Legal Archives - Green Market Report

StaffJuly 19, 2021
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Editors Note: This is a guest post.

Cannabis has been a topic of discussion for ages. Its legalization is a topic of conflict around the entire world. Some people believe it should be legalized for recreational and medicinal purposes, whereas some don’t. But all of these laws and rules are in the government’s hands. 68% of American residents favour its legalization and hope for it to come through under President Joe Biden. It has already been legalized in 15 states entirely and in 36 states for medicinal purposes. Now, with the news of the Marijuana Opportunity Reinvestment and Expungement (MORE) Act possibly taking place in the USA, speculations of its legalization are higher.

The MORE Act was introduced in 2019 with the thought of removing cannabis from the controlled substances list and expunge prior criminal convictions and reforms for the new laws. With its reintroduction under the presidentship of Joe Biden, several reforms to this Act were introduced which weren’t there previously. The MORE Act provides funds via two significant grants. The Community Reinvestment Grant provides funding for services for legal aid of cannabis, and the Cannabis Opportunity Grant allows companies and small businesses in the marijuana field to open up. This Small Business Administration aid will be given to gain access to marijuana, especially for employment by those who were affected due to the ‘War on Drugs’ campaign.

When the MORE Act was released initially, it did not include the people affected by the ‘War on Drugs’. Now, with the new reforms taking place, not only were their criminal records expunged but also that they were provided funds to startup businesses as a means of employment. This Act is backed by around 150 other organizations in the country, including the Drug Policy Alliance and by 120 House cosponsors, and by whopping voters. With so much support from the federal level, the transactions related to marijuana can also be approved. All of this is possible only if the ActAct is passed and converted into a law. 

Joe Biden had claimed that individual states should decide the legality of marijuana in his 2020 campaign, which continued through 2021 and legalized marijuana in 5 more states. Right now, if Joe Biden does stand by his statement and legalize cannabis federally, the economic growth is going to be exceptional and exponential only. Not only that, but medical usage will also increase, which is beneficial to a lot of diseases and can cure some forms of mental illnesses too. Most of this legalization campaign supporters put forth points such as medicinal benefits, considerable tax revenue, and safer usage with regulation. 

The news of legalization has got many companies that sell weed to get prepared for a larger market and reach a wider audience. These businesses can legally sell and transact using online payment modes as well. Many of these weed companies have large investors, but with the legalization, there will be a rise in investors, the stock market, and profits. Companies that not only sell marijuana but also other equipment such as bongs, vapes, and more have gained a larger audience and more profits. All of these businesses will also get legalized with the legalization of cannabis. The MORE Act will support them and other small businesses to achieve employment means not just for them but also for others. Online websites such as Lookah that sell bongs, vapes, and the famous dab pens have seen an increase in sales and gotten a more extensive list of customers from all over the world. 

Before, the federal laws were causing a lot of harm to all the marijuana companies as they weren’t legalized. Even in the states that it was, they could not achieve complete freedom or more customers due to it not being federally legal. Big corporations such as Canopy Growth and Cannabis Wheaton could start without funds or loans from banks, but small businesses could not do so. These big corporations have profited due to the same reason, but with the federal legalization, small businesses will also see a rise and become potential competitors for big corporations.

Unfortunately, these are all just speculations, and there is no guarantee that these laws will be passed. But there are still specific rules that may not allow the Act to be passed into a bill. We’ve seen the various benefits it has for recreation or medicines and the economic and employment field. Thus, it is necessary to legalize marijuana federally for the betterment of the country. Hopefully, Joe Biden will look into the technicalities soon and open up a new world of businesses in the USA. 

 

Prospects for Legalization of Cannabis

 

Cannabis legislation has been a topic of discussion for ages. Its legalization is a topic of conflict around the entire world. Some people believe it should be legalized for recreational and medicinal purposes, whereas some don’t. While all of these laws and rules are in the government’s hands, there is immense pressure from public opinion to consider. 

68% of American residents favor its legalization and hope for it to come through under President Joe Biden. It is already legalized in 15 states entirely and in 36 states for medicinal purposes. Now, with the news of the Marijuana Opportunity Reinvestment and Expungement (MORE) Act possibly taking place in the USA, speculations of its legalization are higher.

The MORE Act was first introduced in 2019 with the thought of removing cannabis from the controlled substances list and expunge prior criminal convictions. With its reintroduction under the democratic leadership, the ActAct has been adjusted to help gain more significant support in the houses. The MORE ActAct provides funds via two significant grants. The Community Reinvestment Grant provides funding for services for legal aid of cannabis, and the Cannabis Opportunity Grant allows companies and small businesses in the marijuana field to open up. This Small Business Administration aid will be given to gain access to marijuana, especially for employment by those affected by the War on Drugs campaign.

When the MORE Act was released initially, it did not include the people affected by the war on drugs but now, with the new reforms taking place, not only were their criminal records expunged but also that they were provided funds to startup businesses as a means of employment. This ActAct is backed by around 150 other organizations in the country, including the Drug Policy Alliance and by 120 House cosponsors, and by the majority of voters. With so much support from the federal level, there is a big hope this newly amended ActAct will finally be approved. But all of this is possible only if the ActAct is passed and converted into a law. 

