Federal law and policy

international law WHO UN cannabisLast Friday, December 7, the World Health Organization (“WHO”) Expert Committee on Drug Dependence (“ECDD”), was scheduled to make a recommendation about the international legal status of cannabis. The WHO is a “specialized agency” of the United Nations, and the ECCD is a WHO committee consisting of experts in the field of drugs and medicines, that assesses the health risks and benefits of the use of psychoactive substances. Alas, the ECDD announced it would temporarily withhold the results of the assessment until January, declaring it needed additional time “for clearance reasons.”

Earlier this year, the ECDD released a preliminary report (“Pre-Review”) on the effects of the plant, which concluded that cannabis is a “relatively safe drug.” The Pre-Review also revealed that cannabinoids (“CBD”) offer numerous therapeutic benefits, including reduction of pain, promotion of sleep, and improvement of motor function for individuals affected by Parkinson’s disease. As a result, the ECDD made the recommendation to the United Nations Commission on Narcotic Drugs (“CND”), that pure CBD not be scheduled under any international drug treaty.

The Pre-Review results gave us and other reform advocates great hope that a more in-depth review would take place before the ECDD makes a final recommendation to U.N. Secretary António Guterres. Comprehensive scientific data on the effects and benefits of cannabis are hard to find. Indeed, the current status of cannabis as a strictly prohibited substance has forced researchers who wish to study the plant to overcome additional hurdles that do not exist for the study of other drugs. To this end, U.S. Surgeon General Jerome Adams declared last week that the federal government should evaluate how it classifies the drug because the restrictive scheduling hinders research.

Just as we need to look at criminal justice laws, rules and regulations, we need to look at health laws, rules and regulations, and that includes the scheduling system.”

This statement by one of the key officials of the Trump administration highlights a shift in the U.S. federal government’s strict position on the prohibition of cannabis. As we previously discussed, the federal government has repeatedly cited to obligations under international treaties to perpetuate the current ban on cannabis and its derivatives. Back in May, the Food and Drug Administration (“FDA”) concluded that CBD should be descheduled but felt forced to recommend rescheduling the plant to Schedule V of the Controlled Substance Act to comply with international treaties to which the U.S is a party. Nonetheless, the FDA specified that if treaty obligations were to no longer require control of CBD that its recommendation would need to be promptly revisited.

Accordingly, the potential recommendation by the ECDD to remove cannabis from international control would create wide-ranging implications for the global effort to legalize the plant, including in the U.S. But for now, we must wait patiently for the ECDD’s recommendation to the CND, which is scheduled to be discussed and to go up for a vote in March 2019. The delay is frustrating, although we are encouraged to see that the U.N. continues to take a hard look at cannabis. Sit tight.

farm bill hemp california cbdThe federal 2018 Farm Bill is likely to become law in the very near future. If it does, it will redefine the hemp industry nationwide. We intend on writing more in the near future as to the specifics of the 2018 Farm Bill, but one interesting question is what effect it will have on California’s industrial hemp and CBD policies.

As anyone in the California hemp business knows, the Department of Public Health (“CDPH”) issued a FAQ policy guideline over the summer which took the position that industrial-hemp derived CBD in food products is unlawful. The FAQ justified this position in part because the federal Controlled Substances Act included industrial hemp as a Schedule I drug, and in part because the federal Food and Drug Administration (“FDA”) had concluded that it was unlawful to place THC or CBD into food products.

The 2018 Farm Bill, if it passes, will essentially amend the Controlled Substances Act to take industrial hemp out of the definition of marijuana. In essence, this would make industrial hemp derived products lawful products. The question then is: Will the 2018 Farm Bill negate the FAQ?

The answer is probably not. Even though the Controlled Substances Act may be amended and some of the underlying support for the FAQ may be undermined, that won’t change the fact that the FDA has not concluded that CBD in food products is lawful. While the CDPH certainly could change its position, the de-scheduling of industrial hemp won’t necessarily change the FDA’s positions right away. In the meantime, it’s safe to conclude that the FAQ still stands.

