ohio cannabis hemp

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”). Today we turn to Ohio.

Hemp cultivation in Ohio is regulated by the Ohio Department of Agriculture (“ODA”). Notably, Ohio was among the first states that got a 2018 Farm Bill hemp production plan approved by the USDA. Way to go, Buckeyes! People who want to grow hemp in Ohio will need to obtain licenses from the ODA and hemp cultivated there is subject to testing requirements established by the USDA’s interim hemp rules.

When it comes to Hemp-CBD, the state has not dialed in its regulatory regime. The ODA is in the process of reviewing public testimony before adopting rules affecting the processing of Hemp CBD products. In late 2019, there was a public hearing concerning proposed processing rules that would govern many different types of Hemp-CBD products (as of today, those regulations haven’t been officially adopted). It’s important to note that these rules would not let anyone go and start processing. Instead, licenses would be required and it looks like the state’s requirements will be pretty comprehensive.

The products that the rules would govern include “hemp buds, flowers, cigarettes, cigars, shredded hemp, cosmetics, personal care products, dietary supplements or food intended for animal or human consumption, cloth, cordage, fiber, fuel, paint, paper, particleboard, and any other product.” So basically, anything under the sun. Notably, the rules anticipate the production of Hemp-CBD products (e.g., cosmetics and food) but also anticipate the use of hemp in all kinds of other products that will not be marketed for Hemp-CBD content (e.g., paint and fuel). These rules are therefore extremely comprehensive.

These rules would also impose some strict requirements on manufacture, including pretty standard things that our hemp attorneys see in other states. This includes testing and labeling, to start.

In sum, while Ohio probably isn’t anywhere near the top of the list when people think about states that allow hemp, it’s actually more friendly than a lot of other large states (looking at you California). While states like California are still in prohibitionist mode for all kinds of Hemp-CBD products, states like Ohio are taking the wheel. For more updates on Ohio’s Hemp-CBD laws, stay tuned to the Canna Law Blog.

For previous coverage in this series, check out the links below:

cannabis cyber crime marijuana

One of our Washington cannabis clients recently learned that its employee was the target of a cybersecurity attack. The employee, who was following instructions via a messaging app, wired money to an individual at the request of who he believed to be an owner of the company. That was not the case! The employee had fallen victim to a cybersecurity attack. Our client has asked us to publish this post as a public service announcement to other cannabis businesses.

These attacks are becoming more and more prevalent as we continue to communicate online. In this case, the employee was a victim of “phishing,” which is a scheme where a fraudster impersonates another person to induce individuals to reveal information or, in this case, send money. Other cybercrimes include data breaches, where hackers obtain sensitive information by breaching a company’s secured files and then use that information for identiy theft, blackmail, or to commit other crimes.  Cybercriminals can operate across the globe meaning that anyone online can quickly become a target. Marijuana businesses in Washington State (and elsewhere) need to be aware of the risk of cyber attacks as we enter a new decade.

No industry is safe from the threat of a cyber-attack or other security incidents relating to technology. However, nefarious online fraudsters may see a unique opportunity in the marijuana industry. Marijuana businesses generally have a lack of access to traditional financial services and therefore deal with a lot of cash. By way of example, compare a restaurant to a marijuana business. A restaurant is inevitably going to deal with cash. Diners may pay an entire bill using cash or may leave a cash tip after charging their meal. But, it’s unlikely that a restaurant’s owner will pay its employees and vendors in cash. Most restaurants also don’t require that their customers pay only in cash.

Now consider a standard marijuana business. Washington’s recreational marijuana market is one of the oldest in the country and many marijuana businesses in Washington can obtain a checking account. However, marijuana retailers are generally operating on a “cash-only” business model as credit card companies like Visa and Mastercard will not process transactions that involve the sale of federally illegal substance. That means retailers often have large amounts of cash to deal with each day. Some of that cash may go directly to pay producers and processors for products on the retailer’s shelves. Regardless of the type of license, many marijuana businesses often have large amounts of cash at hand.  It is therefore not unheard of for an employee of a marijuana business to field requests that involve wiring cash to a given account or otherwise undertake a transaction that might seem odd in any other industry. Lack of access to financial services has made the unusual normal in the marijuana industry.

