they will care about restricting it by doing things like forbidding cannabis deliveries.

Why is this important for the future of cannabis reform in Washington State?

Other jurisdictions with legal medical or adult-use cannabis have experimented with home delivery, and “gray market” home delivery operations are thriving in Washington and other state-legal cannabis states since before legalization. This despite many arrests in Seattle.

The demand for cannabis delivery ensures and proves its durability as a market force. Allowing illegal delivery operations to prosper erodes the legitimacy of legal cannabis markets, and undercuts its economic rationale. Our cannabis clients resent having to pay big taxes and be subject to massive regulations while at having to compete with illegal operations that avoid both of those things. The solution is to permit legal home delivery for medical and/or recreational users and to license and treat those cannabis delivery services  as any other cannabis business.

Why is this important to medical patients and adult-use cannabis consumers?

The ability to legally provide home cannabis delivery services is particularly important to medical marijuana patients with limited mobility or other disabilities that make it impossible or unduly burdensome for them to personally go to a dispensary to obtain cannabis. Also, even adult-use recreational patients can benefit from the convenience and added value of a cannabis delivery service. Just look at Amazon Prime.

For its part, earlier this month a Seattle Times editorial endorsed legalizing cannabis deliveries.

 

Washington state cannabis licenseAdvocates for cannabis reform often point to favorable studies documenting the positive medicinal and wellness effects of marijuana to debunk federal law scheduling of cannabis as a substance on par with heroin. Opponents of cannabis reform invoke statistics that purport to show a relationship between cannabis and crime and violence. What both sides must agree upon, however, is the need for new, in-depth, and nuanced research of legal cannabis’ effect on society. At least if they belive in scientific research over anectdote.

Washington State is  moving in this direction with its cannabis research licenses. Here is what you need to know about these cannabis research licenses.

What is a Washington cannabis research license? Washington’s cannabis research license has been set up to facilitate further study of cannabis’ scientific, medical, and industrial properties and applications. According to Washington statute RCW 69.50.372, marijuana research license holders  may “produce, process, and possess marijuana for … limited research purposes.” The law restricts the scope of permitted research to the generously broad categories of: tests of chemical potency and composition; clinical investigation of cannabis-derived drugs; tests regarding the efficacy and safety of cannabis as a medical treatment; and genomic or agricultural research.

Along with a whole host of other factors, these new cannabis research licenses will help solidify Washington state – more specifically the Seattle area – as a hotbed for cannabis research. Existing Seattle cannabis and biotech and technology firms (almost all of which are quite open to cannabis), along with the city’s vibrant vibrant start-up scene should combine to accelerate worthy cannabis research for a wide range of applications.

What is the latest regarding Washington cannabis research licenses? The Washington state legislature passed a law authorizing licenses for researching cannabis’ medical properties, chemical composition, and agricultural potential last year. Following a rule making period, the Washington State Liquor and Cannabis Board has indicated it will begin accepting applications March 1, 2017. However, absent swift action by the Washington state legislature, this date will probably get pushed back by a requirement in the research licensure law discussed below.

Why might there be a delay in implementing cannabis research in Washington? The law that created cannabis research licenses also mandates that applicants and their research projects be vetted and approved by third-party scientific reviewers. The reviewers are required to audit the research and its reports. This is a an understandable precaution given the state law’s conflict with federal law (which still pretty much makes cannabis illegal for any purpose), and a fair method for ensuring the licenses are being used for their intended purpose.

The problem is that Washington State has not yet approved any third-party scientific reviewers, and no such approvals appear to be forthcoming. Many expected Life Sciences Discovery Fund to serve as a scientific reviewer, but for what appears to be funding reasons, it has not stepped up. Nor unfortunately, have either the University of Washington or Washington State University or any of the other institutions of higher learning in the state. Until a third-party scientific reviewer is approved, applicants will be in limbo.

The new cannabis research law also requires the Washington State Liquor and Cannabis Board select a scientific reviewer to review the research project and determine the merit of its quality, design, and impact; the adequacy of its personnel, expertise, and other functional capacity; and whether the quantity of marijuana cultivated matches the needs of these objectives. No scientific reviewer, no cannabis research.