Ultimately, the 2018 Farm Bill is likely to have far-reaching impacts throughout the industrial hemp industry. We’ll make sure to keep you updated along the way.

industrial hemp 2018 farm bill

Update: The 2018 Farm Bill was just approved by the House. It now heads to President Trump’s Desk. 

At long last, it’s finally happening: The 2018 Farm Bill has made it out of conference and been approved by the Senate. It currently awaits approval from the House, which is expected this week. If Donald Trump signs the 2018 Farm Bill before the current legislative session ends on December 21, industrial hemp will be legal under U.S. federal law. Though we still are likely a few years out from full marijuana legalization, it appears that 2019 is going to be the “Year of Hemp” if Washington D.C. can make this happen before the deadline. Now, we’ll turn to the long awaited hemp-related text of the 2018 Farm Bill, as agreed to by the House and Senate. A copy of the full 2018 Farm Bill is available, via the U.S. Hemp Roundtable, here.

Some key provisions of the 2014 Farm Bill remain. “Industrial hemp” still means parts of the cannabis plant, whether growing or not, with less than 0.3% THC on a dry weight basis. Cannabis with more than 0.3% is still considered marijuana and is still classified as a schedule I substance. Additionally, the 2014 Farm Bill’s hemp provisions will continue for a year after the 2018 Farm Bill is signed. That means that the agricultural pilot programs that we know and love will stick around for a little bit longer.

However, the new version of the Farm Bill differs significantly in that industrial hemp is explicitly defined to include “all derivatives, extracts, cannabinoids, isomers, acids, salts, and salts of isomers” of industrial hemp. Technically, this isn’t necessarily a change in the sense that industry stakeholders (including yours truly) have long interpreted the 2014 Farm Bill to make derivatives and cannabinoids from industrial hemp legal. Now that interpretation has been codified into US law.

The CSA will also explicitly exempt “hemp” from the definition of marijuana. That means that the CSA will acknowledge two different types of cannabis, hemp and marijuana. Hemp is an agricultural commodity. Marijuana is a controlled substance. The problems that plague the marijuana industry including the lack of access to banking, bankruptcy, and federal intellectual property protections should no longer impact businesses dealing solely in industrial hemp. This distinction will also likely lead to increased research by the FDA and other agencies, and remove any question as to whether industrial hemp producers are subject to IRC 280e, which prohibits the taking of deductions related to the trafficking of Schedule I or II controlled substance.

The questions of the interstate transfer of industrial hemp is also addressed. Section 10114 of the 2018 Farm Bill states the following:

TRANSPORTATION OF HEMP AND HEMP PRODUCTS. — No State or Indian Tribe shall prohibit the transportation or shipment of hemp or hemp products produced in accordance with subtitle G  of the Agricultural Marketing Act of 1946 (as added by section 10113) [the provisions on industrial hemp] through the State or the territory of the Indian Tribe, as applicable.
This is a major development as the 2014 Farm Bill did not require states to make any distinction between hemp and marijuana. The new provision means that states that don’t adopt an industrial hemp program cannot interfere with the transportation or shipment of industrial hemp. Though this may not go so far as to require each state to allow the sale of industrial hemp or hemp products, including Hemp-CBD, it does prevent states from interfering with the distribution of industrial hemp.

The 2018 Farm Bill also gives Indian tribes the authority to regulate industrial hemp. This is an important change as the Menominee tribe, who’s territory falls within the state of Wisconsin had its initial hemp crop destroyed by DEA agents. A Federal Court ruled that the 2014 Farm Bill required that hemp be cultivated in  compliance with state law and therefore, because Wisconsin had not implemented an agricultural pilot program to research industrial hemp, that the Menominee tribe could not legally cultivate hemp. The 2018 Bill explicitly gives tribes the ability to implement programs allowing the cultivation of industrial hemp.

One of the reasons the 2014 Farm Bill’s hemp provisions have been so murky is that no federal agency was given regulatory authority over hemp. The 2018 Farm Bill addresses this by appointing the United States Department of Agriculture (USDA). The USDA will oversee a state or tribe’s regulatory authority over industrial hemp. The state or tribe will submit a plan to monitor  and regulate the production of industrial hemp and the USDA will have 60 days to review the plans. Plans must track the land where hemp is cultivated, procedures for testing hemp and disposing of non-compliant hemp, and indicate how the state will enforce against violations of the 2018 Farm Bill.

