Federal law and policy

California cannabis bankingPolitical change comes in fits and starts. Cannabis laws did incredibly well at the state level in the 2016 election cycle, but it looks like we are going to be facing the status quo at the federal level for the foreseeable future. That is good news to some extent, as it is seeming less and less likely that the worst case scenario of the Trump/Sessions Department of Justice will come to fruition. We aren’t expecting to see mass arrests, seizures, and shut-downs in the cannabis industry. On the other hand, we also aren’t expecting to see any major positive changes on cannabis banking or taxes coming out of this government either. The unsteady status quo will remain, where agencies at the federal government will continue to grapple with balancing the criminality of marijuana with the fact that they cannot treat it as wholly criminal, lest they bring about more crime by burying their heads in the sand.

With banking in particular, things have remained relatively consistent since 2014. In February of that year, the Department of Justice and the Financial Crimes Enforcement Network (FinCEN) at the Department of Treasury released simultaneous memoranda creating a civil structure where financial institutions like banks and credit unions that provide services to the cannabis industry could comply with their regulatory obligations. They would still potentially be committing crimes, but the DOJ would treat them as the lowest enforcement priority.

That 2014 announcement of criminal and administrative enforcement strategy was scoffed at by large financial institutions, for good reason. If you are Bank of America, marijuana simply isn’t a large enough market for you to take any sort of criminal risk. But for smaller banks and credit unions, especially those that had been hit hard by the financial crisis, the memoranda provided just enough cover to take the cannabis risk. Between 2014 and now, Washington and Colorado have developed a small but stable network of financial institutions willing to serve the cannabis industry. Oregon has fewer institutions, but it is coming along as well.

California, however, was left behind, and medical marijuana businesses there still struggle to find banks willing to take their money. This is because of the particular wording in the 2014 FinCEN guidance. In order to comply with their regulatory obligations, part of what banks and credit unions that work with marijuana-related businesses have to do is verify that their cannabis business customer is duly licensed by a state that has robust regulations for its marijuana businesses. Until now, California has not had state-licensed marijuana businesses. It has worked under a series of vague state laws, with individual cities and counties coming up with their own regulations for marijuana businesses that have ranged from outright bans to open licensing processes. These local regulations have worked well in some circumstances, but they are insufficient for banks or credit unions that want to provide services to the marijuana industry without facing FinCEN’s wrath.

This is important for the banks because it isn’t only FinCEN that cares about compliance with their guidance. Federal providers of deposit insurance (the FDIC for banks and the NCUA for credit unions) are unlikely to renew a financial institution’s insurance policy if it looks like that institution is working with marijuana businesses but not following the FinCEN guidance. And that deposit insurance is key in separating banks and credit unions that provide real security for your funds and fly-by-night institutions that could potentially lose all your money.

But things are finally changing in California as we coming up on the issuance of state cannabis licenses in January 2018. This will finally give California’s banks and credit unions a system that allows them to comply with the FinCEN and DOJ guidance. And we predict that much like in other states, the early movers will be small banks and credit unions that are willing to take on a little bit of risk to gain the first-mover advantage. I have said for a long time that I don’t think a “cannabis-only” financial institution is the answer. A bank that only serves cannabis businesses would be subject to too much risk because it is only exposed to a single industry that happens to be criminal at the federal level. They would be completely uninsurable. So the best bet is for financial institutions that already have robust and diverse holdings to work with a number of cannabis businesses up to a maximum based on the size of the rest of the bank’s or credit union’s business.

For banks and credit unions looking to do this, it isn’t too early to start working on developing cannabis specific procedures. Well-run financial institutions have a compliance program in place that includes standard operating procedures and one or more employees dedicated to complying with the Bank Secrecy Act and other federal regulations. Those compliance officers will need to update standard operating procedures to include additional scrutiny for marijuana businesses and regular account updates. It is imperative for financial institutions to make sure those procedures are well-tailored so they are sufficient to meet the FinCEN guidelines while not being so cost-prohibitive that the bank or credit union will lose money on cannabis clients.