Cybercriminals may also be drawn to marijuana businesses due to the illicit nature of marijuana under federal law. As we’ve written probably a million times, marijuana is illegal under federal law. That makes reporting cybersecurity events more challenging due to the risk of self-incrimination. A marijuana business may not want to “make waves” by reporting to federal agencies like the Department of Justice (DOJ) or the Federal Bureau of Investigation (FBI). However, it’s worth noting that the FBI has sought out tips relating to corruption in the cannabis industry. Nevertheless, federal prohibition does, at the very least, complicate the ability of marijuana businesses to report cybercrime. Those concerns are not as pronounced if reporting to local law enforcement in states that have legalized marijuana.

If you’re concerned about scams, here is a nonexhaustive list of steps that you can take to mitigate cybersecurity risks before they happen:

Internal policies

Adopt or update a policy where employees are to obtain confirmation by phone before sending money to any person outside of the usual course of business. This doesn’t mean that a person needs to check in before paying a known vendor, but would prevent an employee from wiring money based solely on messages or email.

Check usernames and email addresses

If I email someone, my name will show up as “Daniel Shortt” and my email will read “daniel@harrisbricken.com.” Someone who was impersonating me could list their name as “Daniel Shortt” even if their email address was “ScammyMcScammerson@fraud.net.” The same concept is true with usernames. On twitter, my name is “Daniel Shortt” and my handle is @dshortt90. A fraudster could change his or her name to Daniel Shortt with a handle of @dshort90. This is even trickier as my handle is very close to the fraudster’s (my name has two t’s at the end). Employees should be on the lookout for these fake emails and usernames.

Implement a protocol for reporting security events

If you’ve been targeted once chances are you’ll be targeted again, perhaps in a more sophisticated manner. You want to be able to get the news out without exposing your others to security threats. Forwarding an email to another worker just increases the risk of that person clicking on a link to install malware or engaging with a fraudster. Establishing protocols to send screenshots of suspicious messages or forward them to a designated fraud account are some examples of dealing with this issue.

Audit your existing security procedures

This can be done in house or by hiring a consultant or attorney. If you don’t have a security protocol in place, that’s an even bigger reason to audit your company’s operations. That way you can identify risks before they happen.

Protect your passwords and other sensitive information

You may want to require that your employees use multi-step authentication software when signing into company accounts. This usually requires that a person confirm their login on a separate device such as a smartphone app or link sent via text. Make sure your employees are not sending passwords through email or messaging services. Passwords should also be complex and changed regularly.

If you do fall victim to a cybersecurity attack make sure to respond quickly and notify others in your organization about the threat. You should also reach out to your organization’s lawyer or in-house counsel to discuss next steps, which may include reporting to law enforcement.

cbd label market fda

Last week, I attended Portland’s Hemp CBD Connex, an annual event that highlights the vast potential of hemp and CBD.

Of interest to me–because my practice focuses on the regulatory framework of CBD products–was a panel entitled “Weeding Through the CBD Jungle: How to Grow, Run and Be Successful.” This panel was led by two experienced industry leaders: Stuart Bennett, VP of Contract Manufacturing for Canopy Growth, and Alex Rullo, Executive VP of Strength of Hope. Both panelists discussed the dos and don’ts of selling and distributing CBD products in interstate commerce and stressed the importance of complying with the CBD laws of each state in which a product is sold. This was music to my ears!

As you already know if you follow our blog, the Food and Drug Administration (“FDA”) has taken the position that CBD-infused foods and dietary supplements cannot be lawfully sold or marketed in the United States. Yet, states have adopted their own approaches to regulating CBD products that are not necessarily consistent with the FDA’s current position.

Some states, including Colorado and Oregon, allow the manufacture and sale of all CBD products, including food, dietary supplements, smokable products, and cosmetic products. Other states, like Idaho, strictly prohibit the production and/or sale of any such products. A handful of other states, including California, have banned certain categories of CBD products (usually food and dietary supplements) but seem to take no issue with the sale of other products, such as CBD cosmetics.

In addition, some states that have legalized the sale of Hemp CBD products impose their own regulations, including but not limited to labeling and testing requirements.

As we previously discussed, CBD manufacturers and distributors selling their products in interstate commerce should familiarize themselves with labeling and marketing laws in each state where they plan on placing their products. As a rule of thumb, companies should adopt the most stringent rules, such as those imposed by Indiana, Texas and Utah, to ensure compliance across state lines.