The 2018 Farm Bill covers penalties for violations of approved state or tribal plans and breaks them into the following categories:

  • Negligent Violations occur when a hemp producer unintentionally violates a state or tribal plan for hemp cultivation by failing to provide a legal description of the land where hemp will be cultivated, failing to obtain the required license or authorization from the state or tribe, or produces cannabis with more than 0.3% THC. Producers who commit a negligent violation shall enter into and comply with a plan established by a state or tribe to correct the violation. The corrective action plan must include a date by which the producer corrects the violation and require that the producer periodically report to the state or tribe on compliance for no less than two years. Producers who commit negligent violations will not be subject to criminal or civil enforcement action beyond agreeing to submit to a corrective action plan. However, if a producer commits three negligent violations within a five-year window
  • Other violations occur when a hemp producer acts with a “culpable mental state greater than negligence.” Other violations could cover things like intentionally growing THC-rich marijuana under the guise of industrial hemp or completely disregarding the industrial hemp rules. Other violations will be referred to the Department of Justice or the “chief law enforcement officer of the State” where the industrial hemp is grown.

The 2018 Farm Bill will prohibit “any person convicted of a felony relating to a controlled substance” under state or federal law before, on, or after the date when the Farm Bill passes to produce hemp under the 2018 Farm Bill or participate in a state or tribal hemp program for a period of 10 years following the date of conviction. This prohibition will not apply to any person lawfully growing hemp with a license, registration, or authorization under a 2014 Farm Bill agricultural pilot program prior to the 2018 Farm Bill enactment. In addition, anyone who makes a false statement on an industrial hemp application will also be banned from the industry.

Finally, the 2018 Farm Bill would also extend federal crop insurance coverage to industrial hemp, meaning that the feds will actually insure a cannabis crop. Hemp producers can also apply for USDA certification and grants, as with other agricultural commodities.

Expect us to write more on this in the near term. This is an important day in the history of cannabis reform and will have a major and positive impact on the cannabis industry.

marijuana bank fincen
Slowly but surely, it’s happening for canna businesses.

According to a recent report from the U.S. Treasury Department’s Financial Crime Enforcement Network (“FinCEN”), a growing number of financial institutions are willing to work with cannabis businesses. As of September 30, 375 banks and 111 credit unions were managing marijuana business accounts.

These numbers reveal a steady growth in the number of financial providers willing to engage with the cannabis industry, despite its federal illegality. The report confirms what our cannabis business lawyers have observed over the past few years in Washington and Oregon: namely, most of our licensed cannabis business clients in those states are banked, and it isn’t as hard as it used to be to acquire a basic merchant account. (California is a different story.)

Nationwide, though, most financial services providers have been reluctant to serve the marijuana industry for years, fearing the federal cannabis prohibition would trigger liability under money laundering laws. Earlier this year, many concluded that banks would refuse to associate with cannabis businesses following the decision by then-U.S. Attorney General Jeff Sessions to retract policy protections for licensed marijuana businesses from federal interference. However, the latest FinCEN report reveals that those fears were mostly speculative.

The American Bankers Association, which recently conducted a survey on the issues faced by banks that are serving cannabis businesses, is advocating for greater legal clarity to banks operating in states where recreational and medical cannabis has been legalized. Indeed, the guidelines currently used by the financial services industry are those published in 2014 by the FinCEN and could use an update given the continued ascendance of marijuana reform.

Several key officials of the Trump administration have also expressed the need to clarify cannabis banking issues. For instance, Treasury Secretary Steven Mnuchin stated in congressional testimony that he wants businesses operating in states where marijuana is legal to be able to store their profits in banks.

I assure you that we don’t want bags of cash … We do want to find a solution to make sure that businesses that have large access to cash have a way to get them into a depository institution for it to be safe.”

