Canna Law Blog™ https://harris-sliwoski.com/cannalawblog/ Tough Markets, Bold Lawyers Wed, 27 Mar 2024 04:33:38 +0000 en-US hourly 1 https://wordpress.org/?v=6.4.3 https://harris-sliwoski.com/wp-content/uploads/cropped-Harris-Sliwoski-Logo-FinalIcon-White-1-32x32.png Canna Law Blog™ https://harris-sliwoski.com/cannalawblog/ 32 32 California’s Cannabis Industry Conundrum and the Road Ahead https://harris-sliwoski.com/cannalawblog/californias-cannabis-industry-conundrum-and-the-road-ahead/ Wed, 27 Mar 2024 14:00:10 +0000 https://harris-sliwoski.com/?post_type=cannalawblog&p=135329 Despite continuously surpassing every other state with recreational cannabis in terms of total retail sales, California’s cannabis industry has faced continuous and far-reaching issues on multiple levels that have only spread even further. From declining sales that result in hundreds of millions less in total retail sales to a massive illicit market that the state

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Despite continuously surpassing every other state with recreational cannabis in terms of total retail sales, California’s cannabis industry has faced continuous and far-reaching issues on multiple levels that have only spread even further. From declining sales that result in hundreds of millions less in total retail sales to a massive illicit market that the state ignores, problems abound. California has even seen a pattern of dispensaries and cultivation facilities across California being burglarized and robbed. Suffice it to say, the state’s industry has colossal problems, the magnitudes of which haven’t been seen by any neighboring state.

The issues don’t even include the many internal issues that the California industry is facing, such as unpaid debts and taxes equaling millions and a lackluster effort at social equity inclusion. In fact, issues regarding the illicit market are moving into other states and impacting their total sales as well. In just the first year of operation, the Unified Cannabis Enforcement Taskforce seized over $312 million in illicit cannabis in 2023, which amounts to more than the total cannabis sales of entire states combined. But as an aside, you can read my colleague, Griffen Thorne’s take on why those numbers are insignificant. Either way, given how admittedly widespread the illicit market of cannabis in California is, those several hundred million dollars in illegally grown cannabis seized by the state is just a miniscule fraction of the colossal amount of the total scope of that illegal and unregulated market.

Internal Struggles and Regulatory Hurdles

The ramifications of these many shortcomings and industry-wide problems are being felt like ripple effects that never truly stop flowing. Like the heads of a hydra beast, hardships and disadvantages spring up from one another when dealing with an industry as large yet frequently impeded upon such as the California industry. Worse even, the billion-dollar industry continues to considerably drop in total annual sales. In 2022, sales dropped over eight percent, equaling over $400 million and the total sales figure from 2023 shows an unfortunately similar pattern. In 2023, California dispensaries sold a total of $5.1 billion in total sales, which itself is a 4.7 percent decline in sales from the already slumping 2022.  In total, sales are down a considerable 11 percent from the highest point of sales in 2021 and month over month show painfully little sign of improvement.

Even among fully legal and compliant operators in California, delayed and delinquent tax payments are a growing issue, with hundreds of different tax liabilities being owed by various cannabis businesses. With the exorbitant taxes that California cannabis operators must already regularly pay, the penalties caused by these delays and tax debts could very easily put a business under.

Bay Area Shutdowns and Rising Crime

Any industry professionals who felt falsely optimistic that the precarious conditions and problems that plague the California cannabis industry wouldn’t trail into 2024 were proven entirely wrong, as those widespread and multi-faceted issues have followed nearly every legal and compliant cannabis operator well into the new year. Already dealing with several other systemic and engrossing issues which are the aftermaths of ineffective policies, the Bay Area in particular has been once again hit with a new problem caused by the cascading effects of the many previously mentioned issues.

Cannabis businesses across the state have been either permanently or at least temporarily shutting down. This is bad news for everyone with a stake in the industry – from owners, to employees, to customers, to even neighbors who could benefit from the now-lost tax revenue.

Enforcement Failures and Policy Repercussions

Throughout the tumultuous year of 2023, Bay Area law enforcement continued to conduct several million-dollar operations, with these raids easily surpassing $10 million and thousands of illegally cultivated cannabis plants. Even more concerning, multiple firearms and thousands in cash were also found in these illegal grows. But again, this enforcement is declining and not nearly enough.

What has occurred, and continues to unfold, is an existential crisis for the entire cannabis community. The cannabis industry and legalization were founded on the premise of ending the failed War on Drugs and ceasing the incarceration of mostly black and brown individuals for victimless crimes. However, the current strain on cannabis communities, influenced by the illicit market, has reached a critical point, and business owners are experiencing the increasingly negative impacts of long-term enforcement gaps.

The Path Forward: Challenges and Solutions

What activists fail to acknowledge is that we are now facing the consequences of policies promoted for decades. The rallying cry, “Nobody should go to jail for a plant,” must now evolve. It’s time to end the War on Drugs and begin enforcing regulations to protect the industry. Creative enforcement strategies, beyond imprisonment, must be explored. Enforcement agencies and the cannabis industry, despite their historical distrust, will need to collaborate to achieve this. A short-term policy of stronger enforcement through collaboration can help reduce predominantly illicit sales. Eventually, this will lead to broader consumer acceptance of safe cannabis, purchased from reputable sources. This combined with tax relief can prevent this industry from falling into further despair.