Most financial institutions in Washington and Colorado and Oregon that operate in the cannabis industry do so with little fanfare and rely on customer networking to get business. That will likely be the case in California as well, so there may not be much fanfare from banks and credit unions that are getting into the market. But we are confident that very at least some California banks and credit unions will start taking on cannabis accounts in the coming months.

Cannabis scienceLast week we dropped some science about the current state of cannabis research with a focus on a recent study reviewing all research to date on the positive and negative health effects of cannabis. The “overwhelming takeaway” was that additional research was needed.

We wanted to highlight another study from early April that was published in the Journal of Psychopharmacology. The study doubles down on the potential political ramifications of cutting-edge cannabis research. The team, inspired by earlier studies suggesting that medical cannabis leads to a reduction in opioid overdose deaths, decided to determine whether cannabis’ “substitution effect” applies to other medications. Among New England dispensary members, the results of medical cannabis are stark:

  • 76.7% of respondents reported that they reduced their opioid use since starting medical cannabis.
  • 71.8% reported reductions in anti-anxiety medications.
  • 66.7% reported reductions in migraine medications.
  • 65.2% reported reductions in sleep medications.
  • 42% reported reductions in alcohol consumption.
  • 37.6% reported reductions in antidepressants.

These results reconfirm that medical cannabis reduces opioid use, and now we also know that medical cannabis reduces use of alcohol, antidepressants, and a field of other medications. The team is quick to caution that these results were based on self-reporting and then repeated a far too common refrain, “Additional research is needed.”

Perhaps we could expect to see that research soon, if only the current political climate were not so vehemently anti-science. President Trump recently said: “Drug overdoses are now the leading cause of accidental death in our country. And opioid overdose deaths have nearly quadrupled since 1999 . . . Our Attorney General, Jeff Sessions, is working very hard on this problem. It takes a lot of his time, because this causes so much of the problem that you have to solve – that problem.”

Roughly translated, the President and his staff have recognized that opioid abuse has reached epidemic proportions that require immediate action. The science clearly gives us one piece of the solution: decriminalize cannabis. But with an administration willing to make the insultingly anti-scientific claim that cannabis is “only slight less awful” than heroin, we the people (and Trump’s supporters in particular) will likely be left waiting for a rational administration.

 

Marijuana lawIf you hadn’t noticed, the federal government was set to shut down on Friday due to lack of funding. Thankfully, our House and Senate representatives reached a tentative deal yesterday morning to avoid that. Better still, the budget deal extends the Rohrbacher-Farr Amendment provisions, which prohibit the U.S. Department of Justice from spending money to interfere with implementation of state medical marijuana laws. The legislation should pass later this week.

The new medical cannabis rider will likely be referred to as the Rohrbacher-Blumenauer amendment, or something similar, as Earl Blumenauer (D.-OR) has replaced outgoing house member Sam Farr as a co-sponsor of the rider. Here is the rider’s current proposed language:

SEC. 537. None of the funds made available in this Act to the Department of Justice may be used, with respect to any of the States of Alabama, Alaska, Arkansas, Arizona, California, Colorado, Connecticut, Delaware, Florida, Georgia, Hawaii, Illinois, Iowa, Kentucky, Louisiana, Maine, Maryland, Massachusetts, Michigan, Minnesota, Mississippi, Missouri, Montana, Nevada, New Hampshire, New Jersey, New Mexico, New York, North Carolina, Ohio, Oklahoma, Oregon, Pennsylvania, Rhode Island, South Carolina, Tennessee, Texas, Utah, Vermont, Virginia, Washington, West Virginia, Wisconsin, and Wyoming, or with respect to the District of Columbia, Guam, or Puerto Rico, to prevent any of them from implementing their own laws that authorize the use, distribution, possession, or cultivation of medical marijuana.

By our count, that’s 44 states, plus D.C., Guam and Puerto Rico. For some reason, at least two states with new medical cannabis laws are left out. Those states include North Dakota, where voters approved a medical marijuana ballot initiative in November, and Indiana, whose governor signed a restrictive CBD medical cannabis bill into law late last week. Hopefully these omissions were just an oversight and North Dakota and Indiana make the final cut.

