No shortage of cannabis news in Oregon.

Here we are a few years into legalization of recreational cannabis sales in Oregon, and it’s never a dull moment. Over the past week or so, there were three significant developments around the state with respect to marijuana law and policy. We summarize each below.

     1.     The OLCC hit “pause” on accepting license applications.

A few weeks back, we covered the dramatic Oregon Liquor Control Commission (OLCC) announcement that it would “pause acceptance of marijuana applications” effective June 15th. The apparent goal was to ensure that our licensing paralegal, Meghan Saunders, would receive hundreds of urgent client emails and phone calls over a two-week period. And she definitely did.

The official explanation, of course, is that the agency was simply too far behind to perform adequate services for existing applicants and licensees. That is the explanation OLCC Executive Director Steve Marks gave in the May 30th announcement, and it’s the explanation OLCC Policy Director Jesse Sweet gave at the seminar that he and I co-chaired on June 7th. All in all, it seems like a reasonable explanation.

Fortunately, some of the pressure from the initial announcement was alleviated on June 8th, when OLCC clarified that it would consider an application to be timely received for deadline purposes, even if it did not include an approved Land Use Compatibility Statement (LUCS). The pause ultimately took effect last Friday as promised, but not before dozens of our clients submitted last ditch applications (with and without LUCS) and made their way into the forward moving queue. In all, OLCC reports that an astonishing 1,001 additional applications were received in the two week period between its big announcement and the June 15thdeadline.

If you are looking for more evidence that people are extremely interested in being involved in the Oregon marijuana industry, the OLCC reports that as of yesterday morning a grand total of 1,915 active licenses currently exist in the state (over half of them producers), with another 766 applicants assigned to investigators, 530 ready for assignment and 1,070 businesses in line but without an approved LUCS. There are also 30,018 active marijuana worker permits statewide, with another 17,217 approved and awaiting payment. Despite intense competition and price instability, people keep on coming.

     2.     Billy Williams went to court.

Last month, we wrote about the Williams Memo, a policy document authored by Oregon U.S. Attorney Billy Williams regarding his concerns about overproduction of marijuana in Oregon and black market activity. We observed that industry seemed unfazed by the memo, because it would be too costly, too politically hazardous, and ultimately, too late for U.S. Attorneys to attempt to shutter Oregon’s state-sanctioned cannabis programs.

Mr. Williams and others instead have begun working around the edges, drawing lines in the sand on policy and going after bad (black market) actors. Last week, Mr. Williams filed two federal criminal lawsuits concurrent with law enforcement raiding a licensed Corvallis retailer for allegedly selling pot across state lines, and running an illegal credit card scheme. The raid was led by DEA in concert with Corvallis police, and based upon information gathered by the FBI and the U.S. Postal Service. Those agencies, in turn, began their investigations back in December 2016.

For anyone thinking running a state licensed cannabis business is cover for committing state and federal crimes – including the export of marijuana beyond Oregon – hopefully last week’s news will serve as a wake-up call. And hopefully, Billy Williams and the feds continue to chase these people down.

     3.     Josephine County lost again.

Josephine County has had a rough go with cannabis, especially as of late. We covered its half-baked efforts to curb marijuana farming through restrictive zoning ordinances here, here, here and here, and examined the problematic dynamics in southern Oregon cannabis production more generally here and here. Last week, the Oregon Court of Appeals rejected the County’s appeal of a decision that it had failed to give land owners proper notice of the County’s proposal to ban cannabis farming on smaller, rural residential lots.

The decision being appealed was handed down by the Land Use Board of Appeals, a somewhat obscure Oregon court that rules on the validity of governmental land use decisions. In theory, the County could petition the Oregon Supreme Court for certiorari, and seek a reversal of last week’s Court of Appeals decision. But it seems unlikely that the Oregon Supreme Court would take the case, and less likely still that the County would win.

In that sense, the County is in the same position as with its seemingly desperate federal court lawsuit to quash all cannabis production entirely, and hearken back to the days of prohibition. We expect them to lose that one, too.

“What do you do?”