As 2024 progresses, the multifaceted crisis confronting the California cannabis industry is expected to deteriorate further unless substantial changes are implemented by key organizations such as the Department of Cannabis Control, the Attorney General’s Office, and various law enforcement bodies. The shift from advocating the end of the Drug War to calling for enforcement marks a significant turning point. However, for meaningful change to occur, former advocates must collaborate with the government to creatively address these challenges and navigate the current storm.

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California Cannabis Litigation: Threats of License Loss and Injunctions https://harris-sliwoski.com/cannalawblog/california-cannabis-litigation-threats-of-license-loss-and-injunctions/ Tue, 26 Mar 2024 14:00:53 +0000 https://harris-sliwoski.com/?post_type=cannalawblog&p=135309 An injunction is a request to the court for immediate relief from harm or potential harm. Its purpose is to stop harmful activity, prevent future misconduct or maintain the status quo during the pending litigation. While courts are often hesitant to grant such relief, recent trends suggest a shift in attitude, especially within the cannabis

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An injunction is a request to the court for immediate relief from harm or potential harm. Its purpose is to stop harmful activity, prevent future misconduct or maintain the status quo during the pending litigation. While courts are often hesitant to grant such relief, recent trends suggest a shift in attitude, especially within the cannabis sector.

As any of our litigators will tell you, securing an injunction in California is no easy feat. But California courts may be willing to grant them if cannabis licenses are at stake, in addition to other circumstances such as actual or threatened intellectual property infringement.

What are the legal standards for injunctions?

To receive an injunction, a plaintiff must convince the court, among other things, of the likelihood of success on the merits of its claims and that it will suffer irreparable harm without the relief. As to the first part, the plaintiff must show it will likely succeed on at least one cause of action in its complaint. This does not mean a certainty of success, simply that the facts and the law demonstrate a good possibility of prevailing. While this may seem daunting, a well-pled complaint usually meets this threshold requirement.

The toughest hurdle is demonstrating irreparable harm to the court. If the harm is not imminent, or if the injured party can be made whole via a monetary award, an injunction will be denied. For example, if there is simply a threat of lost money, as opposed to some kind of intangible or non-monetary harm, the injunction will probably be denied.

But, if the loss of a cannabis license is at stake, California courts have shown a willingness to issue narrowly drawn injunctions – probably because they have started to realize that a cannabis license is unlike other business licenses.

What’s so special about cannabis licenses?

In the California cannabis space, there are only a finite number of licenses (while that’s not exactly the case at the state level presently, it is true at the local level where licenses are often explicitly capped or at least capped via restrictive zoning and undue concentration requirements).

Cannabis licenses involve a strict, and often very lengthy application process. Windows of opportunity are by definition narrow. In some locales, business owners may have to forgo other opportunities to apply for a specific license. And in many cases, if a license is lost – for any reason – reapplication may be difficult or even impossible.

Based on factors like these, California courts may be more inclined to believe that the threat of loss of cannabis licenses presents a unique, non-monetary, and irreparable harm.

Balancing hardships and public interest

A final hurdle to secure an injunction involves demonstrating a balance of hardships in favor of the plaintiff, and considering the public interest. In business disputes, courts weigh the possibility of a license loss and the ease of granting relief against the hardship of the party opposing the injunction. For example, imagine a partnership dispute where one party threatens to take some action that would result in loss of licensure. The other party may want an injunction prohibiting that action. The original party may oppose the injunction on various grounds, and the court would then balance those potential hardships. If a license is at play, that will likely factor into the court’s ultimate decision.

Where appropriate, the courts also consider the public’s interest in the relief requested. This might not always be a hotly contested factor in a B2B or partnership dispute, but it’s certainly possible.

The tide is turning for Cannabis injunctions

Obtaining an injunction to protect a cannabis license in California can be challenging, but recent developments suggest the tide is turning in favor of such relief. With courts increasingly recognizing the significance of cannabis licenses and the irreparable harm caused by their loss, seeking an injunction in the right circumstances can be a prudent investment.

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FREE Webinar: How to Buy or Sell a Cannabis Business | April 17th https://harris-sliwoski.com/cannalawblog/free-webinar-how-to-buy-or-sell-a-cannabis-business-april-17th/ Fri, 22 Mar 2024 14:00:42 +0000 https://harris-sliwoski.com/?post_type=cannalawblog&p=135402 Register Here On Wednesday, April 17, 2024 at 12:00 pacific time, Harris Sliwoski managing partner Vince Sliwoski (Portland), Harris Sliwoski partner Griffen Thorne (Los Angeles), and Andy Shelley of CannXperts will present a free webinar entitled “How to Buy or Sell a Cannabis Business.” Drawing on their extensive experience from representing businesses and entrepreneurs through

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Register Here

On Wednesday, April 17, 2024 at 12:00 pacific time, Harris Sliwoski managing partner Vince Sliwoski (Portland), Harris Sliwoski partner Griffen Thorne (Los Angeles), and Andy Shelley of CannXperts will present a free webinar entitled “How to Buy or Sell a Cannabis Business.”