While it’s impossible to cover all state labeling and marketing laws in one blog post, I thought I would provide a brief overview of the label components that have become standard in the industry:

The FDA’s General Labeling Requirements

Every state that authorizes the sale of CBD products also mandates, in one way or another, that the labels of CBD products sold within their borders be labeled in accordance with the Food, Drug and Cosmetic Act (“FDCA”). Under the FDCA, the labels of any product sold in the United States must contain four basic elements:

(1) An identity statement, which indicates what the product is;
(2) A net weight statement;
(3) A list of all ingredients, which in states like New Mexico and Colorado, must clearly identify hemp and CBD. This requirement makes it difficult for companies that are steering clear from using the term “CBD” in an attempt to mitigate the risk of enforcement action. For more information on this issue, please read here; and
(4) The name and address of the manufacturer, packer or distributor along with their street address.

Scannable Bar Code or QR Code

A growing number of states are mandating the use or a scannable bar code, QR code link or web address linked to a document containing information, pertaining to:

  • the batch identification number;
  • the product name;
  • the batch date;
  • the expiration date, which in some states like Indiana, must be not more than two (2) years from the date of manufacture;
  • the batch size;
  • the total quantity produced;
  • the ingredients used; and
  •  certificate of analysis.
FDA Warning Statement

States like Colorado require that the following statement appear on CBD product labels: “FDA has not evaluated this product for safety or efficacy.”

No Medical or Health Claims

As we have discussed at length, the FDA has limited its enforcement actions against CBD companies that make outrageous and unfounded health claims about the therapeutic values of their products. Nevertheless, many states demand that the labels of CBD products sold within their borders be free of any health claims. It’s important to understand that drug claims don’t need to be explicit. If a company implies that its product can be used to treat a disease, the FDA and local authorities may conclude that the product is a drug.  Consequently, if a CBD company makes any medical, disease, or bodily structure or functional claims or implications about its products, the FDA will likely conclude that the company is marketing unapproved drugs in violation of the FDCA.

Ensuring compliance with the labeling and marketing laws (and policies) of each state in which a CBD product is sold can be challenging, yet it is a crucial step in mitigating the risks of enforcement action by federal and state agencies.

cannabis marijuana insurance exclusions

Previously I wrote about insurance generally (see here) and products liability insurance specifically (see here). Today I want to look at some policy exclusions to point out potentially problematic terms that you may notice when reviewing your insurance contract during your annual insurance audit.

First, I need to mention some truths that I believe are accurate in the insurance context, based upon my many years of interacting with business clients:

Many business owners never read their policies. Insurance contracts are often dozens or hundreds of pages long. They are complicated, and they are not written like other contracts, which makes them worse to read than a normal business contract. This results in many business owners meaning to read the contract but rarely getting beyond the coverage jacket on the first page of the policy.

Many business owners never have anyone on their team read their policies. Business owners generally intend to (and do) delegate the insurance review and renewal to someone on their executive team, but that rarely results in anyone reading the contract beyond the first page of the policy. Many insurance owners do not want to pay their lawyer to review their policies, so they will often rely on their broker to assure them as to what coverage they have. Because insurance claims arise only intermittently, the importance of the insurance contract seemingly pales when compared to supply and customer contracts that are the lifeblood of the business, so these tend to fall by the wayside until the next annual renewal.

The right insurance broker or agent can be your ally. First, some terminology. An insurance broker represents an insurance buyer, and an insurance agent represents one or more insurance companies. If you are familiar with real estate, you can analogize to the commercial insurance context. An insurance broker is similar to a real estate buyer’s agent, while an insurance agent is similar to a real estate dual agent who represents both the buyer and the seller in a transaction. Each of these individuals can be helpful to you in the right context with the right motivation. An insurance broker will always be your ally because they work for you and can shop your needs around to various insurance companies. An insurance agent is generally “captive” to the company or companies they represent and has to sell you insurance products offered by those companies, but they are still motivated to sell you a good product to keep your recurring business year after year. In both scenarios, you will not know all of the types of policies that are available, even if you are familiar with the basic insurance policies: commercial general liability, employment practices, workers’ compensation, directors & officers, property casualty, product liability, commercial vehicle, business interruption, and key person insurance. It is better to rely on someone within the industry than try to decipher the purchasing process by yourself.

