cbd fda food claims

This Wednesday, September 11, our own Vince Sliwoski will present at a marquee food industry event in Chicago. The topic will be “Navigating the Use of CBD Oil as a Food Claim.” This stand-alone presentation will occur alongside presentations from regulatory counsel at Whole Food Markets, Sargento Foods, Nestle USA, Non GMO Project and the USDA, to name a few. A handful of our law firm’s national retail and distribution clients will also be making the trip. For the conference landing page, including registration and agenda, go here.

Over the past year or two, we have seen a tremendous uptick in the manufacture, distribution and sale of hemp-CBD products. This trend continues to accelerate despite FDA’s clear position that these products are unlawful under the Food, Drug and Cosmetics Act (“FD&C Act”). And, while the FDA has not been very active in enforcing this position, it recently dispatched another highly-publicized warning letter regarding hemp-CBD products on offer at CVS, one of the nation’s largest retailers.

As we have covered extensively on this blog, the manufacture and distribution of hemp-CBD products under the 2014 and 2018 Farm Bills is a challenging area of law, and incredibly dynamic. The FDA is currently considering whether there is any path forward for these products under its reading of the FD&C Act, while USDA simultaneously writes rules that will affect the industry. The approaches taken by states and even local jurisdictions have been all over the board.

Despite all of the uncertainty and hassle, though, businesses and consumers are moving ahead. Today, you can buy CBD food products (and beverages, topicals, supplements, and pet products) at physical and online retailers throughout the United States. We don’t see that ending anytime soon.

We are honored and excited to have been asked to speak at this leading industry event on the issue of food claims and CBD, and we will continue to serve as thought leaders and advisers on this and related matters. For more on these issues, check out our tagged archives of hemp and FDA blog posts. Otherwise, best of luck to Vince in Chicago and we hope to see some of you at the event.

international law cannabis uruguay single convention

Yesterday, I came across an article in this week’s Economist titled Going to Pot (*sigh*). The premise of this article is that “a global revolution in attitudes towards cannabis is under way” and it explains how countries in many parts of the world have begun to undertake cannabis reforms in varying degrees. This includes everything from wholesale federal legalization (i.e. Canada, Uruguay) to emerging medical cannabis programs (e.g. South Korea, Germany, Thailand, Zimbabwe). The article covers what these changes mean in a commercial sense, but also their implications under international law.

The global reconsideration of cannabis is a recent phenomenon, but only relatively. In August of last year, I explained that the United Nations (UN) itself had finally begun to reconsider the status of cannabis under international law, including under the Single Convention on Narcotic Drugs of 1961 and related treaties (“Single Convention”). I also analyzed, this February, the significant and long overdue World Health Organization recommendations related to the treatment of cannabis under international law. What the UN does with those recommendations is still an open question, but in a certain sense it doesn’t matter: countries are moving ahead.

In keeping with these changes, our law firm has begun doing more and more international advising with respect to cannabis in the last few years. Broadly, we divide this work into three classes:

  1. Importers and exporters of hemp (We have clients doing this. There are no real treaty issues; it’s more about domestic law and customs);
  2. Importers and exporters of medical cannabis (We have clients looking at this. Treaty issues are generally navigable, given the Single Convention allowances on “medical and scientific” cannabis);
  3. Fully legalized jurisdictions, à la Canada (We represent one sovereign looking at this. It is “illegal” and really interesting).

So what happens under international law when a country legalizes cannabis outright? As a practical matter, not much. Public international law is decentralized, unenforceable, unpoliced and frequently broken. This means that neither Canada nor Uruguay will be hauled before a court or tribunal for admitted violations of the Single Convention. The same will be true of Mexico when it legalizes cannabis later this year. Same for Luxembourg. And Switzerland. Etc. At most, these states will be subject to diplomatic moralizing and criticism, mostly out of sight.

That isn’t to say that states do not have options with respect to the Single Convention and cannabis. Below are three that are commonly discussed.

Withdraw from the Treaties

Under international law, a state may withdraw from a treaty in conformance with the provisions of the treaty itself (if the agreement permits withdrawal) or with the consent of all parties. The Single Convention permits withdrawal, at Article 46. And there is precedent for withdrawal: Bolivia withdrew from the Single Convention in 2012 when it wanted to legalize the chewing of coca leaves. It then rejoined with a “reservation” as to coca leaves in 2013.

In the context of cannabis, Canada seems to have discussed the withdrawal option in detail. Ultimately, it appears that Canada will not withdraw, on the reasoning that its contravention of the treaty is principled (cannabis prohibition is harmful), and that withdrawal would be an excessive response given the all the other drugs included in the Single Convention. That may seem unconvincing, but options here are few.