Drawing on their extensive experience from representing businesses and entrepreneurs through numerous M&A transactions, including crucial state license transfers throughout the United States, our panelists will share insights and practical wisdom from their firsthand experiences in the legal cannabis industry.

  • Crafting and understanding Letters of Intent
  • Understanding the advantages and disadvantages of Asset Sales v. Business Sales
  • Conducting thorough Due Diligence
  • Drafting and Negotiating purchase agreements and ancillary documents
  • Navigating State-Specific Regulatory Concerns
  • Managing Escrow Challenges
  • Optimizing Financial Arrangements: Purchase Prices, Holdbacks, Earnouts
  • Tackling Post-Closing Considerations

As always, we’ll also take Q&A, so please feel free to either submit questions when registering or you will be able to ask comments in chat during the webinar.

Register Here

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Arizona Cannabis: From Social Equity Approval to Corporate Cannabis https://harris-sliwoski.com/cannalawblog/arizona-cannabis-from-social-equity-approval-to-corporate-cannabis/ Thu, 21 Mar 2024 14:00:59 +0000 https://harris-sliwoski.com/?post_type=cannalawblog&p=135179 Arguably one of the most surprising states to legalize recreational cannabis in the recent past is Arizona. During the tumultuous 2020 election, Proposition 207 was passed by a very considerable 20 percent margin, with more than 650,000 votes in favor of the measure. Not only was the passing vote of the bill itself and its

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Arguably one of the most surprising states to legalize recreational cannabis in the recent past is Arizona. During the tumultuous 2020 election, Proposition 207 was passed by a very considerable 20 percent margin, with more than 650,000 votes in favor of the measure. Not only was the passing vote of the bill itself and its very progressive language surprising, but an almost landslide margin vote in a state with such previously strict cannabis laws certainly wasn’t as expected as New Jersey legalizing cannabis on the same night.

From Arpaio to Advocacy: Arizona’s Evolution in Cannabis Legislation

Given the unforgettable fact that the State of Arizona has produced such barbaric law enforcement officers such as former Maricopa County Sheriff Joe Arpaio who was responsible for the arrest, imprisonment, and subjugation of thousands on cannabis charges, the passing of Proposition 207 showed that the Grand Canyon State could move away from strict prohibition.

In fact, when it came to medical marijuana, Arizona was a relatively early adopter in 2010 – unlike a host of other states that took years longer to adopt medical marijuana programs. While the first attempt at recreational cannabis in Arizona failed by a single-digit margin in 2016, the late Senator John McCain, who famously served as a Senator for Arizona for a historic 31 years, voiced support for medical cannabis reform and the 10th Amendment approach of letting the states decide their own cannabis policies.

Arizona’s Social Equity Program: Promises, Progress, and Pitfalls

When Proposition 207 passed in 2020, the state added even further reformative measures such as an extensive and very promising social equity program for the many communities who’ve been impacted by prior prohibitionist policies.

“The Social Equity Ownership Program was designed to promote the ownership and operation of licensed Marijuana Establishments by individuals from communities disproportionately impacted by the enforcement of previous marijuana laws”, the Arizona Department of Health Services explains on its website. The department was so definitively certain of the social equity program’s possibilities and opportunities for those most impacted by previous cannabis laws that it posted a glowing review of the program in May of 2022, with then-Deputy Director for Planning and Operations Don Herrington referring to the program as “a model among states that have created them.”

“According to the law,” Herrington wrote, “awarding social equity licenses should promote the ownership and operation of establishments by individuals from communities disproportionately impacted by enforcement of previous marijuana laws.”

The inclusion of those from communities so horribly devastated by cannabis prohibition into the legal market is absolutely a net positive and a program that could provide tremendous and likely lucrative opportunities for those individuals. However, in a very similar way to other states, such as Illinois, the implementation and arduous licensing process has not been without issue.

A common complaint about Arizona’s social equity program is that many of the 26 different licenses available for potential applicants was acquired by large corporate companies or investor groups. And according to many commentators, these are the entities furthest from being considered “social equity applicants” have control over an overwhelming majority of those licenses.

In July 2023, the Arizona Center for Investigative Journalism released a very damning report highlighting these exact complaints. By then, at least 11 of the 26 licenses were alleged to be in the hands of corporate interests distantly removed from anything resembling social equity applicants. Furthermore, seven of those 26 licenses were tied to a confusing web of convoluted shell LLC companies that obscure the true ownership of these licenses.

The Path to Equity: Arizona’s Social Equity Program in Cannabis Legislation

To combat these widespread issues, Republican State Senator Sonny Borrelli introduced Senate Bill 1262, a bill that he claims would restore the licenses to actual social equity applicants and professionals. It would also allow the Attorney General to pursue legal action against those who’ve caused legitimate social equity applicants to enter into allegedly predatory agreements.

“What we have here is an injustice that needs to be fixed,” Borrelli mentioned during a Arizona Senate hearing in February. “We now have here in Arizona a situation where 24 of 26 of these social equity licenses are now fully controlled by companies or people who do not belong in these special groups to get this license.”