Insurance companies are not your friends. I know many insurance agents and brokers, and many are good people who are motivated to provide good service, but there is a reason why companies hire good, experienced law firms to help negotiate with insurance companies when they want to make a claim for a loss against their policy. I also know many lawyers who work for insurance companies doing “insurance defense work” where they fight hard to help their insurance company clients avoid paying out funds to their insured. It is not pretty to be on either side of the table. But you do not want to try to navigate the technical and complex morass by yourself.

Let’s shift from these general points to the topic of insurance riders:

Insurance riders explained. A cannabis company growing hemp or marijuana will typically obtain a commercial general liability policy in response to a statutory requirement to carry insurance, like this language from Washington:

The licensee shall at all times carry and maintain commercial general liability insurance or commercial umbrella insurance for bodily injury and property damage arising out of licensed activities. The limits of liability insurance shall not be less than one million dollars.

(a) This insurance shall cover such claims as may be caused by any act, omission, or negligence of the licensee or its officers, agents, representatives, assigns, or servants.

(b) The insurance shall also cover bodily injury, including disease, illness and death, and property damage arising out of the licensee’s premises/operations, products, and personal injury.

These broad categories above are, in theory, the items that will arise in the life of a cannabis company, but the ubiquitous insurance riders (contract amendments) chip away at this protection. Your policy will not cover every event on purpose, even if you try to buy the most comprehensive policy you can find. And if you do want to procure a policy that covers every potential event, it will almost always be too expensive for your budget. It is to your benefit to audit your policies and understand what events are and are not covered and know your business well enough to know what events are most likely to arise based upon your business plan.

When auditing your insurance coverage, pay close attention to the insurance riders that appear at the end of most sections of an insurance contract. After reviewing hundreds of pages of insurance policies as part of my due diligence for a recent M&A transaction, I point out the following language from actual insurance policies that may cause the typical cannabis business owner to pause:

  1. This policy does not cover seeds, seedlings, vegetative plants, flowering plants, or harvested material that is not yet finished stock.
  2. This insurance does not apply to bodily injury and property damage arising directly or indirectly from alcoholic beverages.
  3. This [workers’ compensation] policy excludes volunteers and employment practices liability.
  4. This [workers’ compensation] policy does not cover business owners.
  5. This policy excludes nutraceutical substances such as essential oils.
  6. This policy excludes vaporizing devices.
  7. The insured must notify the company regarding a change of ownership. (This is not, strictly speaking, an exclusion like the others above, but it was significant enough that I wanted to include it here.) This clause becomes relevant in the M&A context and is different from the standard change of control language in other contracts (like bank financing agreements) that could impact whether you decide to do a stock deal or asset deal. A change of ownership impacts the covered company’s experience rating, and insurance companies love any excuse to reassess a company’s risk profile, find increased risk, and raise a premium as a result.

Attorneys get paid to deal in details. Often business owners believe they are covered by an event when they really are not, but you have to look beyond the insurance coverage jacket and diagram the effect of your insurance riders. This is why we always recommend a comprehensive insurance audit at least once per year.

For more information on the twists and turns of insurance policies, see the following posts:

washington cannabis marijuana

Last month, two pieces of legislation were introduced to the legislature that could substantially alter Washington State’s advertising laws: HB 2350 and HB 2321. Each bill would tighten advertising restrictions for cannabis businesses, particularly with regard to advertising that could appeal to youth. Both bills were filed pre-session, and both already have moved into the Committee on Commerce and Gaming. The bills are summarized below.

HB 2350

This bill, “[r]elating to preventing youth marijuana consumption by updating marijuana advertising requirements,” sets forth new advertising requirements intended to reduce youth exposure to marijuana by prohibiting billboards for advertising marijuana. The legislation also seeks to “provide more flexibility for the use of signs and advertisements by marijuana licensees at their licensed premises.”

Existing regulations already prohibit licensees from placing any sign or advertisement for marijuana or marijuana products within 1,000 feet of the perimeter of a school grounds, playground, recreation center or facility, child care center, public park, library, or game arcade that does not restrict admission to persons twenty-one years or older. However, existing regulations also allow for the placement of billboards, which are currently limited to displaying text that “identifies the retail outlet by the licensee’s business or trade name, states the location of the business, and identifies the type or nature of the business.” These billboards cannot depict marijuana or any marijuana products. The purpose of these restrictions is to limit retailers to placing billboard advertisements that provide the public with directional information to the licensed retail store. However, HB 2350 would prohibit all billboards placed by marijuana licensees, regardless of content.