When meeting someone for the first time this is a pretty standard ice-breaker. Usually the responses are pretty innocuous: “I’m in sales” or “I’m in IT”. But if you add “…in the cannabis industry” to those answers you’re bound to get a number of follow up questions. When I tell people that I advise businesses, investors, and ancillary service providers in the marijuana industry, without fail the first question that I get is “Aren’t you worried about the federal government?” I then go into discussion on the Rohrabacher-Blumenaur Amendment (formerly the Rohrabacher-Farr Amendment), the history of the Cole Memo (which although rescinded still plays an important role in banking), and the importance of complying with your state’s cannabis regulations. Lastly, I talk about the change in the national discussion and perception of the cannabis industry. Gone are the days of the “lazy stoner” stereotypes (although perhaps not for U.S. Attorney General Jeff Sessions). Instead we have sophisticated cannabis businesses providing products to a large and diverse section of America – with more and more states looking to legalize either medical or adult-use marijuana activities this year.

For those of us who follow cannabis bills in the U.S. Capitol and in our state legislative houses, it’s clear that there is momentum towards ending America’s shortsighted and draconian war on cannabis (we covered recent developments on the federal level here). While Republicans and Democrats in Congress can’t seem to agree on anything nowadays, support for individual states to regulate cannabis activities as they see fit for their constituents is one of the few areas where bipartisan support exists. Every day, more Republicans in Congress are signing on as sponsors to bills that will support the cannabis and hemp industries (we see you Mitch McConnell!). And now we can add to the list of cannabis supporting Republicans: President Donald Trump?

Could Trump actually point us in the right direction?

Just last week, the President, while boarding a helicopter for the G-7 summit in Canada, mentioned his support for what Senator Cory Gardner (R-CO) is doing. What exactly is Senator Gardner doing you ask? He, along with Senator Elizabeth Warren (D-MA), and Representatives David Joyce (R-OH) and Earl Blumenauer (D-OR), have introduced the Strengthening the Tenth Amendment Through Entrusting States (STATES) Act. You’ll recall that Senator Gardner didn’t take too well to A.G. Sessions rescinding the Cole Memo, so he vowed to block all Department of Justice appointments in return. After meeting with the President, Sen. Gardner put an end to his blockade (which we covered, here) when the President assured him that “he will support a federalism-based legislative solution to fix this states’ rights issue once and for all.” At the time of the meeting there was no agreement as to what the “federalism-based legislative solution” would look like. Today there is. Here’s a list of what the STATES Act would and wouldn’t do:

  • It would amend the federal Controlled Substances Act (“CSA”) so that the CSA would not apply “to any person acting in compliance with state law relating to the manufacture, production, possession, distribution, dispensation, administration, or delivery of marihuana.”
  • It would also amend the CSA so that the same exclusion would apply to persons acting in compliance with the law of a federally recognized Indian tribe within its jurisdiction.
  • It would deschedule industrial hemp from the CSA entirely.
  • It would make access to banking easier for cannabis businesses as state legal cannabis sales and transactions would no longer be considered trafficking.
  • It would not change the law in states that continue to criminalize cannabis activities.
  • It would not apply to any of the other substances identified in the CSA.
  • It doesn’t guarantee that President Trump will keep his word.

That last point isn’t actually written into the bill, but it’s the 800-pound gorilla in the room that no one can ignore. The President, to be polite, has had a tenuous relationship with the truth and keeping his word, so it’s far from certain that he will throw his support behind the STATES Act. An off-the-cuff remark before meeting with G-7 allies (or are they adversaries now?) does not constitute unwavering support. We’ll have to see more consistent and direct support from the President before we can feel confident that the STATES Act will become law. The President’s support is necessary because he’s still very popular with the Republican base and can therefore give recalcitrant Republicans in Congress cover if they’ve been cannabis opponents previously.

Let’s keep our fingers crossed that the North Korea Summit meeting goes well (who cares about cannabis legalization if nuclear war’s broken out?), that Congress pushes this one through, and that the President carries that high over to the STATES Act.

marijuana cannabis gay
Be inclusive with your business — cake or cannabis.

What do cake and cannabis have to do with each other? Besides the obvious late-night munchies or a great recipe for an edible, a recent Supreme Court decision involving cake impacts cannabis businesses across the nation.

The Masterpiece Cakeshop case garnered a lot of media attention—and for good reason. Not only are the facts enticing but the outcome is even more surprising.