SB 1262 seems initially promising, as it did pass a Senate Health and Human Services Committee with unanimous bipartisan support. That said, three quarters of the House and Senate will need to approve the measure before it’s signed into law. If the bill passes both chambers of the Arizona Legislature and ends up on Governor Katie Hobbs’ desk, she is almost certainly going to be inclined to sign it into law and significantly change the cannabis regime in Arizona.

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How LOIs Can Go Horribly Wrong https://harris-sliwoski.com/cannalawblog/how-lois-can-go-horribly-wrong/ Wed, 20 Mar 2024 14:00:27 +0000 https://harris-sliwoski.com/?post_type=cannalawblog&p=135332 Cannabis businesses often use letters of intent (LOIs) to get agreed deal terms in writing before spending time and money negotiating the definitive written contract. LOIs can be a big help, especially with a complicated deal. But they are easy to botch, and can lead to some pretty devastating consequences if not done right. Be

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Cannabis businesses often use letters of intent (LOIs) to get agreed deal terms in writing before spending time and money negotiating the definitive written contract. LOIs can be a big help, especially with a complicated deal. But they are easy to botch, and can lead to some pretty devastating consequences if not done right.

Be careful for unintended binding LOIs

In the majority of situations, parties to an LOI want them to be fully or partially non-binding. These LOIs are intended only to be outlines of a deal that the parties can use in negotiating finer points. Some provisions may end up being binding, like confidentiality or exclusivity provisions. But the majority of terms are often left to be fleshed out.

The problem is that some LOIs do a pretty bad job of clarifying what is and is not binding. This leads to two pretty bad potential outcomes. First, a provision intended to be binding could be construed as non-binding. Imagine the buyer in a deal wanted the seller locked in to an exclusivity obligation for 60 days after signing, but the LOI didn’t clearly specify that this was a binding obligation (as opposed to just some kind of expectation). It’s possible that the seller could then shop the deal around without any recourse on the buyer’s part.

The second potential problem is possibly a lot worse – an LOI could be deemed binding where it was intended not to be binding. I’ll get into this in greater detail in the next part.

Binding LOIs can be a big problem

From time to time, people want fully binding LOIs. In almost all cases, I think these are a bad idea. Because binding LOIs are, by definition, binding, they must contain a LOT more detail than your average non-binding LOI which may be as short as a page or two. With more detail comes more negotiation, and more time. So in most cases, if parties want a binding document, it makes a lot more sense to just proceed to the definitive contract and not waste time on a binding LOI that will precede it.

As an aside, there are some limited contexts where a binding LOI makes sense despite these concerns. For example, imagine a deal with a lot of different contracts to be drafted and executed at different times over a long period of time, but where the parties are nevertheless willing to spend a bit of time up front negotiating terms. In that case, it may make sense to have a binding LOI, or some kind of other binding agreement to flesh out these contractual obligations.

In any event, where binding LOIs can be problematic is where the negotiating parties fail to include sufficient detail and basically treat them as binding versions of non-binding LOIs. And insufficiently detailed LOIs can lead to a host of issues. I’ve seen plenty of situations where one party would have wanted to include more protective provisions in a full-length definitive, but the other party knows that the LOI is binding and refuses to negotiate anything else. It can be a terrible outcome.

LOI fundraisers

A lot of businesses will issue press releases after inking LOIs, for marketing purposes but also to drum up investments – especially so for public cannabis companies. As you can imagine, there can be a lot of shenanigans here as well. Some cannabis companies will enter into a huge amount of LOIs with little intent to consummate the transactions. This is obviously bad news for their prospective business partner who may have not only wasted time and money on getting the LOI done, but also passed on other deals. And it can lead to even more problems for the company issuing the press release if they don’t represent the proposed deal’s context accurately.

There are some pretty easy solutions to these problems. For example, even a non-binding term sheet can contain restrictions on publicity that are binding (though careful wording is required!). Or one or both parties could carve out exclusivity obligations or allow for LOI termination in the event the other party isn’t taking the deal seriously or it becomes clear that the other side is trying to fundraise off the LOI.

Non-attorney drafted LOIs

People think that because LOIs are not binding and intended to serve as an outline, lawyers are unnecessary. The problem with this train of thought is that it could be incredibly easy for non-lawyers to write an LOI that was intended to be non-binding, but fail to actually make it non-binding. Or they could draft an intentionally binding LOI that fails to include sufficient detail. Or they could make a hundred other types of mistakes that could have been avoided.

As I wrote a few years ago, “Getting a lawyer involved in the term sheet process can be key. This is especially true on complicated or expensive deals, or where one party knows it has less leverage in a deal to request changes at a later date. It’s even more true where the other side or their lawyers are going to be tough negotiators.”

To flesh that out a bit more, as a deal outline, the LOI will be the one of the key things that lawyers look to when negotiating a contract for the life of the negotiation. I can’t tell you how many times I’ve heard lawyers complain that something was “not in the LOI” or “different from what’s in the LOI” during negotiations, even when the LOI was clearly not binding. And in a lot of cases, parties will simply agree to stick to what the original intent was.