Inter se Agreement

Canada and other scofflaws could also form an “inter se” (between themselves) agreement, allowing those states to modify existing drug treaty obligations with respect to cannabis.

The inter se option is wonky territory, even for international law. Based in Article 41 of the 1969 Vienna Convention on the Law of Treaties, it was designed to allow changes without consensus while supporting stable treaty regimes. This option would require that the inter se agreement include a clear commitment to the Single Convention’s original aim; that is, to promote the health and welfare of humankind (as to cannabis, here) and to maintain the original treaty obligations vis-à-vis countries left behind. That doesn’t seem terribly challenging.

So, will an inter se agreement happen anytime soon in the context of cannabis? Probably not, for the simple reason that not enough countries have legalized cannabis outright to create a major constituency. Check back in ten years.

Violate International Law

This is what countries have begun to do, and will continue to do, to the point where the Single Convention is broadly undermined. The scenario is roughly analogous to what U.S. states have done to the domestic Controlled Substances Act as to “marijuana.” It will be an even slower process, however, given the prohibitionist posture of global heavies like China and Russia on cannabis, and the glacial development of international law generally. It will take decades and decades, in fact.

The Economist is correct that a global revolution in attitudes towards cannabis is under way. The revolution of laws, however, will be slower. Until then, and as the poet once said, “to live outside the law you must be honest.” Canada, Uruguay and every other country making a move on cannabis knows exactly how that feels.

hemp cbd litigation

Our cannabis attorneys are often asked by media, clients, and other professionals working in the hemp and CBD marketplace what we think will be the next “big issue” in this developing industry. Often these questions concern regulatory and compliance questions, as (most) companies are keen to mitigate risk and avoid running afoul of state and federal regulators. Regulation is just part of the risk equation, however, as the value chain for hemp and CBD is rife with issues that may give rise to substantial and even “bet the company” litigation. This post offers an overview of litigation trends we are seeing, or in some cases predicting, that hemp/CBD producers, processors, manufacturers, and retailers should keep on their radar.

Disputes between hemp farmers concerning cross-pollination

Cross-pollination is an increasing source of conflict between hemp farmers and we expect an increase in “farmer v. farmer” litigation as hemp acreage increases across the country.  The passage of the 2018 Farm Bill has seen hemp production increase from roughly 25,000 acres in 2017 to 80,000 acres in 2018 to hundreds of thousands of acres in 2019. Oregon alone has surged to more than 60,000 acres of hemp in 2019. Colorado and Kentucky project more than 50,000 acres of hemp each this year and other states have reported significant increases in applications by growers to plant hemp.

Some farmers are growing hemp for biomass, others for seed, and still others for its CBD content.  This last kind of hemp is (for now) the most desirable as consumer demand for CBD seems to increase daily.  Farmers growing hemp for CBD desire certain strains of female hemp plants to achieve a high CBD yield The risk of cross-pollination and contamination by male plants can be a death knell to these farmers’ crops. Even fields grown with certified feminized seed will still have rogue male plants and many hemp farmers walk their fields regularly to remove the male plants. Farmers growing hemp for biomass (e.g. fiber and seed) are less concerned about whether their plants are male or female. Another complicating factor is that some farmers are not sufficiently aware of the dangers of cross-pollination and are not taking appropriate actions to protect their own crops.  Yet another factor, in some jurisdictions, is the risk of cross-pollination between marijuana and hemp.

State regulators are just beginning to work through the complex issues of how to license and approve farmers to grow hemp and how to isolate and protect farmers growing hemp for different purposes. Meanwhile, some farmers have taken matters into their own hands by filing suit against their neighbors for nuisance and other torts alleging that cross-pollination harmed or destroyed their crop.

We expect to see more of these cross-pollination lawsuits in the next several months and urge regulators and farmers to start working toward practical solutions to mitigate the risks of cross-pollination.

Disputes between hemp farmers and purchasers

Disputes between hemp farmers and purchasers of raw hemp – whether for processing CBD or other industrial purchases is a growing concern. Setting aside the cases involving some kind of fraud or failure to deliver the crop (see here, here, and here), we expect to see an increase in litigation between farmers and purchasers. Potential sources of litigation include whether the hemp is legal, chain of custody, total THC, CBD content, and compliance with appropriate state and federal regulations.

