Legal Archives - Green Market Report

Sean HockingSean HockingFebruary 21, 2019
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21min450

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AUTHOR: Glenn Johnson
PUBLISHER:  CANNABIS LAW REPORT

 

Over the past few weeks I’ve had a chance to speak with Chad Frey and get to hear more about his journey in the role of COO and Co-Founder of Cannabis CRE Capital as well as his role as CEO of Attilah, whose wholesale model aims to engage a New Hemp Renaissance. Our conversations have been a frank and honest discussion of the dizzying wild west of a market we’re riding through. 

Chad explains, “At Cannabis CRE Capital, our main focus is to take the legwork out of sourcing lending options in order to provide our clients with additional capital, higher margins, and the additional cash flow to engage in new ventures tailored to future business plans.

Attilah, he continues, is a simple, transparent platform “for supplying wholesale cannabidiol to everyone.” The company is “founded on principles of quality, integrity and client education, we are leading the charge towards CBD accessibility and affordability for the masses. We specialize in retail (brick and mortar) sales solutions for quality CBD brands and provide a platform to expand your business solutions in today’s emerging hemp marketplace.

 

When impassioned, Chad can speak at warp speed on a range of topics with a great depth of nuance and knowledge—from what makes a successful investment pitch to the importance of building a good team from the start, to Hemp in Kentucky and Cannabis in California, and all the legislation in between.

 

As the market is moving and evolving quickly before our eyes, we’ve discussed how we both bring our passion of what we do best to this new category and how hes adjusted his own business practices to fill the necessary needs he sees as opportunities.

 

Q–If we do things right, what are top three steps to take when we look at Hemp, CBD and marketing in the next six months?

At Atillah we believe in transparency, simplicity and quality, I think the number one step to take is education across every vertical.

 

1-Educate the consumer, really talk to the end user on everything about what this product does.

 

2–Bring Products to demographics: Be Specific about what (and who) your product demo is. A lot of people see the dollars signs and are rushing to get to market, with no real plan. If youre trying to market to multiple platforms its difficult to resonate, be strategic.

 

3–Regulation. Its upon us to set the standards. If we want to look at scale like the adult beverage industry, we have the opportunity to set the standards for how this business should operate. For CBD, we also have to say what its not, that is not psychoactive, that its not a poison, we need to showcase how it can positively affect an end user by proper regulations and a healthy legislative process.

When you look at who’s done what in the market to regulate it, Utah did it right–if youre going to have a CBD product you need to register with the agriculture committee. Theyre making sure the consumers are safe, theyre doing it right.

When we look into the structure of what the NYC Department of Health is saying recently–they havent taken any products off the shelves because they cant because of the FDA Q/A forum thats happening now.

 

Q– Theres a lot of miseducation and ignorance in the market too, much of the recent CBD stories on the news made it sound like the CBD in NYC was coming from Cannabis, not Hemp. Marketing and messaging is a blur right now, would you agree?

Yes, we see from recent surveys that 23% of the market doesnt even know what the product is or the difference between Hemp and Cannabis. Many still only think of CBD as the same as marijuana.

In terms of industrial hemp however–we see a spread of business thats differentiating itself by virtue of what market youre doing business in. If youre focusing on the textile side of Hemp and are just harvesting the plant as a whole–theyre not worried about where CBD is in the zeitgeist per se. There are opportunities to build important legacy brands in industrial Hemp too.

Q– Regionally speaking, is there a Market that youre most interested in?

California is what brought us into this, where we will be moving forward, the world’s 4th largest GDP, 2.62T dollars, equal to the United Kingdom. We want to be a globally focused brand.

 

Q– What are challenges are you seeing in California?

A–sticker shock, and B–we see taxes that are cutting into profits.

They have complex legislation in California, a dual licensing structure, you need a local license, then you have zoning, its a lot of money to do business there. We try to provide the best education we can to our clients. We dont want to see any business fail.

Theyre super stringent, there was no testing done before, the FDA is trying to get a basic feel what the market is like in terms of Hemp and CBD. California is falling into the pit with the FDA, waiting on the FDA to say it can be a supplement, like Hemp Seed Oil, which is already GRAS (generally regulated as safe) and theres a lot of friction pulling back and forth right now. When you look at Ginseng for example, there are some false altruistic attributes that exist on a widely accepted supplement.