Joe Biden had claimed that individual states should decide the legality of marijuana in his 2020 campaign, which continued through 2021 and legalized marijuana in 5 more states. Right now, if Joe Biden does stand by his statement and legalize cannabis federally, the economic growth is going to be exceptional and exponential. Not only that, but medical access and use will also increase, which is beneficial to a lot of people suffering from a range of diseases and mental illnesses. Most of this legalization campaign supporters put forth points such as medicinal benefits, significant tax revenue, and safer usage with regulation. 

The news of legalization has got many companies that sell cannabis and related products to prepare for a larger market and reach a wider audience. 

These businesses will be able to transact business with a broader range of payment options as well. Many of the larger weed companies have big investors. Still, with the legalization, there will be a new influx of money that will drive up the whole sector and have a knock-on effect for supporting industries, such as cannabis paraphernalia, vaping, transportation, finance, and legal fields. 

All of these businesses and services will be legalized with the legalization of cannabis. The MORE Act will support them and other small businesses to achieve employment means not just for them but also for others. Online websites such as Lookah that sell bongs, vapes, and the famous dab pens have seen an increase in sales and noticed a marked increase in the number of wholesale and store clients anticipating the growth to come. 

Until now, only the big companies with prominent backers like Canopy Growth and Cannabis Wheaton could afford the startup costs without turning to bank loans. Still, small businesses were barred from entry due to restrictive legislation and costly licensing. 

These big corporations have profited due to the same reason. Still, with the federal legalization, small businesses will also see a rise and become potential competitors for big corporations with a more level playing field.

Unfortunately, for this vast potential to be achieved, the country’s leadership needs to follow the science and act to guarantee that these laws will be passed and result in a more equitable market for all. 

We’ve seen the various benefits it has for recreation or medicines and the economic and employment field. Thus, it is necessary to legalize marijuana federally for the betterment of the country.

 


Debra BorchardtJuly 14, 2021
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Senate Majority Leader Chuck Schumer (D-NY), Senate Finance Committee Chairman Ron Wyden (D-OR), and Sen. Cory Booker (D-NJ) released the full text of their federal draft marijuana legalization bill called the Cannabis Administration and Opportunity Act. This massive piece of legislation is clocking in at a hefty 163 pages and a public comment period is open until September 1.

In general, the legislation aims to deschedule cannabis, expunge prior records, fund equity programs, remove collateral consequences, and transfer regulatory authority for marijuana to the Food and Drug Administration and other federal agencies. Only consumers over the age of 21 would be allowed to buy legal cannabis and adults would be limited to purchases of up to 10 ounces. The bill would also impose a federal tax on marijuana products and put some of that revenue toward grant programs meant to support people from communities most impacted by prohibition who want to participate in the industry.

“Cannabis prohibition, a key pillar of the failed war on drugs, has caused substantial harm to our communities and small businesses, and especially for communities of color,” Wyden said. “It’s as simple as this: Senators Booker, Schumer, and I want to bring common sense to the federal government, end prohibition and restore the lives of those hurt most and set them up for opportunity.”

The legislation proposes to federally deschedule cannabis, expunge prior convictions, allow people to petition for resentencing, maintain the authority of states to set their own marijuana policies, and remove collateral consequences like immigration-related penalties for people who’ve been criminalized over the plant.

The Coalition for Cannabis Policy, Education, and Regulation (CPEAR) said in a statement, “The draft demonstrates a commitment to ensure a national legal cannabis market that is equitable, with protections for the small and minority-owned businesses that have been crucial for establishing legal markets in states across the country.

In addition to those items, the CAOA would transfer regulatory authority over cannabis to the Food and Drug Administration (FDA), the Bureau of Alcohol, Tobacco, Firearms, and Explosives (ATF), and the Alcohol and Tobacco Tax and Trade Bureau (TTB) from the Drug Enforcement Administration (DEA).

“The days of federal prohibition are numbered,” said NORML Executive Director Erik Altieri. “These actions by Senate Majority Leader Schumer and Senators Booker and Wyden reflect the fact that the supermajority of Americans are demanding that Congress take action to end the cruel and senseless policy of federal prohibition. It is time for legislators to comport federal law with the laws of the growing number of states that have legalized the plant, and it is time for lawmakers to facilitate a federal structure that allows for cannabis commerce so that responsible consumers can obtain high-quality, low-cost cannabis grown right here in America without fear of arrest and incarceration.”

Dasheeda Dawson, Chair of Cannabis Regulators of Color Coalition (CRCC) and Cannabis Program Supervisor at City of Portland OR said, “The introduction of the Schumer, Wyden and Booker draft legislation is the first serious look at cannabis legalization for the Senate and I am hopeful that the equity-centered policy reform and regulation led by our members at the state and local levels will continue to shape this historic bill. Across the country, we have seen the positive impact of sharing our informed insights, testimony and proposed amendments aligned with our organization’s founding principles. As active stakeholders overseeing policy and implementation in the existing cannabis industry, CRCC will continue to actively engage with the Senators’ teams, providing industry best practices and cannabis competency gained from our collective and diverse experiences.”

Controlled Substance

One provision within the legislation is a requirement that the attorney general removes cannabis from the Controlled Substances Act within 60 days of the bill’s enactment. However, it continues to allow states to choose prohibition if they like. This would mean that it would still be federally illegal for a company to send cannabis to a state that has chosen prohibition. However, the states apparently wouldn’t be able to stop businesses from shipping cannabis products across state lines to other states where cannabis is legal.