In June, Federal Deposit Insurance Corporation Chariwoman Jelena McWilliams explained that she instructed her staff to consider ways to address the banking issues, but that the agency’s hands were “somewhat tied” until federal law legalizes cannabis.

Support for clarification and for fixing marijuana banking problems also comes from the states. A few months ago, a coalition of the top financial regulators located in thirteen states asked Congress to take action to protect banks working with the cannabis industry.

In their letter, the regulators wrote:

It is incumbent on Congress to resolve the conflict between state cannabis programs and federal statutes that effectively create unnecessary risk for banks seeking to operate in this space without the looming threat of civil actions, forfeiture of assets, reputational risk, and criminal penalties.”

Finally, back in June, a bipartisan group of twelve governors urged lawmakers to pass the Strengthening the Tenth Amendment Entrusting States (“STATES”) Act, which proposed to amend the Controlled Substance Act to exempt state-legal marijuana activities.

This growing support for permanent protections of banks that serve cannabis businesses is a promising sign that legal reform is on its way. The newly formed Democratic House has expressed a strong desire to move cannabis legislation, including banking issues, in the new year. Only time will tell whether the Republican-controlled Senate will allow it.

FLSA cannabis marijuana employment

As we all know, cannabis remains a federally controlled substance, and therefore illegal at the federal level. However, most states have some form of legalization. I have always advised my cannabis business clients to comply with both state and federal laws when it comes to employment laws. It seems to be the safest bet to ensure cannabis companies are not sued by employees for violating federal laws, and it seems to be the smart move in terms of keeps the feds out of their state legalized cannabis businesses.

Recently, a lawsuit arose in the Tenth Circuit challenging whether the Federal Labor Standards Act (FLSA) was meant to provide wage and hour protection to employees of cannabis businesses. In Kenney v. Helix TCS, Inc., the Tenth Circuit will decide whether the FLSA applies to such businesses. The FLSA sets federal wage and hour requirements and sets the standards for when employers must pay employees overtime wages.

In the litigation at issue, Helix TCS, INC. (“Helix”) provides security services to cannabis businesses. Kenney, an employee of Helix, was classified as an exempt employee, meaning Helix did not pay him overtime pursuant to the requirements of the FLSA. Kenney brought suit against Helix claiming he was misclassified as exempt and should have been paid overtime.

Helix moved to dismiss the case, arguing that Kenney was not entitled to the protections of the FLSA because cannabis was entirely forbidden under the CSA. The district court denied the motion to dismiss but certified the ruling for immediate appeal to the Tenth Circuit Court of Appeals.

On Appeal, Helix contends that its employees are not entitled to the protections of the FLSA. Helix’s main argument is that all participants in state recreational marijuana industries assume the risk that their activities will subject them to federal criminal sanctions and therefore they are not entitled to benefits under federal law, and cannot expect federal court to aid their conduct. Essentially Helix is arguing that the federal government would be assisting employees in drug trafficking if they afforded the employees the protections of the FLSA.

It remains to be seen whether the Tenth Circuit will buy Helix’s argument (and whether any of Helix’s remaining employees will want to stick around, for that matter). Helix clearly has the means to fight Kenney’s allegations. Perhaps Helix’s costs will increase substantially if they must pay all security guards overtime and litigation makes sense for them. However, litigation is extremely expensive, and Helix will have to balance those two issues as it proceeds.

In the meantime, best practices are to ensure your cannabis business is paying employees correctly under both state and federal wage and hour laws. If you pay your employees what they deserve, that alone may save you from a lawsuit. That sounds much better than fighting a wage and hour claim through the federal court of appeals.