The one concession made in HB 2350 is that the Liquor and Cannabis Board (“Board”) would no longer be able to limit the number or size of on-premises signs or advertisements used by a marijuana licensee at their licensed location.

HB 2321

The second pending piece of legislation, HB 2321, also aims at reducing youth access to all products intended for consumption by adults over the age of 21. Although retailers would no longer be limited to two signs of limited size outside the licensed premises, the Board would be tasked with ensuring that signs are not appealing to youth or those under twenty-one, and sets forth penalty minimums for violations.

This piece of legislation also specifically targets vapor-product retailers, with vapor products not including “any product that meets the definition of marijuana, useable marijuana, marijuana concentrates, marijuana-infused products, cigarette, or tobacco products.”

Regulations around advertising have been constantly evolving since the passage of I-502. The last major regulatory changes surrounding billboard and outdoor advertising went into effect in 2017, when the following restrictions took effect:

  • Licensees are limited to two signs, at a maximum of 1,600 square inches, that are permanently affixed to a structure or building on the licensed premises;
  • Sign spinners, sandwich boards, inflatables, toys, cartoons, movie characters, people in costumes – all prohibited;
  • Signs are limited to identifying the licensee, location, and nature of the licensed business;
  • Signs and logos cannot contain images of plants or marijuana products, including images that indicate “the presence of a product, such as smoke, etc.”

But billboards in particular have long been a source of contention, since meeting the perimeter restrictions is often difficult, especially in densely populated, urban areas. We will continue following the progress of both of these bills, and will update readers if and when a rule change takes place.

oregon cannabis hemp marijuana

Last week, Oregon kicked off the 2020 legislative session. Because we are in an even-numbered year, this will be a 35-day session. In short sessions, we tend to see fewer pieces of introduced legislation. The prospects for a productive session may also be lower than usual in 2020, given that House and Senate Republicans are threatening to flee the Capitol again (just like in 2019, to stop a carbon cap-and-trade bill). With respect to cannabis in particular, there may be some general fatigue in Salem on both sides of the aisle.

Still, there are a handful of cannabis bills in the hopper and we expect to see at least one omnibus bill wend its way through between now and March 8. Below, I’ve summarized each bill that is or appears to be substantially related to cannabis on the Oregon legislature’s website. I’ve also conferred a bit with our generous contacts in the legislature, informing some of this commentary.

Senate Bills

Senate Bill 1566.  This bill authorizes the Oregon Liquor Control Commission (OLCC) to create data and analysis “regarding commercial sales and commercial industries.” By and through something called the OLCC Information Technology Infrastructure Fund, the agency presumably would extrapolate and package data on both the liquor and cannabis sides. Sales of this data would be made to industry, or governmental bodies may be interested. The challenge here would be adopting standards to establish exemptions from disclosure of public records, along with the tricky interplay between “proprietary” data and public records law.

Senate Bill 1559.  This bill would prohibit “distributing, selling or allowing to be sold flavored inhalant delivery system products.” It’s a vape ban bill. If passed, SB 1559 would take effect “91 days following adjournment sine die”, which by my calculation is June 7, 2020. This bill will be met with opposition by both the tobacco and cannabis industry, who successfully have litigated (at least, so far) an attempted executive ban on sales of both tobacco and cannabis flavored vaping products.

Senate Bill 1577.  This bill is virtually identical to SB 1559 and also would take effect on or around June 7, 2020. Unlike 1559, it was filed pre-session. But both bills have been assigned to the Senate Committee on Health Care and it’s likely that just one would make it out alive. Should be fun to watch.

Senate Bill 1561. This bill requires the Oregon Department of Agriculture (ODA) to develop an Oregon hemp plan for commercial production and sale. It’s an omnibus bill sponsored in part by Floyd Prozansky, known for crafting much of Oregon’s cannabis legislation over the past several years. SB 1561 also:

  • Directs an “Oregon Cannabis Commission” to determine a framework for future governance of the Oregon Medical Marijuana Program
  • Directs the OLCC to adopt rules for registration of medical marijuana grow sites (an attempt to deal with diversion) and establishes plant production limits (same)
  • Specifies health care providers who may recommend medical marijuana use
  • Merges determinations of guilt for certain offenses related to marijuana into a single conviction, and allows the possession of certain items (this looks like clean-up related to 2017’s sprawling SB 302)

This bill is currently in the Senate Judiciary Committee and will see action this week. If there is one bill that I could single out as most likely to go somewhere, it would be SB 1561, and probably in some gut-and-stuff form. Of all its current ornaments, the hemp plan is likely to remain. And if that happens, Oregon will likely have something to submit to the US Department of Agriculture for certification this year.