Nancy Whiteman, CEO, Wana Brands said, “Federal decriminalization would also enable manufacturing and then shipping across state lines which would greatly benefit brands like Wana. Supply chains will become more efficient and cost-effective as plants would be grown in appropriate outdoor climates and other materials could be sourced across markets. For a company like Wana, it means that we would be able to manufacture and ship out of regional or national facilities instead of recreating the wheel in every market.”

Government agencies would all get in on the act. The Bureau of Labor Statistics would begin compiling data on jobs and employers. The U.S. Department of Health and Human Services (HHS) would be required to work with the National Institutes of Health (NIH) on ways to promote cannabis research. The  HHS would also work with the U.S. Department of Transportation (DOT) on data collection for marijuana-impaired driving while also supporting research into “an impairment standard for driving under the influence of cannabis.”

Feedback

The public will have until September 1 to comment on the language of the bill. Marijuana Moment drilled down to summarize the main points for feedback:

-Measuring the potency of cannabis products, the overlap of definitions for hemp and marijuana, regulations for synthetic THC, regulatory responsibilities for various federal agencies and FDA funding.

-Coordinating federal and state law enforcement responsibilities for cannabis, state “primacy regarding cannabis regulation” and interstate commerce.

-Balancing efforts to reduce barriers to entry to the marijuana industry while mitigating the influence of illicit cannabis operators.

-Determining whether cannabis products should go through a premarket review before being marketed.

-How to deal with international treaty obligations with respect to marijuana.

Interested parties are encouraged to submit comments on these and other issues to Cannabis_Reform@finance.senate.gov by September 1.

Next Steps

The legislative draft that the Senators came up with was based partially on a bill that the House passed in December.  It included similar language that would remove some federal penalties, feature a form of expungement and address social equity issues. The House vote at the time was split mostly down party lines and very few Republicans voted for the bill. It seems expungement is a sticking point for many Republicans. The likelihood of this legislation getting the votes in the Senate is low. Even Schumer suggested it was merely a jumping-off point to start the conversation.

“We’d certainly listen to some suggestions if that’ll bring more people on board,” Schumer said. “That is not to say we’re going to throw overboard things like expungement of records — very important to us — and other things like that, just ’cause some people don’t like it.”


Debra BorchardtJuly 13, 2021
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Sacha Baron Cohen, the creator of the character “Borat” has sued privately-owned Massachusetts cannabis company Solar Therapeutics Inc. and the company’s President Edward Dow III for $9 million. Cohen is angry that his likeness as the character Borat was used without his permission on a billboard that was placed on a busy highway. The lawsuit claims that by using Cohen’s image it looks as if he is endorsing cannabis products.

The case states, ” Mr. Baron Cohen never has used cannabis in his life. He never would participate in an advertising campaign for cannabis, for any amount of money. Mr. Baron Cohen never has been involved in advertising any commercial products or services anywhere in the United States or the United Kingdom, despite countless opportunities to do so.”

Solar Therapeutics owns one dispensary in Somerset Massachusetts and has two more planned to open in 2021. The company describes its product as sustainable cannabis.

Cohen Is Anti-Cannabis

Using Cohen’s image is an odd choice for a cannabis company as the comedian has consistently stated his aversion to the plant. “The reason why Mr. Baron Cohen never has used cannabis is that he does not believe it is a healthy choice. With his “Ali G” character, portrayed by Mr. Baron Cohen in the HBO television series Da Ali G Show, Mr. Baron Cohen has spent much of his career making a mockery of “stoner” culture – a culture which the Defendants’ Billboard overtly celebrates. In addition, Mr. Baron Cohen was born into an Orthodox Jewish family; he is an Observant Jew; and he is proud of his cultural heritage. He does not wish to be involved in the heated controversy among the Orthodox Jewish community about whether cannabis can be used under Jewish traditions, customs, and rules – a controversy in which many rabbinical leaders have stated that cannabis use is a violation of Jewish law.” He also notes in the court case that cannabis is still federally illegal and a controversial product that he has no desire to promote.

On April 24, 2021, Mr. Baron Cohen’s attorney sent a cease-and desist letter objecting to Defendants’ wrongful actions and Solar Therapeutics said that they removed the Billboard three days later on April 27, 2021. However, the case claims the company has declined to compensate Mr. Baron Cohen for the exploitation of his image and his Borat character for the benefit of the Defendants and their revenues. the case claims that Solar Therapeutics makes $26 million a year.

Deciding on $9 Million

The actor also explained in the case how the damage amount of $9 million was decided. Citing the example of celebrity Kim Kardashian receiving $300,000 per tweet for simply mentioning brand names on Twitter and noting that a jury awarded $8.9 million to basketball star Michael Jordan against a grocery company for a magazine advertisement that included Mr. Jordan’s image without his permission.

 


StaffMay 14, 2021
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On Thursday, Minnesota’s House of Representatives voted in favor (72-61) of HF 600, a bill that would legalize cannabis for adults 21 and over. So it wasn’t an overwhelming vote to approve. Unfortunately for the state’s residents, the next step for the bill is getting Senate approval and Majority Leader Paul Gazelka (R) has said the Republican caucus is strongly opposed.

This is despite the fact that a polling shows Minnesotans support legalization is growing. 70% said they were in favor of legal cannabis, which has grown from just 30% in 2014. 85% of Democrats want legal marijuana, while only 37% of Republicans say yes. 38% of Republicans in the state have just said no.