Why is this important? Lack of legal and high level cannabis research is a classic “chicken and egg” problem for cannabis legalization. Cannabis is illegal in large part because the powers that be claim it to have no legally recognized medicinal or therapeutic value. And yet — surprise, surprise, efforts to conduct high level research that might show the contrary gets suppressed by a lack of legal access to cannabis and by a reluctance by many to fund research that could be shut down as illegal. Something will have to give in order to overcome this impasse, and it is not sure when or how that might happen.

As cannabis lawyers, we find all of this extremely frustrating, as it not only means that those needing cannabis for medical reasons are cheated out of their medicine in states where cannabis is not legal even for medical treatments, but it also means that in cannabis legal states like Washington, far too many patients do not not get the ideal strain and quantities and ingestion method for their particular conditions because there is no high level research on these things. It also means that countries like Israel and Canada will continue to surpass the United States in cannabis research and technology.

Bottom Line: Do not expect your Washington State cannabis research license soon. And that is too bad.

Cannabis Marijuana pot weedThe world of cannabis has been abuzz since November with anxiety over what a Trump administration could mean for the industry and the future of state- and federal-level cannabis reforms. This was only made worse by the nomination of notoriously anti-marijuana senator Jeff Sessions as Attorney General. Following his party-line approval by the Senate Judiciary Committee yesterday, Sessions is likely to be confirmed by the full Senate by a similar vote in short order. Though hope springs eternal, some in the cannabis industry are bracing for the worst and looking for ways to ensure the rapidly growing industry’s does not go to pot (pun intended) under Trump.

One recent source of optimism is last week’s announcement that Boulder County, Colorado, District Attorney Stan Garnett will be part of a group of prosecutors advising the Trump administration on marijuana policy. The group – comprised of 14 district attorneys, including some from weed-friendly states California and Oregon – is part of the National District Attorneys Association, a prosecutor and criminal justice policy think tank. Advocates for relaxed marijuana laws hope Garnett’s appointment foreshadows a group that will be a voice of reason to the administration and a force against rolling back marijuana reforms in legal states.

Yet it remains unclear exactly what role the NDAA group will play in advising the administration and how its cannabis agenda will take shape. After all, in discussing his selection, Garnett (who is also Colorado’s NDAA state director) remarked that he “always end[s] up on the more liberal position than anyone else, particularly on marijuana.” This observation is borne out by a report entitled “Policy Positions on Control and Enforcement” adopted by NDAA in 2005. Though dated, it reflects NDAA’s most recent official positions on cannabis reforms – and it is not a pretty picture.

In the report, NDAA states that it “opposes the legalization of illicit substances” and notes that it “specifically opposed” California’s 1996 legalization of medical marijuana. It goes on to state that NDAA “opposes the opposition of any state legislation or adoption of voter initiative that legitimizes and legalizes the ‘medicinal use’ of marijuana.” NDAA also alleges in the report that the cannabis reform movement’s “strategy is to legalize all illicit drugs” using “the sick and dying as pawns” and “myths” that cannabis is not harmful, among other claims. One might assume that the NDAA’s position likely evolved in the intervening years, but, according to Garnett, the group’s first meeting saw some prosecutors urge that the governor of every medical and recreational cannabis state be sent a letter demanding closure of all cannabis businesses in 90 days. Garnett, to his credit, “was not shy” about denouncing the idea, but one must wonder how much one or even a small contingent of forward-thinking committee members can affect institutional policy.

Let’s face it people, prosecutors are not generally friendly to cannabis.

It also appears the group’s role and influence in the Trump administration has been overhyped. As reported by Leafly, the Director of Policy and Government affairs at NDAA said in a statement that “[c]ontrary to other reporting, the working group is not affiliated with any other organization or entity, including the incoming administration.” So do not get your hopes up that some pro-cannabis Justice League of prosecutors is about to save the day if Sessions decides to crack down on weed.

It is undoubtedly a positive development that Garnett and other pro-cannabis reform prosecutors are in a position to help shape an important trade group’s position on marijuana. But, industry stakeholders and advocates should temper their expectations for the impact and direction of the NDAA taskforce.

Like pretty much everything else related to cannabis and the Trump administration, the safest stance is probably wait and see.

Cannabis attorneysIf you live and work in a state where cannabis is illegal, can you be fired for going on vacation to a state like Colorado and using cannabis while there? A Texas administrative law judge says no.