House Bills

House Bill 4034. This one mirrors a small component of SB 1561: it directs the OLCC to adopt rules for registration of medical marijuana grow sites and it establishes plant production limits. This bill seems likely to die in the Senate, if it ever gets there.

House Bill 4035. This bill directs OLCC, ODA, the Oregon Health Authority (OHA) and the Governor’s office to “develop a plan to address issues related to regulatory authority over marijuana.” The bill would take effect immediately and sunset in 2021. Like HB 4034, this one is probably going nowhere.

House Bill 4051. This lengthy submission establishes an Oregon Hemp Commission, similar to other commodities commissions around the state. The Commission would be responsible for developing, maintaining and expanding state, national and international markets for Oregon hemp. This bill is a wild card. Maybe it passes on its own, maybe it dies, or maybe it gets rolled into an omnibus bill. But it seems like a great idea.

House Bill 4072. This industry-supported bill is somewhat similar to HB 4051, although it amends existing statutes rather than cutting from whole cloth. HB 4072 directs ODA to administer an Oregon Hemp State Program for “studying growth, cultivation and marketing of hemp.” It also requires ODA to “conduct criminal records checks of applications for licensure related to hemp.” It’s possible that some of this leaches into HB 4051, but it would be surprising if the bills both went the distance, especially given that each creates a “fiscal impact” which triggers budget review.

HB 4078. This bill is similar to SB 1559. It prohibits “remote sales of inhalant delivery systems” which the bill also defines carefully at Section 1(5)(a). This bill was requested pre-session by Governor Brown herself and has been moving along briskly, already receiving a third reading and “do pass” recommendation. This bill contains an emergency clause and would take effect immediately.

HB 4088 – This bill directs OLCC to establish a Cannabis Social Equity Program to provide discounted licensure fees and other support to program participants. This bill seems to be moving a bit with a work session scheduled today, February 12. Beyond that it is hard to know what will happen, but a serious discussion around this issue at the statewide level is a long time coming.

HB 4156. This skeletal bill directs ODA to advance the design of a cannabis business certification program. The idea is to promote market-based approaches to incentivize low-carbon cultivation techniques that use water and energy efficiently. Seems like a good idea! A grant of $300,000 would come from the OLCC’s Marijuana Control and Regulation Fund and the bill would take effect July 1, 2020.

HB 4158.  In some respects similar to bills covered above, this one directs ODA to develop an Oregon Hemp Plan for commercial production and sale. It also requires OLCC to track commercial cannabis shipments (of all types) through an electronic tracking system and make that information readily available to law enforcement. This is an omnibus bill at present and includes clean-up of criminal offenses sprinkled throughout SB 302. HB 4158 is currently in the House Committee on Agriculture and Land Use. It saw some early action, but nothing appears to be scheduled going forward.

All in all, the next month should be eventful. Interested parties can reasonably expect Salem to produce one or two impactful pieces of legislation related to Oregon cannabis, chiefly on the hemp side. We will check back in after March 8. And if there are any major developments between now and then, we will cover those too.

international cannabis marijuana

In the past year or so, we have seen a remarkable uptick in requests for advice and legal services related to the international cannabis trade. Our business and international trade attorneys continue to blaze trails with clients from all over the world on import/export agreements, foreign direct investment, compliance, customs issues and everything in between. Things are evolving very fast.

This webinar will be hosted by Harris Bricken attorneys Adams Lee (Seattle), Griffen Thorne (Los Angeles), Nathalie Bougenies (Portland) and Vince Sliwoski (Portland). The format of the webinar will cover:

  • The treatment of cannabis (both marijuana and hemp) under international law;
  • Import and export of medical marijuana, including customs issues;
  • Import and export of hemp and CBD products, including customs issues;
  • Considerations around foreign direct investment in U.S. cannabis businesses; and
  • Your questions.

Register here to join us on Wednesday, March 4 at 12pm PST.