A potential saving grace is that many of these issues can (and should) be dealt with through a robust production contract or purchase order. Too often, however, we see contracts that fail to address specific issues relevant to hemp.  As we’ve said numerous times before, hemp is a unique commodity that requires contractual terms beyond those found in generic agreements. Although a robust contract may not prevent litigation, it may very well mean the difference between achieving lawsuit dismissal at the outset of a case or spending hundreds of thousands of dollars in litigation.

Consumer and shareholder actions relating to CBD

We anticipate that companies selling CBD products will see a significant increase in claims against them by consumers and shareholders. Last week a consumer class action complaint was filed against JustCBD in the Southern District of Florida. JustCBD sells a variety of products containing CBD – from gummies to soap to tinctures to cartridges. According to its website, the company was “founded on the basis that CBD is Mother Nature’s secret miracle.” The complaint alleges that JustCBD overstated the quantity of CBD contained in its products on repeated occasions and in violation of representations and warranties it made in marketing and selling its products. The plaintiff alleges it conducted independent testing (by Anresco Laboratories) that revealed:

the “JustCBD Honey Liquid Tincture,” which purports to contain “100mg CBD” in the bottle, actually contains just 48.92mg CBD per bottle. This represents an underfill of approximately 51%. As another example, the “JustCBD Apple Rings Gummies,” which purportedly contains “250mg CBD,” in fact contains a non-detectable quantity of CBD. 2 This represents an underfill of 100%. By misrepresenting the true quantity of CBD in their CBD Products, Defendants are able to charge a substantial price premium on account of these fictitious CBD quantity claims.

The complaint alleges claims for breach of warranty, unjust enrichment, fraud, violation of New York’s General Business Laws §§ 349 and 350, and violations of Florida’s Florida Deceptive and Unfair Trade Practices Act.  A full analysis of the JustCBD complaint is beyond the scope of this article. (Feel free to email me for a copy of the complaint).

Suffice to say companies selling CBD products ought to be on notice that the plaintiffs’ bar is actively searching out ways to cash in on the booming CBD market—the complaint notes that market is projected to surpass $23 billion in annual U.S. sales by 2023. Of special concern is that some states permit plaintiffs to recover attorneys’ fees for violations of their laws prohibiting unfair and deceptive trade practices.

Consequently, we anticipate a significant uptick in consumer class actions. (Particularly given some of the claims being made about CBD). Companies in the CBD marketplace should work carefully with their regulatory attorneys concerning any advertising claims and other statements made about their products. For more reading see here, here, here, here and here.

Lanham Act claims between competitors in the CBD marketplace

The Lanham Act, also known as the Trademark Act of 1946, is the principal federal statute that governs trademarks, service marks, and unfair competition. Although the Lanham Act is generally thought of as the trademark statute, the Lanham Act also protects businesses against unfair competition by competitors who use false or misleading advertising or labeling. (Notably, consumers do not have standing under the Lanham Act).

Although we are not yet aware of a Lanham Act lawsuit between CBD companies, we expect that to change. A plaintiff may seek injunctive relief (i.e. an order compelling the competitor to remove the false or misleading advertising) as well as damages and, in some instances, attorneys’ fees. Given some of the claims made by CBD companies (see here), cease-and-desist letters and lawsuits almost write themselves.

I’ll be addressing the Lanham Act in greater detail in the coming weeks as well as an important Lanham Act issue that is on the United States Supreme Court’s docket this term.

International trade and contract disputes concerning Hemp/CBD

Hemp is now an international concern and our international trade lawyers are getting a steady stream of questions on the importation and exportation of hemp and CBD – some that involve the United States and some that do not. See here for a discussion of the impacts of U.S.-China trade war on hemp.

An important part of any international dispute is the question of arbitration. This term the United States Supreme Court will resolve a key issue in international arbitration agreements: whether the New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards (the “Foreign Arbitral Award Convention”) permits a non-signatory to an arbitration agreement to compel arbitration against a signatory to arbitration based on the doctrine of equitable estoppel.  See here for a fulsome discussion of this issue.

Given the global uncertainty surrounding trade and the shifting regulatory environments concerning Hemp and CBD, we fully anticipate an increase in cross-border disputes and international arbitrations.  So if your Hemp/CBD company is working internationally, we strongly recommend you start reading our China Law Blog – which touches on trade and other issues that go well beyond China.

washington hemp cbd food ban

If you’ve been following the hemp scene in Washington state, you know it’s been a bit of a roller coaster. The latest “drop” comes in the form of an August 1 memo from the Washington State Department of Agriculture (“WSDA”) titled Restrictions on the use of hemp CBD as a food ingredient. According to the memo, Washington is following the lead of many other states, most notably California,  in prohibiting the use of hemp-derived CBD (“Hemp-CBD”) in foods and beverages.