This week’s Cannabis Case Summary covers the case of Maryam Roland, a high school teacher from Texas, who recently prevailed before the Texas State Office of Administrative Hearings. During winter break of the 2014-2015 school year, Ms. Roland took a vacation to Colorado. While in Colorado, she admits she consumed an edible cannabis product. Roland then returned to Texas to continue teaching for the spring term. Following accusations of marijuana use, she resigned from her teaching position in February 2015.

According to court documents, a “disgruntled” co-worker had notified the school administration by email that a number of school employees used cocaine, marijuana and other substances. Though Roland was not directly named in the email, she was implicated in the matter. In an interview with authorities, Roland stated she had previously used cannabis “occasionally” but had resolved to stop using cannabis and “get her life together” for the new year. She denied any use of drugs or alcohol on school premises or during the time she was working. Roland was then given both a follicle and urine drug test. She passed the urinary analysis, but there was evidence of cannabis in her hair sample.

This matter was brought before an administrative law judge charged by the Texas State Office of Administrative Hearings. The judge considered whether there was evidence that Roland had violated Texas law and whether she was “unworthy to instruct and supervise” youth. The judge did not conclude that Roland had violated any law. The judge’s determination was based on the determination that there was no evidence that Roland possessed or used cannabis in the state of Texas. It is crucial to note that the judge observed the plaintiff did not allege any violation of federal law. Had the plaintiff made such an allegation,  the outcome may have been totally different as cannabis is clearly federally illegal.

The judge also considered whether Roland had violated district policies related to employees being under the influence of a controlled substance during working hours. Again, the judge concluded in favor of Roland, finding insufficient evidence that she was ever possessed cannabis or was under the influence of any controlled substance while at work. Despite the positive result of Roland’s hair sample for marijuana, the judge concluded there was no basis for the test because the aforementioned co-worker’s email fell short of giving “reasonable suspicion” that Roland was a drug user. Therefore, the court found, the test was improper.

This is an interesting case at the nexus of employment law and cannabis. Employees, even in states where cannabis is legal, are often unable to secure a right to use cannabis off the clock, whether it be for medicinal or recreational purposes. Though ultimately a rather limited administrative law decision, Roland’s case is an example of how cannabis users and patients may be able to operate going forward. In the judge’s own words: “Possession of a usable quantity of marijuana is a criminal offense in Texas, but so is gambling. The ALJ would not recommend that the Board find a teacher unworthy to instruct in Texas because she legally gambled in Nevada.

Cannabis attorneysEmployment law is often unforgiving of medical marijuana patients. Workers are in many instances subject to the same consequences of using marijuana in cannabis-legal states as in states where cannabis remains illegal. Federal illegality has thwarted attempts by employees in many instances to guard against termination or other negative action linked to their consumption of cannabis.

It is therefore notable that an administrative law judge in New Jersey last month ordered an employer to reimburse an injured employee for his purchase of medical marijuana permitted by New Jersey law. Though not a binding rule of law, the judge’s decision is an undeniably positive outcome for medical marijuana patients and could be a harbinger of things to come as marijuana goes mainstream. This week’s Cannabis Case Summary breaks down the administrative law judge’s decision and what it might mean for the future.

The plaintiff in the case, Andrew Watson, worked for 84 Lumber, where he sustained a serious hand injury on the job. Watson’s psychiatrist/neurologist recommended Watson use medical marijuana to treat the pain from his injury. He then purchased around two and one-quarter ounces of medical marijuana over the course of three months, all legally under New Jersey law. Because 84 Lumber refused to cover the cost of the cannabis under its workers’ compensation policy, Watson was unable to continue using marijuana as a pain reliever. Instead, per the company’s policy, Watson relied upon prescription opiates to cope with his chronic pain.

Watson then brought his case before administrative law judge Ingrid L. French to secure reimbursement for the amount he had spent on marijuana and a ruling that his future purchases of medical marijuana to treat this injury would be covered by his employer. Watson argued that medical marijuana was both effective and a fit substitute for the more dangerous and addiction-linked opiates he was prescribed as an alternative. The judge ultimately sided with Watson, stating on December 15 that reimbursement was appropriate and that Watson’s future medical marijuana expenditures should be covered.