The FY2017 budget deal also extends protection of state industrial hemp programs from federal interference, and prevents Washington, D.C. from spending its own money to tax and regulate marijuana sales. An overview prepared by House Democratic Appropriations Committee members noted that the bill does not, however, include language protecting banks from penalties for working with state-legal marijuana businesses, which some in Congress had pushed for.

Like everything else in the spending bill, Section 537 is not a permanent solution of any sort – it merely kicks the can down the road until September 30, when FY2017 ends. Section 537 also is not the long-term fix medical (and adult use) cannabis businesses need, especially in the era of Jeff Sessions and a brutal executive branch.

Looking ahead, we do know from conversations with Rep. Blumenauer’s office that FY2018 legislation being drafted by lawmakers includes extension of the helpful Section 537 language. We also know that most of President Trump’s large proposed cuts take place in the FY2018 budget, and that his cuts do not include Rohrbacher-Blumenauer– at least for now.

But this is where it gets tricky. If medical marijuana safeguards are not present in the FY2018 House proposal, supporters will have to push for amendment on the House floor or in the Senate Appropriations Committee. That’s a tough slog, because House leadership has begun to restrict the scope of policy riders allowed to come to the floor. Last summer, for example, proposed amendments on banking services for marijuana businesses, and on Washington, D.C.’s ability to spend money regulating cannabis, were blocked from floor consideration altogether.

Note that over the past few years, Rohrbacher-Farr has withstood DOJ challenges and garnered a significant uptick in support. In 2014, the measure was approved in the House by a relatively narrow vote of 219-189. In 2015, the approval margin grew to 242-186. Since the last House floor vote, several more states have enacted medical or adult use cannabis laws, and a number of prohibitionists who opposed those measures have been replaced with freshman supporters.

Today, cannabis reformers are confident that if they can get an FY2018 amendment to a House vote, it will easily pass again. It also appears likely that advocates have the votes to pass a broader amendment protecting all state marijuana laws from federal interference — including those allowing recreational use. A measure along those lines came just nine votes short of passing on the House floor in 2015.

Why Congress won’t just change the law, rather than restricting its enforcement, is a question for another day. For now, though, medical marijuana businesses can breathe a bit more easily, at least until September 30.

Donald Trump is expected to announce Representative Tom Marino (R-Pa.) as our country’s next director of the Office of National Drug Control Policy, colloquially known as the US drug czar. As drug czar, Marino would evaluate and coordinate domestic and international our country’s anti-drug efforts and advise the President on U.S. anti-drug efforts. The whole drug czar “thing” is bad news and Marino himself is even worse. He is “just another anti-marijuana, pro-pharma” extremist.

Tom_Marino_Official_Portrait,_112th_Congress

Marino began his professional career as a prosecutor who sought to do his part on in the “war on drugs” by prosecuting drug offenders. Since 2010, Marino has served in the U.S. House of Representatives and consistently opposed measures to reform federal cannabis law.

Marino voted against the Rohrabacher-Farr amendment which prohibits the Department of Justice from using federal funds to prevent states from implementing medical marijuana laws. He also voted against a measure allowing Veterans Affairs doctors to recommend medical cannabis to their patients and he opposed measures to ease federal restrictions on hemp and CBD. When asked about marijuana legalization, Marino stated he would consider legalizing cannabis only “if we had a really in depth-medical scientific study,” and if medical cannabis were available only in “pill form.” In other words, if it has anything to do with liberalizing our cannabis laws, Marino is against it.

 

According to the “Office of National Drug Control Policy Reauthorization Act of 1998” the drug czar “shall ensure that no Federal funds … shall be expended for any study or contract relating to the legalization (for a medical use or any other use) of a substance listed in schedule I” of the Controlled Substances Act and “take such actions as necessary to oppose any attempt to legalize the use of a substance” listed in Schedule I. Cannabis is still a Schedule I substance and therefore subject to this blanket prohibition on legalization and research.