Washington is essentially implementing the Food and Drug Administration’s (“FDA”) policy on Hemp-CBD as a food ingredient. Last year, the FDA approved the drug Epidiolex. Epidiolex contains CBD. The Food, Drug and Cosmetics Act (“FDCA”) and FDA regulations generally prohibit an article that is approved or investigated as a drug from being an ingredient in food or dietary supplements, unless that article was marketed as a food or dietary supplement prior to being investigated as a drug. The FDA has concluded that Hemp-CBD was not marketed as a food or dietary supplement before the investigation of Epidiolex and therefore the FDA’s position is that Hemp-CBD cannot be added to food or dietary supplements.

According to the WSDA, Hemp-CBD is not approved as a food ingredient. Note that the WSDA’s memo does not apply to Washington’s regulated marijuana market. Licensed retailers are still free to sell CBD-infused edibles derived from marijuana, so long as those products were manufactured by a licensed processor. Washington processors are allowed to add Hemp-CBD to marijuana products so consumers, over the age of twenty-one, can still access Hemp-CBD by going to marijuana retailers. Additionally, the WSDA has stated that some parts of the hemp plant, specifically hulled hemp seeds, hemp seed protein powder and hemp seed oil are allowed for use in food. Why? Because the FDA has determined that these components are Generally Recognized as Safe (“GRAS”) for use in food. Notwithstanding these marijuana-food products containing CBD and food items containing these GRAS components, the WSDA is prohibiting all hemp in food:

Other parts of the hemp plant, including CBD, cannot be used as a food ingredient under a Washington State Food Processor License. Foods containing unapproved parts of the hemp plant may not be distributed in Washington State under a Washington State Food Storage Warehouse License.

This development from the WSDA was somewhat unexpected in light of Senate Bill 5276, which went into effect in April and overhauled Washington’s hemp program in light of the 2018 Farm Bill.  Section 4 of SB 5276 provides:

“[t]he whole hemp plant may be used as food. The [WSDA] shall regulate the processing of hemp for food products, that are allowable under federal law, [and] may adopt rules as necessary to properly regulate the processing of hemp for food products including, but not limited to, establishing standards for creating hemp extracts used for food.”

In addition, SB 5276 Section 14 struck RCW 15.120.020’s language which previously prohibited processing hemp, except for hemp seeds, into any consumable good.  This is not to say that the WSDA doesn’t have authority to follow the FDA’s position on hemp, it just seemed as if the legislature had set the WSDA up to allow for Hemp-CBD in a whole host of products, including food.

In terms of enforcement, it does appear that the WSDA is going to ramp out any aggressive efforts against Hemp-CBD right away:

Recognizing that these recent changes in law may have caused some confusion in the manufactured-food industry, WSDA has been reaching out to the industry so they can take appropriate actions, such as removing CBD ingredients from their products or discontinuing distribution of CBD-containing food products in the state. WSDA is committed to working with our food industry partners during this transition.

Steve Fuller, director of the WSDA’s Food Safety and Consumer Services division told Ben Adlin of Leafly that he prefers to focus enforcement efforts on “outreach and education,” optimistically stating that “[a]s processors and distributors learn that this is not legal either federally or within the state, most of them will do the right thing and figure out a way to come into compliance around that.”
If the outreach and education method doesn’t work, we expect to see WSDA partnering with cities and counties to seize Hemp-CBD food products and potentially even shut down non-compliant businesses. It’s worth noting that King County’s Food Protection Program weighed in on Hemp-CBD in food on August 30:

Recently there has been interest from food establishment operators in selling food and beverage products with industrial hemp and its derivatives such as cannabidiol, more commonly known as CBD. Federal and State laws do not permit the manufacture and retail sales of CBD as a food ingredient in foods and beverages for sale in retail food establishments.

Therefore, in King County, the addition of CBD to food and beverages is prohibited until further guidance and approval by the U.S. Food and Drug Administration, Washington State Department of Agriculture, and Washington Department of Health.

This means that operators may not add CBD to food or beverages, nor may they obtain products containing CBD for resale in any retail food establishment in King County, including restaurants, coffee shops, cafeterias, grocery stores, or at temporary food events and farmers markets.