On Thursday, November 30, I’ll be speaking at a presentation hosted by the Seminar Group titled, “The Business of Marijuana in Washington State.” In preparation for this event, I’ve put together a list of materials that I think are vital to understanding the law on hemp-derived CBD (Hemp-CBD). Below is a list of statutes, cases, and other authority that frames the legal status of Hemp-CBD.

industrial hemp cannabisThe Agricultural Act Of 2014 Section 7606 (the 2014 Farm Bill). Any analysis of US policy regarding hemp must the begin with the 2014 Farm Bill. Section 7606 of the 2014 Farm Bill is the starting point of the country’s rapidly expanding Hemp-CBD industry. The 2014 Farm Bill allows states to implement agricultural pilot programs overseeing the cultivation of industrial hemp. Industrial hemp is defined as the cannabis plant with less than .3% THC on a dry weight basis. States that have implemented an agricultural pilot programs are then authorized to issue licenses or permits to individuals and entities who can then cultivate industrial hemp. The 2014 Farm Bill requires a research component. What constitutes research is not defined within the “four corners” of the 2014 Farm Bill. Some states, such as Colorado, Kentucky, and Oregon, have interpreted the 2014 Farm Bill liberally, allowing the commercial sale and distribution of industrial hemp and industrial hemp products, such as hemp-CBD.

Statement of Principles on Industrial Hemp (the Statement). In 2016, the Drug Enforcement Administration (DEA), issued the Statement. The stated goal of this guidance document is to provide clarity as to how federal law applies to activities associated with industrial hemp, grown pursuant to the 2014 Farm Bill. The DEA interpreted the 2014 Farm Bill taken narrowly as the Statement indicates that the general commercial sale of industrial hemp is not permitted except for “marketing research” conducted by institutions of higher education or state departments of agriculture. The DEA also interprets the 2014 Farm Bill to prohibit the interstate transfer of industrial hemp. The DEA has not enforced the Statement robustly. For the most part, the commercial sale of industrial hemp and Hemp-CBD and the interstate transfer of industrial have been unimpeded by the DEA.

The Agricultural Appropriation Act of 2018, Section 537. One of the major reasons that the DEA has not followed up on the Statement, is that Congress has exercised its “power of the purse” to prevent the DEA from using federal funds to prevent the interstate transfer of industrial hemp or the commercial sale of industrial hemp. This was first enacted in 2017 and recently was renewed to run through December 9, 2018.

Hemp Indus. Ass’n v. U.S. Drug Enf’t Admin., 720 Fed. Appx. 886 (9th Cir. 2018). This case, decided by the US Court of Appeals for the Ninth Circuit, was brought by the Hemp Industry Association in response to the DEA’s “marijuana extract rule.”

The rule established a new drug code specifically for marijuana extracts and defined a marijuana extract as any extract containing cannabinoids derived from the cannabis plant. On its face, the rule makes no distinction between industrial hemp and marijuana. Shortly after issuing the rule, the DEA issued a clarifying statement that said that the rule only applied to derivative of marijuana, and that it would not make any extracts that were otherwise legal under US law illegal.

HIA was unsuccessful in the sense that the Ninth Circuit upheld the rule, dismissing the HIA’s challenges on procedural grounds. However, the DEA’s rule was left largely toothless by the time the Court issued its memorandum as the DEA had already walked back the rule through its clarification. Additionally, the Court stated that the 2014 Farm Bill preempted the Controlled Substances Act (CSA), meaning that when the CSA and 2014 Farm Bill conflict, the 2014 Farm Bill prevails. This preemption interpretation does not set precedent, as the memorandum is non-binding. It does, however, give credence to the argument that the 2014 Farm Bill preempts the CSA.

Hemp Farming Act of 2018. The Hemp Farming Act of 2018 was introduced by Senate majority leader Mitch McConnell. Mitch McConnell hails from the state of Kentucky, which has become a major player in industrial hemp. The Hemp Farming Act is much more detailed than the 2014 2014 Farm Bill. It explicitly removes industrial hemp and derivatives from industrial hemp, including CBD, from the CSA. It also provides a more robust regulatory framework’s for states to implement industrial hemp programs.

The Hemp Farming Act was adopted in its entirety in the Senate version of the 2018 Farm Bill. The house version of the 2018 Farm Bill did not include the Hemp Farming Act. Before the 2018 Farm Bill can be enacted into federal law, both houses of Congress must agree on the language of the Bill. Recently, McConnell guaranteed that the hemp provisions included in the Senate Bill would make the final cut. If that’s true, then as early as next year we will see a much more thoughtful (and discernible!) federal policy on industrial hemp.

industrial hemp cannabis farm bill

Just two weeks after Speaker of the House Paul Ryan expressed public support for the legalization of industrial hemp, Senate Majority Leader Mitch McConnell is now guaranteeing that the 2018 Farm Bill will include the industrial hemp legalization provision once the House and the Senate solve their difference regarding this issue.