In 2012, Masterpiece Cakeshop owner, Jack Phillips, refused to create a cake for David Mullins and Charlie Craig’s same-sex wedding. He said he would not use his talents to convey a message of support for same-sex marriage at odds with his religious beliefs. Colorado, like most states, prohibits businesses from discriminating against individuals on the bases of sex or sexual orientation. This means that Colorado businesses who are open to the public cannot refuse to serve someone because of their sexual orientation.

Mr. Mullins filed a complaint with Colorado’s Civil Rights Commission contending Masterpiece Cakeshop discriminated against him and his partner based on their sexual orientation. Mr. Mullins prevailed in front of the Commission and in state courts. Masterpiece Cakeshop appealed to the United States Supreme Court and argued Mr. Philips’ right to free speech would be violated if he were required to create a cake for the couple. Somewhat shockingly, the Supreme Court agreed with him.

The Supreme Court focused on the Civil Rights Commission treatment of Mr. Phillips and determined that the Commission had ignored and dismissed his religious freedom and freedom of speech rights. Justice Kennedy, who wrote the majority opinion, determined that “the neutral and respectful consideration to which Mr. Phillips was entitled was compromised here….The Civil Rights Commission’s treatment of [this] case has some elements of a clear and impermissible hostility toward the sincere religious beliefs that motivated his objection.”

What’s does Justice Kennedy’s opinion mean for cannabis businesses? The decision should not be read as a license to discriminate against patrons or employees based on sexual orientation (or any other protected class). The Supreme Court’s decision was very narrow and likely only applies to the facts of this case. What that means is that although Mr. Phillips’ free speech rights may have been violated, not all cases will turn out this way.

Cannabis businesses that are open to the public are prohibited from discriminating against patrons on the basis of a protected class. The Supreme Court’s ruling did not change that. Cannabis businesses, like other businesses, must provide the same services to all individuals regardless of their race, color, national origin, age, sex, or sexual orientation. Refusing to serve a customer or to provide the same services could result in hefty fines from your state’s civil right enforcement agency, lawsuits by customers, and customer boycotts.

The bottom line is to treat each customer with respect and dignity—a requirement by state governments and a good way to run a business.

Tomorrow, June 5th, Californians will go to the polls and vote on a number of state and local races, along with tax measures and other proposed laws. Cannabis will play a large role in many of them.

In the gubernatorial primary race the two favorites, Lt. Governor Gavin Newsom and former Los Angeles Mayor Antonio Villaraigosa, are both Democrats and they both support the cannabis industry and social justice reforms to right the drug wars’ wrongs. California Treasurer John Chiang is also running for governor and he has made increasing banking opportunities (which we covered here) for cannabis businesses one of his most pressing goals. Even if Mr. Chiang doesn’t win, we hope he continues making progress on this front as lack of access to banking severely hampers cannabis business owners and needlessly creates a danger to public safety. The Republican candidates for governor, John Cox and Travis Allen, hold the same traditional shortsighted and draconian Republican position: cannabis is bad, lock everyone up. To quote the current eloquent speaker in the White House: SAD! Although both Republican candidates are longshots to make the statewide election in November, one of them could get lucky if the Democratic favorites split a large number of votes. That’s because California has an open primary system with the top two vote getters, regardless of party affiliation, moving on to the November election.

Keep the momentum going, California!

Making sure the top two gubernatorial candidates support the cannabis industry and social justice reforms is extremely important but there also a number of other races and measures to keep an eye on tomorrow:

  • Republican Congressman Dana Rohrabacher faces what looks like a tough race as he’s being challenged by a Republican and a Democrat. Mr. Rohrabacher is one of the biggest Republican supporters of the cannabis industry (If you’ve never heard of the Rohrabacher-Blumenaur amendment, we covered that for you here.) The best-case scenario is that Mr. Rohrabacher and one of the Democratic candidates receive the most votes. Worst-case scenario is that Mr. Rohrabacher and the other Republican candidate, Scott Baugh, move on the November election and Mr. Baugh wins. Mr. Baugh has chastised Mr. Rohrabacher’s support of the cannabis industry, so a Baugh-Blumenaur collaboration is highly unlikely.
  • Residents of the Southern California City of Jurupa Valley will vote on whether to allow commercial cannabis activities in certain commercial zones.
  • Ballot Measure CC in the City of Pasadena would authorize up to six retailers, four cultivators, and four testing laboratories to operate in the City. There will also be a cannabis tax measure on the ballot.
  • The City of San Rafael, which we recently covered in our California Cannabis Countdown series, will also place a tax measure on its ballot. Measure G would authorize the City to tax cannabis business up to 8%.
  • There’s also a tax measure on the County of Santa Barbara’s ballot, however Measure T’s passage carries more than just tax consequences – if Measure T fails then the cannabis ordinance passed by the Board of Supervisors that would allow commercial cannabis activities will not go into effect.
  • The County of San Luis Obispo will also put forth a tax measure on its ballot and just as in Santa Barbary County, if the tax measure doesn’t pass then commercial cannabis businesses will not be able to operate in SLO County.
  • Yolo County is proposing a tax measure that would place an initial four percent (4%) cultivation tax and an initial five percent (5%) tax on all other cannabis businesses.

There are other marijuana related measures that will be on ballots throughout California this Tuesday and it’s extremely important for current cannabis business owners, future entrepreneurs, and cannabis industry supporters to pay close attention to the language of the ballot measures–especially tax measures tied to the enactment of cannabis ordinances–and the cannabis positions on those running for elected office. The cannabis industry has made great strides recently and now is not the time to let up. Get out there on Tuesday and vote!

Yesterday afternoon, the Oregon Liquor Control Commission (“OLCC”) published a news release titled “OLCC Will Pause Acceptance of Marijuana License Applications.” This “pause” takes effect Friday, June 15th. The agency’s sudden announcement was a big surprise to almost everyone, and we received a flood of emails and phone calls throughout the afternoon.

Personally, I cannot remember receiving so many urgent calls and emails related to an administrative or political development at any point in the past seven years of working with cannabis businesses. That includes industry shakeout after recent seismic events like the election of Donald Trump, the appointment of Jeff Sessions as U.S. Attorney General, and Mr. Sessions’ rescission of the Cole Memo. In all, the OLCC announcement caused a major stir.

This post will address questions along the lines of those we received yesterday afternoon, in an attempt to give some consolidated thoughts as to what is going on with Oregon marijuana licensing.

The OLCC announcement says it will “temporarily shift licensing staff to exclusively process recreational marijuana license renewals and applications…”. Does the word “applications” refer to new applications, as well as change in ownership applications? What about “applications” for changes in financial interest?

We have confirmed with OLCC that the announcement refers only to new applications. We also have confirmed that the agency will continue to accept new applications after June 15th cut-off. However, OLCC will not move those applications forward in the queue or begin to process them. The focus will shift entirely on applications submitted prior to June 15th, changes within existing licenses, and renewals.

How long is the pause?

We don’t know. And OLCC probably doesn’t even know at this point. Conceivably, it could last through the next legislative session, beginning in early 2019, when the OLCC may look to the legislature to set some parameters on new license issuances. At a minimum, it seems likely that the pause will extend into the fall, given the application backlog and given the fact that the announcement states OLCC’s intent to put “additional resources into the field for compliance activity, with a focus on targeting Oregon’s 2018 fall outdoor harvest.”

Can the pause go on indefinitely?

Probably not, unless the legislature changes something. In our discussions with OLCC over the past few years, the agency has always acknowledged that the current statutory structure prevents it from capping the number of licenses it awards. Thus, under current law, the only way OLCC can limit the amount of marijuana being produced in Oregon is through controlling canopy sizes (which it has not sought to do).

Is OLCC going to ask the legislature for further statutory controls for licensing in 2019?

It seems likely, yes.

I am closing a large real estate transaction next week! There is no way I can get a LUCS and everything else I need to apply by June 15th. Am I screwed?

You might be. If you aren’t willing to forfeit your earnest money and walk away, the best you can do is close the deal and apply for a license, and wait and hope for OLCC to re-start its conveyor belt.

Is there any chance OLCC will extend this abrupt deadline?

Anything is possible but that seems unlikely. It’s also possible that we could see a carve-out for prospective applicants who can somehow prove compelling circumstances or financial hardship due to the abrupt deadline. But that also seems unlikely, and it’s hard to know how those parameters would even be set.