Q– Its hard to navigate the industry from a Marketing perspective today…

Its very difficult to find the right avenues in marketing right now, its an evolving dynamic place. Its important to go more for the target market youre interested in speaking to, but the options of whats allowed to get your message out varies so widely. Adwords is a hot point, as is Facebook and the fact that drop shipping off Shopify you cant process credit cards. Its a challenging space to do business.

We educate people when they are ready, a lot of people are coming into the space we provide all the resources and solutions when they are ready to come into the space…from retail to extraction, the whole plethora.

I think its important that we are associating ourselves with the OGs in Hemp. We look at different ways that we can assist in the market, we need to be taking some of it off their plate and find synergies for new leaders in the hemp industry to evolve.

Our relationships are really built on this. From the US Roundtable, to the US Hemp Association and Vote Hemp with Eric Steenstra whos facilitated pro-hemp legislation passage in more than 39 states, to Joe Hickey and his history and the Kentucky Hemp Association.

 

Q–Which area of the market is most exciting to you today?

Industrial hemp is exciting, it’s been a great grass roots market over the years and weve been practicing with a lot of players there since 1992. From soil health to paper, and products like Bio Fuels and Hempcrete– the industrial uses of hemp are endless. The benefits are remarkable too, from carbon emissions to soil remediation and how it heals the earth and produces such a quality product thats been subjugated for the last 50 years.

CBD is of course in there as well, look at John Rouloc and Nutiva: Been in the category since the late 90s, the largest hemp producer, on a food scale, stepped down to take a position in CBD. Hes highly focused on healthy soil and production–regenerating the soils damaged by pesticides. From what weve seen in the last 50 years–in two harvests you can have healthy soil again after two years–it’s a product thats necessary now more than ever.

Our outreach with Attilah is targeting retail sales sourcing, wholesale oil supply, white/private labeling, and consumer-facing apps to get more CBD/hemp education in the hands of everyday consumers in order to change the landscape and depiction of hemp, that’s the renaissance.

 

In PART II of The Hemp Renaissance: We continue the conversation around the business of business and the18th Century Kentucky connection that will lead us into the 21st Century.

 

About CHAD FREY

At Cannabis CRE Capital, our main focus is to help our clients obtain the right funding for the right job. Focusing exclusively on the cannabis industry, we are here to provide access to new lending solutions, banking options, and equity specifically designed for cannabis-based real estate financing, new developments, refinancing and investment opportunities.

https://cannabiscrecapital.com/

 

Founded on principles of quality, integrity and client education, Attilah is leading the charge towards CBD accessibility and affordability for the masses.

https://www.attilah.com/

 

About Glenn Johnson

I am a Marketing, Branding and Communications Consultant w/ experience in high-touch luxury consumer marketing in the travel/hospitality, wine/spirits, fashion/beauty/grooming and Cannabis categories. My talents include Branding & Brand development, Business Building, Strategy and Brand Storytelling. I excel in working with Founders, funders, start-ups, and small brands.

 

Previously I was co-founder & moderator for the Creative Mind Salon series hosted at Soho House NY w/ industry innovators, creatives & decision makers from fashion, film, photography, music and digital industries which provided IRL intelligent discourse amongst highly-curated leading edge creatives. Connect with me on LinkedIn at: https://www.linkedin.com/in/glenn-johnson-8018944/

 

MARKETING / MATTERS

A Cannabis Column with a Marketing & Branding point of view, including Q & A articles, “Conversations in Cannabis,” with industry innovators across the spectrum of start-ups, founders and brands doing business in the Cannabis category.

 

I can be contacted at glenn.johnson@gmail.com


Sean HockingSean HockingFebruary 19, 2019
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17min631
If you wish to re-publish this story please do so with the following accreditation:
AUTHOR: Jordan Zoot / a BIZ inaBox
PUBLISHER:  CANNABIS LAW REPORT

We have discussed in other Posts our concerns about inadequacies in the information the California Department of Tax and Fee Administration [“CDTFA”] has distributed relating to the Cannabis Excise Tax [“CET”] and Cannabis Cultivation Tax [“CCT”] as well as inadequacies in the tax return CDTFA adopted[1].

We have also regularly submitted questions to CDTFA. Frequently we have suggested answers to our questions.