Karen O’Keefe, director of state policies at the Marijuana Policy Project said, “Minnesotans have suffered far too long under prohibition. Rather than continuing to waste resources on enforcing this failed policy, the Senate should heed the will of the voters and pass legislation to legalize cannabis for adults. Legalization would create thousands of jobs and hundreds of millions in tax revenue, and it would reduce unnecessary stops, searches, and arrests that unfairly and unequally target Black Minnesotans.”

The legislation was sponsored by House Majority Leader Ryan Winkler and it would legalize possession and cultivation of limited amounts of cannabis, while setting up an equitable, regulated system for cannabis sales. It includes funding for community renewal along with cannabis industry training and start-up funding. The grants would focus on individuals facing barriers to education or​ employment, areas with elevated rates of poverty, workers with less than three years of experience, and farmers.

For Minnesotans, this is the first time any cannabis legislation for adult use has been approved. The Democrat-controlled House chamber voted to approve the measure, thus sending the bill to the Republican-majority Senate for further consideration. Still, the bill had received approval from twelve separate legislative committees.

“It’s time for Minnesota to become a leader in the midwest when it comes to sensible marijuana policy,” said NORML State Policies Manager Carly Wolf. “Not only would the passage of this bill allow police and courts to reprioritize their limited resources toward fighting serious crime rather than interacting with otherwise law-abiding Minnesotans over low-level possession offenses, but it would also provide relief to thousands suffering the collateral consequences of a marijuana arrest and conviction. I strongly encourage members of the Senate to follow the will of their constituents, a majority of whom support this policy change, and consider this common-sense remedy to the failed policy of prohibition.”

 

 


StaffMay 11, 2021
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The Cannabis Law Report recently published its Global Top 200 Editorially Selected Cannabis Legal Professionals  2020-2021+. This list featured cannabis legal professionals from jurisdictions around the world. The Cannabis Global 200 is designed to give readers a direct access to the most experienced cannabis/hemp legal experts around the world and in your jurisdiction. With permission, Green Market Report is publishing the list of lawyers, but for more detailed information please go to the detailed list by clicking here.

 

Chris Lane – Mackrell.Solicitors

Chris Lane is Head of Business Development and Marketing at Mackrell.Solicitors and works closely with the Partners to promote the firm and help it continue to grow. Chris started his career in the legal sector in 1995 as a clerk at a Barristers Chambers, but has been…

Nigel Rowley – Mackrell.Solicitors

Nigel is the firm’s Managing Partner and joint Head of Litigation and Dispute Resolution at Mackrell.Solicitors’ London office. He is widely experienced in complex litigation matters, and various forms of dispute resolution. He is a Past Chairman of Mackrell…

Nick Earles – Mackrell.Solicitors

Nick has a huge passion for the cannabis and psychedelic medicines sectors, having already advised on some key regulatory issues that have affected the cannabis industry as well as providing regulatory advice ancillary to corporate and dispute resolution transactions….

M. Allen Hopper

Allen Hopper is an experienced litigator, consultant and policy expert with deep substantive knowledge of federal, state and local cannabis laws and regulations. Mr. Hopper advises and represents cannabis businesses seeking to navigate cannabis laws and regulations,…

Veronica Darling – Cultiva Law

Veronica is a Pacific Northwest native with over a decade of experience in strategic business planning, complex commercial litigation and regulatory compliance. Over the last four years, she has become intimately involved in navigating the Oregon cannabis regulatory…

Dustin Robinson

Dustin Robinson is the Founding Partner of Mr. Cannabis Law – a full-service law firm exclusively focused on the hemp, marijuana, and psychedelic industries. Dustin is licensed in Florida as an Attorney, a Certified Public Accountant, and a Real Estate Agent. He…

Steven F. Groce

Member of the Missouri Bar, the Texas Bar, and the Bar of the United States Supreme Court Juries Doctorate (JD) Law, University of Missouri, at Kansas City – Graduated 1984 36 years Experience in Criminal Defense. Practice primarily devoted to DWI (Alcohol…

Ted Bernhard – Cultiva Law

Ted Bernhard is a seasoned business, securities, tax and regulatory compliance attorney with a professional career spanning over two decades.   He began his legal career with one of the largest and most prominent law firms in the Pacific Northwest and joined Cultiva…

Mio Asami – Cultiva Law

Mio Asami, born in Los Angeles and raised in Seattle, grew up sharing time between the United States and Tokyo, Japan. Following an unconventional path, she possesses a background in transactional business law, intellectual property law, and videography. Mio is a…

Jordan Zoot – aBIZinaBOX Inc.

Mr. Zoot is licensed as a CPA in CA, FL, IL, NY, and TX. He has a national reputation of technical and transactional taxation of pass-thru entities [Partnerships, LLCs and S Corporations], private equity, and alternative asset funds primarily in distressed mortgages…

Chris Mitchell – DLA Piper

Related Matters Advising Althea Group Holdings on its $30 million acquisition of Peak Processing Solutions, a Canadian extraction and contract manufacturing company, and associated capital raising by way of an institutional placement. Advising Toronto Stock Exchange…

Michael Minardi – Minardi Law

Top Cases Minardi Law is currently working on multiple cases aimed at protecting patients rights to use cannabis.  In McKeon vs. Nova Southeastern University, the firm has filed a complaint against the school alleging it discriminated against Mrs. McKeon by expelling…


StaffMarch 4, 2021
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Editors Note: This is a guest post. 