Marino is no friend of cannabis legalization and Trump’s having has tapped someone with such outdated views is concerning. But even more concerning is the mandate that any drug czar must oppose all marijuana legalization efforts. More than half the states  have legalized medical marijuana and eight states have legalized recreational cannabis, with more to come. With legalization, the evidence that it works better than prohibition is piling up. This country’s director of drug policy should have the discretion to consider this evidence and draw his her own conclusions on cannabis prohibition. As things now stand, the role of our drug czar is not so much to craft policies based on changing realities, but to ensure that our drug policies remain stuck in another era. This is bad policy and it makes no sense and it needs to change.

Earlier this year, the Trump administration considered cutting the Office of National Drug Control Policy entirely. Unfortunately, the President’s tapping Marino as the next drug czar indicates he is now heading in a very different direction. Who needs a drug czar anyway? Trump had it right initially. This office should be eliminated and fast.

Cannabis credit cards

Because of federal prohibition, marijuana businesses have limited access to financial services. Distributing cannabis is a federal crime and proceeds from cannabis sales trigger anti-money laundering laws. The Bank Secrecy Act requires banks combat fraud and money laundering and protect against criminal activity. This Act mandates banks investigate their customers for criminal activity and it prohibits banks from doing business with bad actors. Additional banking laws also require national banks file Suspicious Activity Reports (SARs) with the federal government when they know or suspect an account holder is engaged in or trying to cover up illegal activity.

Yesterday, I participated on an educational panel entitled, “The Marijuana Industry & Financial Services: What’s Happening? What’s in Store?” at the American Bar Associations’ Business Law Section Meeting in New Orleans. This panel was co-sponsored by the ABA’s Credit Card Committee, highlighting how important the banking and financial services issues are to both the cannabis industry and to the financial services industry. Federal cannabis prohibition has been hugely costly to the cannabis industry and its customers and to the financial services industry as well, not to mention the massive public safety issues engendered by having to work in an all-cash business.

Federal banking laws kept most banks and credit unions from knowingly working with marijuana businesses until February 2014, when the Financial Crimes Enforcement Network (FinCEN) and the Department of Treasury issued guidelines for financial institutions that want to bank cannabis businesses. These guidelines require banks and credit unions vet their marijuana business customers and regularly report their marijuana customers’ activities to the federal government to ensure compliance with the 2013 Cole Memo.

Though the FinCEN guidelines address getting a bank account (and thoughseveral U.S. Senators have asked for increased guidance from FinCEN regarding banking marijuana ancillary businesses), there are no federal guidelines regarding credit card usage in the cannabis industry, and so none of the big credit card networks (Visa, MasterCard, American Express, Discover) allow their cards to be used for buying or selling of cannabis. This means that even if a marijuana retailer manages to open and maintain a bank account, it likely has no way to accept credit card payments and cannabis customers still typically pay in cash to purchase marijuana products. Even the FinCEN guidelines don’t completely alleviate the cash issue as a result.

These cash payment issues have forced marijuana retailers to employ alternative payment processing methods, such as cashless ATMs, third party payment programs, and bitcoin. These non-bank financial services address many of the problems that arise from running a cash-only business, but they also come with their own set of challenges. Just by way of one example, my law firm’s cannabis business lawyers have handled many cases where banks stopped paying third party payment processors,  resulting in our clients (the cannabis businesses, themselves) not getting paid. No alternative payment service matches traditional credit cards on safety, costs or ease of use. Unless and until cannabis becomes federally legal, cannabis businesses and their customers will still need to employ credit card workarounds (for better or worse).

For more on cannabis and the banking industry, check out our following posts on this topic:

 

Is CBD legalThe DEA announced a new Final Rule late last year regarding “marihuana extracts” that left many in the industrial hemp and CBD industries concerned. The new rule created a separate classification for “marihuana extracts,” which it broadly defined as “any extract containing one or more cannabinoids that has been derived from any plant of the genus Cannabis.” This definition facially includes hemp-based goods running the gamut from hemp rope sandals to hemp lotion to therapeutic CBD oils, but critics have countered that such a definition exceeds the prohibition of “marihuana” created by the Controlled Substances Act. Some fear the DEA’s broadening of what constitutes marijuana extracts foreshadows a more aggressive federal enforcement posture that could devastate hemp-related companies the DEA now (and always) regards as criminal enterprises.