We are publishing this Post as the foundation for a series of at least three Posts in which we will suggest best practices in the financial record-keeping for cultivators, distributors, and dispensaries[2].

In this Post, we are making suggestions to improve and streamline the tax reporting and collection process for the benefit of CDTFA as well as California’s cannabis industry.

 

The failure of CDTFA to quickly and accurately make well-reasoned decisions and educate California’s cultivators, dispensaries, manufacturers and distributors of their respective responsibilities concerning the collection, reporting, and remittance of CCT and CET has cost California millions of dollars in lost tax revenue[3].

The injury that CDTFA has caused does not stop with the cannabis tax dollars California did not collect. CDTFA has caused far more damage with its failure to describe the financial records cannabis businesses must prepare and maintain to prepare accurate and readily verifiable CCT and CET tax returns.   This Post will address the financial record-keeping that CDTFA must require to facilitate the preparation of accurate and readily verifiable CCT and CET returns.

Our first suggestion is that CCT and CET belong on separate returns. It is generous to CDTFA to describe its decision to combine CCT and CET in a single report as lacking in thought. The taxes are collected from different taxpayers.

The two taxes are collected at different points in time in the commercial movement of cannabis from the cultivator to consumer. The two taxes are payable to CDTFA at different times. CCT is collected from cultivators. CET collection is from consumers. The only characteristic that is shared by CCT and CET is that distributors are responsible for collecting these two taxes and remitting these taxes over to CDTFA. These two taxes are so unrelated that it is possible, perhaps even likely, that many distributors that are responsible for collecting and remitting CET will never remit CCT to CDTFA.

CCT is a “cash basis” tax that distributors and manufacturers are required by law to collect from cultivators at the time cannabis material is transferred. The responsibility for remitting the CCT collected from a cultivator to CDTF is imposed on the manufacturer or distributor that collects this tax. In another Post, we have pointed out that the collection and remittance of CCT[4] to CDTFA is one of the “black holes” into which California’s cannabis taxes have disappeared.

We have criticized CDTFA, and we will continue to do so, for its failure to inform and educate cultivators as well as distributors and manufacturers regarding their respective responsibilities relating to the collection and remittance of CCT. Of greater significance, CDTFA failed abysmally to inform and educate the entire group – cultivators, distributors, and manufacturers – regarding the record-keeping responsibilities relating to CCT.

 

In the unlikely instance in which a cultivator transfers cash funds to a distributor in payment of CCT, the distributor is required to give the cultivator receipt. Such a transaction, of course, is a unicorn. If such a transaction were to occur, CDTFA must demand that the funds be held in a separate trust fund account for the benefit of the State of California.   CDTFA must also require the distributor to advise the cultivator when remittance of the funds to CDTFA occurs. The preceding, however, is never going to happen in California’s cannabis industry. Cultivators do not give money to distributors and manufacturers in payment of CCT. In the real world, distributors and manufacturers assume cultivators’ CCT obligation. This is a black hole into which the cannabis tax has disappeared. This is also a trap CDTFA created for uniformed cultivators[5].

The liability for CCT is imposed on a cultivator. Distributors are required to collect CCT from cultivators. A cultivator must receive a receipt from the distributor that expressly identifies the specific amount of CCT the distributor collected from the cultivator in each transaction. Ideally, a distributor would be required to deposit the funds in a segregated trust fund account. California’s cannabis world is not ideal. It is not even close. A cultivator must insist on receiving express and specific documentation from the distributor or manufacturer reflecting the CCT associated with each separate transfer of cannabis. Ideally, a cultivator would also receive a notification from the distributor or manufacturer when its CCT is paid over to CDTFA, but the world of California cannabis is not an ideal world.

 

CDTFA is responsible for the failure of the State of California to collect the bulk of CCT that was not collected in 2018[6].

As is described above, a cultivator must receive a receipt or other documentation for CCT in connection with each transfer of cannabis. In order for such a system to work, CDTFA must require that the receipt or other documentation for each transaction involving the collection of CCT have a Unique Tax Transaction Identifier (“UTTI”) that ties the amount of CCT associated with each separate transfer of cannabis to the cannabis transferred. CDTFA must require both parties to each and every transfer of cannabis involving CCT to prepare and maintain financial records that tie each separate transfer of cannabis and the associated amount of CCT to the same UTTI.