If you cannot attend, feel free to register anyway and submit questions prior to the event. Adams, Griffen, Nathalie and Vince will do their best to field them, and we will post a recording afterward here on the blog.

We hope to see you March 4! In the meantime, check out our extensive series of international cannabis blog posts, which can be found here.

north dakota 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”). Today we turn to North Dakota.

In 2019, North Dakota legalized the cultivation of hemp under the 2014 Farm Bill. However, the new law (HB 1349) does not address the regulation of Hemp-CBD products.

According to guidelines released by the Attorney General (AG), the state seems to defer to FDA guidance when regulating Hemp-CBD products. In addition, even following the enactment of HB 1349, which excludes the term “hemp” from marijuana, law enforcement remained hostile to Hemp-CBD making the sale of these products in the state risky.

Given that the state has decided not to submit a plan under the 2018 Farm Bill and instead continues operating under the 2014 Farm Bill until it expires on October 30, 2020, it seems unlikely that North Dakota will change its position on the sale of these products. So for the time being, CBD companies should refrain from selling their products in this not-so-hemp-friendly state.

For previous coverage in this series, check out the links below:

Harris Bricken cananbis attorneys Nathalie Bougenies and Griffen Thorne will present at the “Nation’s Largest CBD Event” in Las Vegas on February 14th. This Main Stage panel begins at 12pm, and will examine the complex and ever-evolving regulatory framework of hemp CBD.

Nathalie, who has written extensively on market regulations and trends, will address ongoing marketing and labeling requirements. Griffen, who regularly writes about the California CBD industry, will speak to standard legal practices, as well as pitfalls our CBD attorneys often encounter in that state and elsewhere. Rounding out the panel will be Jesse Bader and Jason Drangel from the law firm of Epstein Drangel, and Julian Garcia with USC Gould School of Law,

If you are joining the hundreds of industry professionals descending on Las Vegas next weekend for the USA CBD Expo, this panel will be a great chance to hear from some of the most prominent legal voices in the market.

For more information:

  • The Las Vegas USA CBD Expo is running from February 13th through February 15th. The full schedule can be found here.
  • Industry Buyer and Professional tickets are still available for purchase here.

qr codes cannabis california

Last year, the California cannabis agencies started to ramp up enforcement activities against unlicensed operators. Still, if you ask any licensed cannabis business, enforcement against unlicensed competition is far from where it needs to be. It was widely reported last year, for example, that there were 3,000 illegal cannabis businesses in California. My best guess is that there are many, many more today, in spite of the agencies’ enforcement efforts.

While the agencies continue on the enforcement front, they are coming up with new, creative ways to combat the unceasing torrent of unlawful cannabis activity in the Golden State. For example, last week, one of my colleagues reported on the California Bureau of Cannabis Control’s (BCC) announcement concerning proposed emergency regulations that would require licensed retailers to post unique quick response codes (QR codes) in storefront windows and to carry it with them while delivering cannabis, and would require licensed distributors to carry copies of the QR code certificates while transporting cannabis goods. As explained by the BCC:

Smartphone users are able to use their smartphone camera to scan the displayed QR Code, which automatically links to the Bureau’s Online License Search and confirms the cannabis retailer’s license status. The system also displays the retailer’s address and license location to ensure that the information is not counterfeit.

“The proposed regulations will help consumers avoid purchasing cannabis goods from unlicensed businesses by providing a simple way to confirm licensure immediately before entering the premises or receiving a delivery,” said Bureau Chief Lori Ajax. “These requirements will also assist law enforcement in distinguishing between legal and illegal transportation of cannabis goods.”

Are QR codes really a good idea? Will they have any effect against unlicensed operators? Here are my thoughts: First, it almost goes without saying that the codes are meaningless unless consumers actually use them. Unfortunately, I do not think that many consumers are familiar with QR codes or will use them, even if they are clearly posted as required by the rules. For one thing, members of the public may not be aware of licensing requirements. They might reasonably assume that the existence of a brick-and-mortar location means that those stores are authorized by the government.

And who would blame someone for assuming that? It’s pretty reasonable from a consumer’s standpoint to assume that a business that openly and notoriously sells cannabis is authorized by the city/state, and that illegal businesses wouldn’t do the same thing (after all, you don’t really see a whole lot of people selling cocaine blatantly in commercial establishments). Unless citizens are more thoroughly educated on the differences between legal and illegal cannabis, they aren’t likely to use the codes, or even care if a business is licensed.