All of this is to say that an LOI is an incredibly important investment. Good lawyers don’t need to charge an arm and a leg on them, and a good LOI can save a ton of headache down the road. This is especially the case in a highly regulated industry where one or both of the parties to a deal may be less familiar with regulatory intricacies when negotiating the LOI.

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Cannabis Loans and Investments | The Webinar Replay  https://harris-sliwoski.com/cannalawblog/cannabis-loans-and-investments-the-webinar-replay/ Tue, 19 Mar 2024 14:00:03 +0000 https://harris-sliwoski.com/?post_type=cannalawblog&p=135338 If you missed our February 2024 “Cannabis Loans and Investments” Webinar, we have published a full recording and transcript here. Harris Sliwoski partners Vince Sliwoski, Griffen Thorne, and Aaron Pelley focused on a constellation of important factors for both cannabis industry investors and businesses in 2024: What the increase in open state markets means for

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If you missed our February 2024 “Cannabis Loans and Investments” Webinar, we have published a full recording and transcript here.

Harris Sliwoski partners Vince Sliwoski, Griffen Thorne, and Aaron Pelley focused on a constellation of important factors for both cannabis industry investors and businesses in 2024:

  • What the increase in open state markets means for business and investments today;
  • Current high interest rates and downward projections in the macroeconomic environment;
  • Potential impacts of the proposed re-scheduling of marijuana to Schedule III for struggling cannabis businesses, potentially increasing margins;
  • The intricacies of the cannabis financial landscape;
  • Risk management, navigating lending complexities, and capitalizing on investment opportunities;
  • Regulatory challenges and navigating the cannabis industry with secure financial strategies.

Enjoy!

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Oregon Cannabis License Moratorium: Almost There https://harris-sliwoski.com/cannalawblog/oregon-cannabis-license-moratorium-almost-there/ Mon, 18 Mar 2024 14:00:52 +0000 https://harris-sliwoski.com/?post_type=cannalawblog&p=135318 It looks like a permanent Oregon cannabis license moratorium will finally take effect. I say “looks like” because key contingencies are still in play and, although things look promising, it could also get dicey as of March 31st— or even sooner. In this post, I’ll explain what’s going on with House Bill 4121, which is

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It looks like a permanent Oregon cannabis license moratorium will finally take effect. I say “looks like” because key contingencies are still in play and, although things look promising, it could also get dicey as of March 31st— or even sooner.

In this post, I’ll explain what’s going on with House Bill 4121, which is certainly more than advertised, both in content and in progress. And I’ll explain what it all means for the Oregon cannabis industry.

HB 4121 and the cannabis license moratorium

On February 6th, 2024, I ran our annual legislative forecast and report on the proposed Oregon cannabis laws. We only had one significant cannabis bill in play, which made the 2024 session different than any year going back to 2015. The bill at issue for 2024 is HB 4121.

The enrolled version of HB 4121 is not significantly different than the introduced version previewed in my February 6th blog post. I’ll therefore dispense with another fulsome commentary, except to note that HB 4121 is generally sold as a pro-industry moratorium bill. HB 4121 is much more than that, however– especially when it comes to two big topics: law enforcement and hemp products.

HB 4121 highlights

Law enforcement; inspections

  • Authorizes collaborative mapping of cannabis grow sites, to inform law enforcement where licensed (and therefore, unlicensed) grows are located
  • Requires the Oregon Liquor and Cannabis Commission (OLCC) to work with the Oregon Department of Agriculture (ODA) to develop testing methodology to distinguish marijuana and hemp plants
  • Gives ODA power to require destruction of marijuana plants by hemp growers
  • Allows ODA and OLCC to enter into agreements to allow OLCC to inspect hemp crops
  • Requires ODA to adopt rules to allow law enforcement to accompany ODA on-site inspections
  • Authorized the Governor to call in the National Guard to help ODA and law enforcement with hemp site visits

Hemp product registration

  • Requires OLCC and ODA to establish a registration program for hemp products intended for human or animal consumption or use
  • Requires in- and out-of-state hemp manufacturers, packagers and distributors to pay fees, register in Oregon, submit a boatload of information, and comply with many rules

Marijuana license caps and moratorium

  • Prohibits OLCC from accepting new license applications pretty much forever, due to restrictive, ratio-based formulas tied to population
  • Contains an exception for producers looking to change canopy size, and for research labs
  • Contains an exception for the renewal or “transfer” of an existing license

Minor decoy operations

  • Requires OLCC to develop uniform standards for minor decoy operations
  • Requires OLCC standards to conform to law enforcement standards for minor decoy stings

Temporary permits

  • Requires OLCC to develop a process for applicants to work at a licensed business until they receive a marijuana worker permit, or a denial
  • Allows OLCC to revoke or suspend a permit for actions an individual took while in temporary permit status

Is HB 4121 going to pass? Does it matter if or when the Governor signs?

The bill is probably going to pass, but it matters very much when the Governor signs.