If CDTFA requires both parties to each transaction involving CCT to prepare and maintain records tied to a UTTI in the records of both parties, accurate tax returns which reflect the collection and remittance of CCT will result. CCT in effect becomes almost like an inventoried item. The total of all of the CCT collected will be matched to the total amounts remitted, passed-on, or held at any point in time. Verification through an audit is simplified with standardized procedures. However, unless CDTFA requires the use of a UTTI by both parties to every transaction, CDTFA will continue to have a black hole and taxpayers will continue to prepare inaccurate returns.

The collection and remittance of CET involves different but related issues to CCT. The record-keeping issues relating to CET involve a higher level of complexity than those associated with CCT.

However, before we turn to a summary discussion of matters relating to the collection and remittance of CET, we want to mention two peripheral issues.

First, over the next few weeks, we intend to publish discussions of best practices in financial record-keeping for cultivators, manufacturers, distributors, and dispensaries, although not necessarily in that order.

Second, we want to take this opportunity to refer readers to an earlier Post relating to the number of sets of books a California cannabis business must maintain. The reason for this second reference will become evident from the discussion of the collection and remittance of CET that follows.

CET is collected from cannabis consumers. The dispensary or delivery-only dispensary that transfers cannabis to a consumer is required to collect, account for, report and pay-over CET to a distributor. We have separately addressed the responsibilities of the dispensaries that collect CET. In that Post, we emphasized the importance of treating these funds in the hands of the initial collector as trust funds. It is even more critical that a distributor segregate and account for CET as trust funds. A distributor receives CET from a dispensary as money held in trust by the dispensary for the benefit of the State of California. This money is paid over to a distributor as money held in trust. An argument can be easily made that a failure of a distributor to treat this money as funds held in trust is a breach of a fiduciary duty owed to the State of California.

The source of the funds received by a distributor as CET is different from the source of CCT funds. The timing of the obligation to remit these funds to CDTFA is different from the timing for the remittance of CCT. Because the source of the CET and timing for the payment of CET is different for these funds, these funds must be accounted for separately from CCT. Further, these funds must be as separated from any money held by a distributor that represents CCT collected from a cultivator. A distributor that receives both CET and CCT must maintain separate, segregated trust accounts for CET and CCT. For the same reason, a distributor must keep separate sets of financial records for CET and CCT. This is the reason we referenced our Post regarding the number of separate sets of books a cannabis business must maintain.

 

Like the purchase of cannabis from a cultivator, a sale of cannabis by a distributor must include documentation that explicitly identifies the cannabis sold by the distributor and the associated CET collected by the distributor. The documentation the distributor provides to the purchaser must specifically and expressly identify the cannabis and the associated CET and must be uniquely identified with a UTTI. CDTFA must require both the distributor and the dispensary to utilize a UTTI in connection with each separate transfer of cannabis. CDTFA must also require both parties to prepare and maintain financial records that tie each of the uniquely identified transactions involving CET into the summaries relating to CET reported in their respective tax returns of the dispensary and the distributor.

 

If CDTFA requires the preparation and maintenance of the records described above, the tracking of CCT and CET will readily follow. Distributors and dispensaries will be able to easily prepare accurate and verifiable tax returns. Distributors will maintain trust accounts which segregate the funds that represent CCT and CET from other funds. Both parties to every transaction involving the collection of CCT or CET will have a unique, separate record of each transfer of cannabis and the associated CCT or CET.

 

In addition to requiring the use of a UTTI in connection with each transfer of cannabis involving CCT or CET, CDTFA must require each distributor and manufacturer to maintain its books of account for all purposes on an accrual method of accounting. We have written extensively on the mechanics of the accrual method of accounting in “Which Set of Books” and “Cannabis Inventory Costing Update.” The critical elements of the application of the accrual method of accounting to California’s cannabis industry are:

 

  • Revenue recognition must track the movement of cannabis material which must include consideration of commercial shipping terms [eg. FOB Shipping Point and FOB Destination].

 

  • The articles which we have referenced provide the details relating to the procedures for the amounts added to the cost of cannabis material under the specific inventory costing provisions[7].

 

  • The amounts which are not permitted to be capitalized and included in the cost of cannabis material will be subject to IRC Section 280E or may be deductible under certain circumstances.

 

The accrual method of accounting will dictate the point at which the earnings process is complete. The use of an accrual method of accounting will also facilitate the determination of cost of goods sold (“COGS”) for each interval as well as the determination of ending inventory.