If there’s a Farm Bill, it’ll be in there, I guarantee that,” McConnell told reporters last Friday.

(To watch McConnell’s hemp legalization guarantee, go to 13:15 into this video clip).

As we have discussed at length, the House and the Senate versions of the bill differ in that the House version is silent on the legalization of industrial hemp whereas the Senate version, which was introduced by the Senate Majority Leader himself, would remove the crop from the definition of “marijuana” under the Controlled Substance Act, and instead treat hemp like a standard agricultural crop. Indeed, although industrial hemp and marijuana are the same species, hemp contains a negligible amount of tetrahydrocannabinol (“THC”), the psychoactive compound that gives its users a high.

In justifying his support of the legalization of the crop, McConnell stressed the immense value and versatility of industrial hemp. In addition, McConnell declared that he became aware of the international implications of hemp legalization during his visits of hemp processors this past year and explained that major foreign investors have expressed interest in the hemp business, signaling the crop’s tremendous potential.

I don’t want to overstate this—I don’t know if it’s going to be the next tobacco or not—but I do think it has a lot of potential. And as all of you already know, in terms of food and medicine but also car parts…it’s an extraordinary plant.”

According to the Senate Majority Leader, once legalized, industrial hemp will be “lightly regulated” by the U.S. Department of Agriculture. In addition, there will be no more federal involvement except for the issuance of crop insurances to hemp farmers—which is one of the most significant provisions included in the Senate version of the bill. Instead, industrial hemp would be regulated by local law enforcement, pursuant to the state program under which hemp farmers would be registered.

Although McConnell acknowledged that a provision pertaining to work requirements for food stamp recipients had caused delays in the enactment of the 2018 Farm Bill, he declared that the enactment of the bill will be one of his top priorities when Congress reconvenes for a lame-duck session.

The continuing public support for the legalization of industrial hemp by conservative Congressional leaders strongly suggests that the enactment of the 2018 Farm Bill is imminent, which is fantastic news!

Jeff Sessions Hates Cannabis
Finally, Sessions is a goner.

Jeff Sessions, the drug warrior that may or may not have liked the KKK until he found out they smoked pot, is out as U.S. Attorney General. After two years of being relentlessly bullied by President Trump, Sessions has apparently had enough. The Sessions resignation is of special interest to the marijuana industry because of just how much he hates marijuana. So it’s great news that Sessions is out, right?

While it’s certainly not bad news, the real story is that it doesn’t really matter. Looking back at the Sessions era, the only truly significant act that he took regarding marijuana was the withdrawal of prior federal guidance to U.S. Attorneys regarding marijuana enforcement in January 2018. At the time, we couldn’t tell whether this was the first step in an organized crackdown on marijuana or simply a shot across the bow. As a result of the withdrawal of the prior guidance memos, discretion on whether to prosecute marijuana crimes shifted from the Department of Justice to each of the 93 U.S. Attorneys assigned to the various federal judicial districts.

But lo and behold, nothing actually changed in federal enforcement. There were rumblings out of Oregon (whose U.S. Attorney was just picked to chair the Attorney General’s Marijuana Working Group), but those rumblings led to stakeholder meetings and the issuance of detailed enforcement guidance. This is a far cry from the raids, arrests, and seizures that doom and gloom types predicted when Sessions was named Attorney General. To date, since Washington and Colorado legalized in 2012, there has not been a single instance in the United States where law enforcement has acted against a marijuana business unless it has been able to demonstrate significant violations of state law and violation of prior-stated federal enforcement priorities.

The takeaway, then, is that the cake has already been baked. With another round of state liberalization of marijuana rules, the country has continued its unstoppable march toward federal legalization/decriminalization. If the politics and logistics of enforcing federal marijuana laws against state legal businesses proved unworkable for Jeff Sessions, they are unworkable for anyone.