The booming USA cannabis industry has had to overcome many hurdles to reach the position it is in. With amendments to the Prevent All Cigarette Trafficking (PACT) Act it may have hit yet another setback. In the following article we explain what the PACT act is all about, how the amendments to the act will affect the industry and those who work within it, and what the answer may be going forward. We’ll begin by explaining the act itself and its origins. 

What is the PACT Act? 

The PACT Act was originally passed as law in 2008. However, it has its roots in an act drawn up 60 years earlier in 1949 called the Jenkins Act. The Jenkins Act was aimed at combatting contraband tobacco. It required all carriers who were shipping tobacco or tobacco products across state lines to report the sale of such products to the relevant tax authorities. Tobacco was, naturally, a much-traded product in terms of illicit deals, hence the requirement for the act to impede on tax avoidance.

In 2009 the PACT Act amended the Jenkins Act. Additions to the act included the prevention of the U.S Postal Service (USPS) from delivering cigarettes and tobacco products. This amendment also applied to smokeless tobacco products. The Act also requires sellers of tobacco products to adhere to strict regulations including registering with the ATF (Bureau of Alcohol, Tobacco, Firearms and Explosives) and the tax authorities in the state they are shipping to or, in fact, where an advertisement for such products is displayed.

In addition, they must use a carrier who checks the identification of the recipient, and records of sales must be kept for a number of years, among other specific requirements. Originally these regulations did not apply to vaping products. That is about to change, as we will explain. 

How Will the PACT Act Affect the Cannabis Industry? 

The recent amendment to the PACT Act – ‘Preventing Online Sales of E-Cigarettes to Children Act’ – brings vape products under the umbrella of the act. Within the wording, the definition of ‘cigarette’ has been amended to include ‘Electronic Nicotine Delivery Systems’ (ENDS). At first glance ENDS appears not to include cannabis products. However, the Act defines ENDS as follows:

“any electronic device that, through an aerosolized solution, delivers nicotine, flavor, or any other substance to the user inhaling from the device including an e-cigarette; an e-hookah; an e-cigar; a vape pen; an advanced refillable personal vaporizer; an electronic pipe; and any component, liquid, part, or accessory of a device described without regard to whether the component, liquid, part, or accessory is sold separately from the device.”

This means that USPS can no longer deliver vape products to consumers. There is some debate ongoing as to whether USPS can deliver business to business – such transactions were exempt from the original PACT Act where strict criteria were met – as the service has yet to publish its intentions. 

There has been plenty of reaction within the industry, notably from online retailers and suppliers of vape products who face potential damage from the latest amendments. For example:

The ban is going to affect cannabis industry also. We are working on a plan with alternative shippers to get our customers their weed vaporizer products, however, the shipping time and shipment fee may increase” the owner of vape4ever.com said. Vape4Ever is an established online supplier of quality vaporizer products at the leading edge of the market.

A worrying addition to the above is that two of the major US carriers – FedEx and United Parcel Service (UPS) – have announced they will no longer transport vaping products in the USA, with FedEx applying its rules from March 1st, 2021, and UPS enforcing the ban from April 5th. T

What Happens Next?

Whether the current cannabis industry growth projections – which are very healthy indeed – remain in place in the face of the PACT Act remains to be seen. The major concern is for smaller businesses in the vape and cannabis industry who face expensive upgrades to their computer systems as well as revisions to their working practices in the light of the USPS, FedEx and UPS transport bans that are coming into effect shortly.

The ACT requires the USPS to officially clarify the regulation on the carrying of ENDS by April 27th, 2021. At the time of writing there has been no such clarification, and businesses are advised to ensure compliance by that date at the latest. There will be a need for suppliers to find private logistics solutions in order to enact delivery of vape products, and many are currently investigating and organizing such solutions.

The PACT Act is a blow to a burgeoning industry that has given rise to many small outfits and provides many jobs, and it is hoped that the smaller players in the market can find a cost-effective solution to comply and enable delivery to continue.


StaffMarch 1, 2021
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Editors Note: This article was submitted by Ashley Elsner Co-Founder and COO of Artery Pay.

On Friday, February 19, 2021, Jim Patterson, the former CEO of Eaze, was charged with and pled guilty to conspiracy to commit bank fraud in connection with credit card processing for cannabis products on the Eaze platform as part of an ongoing criminal trial against Hamid Akhavan and Ruben Weigand. In this article, I explain what is alleged, why it’s illegal, why you should care, and how to protect yourself and your business.

What did Mr. Patterson and his co-conspirators allegedly do?

On March 31, 2020, Hamid Akhavan and Ruben Weigand were charged with conspiracy to commit bank fraud in violation of 18 U.S.C. § 1349. The indictment alleges that, from 2016 through 2019, Akhavan, Weigand, and other, unnamed co-conspirators engaged in a conspiracy, the “Transaction Laundering Scheme,” to deceive banks into processing over $100 million of credit and debit card payments to marijuana retailers by disguising the transactions so as to create the false appearance that they were unrelated to the purchase of marijuana.

-United States v. Akhavan, S3 20-cr-188(JSR), (S.D.N.Y. May. 20, 2020)

Jim Patterson has pleaded guilty to his part in the above criminal indictment. For your reference, below are the definitions of the crimes alleged in the indictment.

18 U.S.C. § 1349 states:

Any person who attempts or conspires to commit any offense under this chapter shall be subject to the same penalties as those prescribed for the offense, the commission of which was the object of the attempt or conspiracy.