Why are they really doing this?

The reasons stated in the news release are compelling. Given all of the mergers and acquisitions going on in the Oregon industry, our Portland office processes a large amount of change-in-ownership, loan clearance, and other types of transactions with OLCC. We can confirm that the process has become painstakingly slow for businesses and investors, despite OLCC’s best efforts. Applications for new businesses are also very slow. In addition, the announcement references the need to “put additional resources into compliance activity” as stated above. That’s a good idea generally, but there is doubtless some political pressure behind this objective, too.

What do we do next?

More information will be available in the coming days and weeks. So sit tight and stay tuned. Alternatively, you can always head to California. They have the opposite problem.

california cannabis marijuanaThe movement to legalize cannabis in the United States has come a long way since Californians started it all with the Compassionate Use of Act of 1996 (“Prop 215”). For many years after Prop 215, the pace of change was glacial. In California, it wasn’t until 2004 (8 years after Prop 215) that the California State Legislature passed Senate Bill (“SB 420”). SB 420 recognized the rights of qualified patients and their caregivers to collectively or cooperatively cultivate medical cannabis. Then it took an additional four years until the California Attorney General (who at the time was Jerry Brown, the state’s current governor) released the state’s guidelines (“Guidelines”) on medical cannabis enforcement in 2008.

The Guidelines created the framework for non-profit mutual benefits corporations, collectives, and cooperatives to provide medical cannabis to their patient members. Although the Guidelines were a step in the right direction, they still left many medical cannabis operators uncertain as to what was allowed. It took another seven years before California substantively addressed the cannabis industry when the State Legislature passed the Medical Cannabis Regulation and Safety Act in 2015 (“MCRSA”). But ever since the passage of the MCRSA and the Adult Use of Marijuana Act in 2016, the pace of change in California’s cannabis regulatory landscape is perhaps best described by a quote from Ernest Hemingway’s “The Sun Also Rises.” One of the characters, when asked how he went bankrupt, replied, “Two ways. Gradually and then suddenly.”

In California, we are firmly entrenched in the “suddenly” camp of cannabis regulations. The main reason cannabis operators are seeing a flurry of laws and regulations is because the Medicinal and Adult-Use Cannabis Regulation and Safety Act (“MAUCRSA”) allows for both state and local governments to regulate and license cannabis businesses. Keeping up with the state’s dual licensing regime is a never-ending endeavor. As an example, the state licensing agencies – the Department of Food and Agriculture, the Department of Public Health and the Bureau of Cannabis Control – just recently released and published readopted emergency regulations (which we covered, here).

This week we also saw important legislation make progress on the state and local level. They are as follows.

State Level:  AB 2641 and Temporary Retailer Licenses.

On the state level we saw Assembly Bill 2641 make it out of committee. We previously covered AB 2641, here, but a brief recap will be helpful. Under MAUCRSA only a retailer, delivery-only retailer, or microbusiness (“Retailers”) can sell cannabis products to the public. Currently, cannabis cultivators and manufacturers have no way to directly sell their cannabis goods to their consumers – they are completely reliant on Retailers at the point of sale to tell the public about their product and company mission. AB 2641 would allow certain cultivators and manufacturers the ability to obtain temporary retailer licenses. These temporary licenses would authorize cultivators and manufacturers to sell their products directly to their consumers at temporary cannabis events that are authorized by the appropriate local jurisdiction. AB 2641 needs the approval of two thirds of the State Assembly for it to pass. You can find information on how to support AB 2641 through the California Growers Association website.

Local Level: Sonoma County Recommendations.