So celebrate – the Sessions era is over and hopefully we don’t have to sit through any more scoldings from the Attorney General trying to tie marijuana to the opioid epidemic. But even though we may be wrong, we think the real story of the Sessions era is that the fear of widespread federal enforcement of drug laws against state-legal actors will never come to fruition.

 2018 marijuana cannabis midterms michigan utah missouri

Today was a stellar day for marijuana advocates around the country. Not only did a handful of states authorize legalization of medical and recreational marijuana at the polls, but the Democratic Party took control of the House of Representatives, and one very problematic Congressman, Pete Sessions, was sent packing down in Texas.

Below is a summary of the big changes nationwide, with many of these results still firming up at the time of writing. Note that this post does not detail some of the “smaller” local developments, such as decriminalization in certain Ohio cities, enthusiasm for cannabis by Wisconsin voters, or many other positive developments ushered in by this evening’s voting.

Michigan

Congratulations to the Wolverine State, which voted to legalize adult use (recreational) marijuana statewide. Individuals who are at least 21 years of age will be permitted to possess and use marijuana and marijuana-infused edibles, and grow up to 12 marijuana plants for personal consumption (that’s quite a bit). Permitted retail sales will be subject to a relatively modest 10% tax. Per state law, ballot initiatives take effect 10 days after results are certified, which can take up to three weeks from yesterday. So, legalization should take effect by the end of the year. Michigan is the tenth most populous state in the nation, and the first Midwestern state to legalize cannabis– which is a big deal. (Yes, Michigan is a part of the Midwest.)

Missouri

Missouri is another Midwestern state to make giant strides on cannabis, legalizing medical marijuana statewide. Missourians reviewed three medical cannabis legalization measures on the ballot: the one that passed is known as Amendment 2. Amendment 2 is an impressive entrée into legalization for a couple of reasons: first, it actually amends the state constitution to allow medical cannabis; and second, it contemplates a licensing program extending far beyond decriminalization, to state licensure for cultivators, manufacturers, testing labs and dispensaries. Under the new regime, qualified patients with physician approval will be allowed to receive cards for any condition the physician sees fit. There will be a 4% tax on retail transactions. Of the three initiatives on Missouri’s ballot, this one was the best.

North Dakota

Alas, North Dakota failed to move beyond the confines of its medical marijuana program. Measure 3 would have allowed people 21 and older to possess, use, grow, buy and sell marijuana for recreational purposes, and it would have expunged previous cannabis convictions from criminal records. Stepping back, Measure 3 was an odd initiative in that it failed to include any language regarding regulation or taxes. Apparently, the idea was to let the legislature figure that part out, but Measure 3 advisers may be kicking themselves for that strategy today.

Utah

Like North Dakota, Utah is a fairly conservative state. In keeping with that ethos, Utah passed a fairly conservative ballot measure last night to legalize medical marijuana – but passed it nonetheless. Proposition 2 allows qualified patients with physician approval to a purchase two ounces of medical marijuana in any two week period, or products containing 10 grams of CBD or THC. Curiously, smoking medical marijuana isn’t allowed. To the good, patients who live more than 100 miles from a dispensary will be able to cultivate 6 plants at home, and there will be a caregiver program. The state will issue licenses for cultivation, processing, testing and dispensaries.

In all, Proposition 2 had a very interesting backstory, such that today’s legalization of medical marijuana in Utah was something of a fait accompli. You can read about that here.

Congress

Democrats took back the House of Representatives last night, which is great news for federal legislation prospects. Although cannabis is not a distinctly partisan issue these days, most progressive cannabis legislation tends to come from the House, and the prospects of moving marijuana legislation are far superior today than yesterday. The fact that the Senate is still solidly Republican is not ideal for federal legalization, but the prospect of compromise legislation on everything from decriminalization to banking to taxes — to say nothing of issues like industrial hemp — is better than ever.