So what is the big takeaway here? If you are operating in Washington State, steer clear of Hemp-CBD in foods for now. If the FDA changes its tune, the WSDA will likely follow suit but until then, selling Hemp-CBD food in the Evergreen State is risky.
Finally, if you want some additional information on Hemp-CBD in Washington, check out the September 3 episode of KUOW’s The Record where I spoke to host Bill Radke about whether CBD bars are legal in Washington State.

cannabis marijuana assignment benefit creditors bankruptcy

We recently hosted a webinar on alternative dispute resolution options for cannabis companies. In addition to the handful of questions we received on receivership, one topic of particular interest was the potential for cannabis companies to utilize different restructuring or bankruptcy options.

As you might know, a hefty percentage of the disputes we see in this industry has to do with business “divorces” between partners – which unfortunately, often lead to the business becoming insolvent or nearly so. While receiverships may be the best option for you (be sure appointing a receiver doesn’t conflict with your company’s agreements!), another option is an assignment for the benefit of creditors (nicknamed, “ABC”).

ABCs are state law creatures and ultimately result in liquidation of a debtor’s assets for its creditors’ benefit. This is potentially a really effective solution for cannabis companies that lack access to bankruptcy protection but wish to continue operating and avoid debt restructuring. The debtor will select an “assignee” to take legal and equitable title to the debtor’s assets, sell those assets, and then distribute those sale proceeds to any creditors in the order of priority established by state law. This process is often non-judicial and therefore has the advantage of speed and flexibility in the liquidation process absent litigation complications.

A high-level overview of the mechanics: the assignee is generally an individual selected by the troubled or insolvent company. The decision to initiate an ABC must be approved by the equity owners. Then, the debtor must turn over and assign all right, title, and interest in its assets to the assignee, as well a complete listing of all creditors, their addresses, and the amount of indebtedness. Thereafter, the assignee is not only charged with the responsibility of gathering all of the debtor’s assets and selling the debtor’s right, title, and interest in those assets – it also has a fiduciary duty to all creditors. The assignee must give notice of the ABC to all creditors and invite each creditor to file a claim.

The assignee will generally obtain at least one liquidation appraisal, and if the assignee can find a buyer for all the assets which exceeds the appraised value by a reasonable amount, the assignee may immediately sell to that buyer without initiating any advertising or auction. More commonly seen though, there is some type of auction sale. The assignee will assemble the debtor’s assets and have them liquidated in bulk or piecemeal, whichever will gain the debtor the highest price.

A word of caution though: you should always have a knowledgeable attorney ensure that this is the right option for you, depending on the applicable state’s law and practice. As we all know, each state has its own version of laws and regulations that govern state-legal marijuana businesses. There may be real limits to how inventory can be sold to pay off debts. Or, if your company is insolvent and your license needs to come into play, most states have stringent licensing requirements that hamper the ability to transfer those licenses without review and approval by the state (which could really undermine the coveted benefits of speed and flexibility).

As a final and semi-related note, all players in the cannabis industry should be aware of not only their potential options, but also the limitations of those options. In order to put yourself in the best position at the outset, talk with our transactional team about how to put protections in place – whether it’s making sure you’re selecting the appropriate entity form or planning a proper preemptive exit strategy. If you’re a creditor, maybe consider the need for additional collateral in your transactions. If you later find that your business is struggling to stay afloat or is no longer above water, having these types of protections in place will undoubtedly aid the restructuring or liquidation process.

napa california cannabis

 

Cannabis cultivation and the means for regulating it have been contentious topics in Napa County for some time now. Back in July, proponents of allowing commercial cannabis cultivation in unincorporated Napa County, led by the Napa Valley Cannabis Association, collected enough signatures to qualify for a ballot measure during the March 3, 2020 election.

Following collection of those signatures, the County Board of Supervisors took up the issue on July 23rd. Typically, the Board would have three possible paths forward in such a situation. The Board could: 1) place the measure on the ballot next March, 2) adopt the measure outright, or 3) order a 9111 report to analyze the potential impact of the measure before taking action at a later date.

The County Board of Supervisors issued a 9111 report regarding the cannabis regulation initiative on August 20th in which it analyzed the land use, environmental, fiscal, and other impacts of the proposed initiative. The report detailed some of the negative implications that could result from the initiative, including a purported negative impact on Napa County’s tourism industry “through adverse odor and visual impacts on wineries, restaurants, resorts, and lodging facilities in both incorporated and unincorporated areas of the county.” The report drew analogies to the struggles of Santa Barbara County in regulating cannabis as well.

Aside from the details contained in the 9111 report, opponents of the initiative emphasized that the initiative process was not the proper means for developing cannabis regulations for the county, because the county’s ability to amend the regulations established pursuant to that initiative would be extremely limited. Such amendments could only occur via a ballot vote.