The administrative law judge’s conclusion raises interesting questions. Does it make sense for companies in medical marijuana states to make effort to expressly cover medical marijuana as an alternative to (often more costly) pharmaceuticals to treat pain or other ailments? Can employees bank on this reasoning to carry the day if they decide to obtain medical marijuana as an alternative to narcotic painkillers? The answer to both questions is uncertain and will be affected by political as well as legal shifts in the United States. Nonetheless, the outcome in this case should be encouraging to medical marijuana patients in New Jersey and beyond.

It should be noted that the decision in this case was rendered by an administrative law judge. Such an opinion has similar but different effect than a decision by a state or federal judge. New Jersey is, however, known for its robust state administrative law. The persuasive authority of this decision should not be discounted nor overestimated.

Good news for medical marijuana patient Watson is good news indeed, but the overall place of this decision in the mosaic of favorable rulings amidst continued federal prohibition is inherently precarious.

 

Arkansas CannabisArkansas voters’ decision to approve state-legal medical marijuana evidences a shift in attitudes towards medical cannabis that transcends stereotypical red-state/blue-state division on progressive cannabis reform. Arkansas will soon join Florida and Louisiana as traditionally “southern” states to embrace some form of medical marijuana legalization.

The Arkansas Medical Marijuana Commission is developing rules and regulations that will shape the trajectory of medical cannabis in the state. Though medical marijuana is now enshrined in the Arkansas state constitution, the Commission’s implementation of the law will largely determine the character and viability of the system.

Investors and entrepreneurs looking to capitalize on Arkansas medical marijuana should consider several questions raised by the legalization amendment itself and by the actions the Medical Marijuana Commission has taken since the November vote. The Commission has yet to promulgate final rules, and it will not do so for at least a few more months. But the rules trickling in already shed some light on several challenges and opportunities facing early movers in Arkansas’ medical marijuana industry.

Do I have to be an Arkansas resident to enter the industry? Not necessarily. Issue 6 as passed requires an individual applying for a dispensary or cultivation license to have been a resident of Arkansas for the past seven consecutive years and a rule adopted by the Commission requires applicants establish residency through two forms of identification. However, Issue 6 requires only that 60% of the individuals owning an interest in a medical marijuana dispensary or cultivation operation meet the residency requirements. This means that even though the individual named as the applicant on the form must be a long-time, continuous resident of Arkansas, that individual can recruit non-resident investors if Arkansas residents make up 60% of the syndicate. Interestingly, Issue 6 states that 60% of owners must be Arkansas residents – not that 60% of the cannabis company must be owned by Arkansas residents. Accordingly, a group of six Arkansas residents could own a medical marijuana facility with as many as four non-residents even if the four non-residents own a disproportionate share of the ownership interest.

Residency rules are more and less restrictive for other medical marijuana stakeholders. For example, “visiting qualified patients” (defined as visitors and those who have lived in Arkansas for less than 30 days) may receive medical marijuana from Arkansas dispensaries if they present a valid medical marijuana registry identification card from another state. On the other hand, members of the Arkansas Medical Marijuana Commission must be residents for ten years.

Are there capital requirements to obtain an Arkansas cannabis license? Capital requirements are a big obstacle to entering the Arkansas medical marijuana market. The Commission recently approved a licensure and renewal fee of $100,000 for dispensaries and cultivation operations. This is in addition to the several thousand dollar –- and only partially refundable -– application fee. The fees are steep, especially considering the uncertainty surrounding the mostly unknowable and uncertain market and regulatory environment of the fledgling Arkansas medical marijuana industry. The Commission also required proof of assets or a surety bond of $1,000,000 and proof of $500,000 in liquid assets to obtain a license. We see these high financial barriers as likely to limit the growth of Arkansas’ cannabis industry, while at the same time leading to experienced and well-funded non-residents taking a large stake in it by providing necessary start-up capital. Our cannabis business lawyers are already getting a slew of calls and emails from cannabis industry veterans from outside Arkansas looking to get in and from Arkansas residents looking for experienced outside help and funding.