The underlying offense here is bank fraud defined in 18 U.S.C. § 1344, which states:

Whoever knowingly executes, or attempts to execute, a scheme or artifice—

(1) to defraud a financial institution; or

(2) to obtain any of the money, funds, credits, assets, securities, or other property owned by, or under the custody or control of, a financial institution, by means of false or fraudulent pretenses, representations, or promises;

shall be fined not more than $1,000,000 or imprisoned not more than 30 years, or both.

In essence, Akhavan, Weigand, and Patterson are charged with lying to financial institutions about what the transactions on the Eaze platform were for to trick them into processing transactions for cannabis products in the US. 

Why is this illegal?

First, a little background in how card processing works. There are a number of financial institutions that are involved in the processing and clearing of card-based transactions. Each one has to consent to process and clear the transactions. To do this, card networks like Visa, Mastercard, American Express, and Discover, that provide transaction systems, have created specific network rules and category codes that apply to card processing. Card issuing banks, such as Bank of America, Chase, Wells Fargo, Citigroup, and Capital One, underwrite the consumer transactions that the card networks feed them according to those same rules and category codes that they developed in collaboration with one another. Both the card networks and the card-issuing banks have to agree to support transactions for specific products and services so that those specific products and services get a category code. The category code is transmitted at the time of transaction and lets the underwriting bank determine if that transaction can be accepted for the specific consumer for the specific products and services. 

Why is this important? Because neither card networks, that provide the systems, nor card-issuing banks, that provide consumers with the cards that are presently in their wallets, have agreed to process cannabis transactions until federal legalization of cannabis products at the earliest. Large national financial institutions, the card networks, and card-issuing banks included, have taken the position that as defined in their network and institutional rules, the US federal prohibition makes cannabis products illegal, and therefore, they will not process and clear those transactions via their systems and institutions. 

To that end, the card networks have not provided a category code for US cannabis products. In order to trick card networks and card-issuing banks into processing and clearing cannabis product transactions, someone would have to miscode those transactions as an accepted category code. Miscoding financial transactions to a bank in any way is bank fraud. In this case, it is also money laundering because it deliberately hides the true source of the transaction.  

But why should I, a cannabis business owner, care what happened to Jim Patterson from Eaze?

The simple answer is that bank fraud and money laundering cases get prosecuted. To that point, Judge Rakoff, the federal judge hearing the case, refused to grant dismissal against Weigand and Akhavan for 2 arguments that I hear from industry professionals all the time. 

First, and I admit this argument (and it’s inverse that everything is federally illegal so who cares) always makes me laugh, Weigand and Akhavan’s attorneys argued that the Rohrbacher-Farr Amendment to the 2014 congressional spending bill prevents federal prosecutors from going after marijuana operations that comply with state law. Judge Rakoff’s response was that they are accused of bank fraud, not engaging in state-licensed cannabis business. “The Rohrbacher-Farr Amendment does not condone bank fraud by a medical marijuana dispensary any more than it condones murder, robbery, or assault.” I don’t think I can say that any more clearly but I’ll try. Cannabis protections from federal prosecution do not extend to other crimes.

Second, “no harm, no foul”. That is just not true. Financial crime laws are instrumental in protecting the US and its citizens from all kinds of criminal and terrorist organizations. It was money crimes that took down the mafia and made it possible to prove criminal organization. It is money crimes that allow law enforcement to track, monitor, and dismantle terrorist organizations, gangs, and cartels now. Money laws are paramount to public safety so money crimes are not “no harm crimes”. 

I will add that the stability of the US economy and our financial markets is due in large part to the expectation of legal enforcement against fraudulent behavior. Fraud is a crime that does hurt people and businesses. I don’t like to make slippery slope arguments, but this is one of the rare cases where it actually applies. If you let some people get away with fraud, others see that fraud laws are not enforced and start committing fraud too. Then no one can trust anyone anymore and it becomes impossible to engage in free enterprise. Fraud breaks capitalism which relies on legitimate information and intention.

Finally, I’m going to add one more argument that wasn’t put forward but I hear all the time: “I didn’t set up the bank fraud so I’m not responsible for it.” Unfortunately, that’s not true; RICO is why. “RICO” stands for Racketeer Influenced and Corrupt Organizations Act (18 U.S.C. §1961 – §1968.) It is an extremely important tool for law enforcement for dismantling criminal organizations. RICO allows criminal liability for predicate offenses, like bank fraud and money laundering, to be extended to executives that control and order predicate offenses in furtherance of an enterprise. That means that criminal liability for these types of scams can extend to you, the business owner, just for using the scam, and sadly, it doesn’t matter if you know it’s a scam or not. You can still face prosecution. And, RICO requires forfeiture of “ill-gotten gains.” That means that by using the scam, you made legitimate transactions into illegal ones that can be subject to being frozen and seized. 

How can I protect myself and my business from getting into similar trouble?