Second, along those lines, even if people use the codes, they are also meaningless if people continue to patronize unlicensed businesses. There are consumers who just do not care. I have spoken to many people who say “what’s the difference?” or “why should I care if the business  has a license?” or “at least I don’t have to pay taxes.” Why would a person who is dead-set on getting a delivery at 1 AM (hours after all licensed businesses are legally forced to shut down) not make the purchase because the delivery company didn’t have a license? These consumers will not be swayed by a QR code.

Third, and also along those lines, if a consumer is not aware of the QR code requirement, and steps into an unlicensed business that has no QR code on the wall, there will be no effect. In other words, will a consumer say to themselves “I don’t see a QR code on the wall, so I won’t shop here” if they are not aware of the QR code requirement? Of course not.

Fourth, unlicensed businesses can fake QR codes. The BCC’s QR code is supposed to link to the BCC’s license lookup tool and show the licensed business and its address. How hard would it be for an unlicensed company to get a fake website that looks just like the BCC’s and link to it with its own fake QR code? Probably not very hard. For businesses that are already ignoring the law, this wouldn’t be a stretch.

Finally, the most likely outcome here is that licensed cannabis companies are hurt by this rule. Without a doubt, many licensed businesses will violate this rule, and some will be fined or face other penalties for doing so. While the QR codes are certainly well intended, it’s easy to see how licensees can feel like they are being punished for someone else’s crime.

All of this is not to say that I think QR codes are a bad idea. They are definitely a step in the right direction. But for agencies that have been reported to be intensely understaffed, there are certainly a lot of other areas where licensed businesses would like to see (and can see) improvement. I gave my thoughts on some of these ways last summer, and those thoughts have not changed. For a summary, I think the agencies need to, at least:

  1. Allow more licenses. Last year, there was a push to pass AB-1356, which would have required local jurisdictions to allow certain local retail permitting if local voters voted in favor of the Control, Regulate and Tax Adult Use of Marijuana Act of 2016. As we all know, most California cities are not exactly welcoming cannabis businesses with open arms (though ironically, refusing to allow licensed businesses ensures that the unlicensed market thrives). AB-1356 was ordered into the California Assembly’s inactive file in May 2019, but in January 2020 it was pulled back out and now has a second chance at being passed. The law will face some uphill legal battles, which we are sure to write about in the near future, but the fact that it is getting a second chance could be huge news.
  2. Allow more deliveries.  The BCC actually made an effort to expand deliveries by enacting a rule that allows deliveries across the state. However, dozens of cities have sued the BCC over the rule and a private company is suing Santa Cruz for implementing rules that would restrict deliveries in contravention of the BCC rule. We expect some resolution on these cases later this year, but if the BCC rule is struck down, it will be a devastating blow to the legal cannabis industry and a huge gain to the illicit market.
  3. Speed up the licensing process. This has admittedly gotten better since I posted back in 2019. That said, the licensing process is still long and complicated, and any progress the agencies could make in getting people licensed will have an immediate impact on the illicit market.
  4. Broaden the hours of operation. For reasons I have never clearly understood, retailers are only allowed to sell cannabis until 10 PM. Retailers have no way to compete with unlicensed vendors who will sell cannabis at all hours of the night. It makes no sense that cannabis retailers have more restrictive hours of operation than alcohol retailers. It’s time for a change.
  5. Lower taxes. Unfortunately, the state didn’t get the memo, and in spite of pretty furious backlash, decided it was a good idea to increase taxes on licensed and compliant cannabis operators. While Governor Newsom said that he would simplify and maybe reduce cannabis taxes, we still don’t know whether that will officially happen, or when. But it goes without saying that higher taxes = higher prices and take out businesses who have to compete with non-taxpaying operators.
  6. Ramp up enforcement. As noted above, this is already happening. But it needs to happen more. Much more.

I will add a seventh point to this list: educate the public. As I pointed out above, QR codes are useless if people don’t know what they are. To be fair to the BCC, it has posted about this on social media and I even saw a billboard referring to the QR codes. But that’s just a drop in the bucket and the education needs to continue statewide. This is unquestionably an area that we will be writing on frequently over the next few years. Please stay tuned to the Canna Law Blog for more updates on the battle between licensed and unlicensed operators.