The DEA’s rule will soon be put to a court test as The Hemp Industries Association, Centuria Natural Foods, Inc. and RMH Holdings, Inc. last week filed a challenge to the DEA rule in the federal Ninth Circuit Court of Appeals. Whatever the result, this court’s ruling will likely significantly impact the future of the hemp-related industry and implicate key components of the burgeoning cannabis reform movement as well.

The core of the plaintiffs’ argument is that the DEA rule conflates “marihuana”—the substance prohibited by the Controlled Substances Act—with all cannabinoids and all parts of the cannabis plant, which it lumps into “marihuana extracts.” Plaintiffs point to legislative history that in 1937 Congress chose to use the term “marihuana” because at the time there was no meaningful and scientifically valid way to distinguish between the plant itself and the constituent parts Congress sought to outlaw. Plaintiffs also point to the 2014 Farm Bill, which permitted industrial hemp production so long as the plants remain below a threshold THC level, and the Consolidated Appropriations Act, which prohibited using federal funds to enforce the Controlled Substances Act against certain cannabis business. Plaintiffs contend that these legislative moves, along with greater scientific understanding of the cannabis plant and the ability to isolate specific components of the cannabis plant, all indicate Congress’s intent to carve out space for these businesses to operate legally. Plaintiffs also contend that the Ninth Circuit itself, in a 2004 case, recognized that not all naturally-occurring cannabinoids are per se prohibited by the Controlled Substances Act.

Plaintiffs contend the DEA exceeded its scheduling and enforcement authority under the Controlled Substances Act by undertaking a “de facto scheduling” of substances not contemplated by the Controlled Substances Act and that Congress views as distinct from marijuana as a “drug.” Plaintiffs essentially allege that with this rule the DEA is attempting to enforce a law Congress never enacted. This is a common challenge to expansive administrative rulemakings, but its application to any particular situation can be hard to predict and it usually hinges on the court’s reading of the underlying statute and the level of deference the agency’s action deserves.

We will keep an eye out as this case progresses and pass along any important updates as they come in.

Marijuana policy Oregon Washington CaliforniaYesterday, the governors of Oregon, Washington, Colorado and Alaska submitted a brief, plainspoken letter to two federal officials: Attorney General Jeff Sessions, and Treasury Secretary Steve Mnunchin. The letter requests that the Trump administration respect states’ rights, and engage with the governors “before embarking on any changes to regulatory and enforcement systems” related to state-legal marijuana. You can view the letter here.

Anyone following the story of weed in America knows that Jeff Sessions holds retrograde views on cannabis. Mnunchin has been more circumspect, stating only that FinCEN guidance on banking pot businesses is a “very important issue” and that he would “work with Congress and the President to… ensure that all individuals and businesses compete on a level playing field.” Unlike Sessions, Mnunchin has not shown his hand on cannabis policy to date.

The governors’ letter is not the first communication by any of these states with the new regime regarding cannabis. On February 15 Governor Jay Inslee of Washington wrote to Sessions requesting a meeting on the cannabis issue, which appears not to have been granted. The next week, Governor Kate Brown of Oregon attended a meeting with several other governors and President Trump, who purportedly wanted to give “more flexibility to the states”— at least in a general sense, and at least on that particular morning.

Other key players, like Washington Attorney General Bob Ferguson, have taken a less conversational approach, and promised to fight the feds on cannabis. (If you are wondering how that may pan out, see our analysis here and here.) This combative approach has been echoed by Oregon Attorney General Ellen Rosenblum, as well Oregon U.S. Senator Ron Wyden and Representative Earl Blumenauer, dependable cannabis advocates who have been busy charting a Path to Marijuana Reform as well.

So, which approach is best? Maybe all of them. It is clear that state governors, officials and representatives are not going to rest while the threat of federal enforcement looms. Private industry has also banded together, with lobbying groups like the New Federalism Fund, which consists of marquee industry players (including Canna Law Group clients), rising to the fore. The April 3 governors’ letter is only the latest in a series of salvos by states and the industry. Expect more to come.