  1. Never lie to a financial institution about what you do. When you fib, financial institutions always eventually catch you and account shutdowns are substantial disruptions to your business and annoy your customers. If you are a licensed cannabis business that follows your applicable regulations and you don’t take products or money across state or international lines, you are not doing anything wrong. If the bank or processor chooses not to work with you because you are a cannabis business, that is their right. There are other banks and payment systems that will work with you as long as you haven’t fibbed to other banks in the past. It’s not necessarily easy or cheap but getting legitimate, open cannabis banking and cannabis payment platforms is the best thing for you and your business. It’s legal, reliable, and sustainable. 
  2. Due diligence your financial providers and their offerings. You should be able to find out who they are, if they actually have appropriate experience, be able to contact and confirm with their backing banks that they have approved working with cannabis and that they know that your payment platforms are working with cannabis. If you find this to be too difficult, ask your lawyers and accountants to help you. They are your fiduciaries and have legal and moral obligations to make sure that you and your business are protected. 
  3. Don’t use “workarounds”. There are no “workarounds” in finance. Attempts to “workaround” getting direct, verifiable consent from banks, card networks, other financial institutions are a bad idea. Not only can you be held personally criminally liable for misrepresenting your business and your transactions, like what happened to Mr. Patterson, your assets under these scams are freezable and seizable. Using “workarounds” can expose you to other threats to your business as well. For example, when your bank catches you, they can shut down your bank account and will submit your information to the terminated merchant file (TMF). The TMF is used by banks, payment processors, other financial institutions to determine if you are a “bad actor. This status can kill your ability to obtain any financial support in the US, think insurance, lending, banking, payments, listing on stock exchanges, etc. Also, this reputation will follow you and the rest of your executive team to future businesses. It’s not limited to your present company. 

Don’t play games with your money.

Ashley Elsner is a financial lawyer and the Co-Founder and COO of Artery Pay, a payments company making payments and banking easy for cannabis businesses. Artery Pay unifies payments and banking compliance into a single system so that merchants and the banks and credit unions that support them are able to work with each other easily, effectively, and transparently. Whether you want non-cash payments or need help with your cash, Artery Pay can manage all of your transaction needs. Artery Pay is easy, fun, cheap, and legal – the way cannabis should be. For more information, visit www.arterypay.com or contact Ashley directly at ashley@arterypay.com.


StaffFebruary 22, 2021
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17min11790

On Monday, New Jersey’s Democratic Governor Phil Murphy signed legislation that legalizes adult-use marijuana possession and licenses retail marijuana sales.

“The enactment of these laws is long overdue,” said NORML State Policies Manager Carly Wolf — who emphasized that state and local police have made over 6,000 arrests for marijuana-related violations in the months since New Jersey voters overwhelmingly decided at the ballot box. “Now, going forward, tens of thousands of otherwise law-abiding New Jerseyans will no longer be subject to arrest and a criminal record for their personal use of marijuana, and the commercial market will be regulated in a fair and inclusive manner.”

NORMAL stated that three bills were signed by the Governor. A21/S21 licenses the commercial production and retail sale of cannabis to adults. Under the new law, adults may legally purchase and possess up to one ounce of cannabis. Retail sales are subject to state sales tax. Seventy percent of the revenue derived from sales taxes on retail marijuana purchases will be directed toward reinvestment in designated, lower-income communities. Sales are expected to begin this summer. The legislation also calls for the creation of a five-member Cannabis Regulatory Commission that will be tasked with issuing detailed regulations by June 2021 that will govern virtually every aspect of the adult-use cannabis industry.

The new law caps the number of state-licensed cultivators at 37 for the first two years. Existing state-licensed medical cannabis producers will be among those eligible to provide to the retail market. It has been estimated that adult-use retailers may be operational within six months. Applications for adult-use cannabis business licenses will begin to be accepted 30 days after the regulations are issued.

Murphy also signed A1897, which removes criminal and civil penalties for the private possession of up to six ounces of cannabis by those ages 21 and older, as well as for the possession of personal use amounts of hashish (up to 170 grams). It also depenalizes activities involving the transfer of up to one ounce of cannabis, and reduces criminal penalties for activities involving larger quantities (distribution of more than one ounce but less than five pounds) of the substance.

Gov. Murphy also signed a third piece of legislation into law, A5342. It provides for a series of written warnings, rather than the imposition of either criminal penalties or fines for those under the age of 21 who are caught with cannabis. The Governor lobbied for the measure, which was passed by lawmakers this morning. Under the measure, third-time juvenile offenders could receive community service. Provisions in the law also restrict police from conducting searches of juveniles based solely on the odor of marijuana.

“This is a major milestone on the path to ending cannabis prohibition in New Jersey,” said Jennifer Cabrera of Vicente Sederberg LLP, a national cannabis law firm that helps shape and implement cannabis laws and regulations across the U.S. Based in Union County, she co-manages the firm’s New Jersey and New York offices and works closely with state lawmakers and regulators on cannabis policy issues.

“The legislation was intended to promote small locally owned businesses and should foster a vibrant craft cannabis industry in the state,” Cabrera said. “It reserves licenses for microbusinesses and offers them a streamlined application process that will reduce barriers to entry and help them get a footing in this growing industry. There are some additional steps we would like to see policymakers take to make it easier to operate these microbusinesses, and we look forward to working with them as they fine-tune the system. Still, this is a great starting point and opens the door to a lot of exciting opportunity for local entrepreneurs.”

Vicente also stated that the law also includes several provisions aimed at promoting social equity in the cannabis industry and repairing damage caused by prohibition. For example, it specifies that 30% of licenses must be allocated to businesses owned by women, minorities, or disabled veterans, and at least 25% should be allocated to residents of impact zones, which are defined as municipalities with more than 120,000 residents that rank in the top 40% of municipalities in the state for cannabis-related arrests; have a crime index of 825 or higher, and have a local average annual unemployment rate that ranks in the top 15% of municipalities.