It was a relief to see the OLIS website updated on March 13th, three days after the session ended, showing that the Speaker of the House signed the bill. The Senate President, Rob Wagner, needs to sign next, and then Governor Tina Kotek. At this point, OLIS would normally show that the bill is awaiting signature by Wagner. For whatever reason the website doesn’t reflect this status, as it normally would; but I’m told by drafters of the bill that it’s headed to Wagner’s desk, and then Kotek’s. Both are expected to sign.

If the Governor signs HB 4121, it will become law immediately, based on its text. If the Governor vetoes HB 4121, it will not become law. And if she neither signs nor vetoes, HB 4121 will become law 30 days after its passage, which would be April 12 or thereabouts. That last scenario presents a problem for OLCC and the cannabis industry. This is because the current marijuana license moratorium expires on March 31, 2024.

In a “no sign and no veto” scenario, we could be looking at a gap of 12 days or so when OLCC is forced to take applications. A similar situation occurred back on May 31st, 2018, when OLCC announced a June 15th “pause” of application processing. Over 1,000 new applications flooded the portal in a two-week period. This exacerbated an already significant OLCC bottleneck; and, while many of those applications fell away, others made it through. We had several clients make a pretty penny reselling those landgrab licenses.

On Friday, March 15th, I was told by HB 4121 architects that OLCC has alerted the Governor’s staff to the timing exigency. This informs my comments up top that “things look promising.” If and when HB 4121 passes, though, please remember that we are in for more than a license moratorium. The law enforcement component of this bill is prominent. Further, Oregon is set to move ahead with a restrictive, outlying regime for hemp and hemp-derived products.

UPDATE 03/20/24: Governor Kotek signed HB 4121 on March 20, 2024 and the law took effect on that date.

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Washington May Raise the Minimum Age for High THC Cannabis Purchases https://harris-sliwoski.com/cannalawblog/washington-may-raise-the-minimum-age-for-high-thc-cannabis-purchases/ Fri, 15 Mar 2024 14:00:55 +0000 https://harris-sliwoski.com/?post_type=cannalawblog&p=135110 Washington House Bill 2320 Washington State has often led the way in progressive cannabis policies. However, the introduction of House Bill 2320 by the Washington State legislature could mark a pivotal shift in this trajectory. This bipartisan bill proposes to raise the minimum age to 25 years for purchasing and consuming products containing 35% or

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Washington House Bill 2320

Washington State has often led the way in progressive cannabis policies. However, the introduction of House Bill 2320 by the Washington State legislature could mark a pivotal shift in this trajectory.

This bipartisan bill proposes to raise the minimum age to 25 years for purchasing and consuming products containing 35% or more THC, based on concerns over the potency of modern cannabis concentrates and their effects on young consumers. This legislation has sparked a heated debate among policymakers, health experts, cannabis industry stakeholders, and the general public. At the heart of this debate is the balance between public health safety and individual freedoms, the integrity of scientific research informing these policies, and the future of the cannabis industry in the state.

This post aims to dissect the implications of House Bill 2320, questioning the rationale behind its specific age restriction and potency limits, and arguing why this legislative approach may not only be misguided but potentially detrimental to the very goals it seeks to achieve.

House Bill 2320 and age limits for products of 35% THC or more

If signed into law, the bipartisan House Bill 2320 would prohibit the sale of any cannabis product that contains 35 percent or more to anyone under the age of 25.

This bill was introduced by Democratic Rep. Lauren Davis:

“Today, there’s no legal limit on the potency of the psychoactive element, THC, in cannabis concentrates,” Davis explained in a press release on her website. “Cannabis vape oils, dabs and shatter are regularly sold with a THC potency of nearly 100 percent, a tenfold increase in potency from when cannabis was legalized in 2012. These concentrated products are different. And dangerous.”

“The cannabis industry has changed considerably since cannabis was legalized,” Dent said. “This legislation is needed to address the ever changing market and put some measures in place to protect cannabis users and our youth.”

Dent and Davis primarily reference the November 2020 report from the Washington State Prevention Research Subcommittee in their research. This report, conducted jointly by Washington State University and the University of Washington, often conflates correlation with causation.

The underlying premise for this study was that there has been an increase in both cannabis potency and in the availability of high potency concentrates. Contrary to these claims, the potency of cannabis has not significantly increased. Rather, many growers have learned to manipulate the testing so their product shows high THC, which can get higher prices. One testing facility claimed a concentrate consisted of 103% THC!

Why I don’t like House Bill 2320

1. Scientific Evidence and Misinterpretation

The justification for House Bill 2320 heavily relies on a report that, critics argue, conflates correlation with causation regarding cannabis use and its effects. A more nuanced examination of scientific literature reveals that the relationship between cannabis potency and adverse health outcomes is complex and not as straightforward as the bill suggests. Moreover, the claim that cannabis potency has drastically increased ignores the variability and sophistication of cannabis cultivation methods that have been in practice for decades. Legislators should base regulations on a comprehensive review of scientific evidence rather than isolated reports that may not capture the full spectrum of research.