Though 29 states have some form of cannabis legalization, the federal government still lists marijuana as a Schedule I controlled substance in the Federal Controlled Substance Act (CSA). According to the CSA, cannabis has no recognized medical benefit, has a high risk for abuse, and is too dangerous to research even under medical supervision.

A series of bills introduced in both the House of Representatives and the Senate could change all this. Senator Ron Wyden (D-Ore) and Representative Earl Blumenauer (D-Ore) introduced the legislative package on March 30 as the “Path to Marijuana Reform.” The package is made up of the three following bills:

  • The Small Business Tax Equity Act. This would create an exception to 280E that would allow a marijuana business that complies with state law to claim deductions and credits associated with state-legal selling of marijuana. This would allow marijuana businesses to deduct common business expenses like rent, most utilities, and payroll. Marijuana businesses could also claim tax credits, like those intended to incentivize energy efficiency, research and development, or hiring veterans. In other words, cannabis businesses would start being treated by the tax code as legal businesses, not criminals.
  • The Responsibly Addressing The Marijuana Policy Gap Act. This would address the gap between federal and state law by amending the CSA to exempt persons acting in compliance with state marijuana law from criminal penalties under the CSA. This Act would also reduce barriers for state-legal marijuana businesses by allowing them easier access to banking, bankruptcy protection, marijuana research, and removing prohibitions against advertising marijuana. It would also establish an expungement process for certain marijuana violations which would allow access to public housing and federal financial aid for higher education and would ensure that a person cannot be deported or denied entry to the U.S. solely for consuming marijuana in compliance with state law. Finally, it would ensure veterans have access to state-legal medical marijuana and protect Native American tribes from punishment under federal marijuana laws.
  • The Marijuana Revenue and Regulation Act would remove marijuana from the CSA which would allow marijuana to be regulated at the federal level. It would impose additional taxes on marijuana products, including an excise tax similar to the one currently imposed on cigarettes, and it would establish an occupational tax on marijuana producers and on marijuana products. It would establish federal permitting for marijuana business under a system operated by the Department of Treasury. It would also allow for regulations to control marijuana advertising and packaging.

In a statement, Rep. Blumenauer used his home state to highlight the problems with conflicting state and federal laws on cannabis:

As more states follow Oregon’s leadership in legalizing and regulating marijuana, too many people are trapped between federal and state laws. It’s not right, and it’s not fair.

Passage of all three bills would drastically change an industry that has matured and grown despite federal opposition. It is too early to know whether these bills stand a chance of becoming law, but if these trio of cannabis bills does pass, they would leapfrog the U.S. into one of the (if not the) most progressive countries on cannabis. Even if these bills do not pass this legislative session, they will almost certainly serve as guidelines for eventual legalization. Many are skeptical of these bills passing in light of our current presidential administration, and yet, this may be exactly why their chances may be so good right now. Write your senator and your congressperson to let them know that full legalization is important to you.

Cannabis lobbyingNot much gets done in American politics, especially in Congress, without the influence of the hundreds of lobbyists that represent industries, labor, and other interest groups before Congress and federal agencies. The overwhelming role of lobbying has so far been seen as a net negative for the cannabis industry. Powerful alcohol, tobacco, private prison and pharmaceutical lobbies have every incentive to block federal cannabis reforms that could displace demand for competing products and certain prescription medication or cut down on prison time. Pessimists for the future of marijuana prohibition point to these groups as a primary impediment to generating the political will necessary to legislate an end to cannabis prohibition under the Controlled Substances Act.

In an effort to level the playing field, a coalition of cannabis industry leaders recently formed the New Federalism Fund (NFF). NFF aims to wield the increasing popular support and financial success of state-level cannabis programs to bring pressure on federal lawmakers to support progressive reform.

Who is NFF? Support for the group comes from a wide variety of cannabis industry stakeholders, both recreational and medical, and it runs the gamut from dispensaries to private equity funds. The most widely recognizable company on its founding board is Scotts Miracle-Gro, which entered the ancillary cannabis market in 2016. Other notables include LivWell EnlightenedHealth, Privateer Holdings, Native Roots, and Medicine Man.

NFF is organized as a 501(c)4 non-partisan lobbying organization.