But on August 28th, proponents of commercial cannabis cultivation in the county “announced plans to withdraw their ballot initiative, saying they now prefer regulations they are seeking to be included in an ordinance by the county board of supervisors.”

“Following discussions with industry trade associations, various members of the Napa Board of Supervisors and community, the NVCA and The Committee prefer an ordinance that is a living document, over an initiative process,” Napa Valley Cannabis Association board member Eric Sklar wrote. “An ordinance can be evolved and changed by the Board of Supervisors at any time, whereas approved initiatives can only be changed with a ballot vote.”

Additionally, Sklar described the withdrawal as a “gesture of good faith,” stating, “We support and prefer the ordinance process to collaboratively develop written regulations that will evolve in line with the current and future needs of the community, in a responsible and representative manner.”

Hopefully the withdrawal of the initiative will open the door to productive collaboration on an ordinance that adequately addresses the interests and concerns of all impacted parties. This serves as yet another example of the myriad ways local jurisdictions in California have struggled to regulate cannabis in the wake of legalization, and we’ll be paying close attention to see how one of California’s most recognized agricultural regions decides to move forward.

idaho cannabis hemp cbd

The Agriculture Improvement Act of 2018 (“2018 Farm Bill”) legalized hemp by removing the crop and its derivatives from the definition of marijuana under the Controlled Substances Act (“CSA”) and by providing a detailed framework for the cultivation of hemp. The 2018 Farm Bill gives the US Department of Agriculture (“USDA”) regulatory authority over hemp cultivation at the federal level. In turn, states have the option to maintain primary regulatory authority over the crop cultivated within their borders by submitting a plan to the USDA. This federal and state interplay has resulted in many legislative and regulatory changes at the state level. Indeed, most states have introduced (and adopted) bills that would authorize the commercial production of hemp within their borders. A smaller but growing number of states also regulate the sale of products derived from hemp.

In light of these legislative changes, we are presenting a 50-state series analyzing how each jurisdiction treats hemp-derived cannabidiol (“Hemp CBD”). Each Sunday we will summarize a new state in alphabetical order. So far, we’ve covered Alabama,  Alaska,  Arizona,  ArkansasCaliforniaColoradoConnecticutDelawareFlorida, Georgia and Hawaii. Today we turn to Idaho.

To put it bluntly, Idaho is probably the worst state in the country to get caught with hemp. Hemp cultivation is not legal, even after the passage of the 2018 Farm Bill. The state legislature considered House Bill 122 earlier this year. It would have allowed for the regulated cultivation of hemp. It stalled out in April.

Long before that bill failed, the Idaho Attorney General issued an informal opinion (see pages 132-134) on the legality of Hemp-CBD in 2015. He concluded that in almost all cases, the possession of any form of CBD, whether derived from marijuana or hemp, is illegal.  According to the opinion, in Idaho, products containing CBD are only legal if the two following criteria are met:

  • the substance cannot contain any THC; and
  • the substance must be excluded from the definition of “marijuana” under Idaho Code § 37-2701(t)

Under Idaho Code § 37-2701(t), the only legal part of the cannabis plant, whether hemp or marijuana, are (a) mature stalks of the plant; (b) fiber produced from the stalks; (c) oil or cake made from the seeds or the achene of such plant; (d) any other compound, manufacture, salt, derivative, mixture, or preparation of the mature stalks; or (e) the sterilized seed of such plant which is incapable of germination.

For a CBD product to be legal in Idaho and it must be totally THC free and must come from one of the five categories mentioned above. It doesn’t matter whether the CBD was derived from hemp or marijuana. If derived from anything other than the seeds or stems of the cannabis plant, it is illegal.

Stems and seeds aren’t going to have high levels of CBD or any other cannabinoids so really this just means that CBD is pretty much outlawed in Idaho with one notable exception: Idaho allows for FDA-approved CBD, such as that found in Epidiolex. The Idaho Office of Drug Policy’s webpage on CBD Drug Policy indicates that Idaho’s position on CBD has not changed as of June 2019 and that the informal opinion from 2015 is still followed.

Idaho’s opposition to hemp goes beyond the informal opinion as Idaho has recently seized hemp shipments traveling through the state. On August 28, 2019, the Ninth Circuit Court of Appeals heard oral arguments in Big Sky Scientific, LLC v. Jan Bennetts, on appeal from the District of Idaho. We wrote about that case in great detail here.

