New Jersey, like many other states, allows for the cultivation and sale of marijuana for medicinal purposes. Marijuana is not yet allowed for recreational use in New Jersey. While medical marijuana use and consumption is legal under New Jersey state law, it remains illegal under Federal law, which leads to an interesting and complicated situation when an applicant seeks zoning approvals for a marijuana facility. Planning and/or Zoning Boards are essentially asked to approve a use that is illegal under Federal law.
Last month, Congress approved the final 2018 version of Section 7607 of the Agricultural Act of 2014 (the “Farm Bill”), which received bipartisan support in the Senate. The Bill removes “hemp,” a variety of the Cannabis sativa plant species, from the Federal Controlled Substances Act (“CSA”) and legalizes hemp cultivation as an agricultural commodity similar to grain, meat, and dairy. Commentators expect the historic new Farm Bill to considerably encourage and promote innovation, development, production, and consumption of hemp in the United States. But to understand the significance of the 2018 version of the Farm Bill, it is important to take a step back and understand what industrial hemp is, what distinguishes it from marijuana, which remains a Schedule 1 prohibited substance, and what the future of hemp looks like in this Country.
Risk management is important for any business let alone a startup in a developing industry, but it takes on a whole new meaning for cannabis companies looking to make their mark on the burgeoning cannabis market. As more and more states go green and join the mounting number of sovereigns that permit, tax, and regulate medical and adult-use marijuana, the need for cannabis related banking, insurance, and real estate continues to grow.
As any cannabis entrepreneur and operator knows, the business is risky, capital intensive, and presents many unforeseen challenges. Proper and adequate insurance coverage and risk management is therefore paramount in such an uncertain, undulating industry.
In addition to intellectual property and banking law, bankruptcy law remains a complicated field for marijuana companies to access, let alone navigate. In the United States, The U.S. Trustee Program (“USTP”) is the component of the Department of Justice (“DOJ”) responsible for overseeing the administration of bankruptcy cases. The USTP appoints and supervises the 1,100 private trustees who handle every bankruptcy case across the country under federal bankruptcy laws.
While 46 states have instituted laws permitting or decriminalizing cannabis or cannabis-based products in some way, prior events this year created an environment of legal uncertainty.
Since 2013, cannabis companies have relied on guidance contained within a trio of memos from former deputy U.S. Attorney General James Cole, which detailed the federal government’s concerns with preventing marijuana distribution to minors, gangs, or into states where the drug’s sale remains illegal, as well as preventing the use of the drug as a pretext to traffic other illegal drugs, in use with violent firearms, driving under the influence, and growing marijuana on public lands or on federal property.
Those companies who were compliant with state cannabis laws and did not run afoul of any of these concerns basically considered themselves as being safe from federal prosecution.
But that security diminished earlier this year when U.S. Attorney General Jeff Sessions rescinded the guidance in the Cole memos. Continue Reading What You Need to Know About the Strengthening the Tenth Amendment Through Entrusting States (STATES) Act
Recently, U.S. Representative Matt Gaetz introduced the Medical Cannabis Research Act (the “Act”), which would facilitate and encourage federally-approved clinical trials testing the medicinal effects of chemicals found in the marijuana plant. The bill is notable because, if passed, it would bypass the U.S. Department of Justice (DOJ) as it relates to marijuana research licenses and would put the task in the hands of Congress.
Currently, the House Judiciary Committee, which is responsible for the drug enforcement efforts of the federal government, approved the measure. If this bill passes, it would provide an opening for more medical marijuana research, which has been virtually non-existent at the federal level over the last five decades.
Notably, the Act increases the number of federally-approved manufacturers of research-grade marijuana from one to three and sets strict criteria for those manufacturers to obtain and renew their registrations. Currently, only the University of Mississippi is permitted to grow research-grade marijuana.
On September 5, 2018, New Jersey Governor Phil Murphy announced that the NJ Department of Health (DOH) had received 146 applications from 106 different organizations to operate vertically integrated medical marijuana dispensary operations in the state. The application window closed on August 31, 2018 and the winners of the six for-profit licenses will be announced on November 1, 2018.
Each applicant had to identify in which of the three regions of New Jersey – North, Central, and South – the applicant was interested in operating an Alternative Treatment Center (ATC). Fifty applicants identified the northern region, 45 selected the central region, and 51 the southern region.
As of September 2018, nine states, including the District of Columbia, allow adult-use (recreational) marijuana and thirty-one states have adopted laws legalizing the sale and use of medical marijuana. The possession and sale of marijuana, however, remains illegal at the federal level due to the Controlled Substances Act’s classification of marijuana as a Schedule I narcotic alongside heroin, LSD, and ecstasy.
For a cannabis business operating within the bounds of state law seeking to enter the marijuana industry, the juxtaposition of marijuana’s quasi-legality raises important legal and practical concerns, one of the most pressing being access to banking. The Federal Bank Secrecy Act (the “BSA”), 31 U.S.C 5311 et seq, prohibits national financial and banking institutions from accepting money generated from the sale of cannabis, often forcing marijuana companies to operate on a cash-only basis and putting them at risk of criminal activity. The cannabis industry’s bout with banking has somewhat of a rocky history.
With medical marijuana legal in more than half of the United States and nearly 70% of the country having access to medical marijuana, the clinical research on the health benefits and healing properties of cannabinoids is contributing to the growing empirical studies and evidence supporting the use of marijuana as an effective medicine.
Frustratingly, however, many medical cannabis patients suffering from debilitating conditions and diseases such as multiple sclerosis, cancer, muscular dystrophy, seizure disorders, anxiety, migraines, and chronic pain, must solely bear the cost of medicine in the form of cannabis because it is not covered by healthcare insurance. Although a physician’s recommendation of cannabis for a patient’s qualifying ailments is no different than a script for opioids, anticonvulsants, or antidepressants, the patient’s health insurance provider will cover the cost of the latter but not the former.
Why? Several reasons.
Recently, on June 25, 2018, the Food and Drug Administration (FDA) approved Epidiolex, which is a prescription drug containing cannabidiol (CBD) isolate. Epidiolex is the first FDA-approved medicine that contains plant-derived, non-synthetic cannabinoids. The drug is used for treatment of seizures associated with two rare and severe types of epilepsy: Lennox-Gastaut syndrome and Dravet syndrome. CBD is a chemical component of the cannabis sativa plant, also known commonly as marijuana. Another form of the cannabis sativa plant is hemp. Marijuana and hemp contain both CBD and tetrahydrocannibol (THC) components. The difference between marijuana and hemp is the amount of THC that each plant produces. While marijuana can produce up to 30% of THC, hemp can produce no more than 0.3%. Hence, the critical difference is that hemp has no psychoactive effect. Moreover, the Ninth Circuit also recently ruled that CBD derived from hemp is not a controlled substance.
Though the recent approvals do not change the state of the law with respect to marijuana, the tides are slowly changing. Epidiolex is now the first FDA-approved drug that contains substance derived from marijuana. It is therefore possible that the approval of Epidiolex may lead the Drug Enforcement Administration to review and reschedule the status of cannabinoids under the Controlled Substance Act (CSA).