As previously mentioned, California is a dual licensing state and we cover local changes in our California Cannabis Countdown series. Each California city and county have their own internal processes for passing cannabis ordinances in their jurisdictions. For example: In Sonoma County, the Planning Commission, the Board of Supervisors (and their Ad Hoc Cannabis Committee), the Cannabis Advisory Group, and the public (through hearings and workshops) all play a role in shaping cannabis policy in Sonoma County. Ultimately it comes down to the Board of Supervisors and we covered one its more contentious hearings here. The County’s Permit and Resource Management Department just recently released a staff report (“Report”) with proposed changes to the county’s cannabis ordinance. Here are some of the Report’s recommendation highlights:

  • Allow adult-use cannabis operations;
  • Extend the life of new cannabis permits from one to two years;
  • Allow transferability of permits between operators;
  • Add processor, microbusinesses, self-distributor transport-only, and shared-use manufacturing as cannabis license types;
  • Amend whether a conditional use permit or zoning permit is needed depending on the zone and parcel size of the property; and
  • Create a cannabis inclusion zone for cultivation applicants that do not have eligible zoning, but which have unique characteristics that may make them eligible for a conditional use permit.

You can download the full Report from the County’s cannabis page, here. The Planning Commission will hold a hearing to discuss the Report’s proposals on June 7th at 1:30pm. AB 2641 and Sonoma County’s Report can provide instrumental lifelines to many cannabis businesses, so let’s do what we can to ensure they pass. Keep checking in as we’ll be sure to keep you posted on their developments.

california marijuana cannabis

Whenever government enacts new regulations there will always be some people and businesses that will be unhappy with the new changes. So, it came as no surprise when California embarked on its mission to create a state licensing regime for cannabis businesses (as well as personal use) that issues would arise. What made enacting cannabis regulations in California so difficult is that ever since Californians voted for the Compassionate Use Act in 1996 (a/k/a Prop 215), cannabis cultivators, manufacturers, and dispensaries were operating without regulations in what everyone conveniently called the legal “grey” area (a Michael Cohen area of practice).

That all changed when the state legislature passed the Medical Cannabis Regulation and Safety Act (MCRSA) in 2015 and a majority of the good people of California voted in favor of the Adult Use of Marijuana Act in 2016 (AUMA). In June of 2017, California Governor Jerry Brown signed into law Senate Bill 94 (a/k/a the Medicinal and Adult-Use Cannabis Regulation and Safety Act a/k/a MAUCRSA). MAUCRSA merged medical and adult-use cannabis activities under one regulatory regime and empowered three state agencies to license and regulate the commercial cannabis industry: The California Department of Food and Agriculture (cultivators, processors, and nurseries); the Department of Public Health (manufacturers); and the Bureau of Cannabis Control (distributors, retailers, delivery-only retailers, microbusinesses, and testing labs). Each state agency released their emergency regulations in November of 2017, which we covered for cultivators, manufacturers, distributors, and retailers.

The emergency regulations were quite the departure from the previously unregulated “grey” market of the previous twenty years. They were however not without some hiccups: Such as the removal of the cultivation acreage cap or the steadfast intransigence of local jurisdictions in licensing commercial cannabis activities.

After the release of the emergency regulations, representatives from the three state cannabis licensing agencies travelled up and down the state to solicit public input on the regulations. The reason the state continued to solicit feedback from the public was due to the fact that the emergency regulations were actually just temporary regulations. All three state agencies were required to release permanent regulations later this year – when exactly the permanent regulations were going to be released was anyone’s guess. While current cannabis businesses and aspiring entrepreneurs have been busy figuring out how to navigate the licensing landscape, the state just went ahead and made changes to the emergency regulations. Just this Friday all three state agencies released new emergency regulations (nothing like a regulation drop on a Friday!). We’ll cover the changes in greater detail in future posts (stay tuned) but here are a couple of highlights:

  • Applicants can submit one application (and pay one fee) to obtain both an adult-use and medical cannabis license. Previously you had to submit two applications and pay two separate licensing fees if you wanted to operate in the medicinal and adult-use market. This applies to all three licensing agencies.
  • A licensee can now engage in commercial cannabis activities with any licensee, regardless of medical or adult-use designation. This is a permanent extension of the transition period in the emergency regulations that allowed medical cannabis licensees to contract with adult-use licensees and vice versa (the transition period was set to expire on July 1, 2018). This also applies to all three agencies.
  • The Bureau of Cannabis Control’s definition of financial interest holder was amended to specifically state that anyone that has an agreement to receive a portion of the profits of a commercial cannabis business will be considered a financial interest holder (there’s an exception for diversified mutual funds, blind trusts, and similar financial instruments).
  • The BCC regulations also specify that licensees authorized for retail sales may not sell or deliver cannabis goods through a drive-through window.
  • A retailer’s delivery employee can now carry cannabis goods valued up to $10,000 while making deliveries (the cap was previously set at $3,000).
  • The Bureau of Cannabis Control reduced the annual license fees for its licensees.
  • The Department of Food and Agriculture revised how it will measure canopy for indoor, mixed-light, and outdoor license types.
  • The Department of Public Health (DPH) formally incorporated the regulations for shared-use facilities, which we covered here.
  • The DPH specifically removed tinctures from the definition of a product containing alcohol. However, tinctures shall not be sold in a package larger than two fluid ounces and shall include a calibrated dropper or other measuring device.