The case involved the Idaho State Police’s seizure of 6,700 pounds of industrial hemp biomass cultivated lawfully in Oregon that was on its way to Colorado for state-lawful processing. The appeal involved the denial of Big Sky’s preliminary injunction by the state court. Big Sky moved for a declaratory judgment stating that Idaho Police improperly seized Big Sky’s hemp in light of the 2018 Farm Bill’s and a preliminary injunction requiring police to return the hemp. The District Court issued an Order denying relief to Big Sky stating that it’s not clear that the 2018 Farm Bill, which prohibits states from interfering with shipments of legal hemp, provides protection for hemp grown under the 2014 Farm Bill. Because the USDA has not approved any state-level hemp cultivation plans under the 2018 Farm Bill, all hemp in the US is grown under the 2014 Farm Bill. In other words, all hemp shipments are at risk of seizure if they pass through Idaho.

The Ninth Circuit indicated that it believes federal jurisdiction may have been improper, meaning the case may ultimately be dismissed on procedural grounds. Even if Big Sky is unsuccessful here on procedural grounds, it’s worth noting that the USDA’s opinion is that Idaho should not have seized this hemp under the 2018 Farm Bill.

One day Idaho will come around and stop fighting hemp farmers who are merely shipping products through the state. For now, Idaho is one of the worst states on hemp. If you are a stakeholder in this industry, avoid Idaho at all costs.

julian castro marijuana cannabis

Every Saturday, we have been running a series of blog posts that take a close look at the Democratic Party candidates for President in 2020. We examine each candidate’s historic approach to marijuana law and policy, and we also canvas their current respective stances on marijuana.

Over the past nine weeks, we covered Joe BidenBernie SandersKamala Harris, Elizabeth WarrenPete ButtigiegCorey BookerBeto O’RourkeAndrew Yang and Amy Klobuchar.  Today, we turn to Julián Castro, former U.S. Secretary of Housing and Urban Development and former Mayor of San Antonio.

Grade: B-

Stance on marijuana: Julián Castro supports legalizing marijuana and expunging records of past marijuana convictions as he said at a town hall in April.

History: Prior to his pro-legalization statement in April, Castro had remained relatively ambivalent on the issue of marijuana. Under Castro, HUD issued a statement reaffirming its policy of allowing property owners to evict marijuana users in federally assisted housing facilities. Other than this statement, however, Castro lacks much of a legislative record (or any other record) on marijuana. In 2014 (five months before his appointment as HUD secretary), Castro expressed uncertainty about whether he supported legalizing marijuana:

I haven’t looked at the science yet about addiction and what it means, but it’s certainly something that I think deserves more scrutiny and more analysis.

Castro’s website does not mention marijuana. Though Castro does address some aspects of criminal justice reform through his platform on policing, important topics such as the War on Drugs, legalizing marijuana, and sentencing reform are nowhere to be found on his website.

To his credit, Castro has expressed his views on marijuana on social media. In 2017, he criticized the Trump administration for threatening to crack down on states that legalized marijuana, writing in a Facebook post:

The federal government should focus its resources on more serious crimes. Not only that, growing evidence from Colorado and other states suggests we can sensibly legalize marijuana use with reasonable controls in place. State voters should have that power.

This past January, Castro retweeted a post by Representative Ro Khanna that called for both legalizing marijuana and expunging marijuana convictions from criminal records. Then in April, Castro announced his full support for legalization at a town hall and later on Twitter.

Conclusion: Julián Castro receives a “B-” grade because his support for the legalization of marijuana is not an important part of his platform and because he has no legislative record on the issue. Castro has openly supported legalizing marijuana on his social media, but he does not mention marijuana on his website and only recently did he wholeheartedly express support for legalization at the federal level. He also omits key aspects of criminal justice reform from his platform. Overall, as president we think Castro would support legalizing marijuana, but we question his enthusiasm on this issue.

usda hemp testing thc

Hemp stakeholders have been eagerly waiting for the release of rules and regulations by the U.S. Department of Agriculture (“USDA”). Although the 2018 Farm Bill removed the hemp and its derivatives from the Controlled Substances Act, it did not provide clear, consistent and reliable standards to safely and lawfully produce the crop. Instead, the new law tasked the USDA with adopting those standards with which states and Native American tribes wishing to regulate the crop within their borders will have to comply.

Earlier this summer, the USDA announced in a notice published in the Federal Register that it aimed to release its interim final rule in August. However, various comments recently made by USDA representatives suggest that the agency is struggling to meet its deadline. Specifically, the agency seems to be wrestling with the drafting of THC testing standards.

THC Testing standards matter because THC concentration is the key factor in differentiating hemp from marijuana.  It is the difference between a regulated agricultural commodity and a Schedule I controlled substance. Without a national THC testing standard marijuana and hemp are virtually impossible to differentiate because they look, smell and feel the same.