What else should I know before getting into an Arkansas cannabis business? In addition to the usual concerns about federal illegality of marijuana and obstacles to operating a marijuana business like lack of banking, investors in Arkansas should beware that the Arkansas Medical Marijuana Commission has yet to complete its work creating rules and much could change. Ultimately, the Commission’s final rules will not be finalized for a few months and all manner of restrictive local land use codes, ordinances, and other laws could result. Nonetheless, the potential for a vibrant medical marijuana industry in Arkansas is undeniable and investors and entrepreneurs should pay close attention. After all, Arkansas is famous for its diamonds in the rough.

Cannabis estate planningLike many business owners, those who find success in the cannabis industry often want to leave their assets to friends and family at death. Unlike many other business owners, however, successful cannabis business owners’ largest assets are likely to be tied to what the federal government considers an illegal criminal enterprise. Whether you wish to bequeath a large grow operation, an ownership interest in a dispensary, or even a small personal stash, transfers of cannabis-related assets at death present unique challenges for individuals and estate planning professionals. No matter the situation, the basic question remains the same: What happens to my weed when I die?

Law professor Gerry W. Beyer of Texas Tech and Brooke Dacus published a law review article last year that sought to answer this question. It is an essential read for anyone in the cannabis industry considering how to arrange their affairs and the distribution of cannabis-linked assets at death. As is the case with many issues surrounding state-legal cannabis, a critical issue is the differential treatment of marijuana under state and federal law. Even in the realm of state law, however, the use of cannabis – even as part of a state-legal medical marijuana program – can raise issues related to one’s capacity to execute a will or even receive distributions from certain trusts. Beyer and Dacus do an excellent job awill actually be seized, it is impossible to know if that will be the case when it is time for a will to be administered.

What is more, a beneficiary may be criminally liable for possessing illegal materials like cannabis by function of the administration of the will itself. Beyer and Dacus draw a poignant analogy to a case where a beneficiary was found guilty of illegally possessing a firearm by a felon after having been given his father’s antique war-era gun at his father’s death and then keeping that gun unloaded in a closet. The court held that the heir’s possession of the firearm in a space the heir controlled was enough to violate the law. Beyer and Dacus also ask whether and to what extent an executor can administer an estate without exposing themselves to criminal liability. At least one federal court case cited by Beyer and Dacus suggests courts will not permit an executor to administer a will that includes cannabis, leaving the door open to penalties or perhaps even prison for someone who does so. It is important to note that cannabis and cannabis-related assets are subject to estate tax regardless of their legality.

Still other issues cloud the presumptive validity of a will executed by a testator who frequently uses cannabis or is under the influence of cannabis at the time of will execution. Though past habitual “drug use” has been found to interfere with testamentary capacity in some instances, Beyer and Dacus suggest most wills will be valid when an individual who uses cannabis is in fact in a state of mind to make estate planning decisions. Nonetheless, cannabis users and business owners should at least consider taking extra steps to demonstrate their testamentary capacity, such as by using a video explaining their intent, for example.

The wave of cannabis reform in the United States has been a game changer in many arenas, including the seemingly mundane like estate planning. Yet law can often be slow to catch up. Cannabis is a multibillion dollar industry on the cusp of even greater expansion, and those who reap the spoils should consider how to best protect and share their success with future generations.

Who knows, maybe someday cannabis estate planning will be a legal speciality.

home grown cannabisAs cannabis reform continues to spread across the United States, we are seeing a marketplace increasingly driven by business interests. This is the eighth installment in our series looking at how the changing landscape of cannabis policy affects a key group of often-overlooked stakeholders: medical marijuana patients who choose to cultivate their own supply of cannabis. Go here for the home grown laws in Washington and Oregon, here for the laws in California and Alaska, here for the home grown laws in Michigan and Illinois, and here for the laws in New York, Rhode Island, and Vermont, here for the laws in Hawaii, New Mexico and Nevada, here for Colorado and Montana, and here for the laws in Arizona, DC, and Massachusetts. Though there are undeniably many benefits to the expansion and professionalization of the commercial cannabis industry, it is also important to account for these small-scale medical marijuana producers that started it all.

2016 saw many states approve recreational or medical cannabis reforms. Though progress has been limited at the federal level, the tide of public opinion and state policy is increasingly clear. As part of our series on home cultivation of marijuana, what follows is a round-up of November changes to home cannabis cultivation in multiple states.