The public will now have all of five days to comment on the re-adoption of the emergency regulations. The five day window for public comment will begin once the California Office of Administrative posts the emergency regulations on its website – which it can do no earlier than May 25, 2018. When these updated emergency regulations are formally adopted the licensing agencies will have 180 days to develop their final regulations. Be sure to check in as we update you with even more details on these emergency regulations and how they may impact your cannabis business.

marijuana oregon seminar

On June 7, our own Vince Sliwoski will chair an all-day continuing legal education (CLE) event called The Business of Marijuana in Oregon, along with Jesse Sweet, a lawyer and senior policy analyst at the Oregon Liquor Control Commission (OLCC). This will be Vince’s fourth year presenting at the event and his third year as chair. The roster of speakers lined up for this CLE is better than any year to date, and everyone, including non-lawyers, would be well served to attend. For a full event description, including topics, speakers and registration links, click here.

Looking back over the past four years, it is amazing to see how much things have changed in Oregon cannabis. At this point, the OLCC’s recreational marijuana program is fully built out, with over 3,400 applicants now on file with the state. We are proud to call many of these Oregon producers, processors, wholesalers and retailers our clients, alongside the many investors and ancillary service providers we represent.

Sometimes, it is said that pioneers get slaughtered and settlers get rich. Now that the Oregon regulatory groundwork has stabilized, we have begun to see a second wave of entrepreneurs and investors move in on the local industry. Many of these new entrants bring skills, capital and experience from other regulated markets, while others are new to the space. Over the next year or so, we expect to see a fair amount of market consolidation throughout the Oregon cannabis industry. (See our most recent observations on the “state of the State” here).

Oregon attorneys and business owners alike need to be familiar with the unique regulatory concepts and industry dynamics that will be discussed on June 7, in order to best serve the Oregon cannabis industry. These concepts include state laws and administrative rules, developments in the highly dynamic federal sphere, and practical approaches to working with and in the cannabis industry. Attendees will hear from regulators, bankers, CPAs, and, of course, lawyers aplenty.

We hope you will join us on June 7 for an eight-hour survey of Oregon cannabis that is both broad and deep. And if you are a Harris Bricken client or a friend of the firm, please click here to request a promotional discount code, which can be applied to either the webcast, or to in-person attendance.

See you soon.

marijuana cannabis supreme court
Nice work by the Court.

Back in December, we wrote about Murphy v. NCAA (“Murphy”), a case where the State of New Jersey challenged a federal law that bans states from allowing sports gambling. We explained that this case has important implications for state-legal marijuana programs, because it asks whether the Constitution’s anti-commandeering doctrine prevents the federal government from forcing states to ban certain activities. The case took a long and winding path, but on Monday, the U.S. Supreme Court ruled by an impressive 7-2 margin that federal prohibition did not preempt the state’s gambling laws. This is great news for cannabis.

We have argued on this blog that applicable law prohibits the feds from shutting down state cannabis programs. In support of this argument, we have observed that the Tenth Amendment of the Constitution (the source of the anti-commandeering doctrine), coupled with the express, anti-preemption language of the federal Controlled Substances Act, grants the states ample authority to run cannabis programs. Given the precedent established in Murphy on Monday, it is hard to imagine any other outcome if the feds were attempt to enjoin (shut down) a state licensing program for marijuana.