Pursuant to Section 297B (a)(2)(A)(ii) of the 2018 Farm Bill, states and Native American Tribes seeking regulatory authority over the production of hemp must submit a plan to the USDA that includes, in part,

a procedure for testing, using post-decarboxylation or other similarly reliable methods, delta-9 tetrahydrocannabinol concentration levels of hemp produced in the State or territory of the Indian tribe[.]”

As I explained in a prior post, there is no “postdecarboxylation” testing method per se, and although the congressional intent of the 2018 Farm Bill apparently was to refer to a testing method known as gas chromatography (“GC”), this method has been heavily criticized by stakeholders because it tends to increase the THC concentration in the hemp sample and pushes it over the 0.3 percent limit.

So it isn’t entirely surprising that the USDA is struggling to craft THC testing standards with so little guidance.

Unfortunately, this delay is further exacerbating state and local enforcement authorities’ ability to differentiate hemp from marijuana. As of now, most jurisdictions lack the resources to test for specific levels of THC and differentiate hemp from its illegal cousin, marijuana. The patchwork of testing standards across states has further hindered the lawful sale of hemp nationwide. After all, why impose a 0.3 percent THC threshold if the states are imposing 50 different testing standards?

Establishing a reliable and uniform testing standard is only one of many other standards the USDA needs to promulgate in order to fulfill the intent of the 2018 Farm Bill. Implementing a procedure for tracking the source of the crop and its finished products is as important as the adoption of a uniform testing standard. Indeed, the 2018 Farm Bill legalized hemp grown pursuant to a state or Native American tribe plan. This means that not all hemp is treated equal, even if the tested crop contains no more than 0.3 percent THC.

As such, hemp industry players must maintain records showing the source of the plant, including but not limited to the grower’s license under which hemp was cultivated as well as the certificate of analysis (“COA”) for each batch of hemp or finished hemp product tested showing that they contain no more than 0.3 percent THC. If your company is dealing in hemp, you should know exactly where it was grown and should be prepared to prove it.

The lawful production and sale of hemp and hemp products is a complex business that requires cautious planning and due diligence. As such, hemp stakeholders should consult with lawyers who thoroughly understand the field in order to mitigate their risks and thrive in this fairly unregulated market.

california cannabis licenseCalifornia’s cannabis law—the Medicinal and Adult Use Cannabis Regulation and Safety Act and its corresponding regulations (or “MAUCRSA”)—doesn’t put a cap on the number of licenses that will be issued. MAUCRSA even envisions that large size (Type 5) cultivation licenses will be issued in 2023. In theory, the state could issue unlimited licenses, but that’s extremely unlikely to happen in light of how municipalities across the state have limited commercial cannabis activity. Even though we don’t have explicit license caps at the state level, in a few years, there probably won’t be many (or any) licenses left to give out.

One of the reasons for this is the fact that most of the cities and unincorporated county areas in the state prohibit cannabis activity altogether. Unless that changes, licenses will never be available in those areas. Legislation this year that would have required localities to issue more licenses essentially failed. And even if it does change, those jurisdictions are highly unlikely to open up their doors to dozens of different operators—if they weren’t cannabis-friendly before, we doubt they would be in the future.

Even in cities that allow cannabis activity, the majority have caps in one form or another. If you’ve been reading this blog at all, you’re probably familiar with the City of LA’s ultra-competitive retail licensing process that’s about to open up for 100 social equity applicant businesses, Pasadena’s recent process for 14 total licenses, or Culver City or West Hollywood’s previous competitive licensing processes.

And even in cities that don’t have caps, it’s unlikely that they’ll give out unlimited licenses. City and state laws incorporate sensitive use “buffer zones” or other similar requirements that can make it hard to physically find space to set up shop. In some jurisdictions, pushback from locals has led to the proposal of caps where there were none. For example, Santa Barbara County is in the process of adopting caps on cultivation in light of strong resistance from local residents, many of whom were unsatisfied with even the size of the new cap. (Santa Barbara County retail cannabis licenses were already subject to a tight cap, to boot.)

What all of this means is that even though MAUCRSA doesn’t limit licenses in California, local laws may run the well dry sooner than you think. We expect that in a few years, most jurisdictions will be “full” and occasionally, new jurisdictions will open up for highly limited permitting. If this happens, it’s safe to say that these new permit opportunities will be extremely competitive.

Companies that are considering applying for California cannabis licenses should act sooner rather than later, so they aren’t left behind. Otherwise, companies will have to turn acquiring interests in licensed businesses, which can be a big challenge in and of itself.