What are NFF’s specific priorities? NFF’s website outlines the group’s founding initiatives for particular reforms and the following priorities:

State-first cannabis regulation. NFF advocates for a state-first approach to cannabis policy, emphasizing that it is the best framework for enhancing local economic prosperity through tax revenue and job creation, ensuring patient access, and diverting cannabis from the criminal market. NFF emphasizes the success of early cannabis states and their potential to serve as policy laboratories to serve as examples for other states as envisioned by the Tenth Amendment.

Codification of the Cole Memo. The tenuous legal authority of the Cole Memo is probably the most immediate threat to the cannabis industry. To that end, NFF advocates for codifying the memo’s hands-off approach to state marijuana legalization. Though Jeff Sessions recently signaled that the Cole Memo is still good authority, codification would provide the cannabis industry greater certainty.

Equitable taxation. NFF argues for changing IRC 280(e), the infamous tax provision that greatly limits cannabis businesses’ ability to take advantage of the tax advantages afforded other legal businesses.

Will NFF succeed? Who knows, and, for that matter, defining “success” in this context is tricky. So long as the federal government does not crack down on existing state cannabis programs, NFF may be able to claim victory simply for having helped to maintain the status quo. But, if the question is whether NFF will secure federal legalization of cannabis, the prospects for success dim significantly. Nonetheless, having a strong pro-marijuana lobby is in the interest of all cannabis stakeholders and is an important sign that the legalization movement is maturing.

Marijuana and cannabis safety standards ASTMASTM International recently announced plans to launch a new committee on creating technical standards and guidance materials for the full life cycle of cannabis products. The new ASTM cannabis committee initially plans to focus on developing voluntary consensus standards related to cannabis in the following six technical areas:

  • Indoor and outdoor horticulture and agriculture
  • quality management systems
  • laboratory
  • processing and handling
  • security and transportation
  • personnel training, assessment, and credentialing

The development of uniform standards for cannabis related products, systems and services is critical to the cannabis industry because there is no currently no consensus on how cannabis products should be produced and processed to ensure product quality and safety. Because cannabis and its derivatives are still illegal under federal law, federal agencies such as the Food and Drug Administration (FDA) have not enacted anything that resembles the regulations it has implemented for tobacco products or medications or food. Some states, such as Colorado and Washington, have some quality control and assurance rules, especially regarding the safety of edibles and the use of pesticides. However, many aspects of cannabis remain wholly unregulated at the state level, and the patchwork of state regulations introduced thus far by various states have been inconsistently drafted and implemented.

ASTM International is one of the world’s largest voluntary standards developing organizations and it has helped develop over 12,000 industry standards for materials and products ranging from aluminum to zippers. ASTM International draws input for proposed standards from volunteer members from around the world that represent a broad range of industry stakeholders such as producers, users, consumers, government and academia. ASTM standards are voluntary, but many government regulators cite to them in their laws, regulations and codes, thus giving them the force of law. They also are commonly referred to in court cases.

The process of drafting, reviewing, and approving ASTM standards for the cannabis industry will take time. Once a technical committee for cannabis is established, ASTM will establish subcommittees to address individual technical areas. Each subcommittee will establish a task group responsible for researching and drafting a proposed standard. The draft standard will then be reviewed and voted upon by the technical committee and then it will go to the full ASTM membership. Depending on the committee and subject matters, ASTM standards can be drafted, reviewed, and approved in as little as nine months, or can take more than a year.

This process of developing industry standards for cannabis presents an opportunity for a data-driven conversation on how the cannabis industry should evolve and mature. Identifying objective standards for best-practices in the processes of growing, producing, processing, transporting, and packaging cannabis products will be a necessary step if the cannabis industry is going to mature and sustain itself on a broader (and potentially international) scale. When railroads were first introduced in the United States, locomotives and railroad tracks used different gauges in different parts of the country because the railways initially were built only to serve local needs. The cannabis industry is in a similar early stage of development, with individual states drafting and implementing cannabis regulations that are inconsistent with others in other states. Ultimately, the development of industry standards is a necessary step that will help the cannabis industry grow beyond its current state limits and speed up the day when our country sees cannabis as just another legal product.