The new recreational marijuana states:

California. The first state to legalize medical marijuana has now embraced recreational cannabis with the passage of Proposition 64 in November 2016. The old law exempted qualified patients from prosecution if they cultivated no more than 100 square feet of marijuana for their own personal, medical use. Primary caregivers were permitted to grow up to 500 square feet.

The new law requires that amounts of marijuana possessed by people 21 years or older in excess of 28.5 grams be kept within or on the grounds of a private residence. The law allows no more than six living marijuana plants to be “planted, cultivated, harvested, dried or processed” within a single residence at one time. The state law also protects localities’ ability to pass laws regulating home cultivation within their jurisdictions.

Nevada. Nevada also voted to legalize recreational cannabis this November by passing its Question 2, though it had previously permitted medical marijuana. Nevada’s new law permits possession of up to one ounce of marijuana. It also allows home cultivation for individuals who live more than 25 miles from a registered marijuana dispensary. These individuals may grow up to six mature cannabis plants at a time.

Massachusetts. Massachusetts voted to approve legal recreational marijuana by passing Question 4 this year. The state allows persons 21 years of age and older to possess up to 10 ounces of marijuana at their home and grow up to 6 marijuana plants, up to 12 per household.

Maine. Like most of the other states to legalize recreational marijuana in 2016, Maine’s new law, Question 1, allows adults over 21 to cultivate up to 6 mature cannabis plants and possess as many as 12 immature plants. Outdoor grows are more heavily regulated.

 

The new medical marijuana states:

Florida. Unfortunately for green thumb patients and master growers alike, Florida’s Amendment 2 does not currently permit home cultivation of marijuana as part of its new medical marijuana program.

Arkansas. Arkansas’ Issue 6 also does not permit home cultivation of medical marijuana. Look here for more of our thoughts on Arkansas medical marijuana.

North Dakota. North Dakota’s Measure 5 allows qualified patients who live at least 40 miles from the nearest registered dispensary to grow their own.

Montana. Voters in Montana approved I-182 in November to permit medical marijuana in the state. Qualified patient home growers are allowed a total of 4 mature plants and as many as 12 seedlings. Patients are allowed to possess one ounce of usable marijuana.

Even as the tides of federal cannabis policy become increasingly uncertain, these states evidence that the times are indeed changing, and this holds true for growing your own as well.

 

Cannabis lawyersWalking home one freezing night in December 2014, I was taken aback to look up and see a storefront with a bright neon sign that read “CBD OIL SOLD HERE” in the window. It was not the “what” of the sign that startled me – CBD oil is, of course, a product with many therapeutic qualities and a wide range of uses – but the “where.” Far from cannabis-friendly Seattle, I was home for the holidays in southwest Missouri, a socially conservative state where attempts to even put medical marijuana on the ballot face fierce opposition. Though only a first-year law student at the time, I knew enough to know something did not add up: CBD is derived from the cannabis plant, and marijuana is illegal under federal — and, in Missouri, state law. Therefore, I thought, CBD is illegal. How were they getting away with this?

As I now know – and as we have explained before – the business in question was relying on an ambiguity in the Federal Controlled Substances Act’s definition of “marijuana.” The Controlled Substances Act does not include in its definition of “marijuana” the plant’s “mature stalks.” Mature stalks are the part of the cannabis plant used to make hemp, which is not prohibited by the Controlled Substances Act either. The stalks also contain CBD oil that can be extracted and used just the same as CBD derived from other parts of the plant. The ambiguity was enlarged with the passage of the 2014 farm bill, which allowed some cultivation of hemp with THC levels below 0.3%. Ergo, CBD oil is not technically illegal – right?

Wrong.

Two days ago, the Drug Enforcement Administration issued regulations that effectively put the kibosh on attempts to dance around the Controlled Substances Act’s definition of “marijuana” when it comes to CBD oil. The new rule creates a new “Controlled Substances Code Number” for “Marihuana Extract” and extends that classification to extracts “containing one or more cannabinoids from any plant of the genus Cannabis.” Because CBD is a cannabinoid and hemp is a plant of the genus Cannabis, the rule explicitly applies to the many CBD products currently being widely sold online and in shops like the one I encountered in Missouri. DEA confirmed as much in response to public comment on its initially proposed rule, stating that “[f]or practical purposes, all extracts that contain CBD will also contain at least small amounts of other cannabinoids. However, if it were possible to produce from the cannabis plant an extract that contained only CBD … such an abstract would fall within the new drug code 7350.” DEA justifies its new rule as necessary to fully comply with the UN Convention on Narcotic Drugs and finds its statutory authority to promulgate the rule in the Controlled Substances Act.