2. Inconsistencies with Age Restrictions for Other Substances and Responsibilities

The bill’s proposal to limit access to high-THC cannabis products to those 25 and older stands in stark contrast to regulations for other substances and adult responsibilities. At 18, individuals are deemed responsible enough to vote, enlist in the military, and make lifelong decisions about education and debt. This discrepancy raises fundamental questions about how society defines adulthood and the rights and responsibilities it entails. If young adults are trusted to make significant decisions in other aspects of their lives, restricting their access to cannabis based on an arbitrary age limit undermines this trust and contradicts existing legal precedents.

3. Impact on the Cannabis Industry and Consumer Behavior

By imposing strict limits on THC content for consumers under 25, House Bill 2320 risks stifling innovation and growth in the cannabis industry. Such restrictions may also drive consumers towards the black market in search of higher potency products, undermining the safety and regulatory gains achieved through legalization. The focus should instead be on promoting safe consumption practices, education, and quality control across all legal cannabis products, rather than imposing age-based restrictions that could have unintended economic and public health consequences.

4. A One-Size-Fits-All Approach to Drug Policy

The bill exemplifies a one-size-fits-all approach to drug policy that fails to consider individual differences in usage patterns, tolerance, and medical needs. Cannabis, like many substances, affects individuals differently, and policy should reflect a nuanced understanding of its use. Regulations must be flexible enough to accommodate the therapeutic use of high-THC products for young adults under 25 who may benefit from them, under proper medical guidance.

Vote No on Washington State House Bill 2320

As the debate around House Bill 2320 continues, it is crucial for lawmakers, stakeholders, and the public to critically assess the foundations and implications of this proposed legislation.

The discussion surrounding cannabis potency and age restrictions touches on broader themes of autonomy, public health, scientific integrity, and the role of government in regulating personal choices. While the protection of young consumers is a laudable goal, the approach taken by House Bill 2320 may not be the most effective or equitable way to achieve it.

Instead, we should strive for policies that are informed by comprehensive scientific research, respect individual freedoms, and promote the safe and responsible use of cannabis. Emphasizing education, harm reduction, and quality control can achieve the bill’s public health objectives without imposing arbitrary age restrictions that contradict existing legal standards for adulthood. As we navigate the complexities of cannabis regulation, let us ensure that our policies reflect a balanced consideration of evidence, ethics, and the diverse needs of our community.

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California Allows Cannabis Cultivators to Reduce License Sizes https://harris-sliwoski.com/cannalawblog/california-allows-cannabis-cultivators-to-reduce-license-sizes/ Thu, 14 Mar 2024 14:00:19 +0000 https://harris-sliwoski.com/?post_type=cannalawblog&p=135266 The California Department of Cannabis Control (DCC) just published some new guidelines for cannabis cultivators following the passage of SB-833. Among other things, California will let cannabis cultivators reduce their canopy size and thereby reduce license costs. This will be a huge benefit. I write a lot about the woes that California’s cannabis industry faces

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The California Department of Cannabis Control (DCC) just published some new guidelines for cannabis cultivators following the passage of SB-833. Among other things, California will let cannabis cultivators reduce their canopy size and thereby reduce license costs. This will be a huge benefit. I write a lot about the woes that California’s cannabis industry faces – often due to overly burdensome regulation – but in this case, I think the DCC’s guidelines will have a positive impact on certain cannabis cultivators in the Golden State.

California has about a zillion different types of licenses for cannabis cultivators. They are based on size (specialty cottage, specialty, small, medium, and the relatively new large) and type (indoor, outdoor, or mixed-light). And there are separate licenses for nurseries and processors (you might think processing is manufacturing, because that would make sense, but you’d be wrong!).

Having more than a dozen different types of licenses guaranteed problems. One of those problems is that the state did not create a mechanism to easily change between license size. With the opening of large licensing in 2023, the state made it possible to go “up” in size, but not down. This was a big problem for a lot of folks in the industry.

Here’s an example: imagine a cultivator got a medium indoor license (which allowed for between 10,001 and 22,000 square feet of canopy). At the time of licensure the cultivator had enough built-out capacity to have 7,500 square feet of canopy, but expected to build out another room a few months down the line. For whatever reason, the cultivator didn’t have the means to complete the buildout and was stuck paying the medium indoor fee of $77,905 as opposed to the small indoor fee of $35,410.

Until recently, the cultivator’s only option would be to continue to pay double the annual licensing fee, or to submit a completely new application for the smaller license. This could be a cumbersome and costly process, even if it would lead to a better cost savings over time.

According to DCC’s new guidelines, cannabis cultivators will be able to request a reduced-size cultivation license either upon renewal or if they make a one-time change to their expiration date outside the renewal process. While we don’t have much data on how many licensees this will affect, it will hopefully help affected cannabis cultivators and reduce regulatory red tape.

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Indigenous Innovation in the Minnesota Cannabis Industry https://harris-sliwoski.com/cannalawblog/indigenous-innovation-in-the-minnesota-cannabis-industry/ Wed, 13 Mar 2024 14:00:07 +0000 https://harris-sliwoski.com/?post_type=cannalawblog&p=135205 A Tradition of Excellence For thousands of years, Native tribes across North America have harnessed the benefits of the hemp and cannabis plants. These plants have held sacred and significant roles in many Indigenous cultures, deeply intertwined with spiritual practices, medicinal applications, and traditional ways of life. It’s no wonder, then, that Indigenous people are

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A Tradition of Excellence

For thousands of years, Native tribes across North America have harnessed the benefits of the hemp and cannabis plants. These plants have held sacred and significant roles in many Indigenous cultures, deeply intertwined with spiritual practices, medicinal applications, and traditional ways of life.