Pete Sessions (“Prohibition Pete”)

This one could probably fall under the “Congress” paragraph above, but it’s a significant enough development to merit special mention. Back in March, I had fun writing about how Pete Sessions was almost single-handedly blocking cannabis reform, including bipartisan proposals, from his perch as Chair of the House Rules Committee. Well, Pete lost yesterday. This means that the undemocratic nonsense of blocking floor votes on issues that both parties want to vote on, is likely over. This development will probably be under-reported given everything else that occurred today, but it’s huge.

All in all, voters across the U.S. once again expressed their desire to do away with prohibition on November 6. This morning, 33 states and the District of Columbia have laws broadly legalizing marijuana in some form. The President may be open to reform, and we expect industrial hemp to be legalized within a couple of months. Interestingly, the U.S. has also found itself in a marijuana sandwich of sorts, between Canada’s recent federal legalization and Mexico’s imminent legalization. But that’s a story for another day.

For now, cannabis reform advocates should rejoice: Voters rejected prohibition in many places, nationwide.

hemp cbd paul ryan farm bill
There’s been quite a bit of it lately on hemp and CBD.

Earlier this week, Speaker of the House Paul Ryan announced his support to end federal cannabidiol (“CBD”) prohibition and expressed strong support for the uses of industrial hemp. To view the video of Ryan’s comments, go here at the 21:15 mark.

For any newbies out there, CBD is one of the many chemical compounds in a class called “cannabinoids” that naturally occur in cannabis plants. “[CBD] has proven to work,” Ryan said, specifying that it “helps reduce seizures.” Indeed, the Food and Drug Administration (“FDA”) approved Epidiolex back in August, which is G.W. Pharma’s oral CBD solution for the treatment of seizure associated with Lennox-Gastraut and Dravet syndrome. The FDA approval prompted the Drug Enforcement Administration to reschedule all FDA-approved drugs containing cannabis-derived CBD with no more than 0.1 percent THC under Schedule V of the Controlled Substance Act (“CSA”).

The Speaker, who is not running for reelection and is retiring from Congress at the end of the year, shared that his mother-in-law used a synthetic form of cannabinoids when she was dying from melanoma and ovarian cancer.

Ryan also jumped on the opportunity to speak in favor of industrial hemp when responding to a medical marijuana question from a rally attendee who husband had succumbed to cancer. “And by the way, there’s a lot of industrial uses for hemp that I understand from talking to Mitch McConnell is a big deal to Kentucky agriculture,” he said. “And we’re all in favor of that as well.” Ryan is not going as far as John Boehner, a recent House Speaker who is currently sitting on an advisory board for a for-profit marijuana company, but his take is welcome news to us.

The Speaker’s endorsement of industrial hemp comes at a decisive time. As we previously discussed, Congressional leaders are still attempting to reconcile the House and the Senate versions of the 2018 Farm Bill. The Senate version, which was introduced and championed by Senate Majority Leader Mitch McConnell, would legalize hemp by removing the crop from the CSA definition of marijuana. The House version, however, is silent on this issue, and thus would afford meager protection for the crop. With Paul Ryan’s public support for ending federal CBD prohibition, however, it seems more likely that the House would approve the hemp language found in the Senate bill.

This is not the first time that Ryan has expressed support for the legalization of CBD and industrial hemp. Back in 2015, the speaker co-sponsored a bill with Rep. Scott Perry (R-PA) that sought to remove industrial hemp and CBD-infused products containing less than 0.3 percent THC from the definition of marijuana under the CSA.

It is still important to note, however, that the Speaker’s endorsement of CBD does not extend to the full legalization of marijuana, even for medical uses. “There’s no THC in that oil. That is not medical marijuana,” he declared. But of course, Ryan’s statement is inaccurate given that most CBD products contain small amounts of the psychoactive cannabis compound.

Nonetheless, proponents of industrial hemp and CBD should be pleased by this latest and encouraging development. The public support for the legalization of the crop and of marijuana’s non-psychoactive cousin by one of the most powerful Congressional leaders reveals a shift in the minds of conservatives and suggests the likely passage of the much anticipated 2018 Farm Bill. Stay tuned!