What does this mean for sellers of CBD extracts online or in states with unfriendly cannabis laws? It means the DEA is explicitly saying that it considers your product to be illegal under the Controlled Substances Act along with other illicit cannabis products. It also means that they are enhancing their ability to track CBD and enforce its interpretation of the law.

In truth, CBD merchants were probably always on the wrong side of the gray area in DEA’s eyes because CBD extracts almost necessarily contain other cannabinoids. As DEA stated in its justification: “Although it might be theoretically possible to produce a CBD extract that contains absolutely no amounts of other cannabinoids, the DEA is not aware of any industrially-utilized methods that have achieved this result.” The difference now is that the DEA is officially putting CBD sellers on notice that their businesses are subject to enforcement action.

Though our cannabis lawyers are unhappy with the DEA’s statement, we would be remiss if we did not tell you that you would be wise to heed this warning: selling CBD is illegal.

Cannabis attorneysCannabis businesses must navigate many hurdles to survive and thrive in today’s evolving marijuana legal landscape, but not all challenges unique to this industry are caused by its precarious status under the law per se. Odor generated by marijuana cultivation is a prime example. As we have written previously, noticeable cannabis odor does not always make for a successful nuisance claim. But because not everyone wants to live next door to a pungent grow house, many localities have instituted specific rules to keep marijuana smell contained. This Cannabis Case Summary looks at the serious cost to cannabis businesses of disregarding cannabis smell rules, the potential difficulty of proving legal causation of marijuana odor, and the value of being a good neighbor.

According to the Boulder Daily Camera, Colorado cannabis producer Dandelion Grow was hit with a $14,000 fine in November for failing to comply with local cannabis odor rules. The citation came after a series of complaints that the grow’s smell could be detected from more than a block away. The city of Boulder requires cannabis businesses to limit odor to their own premises; Boulder County more permissively draws the line at licensees’ property boundaries. In response to the cannabis odor complaints, City of Boulder officials ordered Dandelion Grow eliminate the offensive odor and pay a $4,000 fine.

Just a weeks later, Dandelion Grow incurred a second fine for an identical cannabis odor violation – this time for $10,000. According to a Boulder city spokeswoman, Dandelion Grow had “elected not to make the necessary changes to come into compliance” with Boulder’s marijuana odor regulations. Dandelion Grow disputes this characterization and is moving to appeal the citation.

According to reports, Dandelion Grow is resting on two main theories to support its appeal. First, that such large fines – the largest in the history of Boulder’s legal cannabis industry – are unduly punitive because the company is working in good faith with the city to remedy the smell issue. Second, Dandelion Grow argues that it is only one of several cannabis-related facilities in the immediate area and the City of Boulder is arbitrarily pinning the odor on Dandelion Grow without adequately proving it is the only – or even the major – contributor to the cannabis odor.

This argument raises interesting questions concerning tort liability for a conventional nuisance claim with the same facts where a defendant presses on the element of causality. Unless and until the fabled marijuana breathalyzer begets court-admissible marijuana smell-o-vision, isolating a smell in a cluster of marijuana grow sites in close proximity will probably remain an inexact science.

However the Dandelion Grow case plays out, it should serve as a cautionary tale to cannabis businesses that local cannabis smell ordinances can carry real costs and consequences. Beyond the fines and the publicity, Dandelion Grow has also incurred and will likely continue to incur attorneys fees in fighting against the fines. We do not have enough facts to know what Dandelion Grow might have done differently, if anything at all, but this case should serve as a warning to cannabis growers to be wary of local laws, including cannabis smell laws.

NOTE: The above is part of our plan to summarize all cannabis civil cases with a published court decision. By civil case, we mean any case that involves cannabis or the cannabis industry that is not a strictly criminal law matter. These cannabis case summaries are intended both to keep you up to date on cannabis laws as interpreted by the courts and also to serve as a resource for anyone conducting cannabis law research. We also will seek to provide key unpublished cannabis law decisions as well, when available.