It’s no wonder, then, that Indigenous people are emerging as leading entrepreneurs and innovators in the burgeoning cannabis industry. They are advancing the cannabis sector, guided by their rich cultural heritage and a commitment to sustainable practices. Today, tribes in Minnesota are poised for their turn.

Pioneering Tribal cannabis projects and organizations

Innovative endeavors like Nuwu’s Sky High Lounge in Las Vegas, Nevada, highlight the social and cultural dimensions of cannabis, offering a unique gathering space that celebrates Indigenous traditions and promotes responsible consumption. Meanwhile, groups such as the Indigenous Cannabis Industry Association underscore the blend of business savvy and creativity Indigenous people bring to the industry. These initiatives demonstrate a commitment to moving the cannabis industry forward, enriching it with cultural values, innovative business models, and a holistic approach to sustainable growth.

A milestone in Minnesota

Minnesota, a state newly legalizing recreational cannabis, has seen an Indigenous revolution within its cannabis sector, primarily on reservation lands. As the broader state awaits recreational cannabis frameworks and regulations, tribal lands operate under a different set of rules governed by tribal sovereignty. This unique status allowed the Red Lake Nation to open Minnesota’s first recreational cannabis dispensary, NativeCare, marking a historic moment for Indigenous participation in Minnesota’s cannabis industry.

Located in Minnesota’s remote northern region, the Red Lake Nation Reservation is one of 11 federally recognized Tribes in the state. Its dispensary attracts hundreds of visitors daily and plans expansion, showcasing the economic and social impact of these enterprises.

Expanding Tribal cannabis opportunities across Minnesota

Minnesota is home to 11 federally recognized tribes with reservation lands. This diversity presents multiple avenues for growth and development within the Minnesota cannabis industry, particularly before statewide regulations are finalized in 2025. As more tribes in Minnesota explore opportunities in this space, they can leverage their unique cultural perspectives and traditional knowledge to create innovative products and services, while also generating economic opportunities for their communities.

The Mille Lacs Band of Ojibwe’s visionary project

The Mille Lacs Band of Ojibwe, with its reservation land strategically located closer to the Twin Cities metropolitan area, announced an ambitious cannabis cultivation facility project. This 50,000 square-foot facility represents a significant investment in cannabis cultivation, and will likely provide considerable economic benefits to the region. Incorporating sustainable and environmentally friendly practices, the facility aims to showcase the tribe’s commitment to responsible stewardship of natural resources while meeting the growing demand for high-quality cannabis products.

While the facility itself will be located in Onamia, Tribal leadership sees this colossal facility as an operation that will benefit the fellow Native-owned cannabis businesses in Minnesota by selling their cultivated products to the Red Lake Nation and White Earth-owned stores, as well as whatever Native-owned cannabis retail businesses are created. The Leech Lake Band of Ojibwe also legalized the use of cannabis on their lands last August, so the framework for a successful cannabis business has already been somewhat planted.

Acknowledging the role of Indigenous peoples

Joe Nayquonabe, Jr., CEO of Mille Lacs Corporate Ventures (“MLCV”), highlighted the significant role Native Americans play in the cannabis industry and the potential of their cultivation facility. Expected to produce an impressive 1600 pounds of cannabis flower monthly, will no doubt leave a big mark. Nayquonabe emphasized the importance of respecting traditional values while embracing innovative business practices, stating, “Our ancestors have long understood the medicinal and spiritual properties of this plant. We are honored to continue this legacy while also creating economic opportunities for our people.”

Economic and regulatory considerations

The operation is being planned to produce an impressive 1600 pounds of cannabis flower monthly, and it will create 30-40 skilled jobs in Onamia, significantly impacting the local economy and providing employment opportunities for tribal members and the surrounding community. Furthermore, MLCV’s commitment to compliance with forthcoming state regulations demonstrates a proactive and responsible approach to cannabis cultivation and sale. This facility is poised to not only serve the local community but also support other Native-owned cannabis businesses across Minnesota, fostering a supportive network and supply chain within the industry.

National impact

The construction of this large-scale facility could be a watershed moment for Indigenous involvement in the cannabis industry, not just in Minnesota but across the United States. With the industry’s estimated sales reaching $1.5 billion by the end of the decade, Native-owned cannabis enterprises are well-positioned to thrive and expand, further embedding Indigenous innovation and leadership within the national cannabis landscape.

As more states legalize and regulate cannabis, the potential for Indigenous-led businesses to make their mark on the industry will only continue to grow, bringing unique perspectives, sustainable practices, and a deep reverence for the plant’s cultural significance.

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Way back in 2015, Harris Sliwoski put on the First National Tribal Cannabis conference, in tandem with the Tulalip Tribe, and we have worked on Tribal cannabis matters ever since. Next stop: Minnesota.

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