“New Jersey has adopted some of the strongest social equity provisions we’ve seen,” Cabrera said. “Contemplating these issues at the outset of the process will likely prove to be a big advantage for the state. It is much easier to build these considerations into the system than it is to go back and incorporate them later.”

 


Kaitlin DomangueFebruary 10, 2021
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5min11630

On February 5th, state lawmakers voted to legalize cannabis in Virginia and establish a recreational market. Both chambers’ initiative would legalize possession of an ounce of marijuana or less, and begin the process of expunging certain cannabis-related misdemeanors on July 1st. Retail sales are predicted to start in 2024, per the plans of both the House and Senate.  

Virginia already has a medical marijuana program, but it’s limited compared to most states. Even so, the medical program is expected to be valued at $50 million in sales by 2024, and the adult-use market is poised to grow even bigger. 

Here’s what you need to know about the newly introduced adult-use legislation in Virginia: 

The vote passed through the Virginia General Assembly on February 5th 

Both chambers passed the bill to legalize cannabis for adult use at the beginning of February. The bill was introduced by Senator Adam Ebbin, who said “I think that Virginia is on a path to an equitable legalization plan for marijuana. There have been a few bumps, but I’m hopeful that we’ll have a polished bill we can agree upon in the next few weeks,” said Sen. Adam Ebbin.

The House passed the bill 55-42 

House Democrats were in favor of the bill, while Republicans were opposing it. The House’s version of the bill would maintain all cannabis criminal penalties until January 1st, 2024, when the first adult-use retail sale is set to take place. 

The Senate advanced its modified version 23-15

One of the Senate’s changes include allowing Virginia jurisdictions to opt out of retail stores, and will require a second vote by state lawmakers next year. The House and Senate need to agree on these changes before Gov. Ralph Northam signs the proposal. The governor has already voiced his support for the bill, and is expected to sign it. 

The biggest portion of tax revenue from cannabis sales will be invested in at-risk children

One of the most exciting things about both versions of the bill is where the tax revenue is going. The biggest portion of the revenue is set to fund Pre-K for at-risk children in the state of Virginia. “Reforming our marijuana laws is one way to ensure that Virginia is a more just state that works better for everyone. It also will eventually bring in tax revenue that can be used to further make sure we are providing equitable access to opportunity. For example, just half of the potential annual revenue could pay for two years of quality Pre-K to every one of Virginia’s most vulnerable three- and four-year-olds—children who deserve the best start in life,” said Gov. Ralph Northam. 

One of the bill’s chief patrons is a Black woman 

Louise Lucas has been representing Virginia’s 18th district since 1992. She is one of the chief patrons of this historical bill, along with fellow Virginia Senator Adam Ebbin. She is the floor leader of her Democrat colleagues in the state Senate, and because Democrats won a majority of seats in the 2019 Virginia senate election, Lucas succeeded Republican Stephen Newman as the Virgina Senate’s President pro tempore. This makes her the first woman and the first African-American to hold this position. 

The future of Virginia’s adult-use market

According to a recent study conducted by the Joint Legislative Audit and Review Commission, legalizing and taxing commercial cannabis sales in Virginia could generate between $154 and $308 million by the fifth year of sales. 

The legalization will hopefully bring much-needed social change, too. The study also found that Black Virginians makeup a disproportionately high number of cannabis-related offenses, and with this bill – that can be resolved. 


StaffJanuary 11, 2021
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6min11190

Governor Andrew Cuomo confidently stated that New York will legalize adult-use marijuana in his state of the state address on Monday.

“We will legalize adult-use recreational cannabis, joining 15 other states who’ve already done so,” Cuomo said in the speech. “This will raise revenue and will end the over-criminalization of this product that has left so many communities of color over-policed and over-incarcerated.”

This statement follows last week’s announcement that he would pursue legislation in 2021 to establish a legal market for marijuana in New York, which would effectively end marijuana prohibition in New York State and create a system to tax and regulate marijuana in a manner similar to alcohol for adults over the age of 21.

New York lawmakers pre-filed a bill to legalize marijuana last week. The legislation was introduced in the Senate by Sen. Liz Krueger (D) and 18 other lawmakers. The new legislation is identical to a version she filed last year which never went further than being filed.

Melissa Moore, New York State Director of the Drug Policy Alliance and member of Start SMART NY Coalition (Sensible Marijuana Access through Regulated Trade) said, “By including marijuana reform in today’s State of the State address, Gov. Cuomo has signaled that this is a top priority in this year’s legislative session. When it comes to responsibly regulating marijuana, it’s critical that we don’t just get this done, but we get it right. Equity must be the guiding force, and we will continue to work with the Governor’s administration and legislative leaders to ensure any new law comprehensively addresses the harms to communities wrought by the war on drugs through dedicated community reinvestment. New Yorkers are more ready than ever to create a new paradigm for marijuana reform. Let’s make 2021 the year for marijuana justice.”

Under the Governor’s proposal, a new Office of Cannabis Management would be created to oversee the new adult-use program, as well as the State’s existing medical and cannabinoid hemp programs. Additionally, an equitable structure for the adult-use market will be created by offering licensing opportunities and assistance to entrepreneurs in communities of color who have been disproportionately impacted by the war on drugs. Once fully implemented, legalization is expected to generate more than $300 million in tax revenue.


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