In reaching its opinion, the majority acknowledged that the question of whether to legalize sports gambling “is a controversial one” that “requires an important policy choice.” But that choice, the majority continued, “is not ours to make. Congress can regulate sports gambling directly, but if it elects not to do so, each State is free to act on its own.” It is hard not to see parallels with marijuana legislation there. Along those lines, the Court also observed that:

“The legalization of sports gambling is a controversial subject. Supporters argue that legalization will produce revenue for the States and critically weaken illegal sports betting operations, which are often run by organized crime. Opponents contend that legalizing sports gambling will hook the young on gambling, encourage people of modest means to squander their savings and earnings…”

Substitute “marijuana” for “sports gambling” and you have an almost perfect distillation of the broad policy arguments made by pro- and anti-cannabis prohibition camps. Because of these striking parallels, supporters of cannabis filed an amicus brief in support of the State of New Jersey. In addition, litigants in the Supreme Court’s most notable marijuana case to date, Gonzales v. Raich, were quick to opine that Murphy is easily distinguished from the former case, which dealt only with the federal government’s ability to enforce federal laws within state borders, and not with the feds’ ability to require states to pull state laws off the books.

For cannabis advocates, Murphy is an especially fun case, because it originally was brought by former New Jersey Governor Chris Christie, and the case was known as Christie v. NCAA before Phil Murphy became the state’s governor. Christie, of course, is known for his repeated attacks against state legalization of marijuana, and his disregard of states’ rights in that context. Today, however, he is applauding the Murphy decision and the “rights of states and their people to make their own decisions.” Go figure!

In any case, anyone in favor of states’ rights, including the right to ignore retrograde federal laws around marijuana prohibition, should be excited about the Supreme Court’s decision in Murphy. It stands as the latest in a string of promising federal developments signaling the end of cannabis prohibition. Hopefully, the end is finally near.

california cannabis insurance
In California, it just got easier for landlords.

One of the most important elements of a commercial tenancy is insurance. Generally, the landlord maintains property insurance for damage to the building, existing improvements, and surrounding property, as well as liability insurance for bodily injury and property damage occurring on the premises. The landlord will typically pass the cost of that coverage on to the tenant as an operating expense, proportionally according to the tenant’s share of space in the building. The tenant will typically be required under the lease to carry, at its own expense, property insurance on all tenant improvements and tenant personal property, as well as its own liability policy covering injury and property damage occurring on the premises.

Because marijuana remains a Schedule I controlled substance that is federally illegal to produce or sell, most traditional insurance companies have declined to write insurance policies for the commercial cannabis industry. This relates to the federal illegality of marijuana itself, and also the increased risk associated with commercial cannabis as a result of such illegality, e.g. increased rate of loss from theft or burglary. As a result, landlords and tenants alike have often had to look to non-admitted carriers or surplus lines insurers to write a rider on a policy to cover cannabis activity. Such coverage is often extremely limited in scope, rife with exclusions, and very expensive. That said, rolling with a general liability policy that is not specific to cannabis is often even worse.

In industries other than cannabis, buyers tend to disfavor non-admitted carriers. This is due to the risk of losing out on various benefits offered through admitted carriers. Such benefits include: the certainty of financial stability and good business practices that comes with the state’s stamp of approval, the right to appeal claims that are denied, and the guarantee that the state will pay certain claims if the insurance company goes bankrupt. Cannabis businesses have had none of these benefits, until now.

Last week, the California Department of Insurance announced that it has approved a Lessor’s Risk policy issued by California Mutual, a traditional carrier with an “A- excellent” rating, for landlords renting to commercial cannabis tenants. Lessor’s Risk coverage is typically a comprehensive landlord insurance package that includes both the property and liability coverages often carried by commercial landlords. Specific commercial cannabis activities and businesses services by this announced coverage would include cannabis labs, product manufacturing, cultivation, and dispensary operations.

In the bigger picture, this is an important development for at least two reasons. First, it signals to other large insurers that the water is warm to start writing policies for cannabis businesses, and increased competition will mean lower prices, which will encourage more landlords to lease to cannabis tenants. Second, it is a huge step towards further legitimizing the cannabis industry by treating it like any other industry that requires business and government services. And it also highlights the need for perhaps the most important business service, banking, which is currently headed in the right direction as well.

All in all, when you have the Insurance Commissioner for the fifth largest economy on earth organizing cannabis facility tours for insurance executives, you can’t help but notice how seriously the state is taking this industry. That’s a good thing for landlords and tenants alike.