 

The calculation of CET using the rules we have suggested that CDTFA require will determine when each transfer of cannabis constitutes a completed sale. The total amount of CET due for each reporting period will be equal to the CET on cannabis goods which are deemed to be sold by the distributor or manufacturer.

Footnotes

[1] See Help CDTFA Fill Blackholes 

 

[2] See Cannabis Tax Calculation Example for an example of how the taxes are calculated.

 

[3] See Collecting Reporting – Remitting Tax

 

[4] See CCT Collection Best Practices

 

[5] See California License Sale SCAM

 

[6] See CCT CET – Responsible Persons for a completely distinct discussion with respect to a gaping hole in the CCT/CET statute.

 

[7] See Cannabis Inventory Costing Update 

 


Mark TaylorFebruary 18, 2019
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5min1000

Interest in Germany as a major European cannabis hub is not waning (apparently) despite its botched licensing process, as 79 firms have bid to become growers, the government said.

The German Federal Institute for Drugs and Medical Devices (BfArM) is leafing through the applications and will eventually hand out cultivation licenses to a minimum of three and a maximum of 13 firms (hopefully).

A Dusseldorf court caused the initial tender, which had an intake of 118 hopefuls, to halt after ruling companies hadn’t been given enough time to adjust after a change in the bidding process.

The current tender is also facing a similar challenge, with a court date fixed for April 10, but the government believes there will be no more delays and the contracts will be handed out in the second half of 2019 (fingers crossed).

Once up and running (possibly), the government will issue grower contracts for 10,400 kilograms (22,928 pounds) of cannabis over the next four years.

As the first harvest is not expected until the end of 2020 (hopefully), the drug will continue to be imported as the law allows, however, this has also been fraught with problems as demand has significantly outstripped supply (of course it has).

The country has reported a shortage following problems of low stock from Canadian suppliers, from whom it has relied on since legalizing medicinal marijuana in 2017. It also imports from the Netherlands.

Given the issues it has experienced, the home-grown tender will (possibly, eventually) ensure a high-quality native supply is also available, said Maik Pommer, a spokesman for the drugs agency.

“It’s about ensuring the security of the supply,” Pommer said.

The agency declined to comment on where the main growing regions will be. Each contract is for 200-kilogram lots, which experts say will open the door for smaller growers to enter the market (maybe).

As the largest of the EU states, Germany’s medical cannabis market was priced at $19.1m in 2018, according to Frankfurt-based pharmaceutical company Farmako, and could increase to $200m in 2019.

Across all of Europe, Farmako executives say, the medical cannabis market could reach $55bn in the next decade.

(Disclaimer: Cannabis Law Report is not responsible for the accuracy of the many consultancy and research reports currently flooding the market with numbers pulled from thin air.)

Prior to the 2017 legalization of medicinal marijuana in Germany, around 1,000 critically ill individuals were authorized to use it

The government said it expected only about 700 patients per year to request prescriptions, which are partly covered by public health insurance, but in less than a year more than 13,000 people applied.

In November 2018, it was estimated 40,000 patients had been prescribed marijuana in Germany.

This could easily top 1m, and 5m in the wider European Union, showing how significant Germany is as a market for firms looking to gain a foothold in the EU; the annual cost of therapy per patient is between €4,500 ($5,090) and €30,000 ($33,000), making it potentially a multibillion-euro market.

Germany is the EU’s largest domestic market, and has long attracted attention from Canadian and US firms, but is also the target of fledgling EU growers from jurisdictions such as Greece, Spain, Italy, and Malta.

Wider legalization seems only a matter of time (probably), as the topic unites many of Germany’s otherwise divided political parties.

The Free Democrats, Green party and the Left party all believe criminalization only feeds the black market and puts recreational consumers at risk. They also point to the amount of tax revenue legislation could bring.

Angela Merkel’s Christian Democrats are strictly anti-cannabis, and the other ruling party, the Social Democrats, are neutral.


Sean HockingSean HockingFebruary 18, 2019
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11min1910
Editors Note: This letter was originally published by the Cannabis Law Report and GMR takes no position with regards to the subject. 
Here’s the full letter dated 17 February 2018

Hemp Authority- open letter.2-17-19

February 17, 2019
An Open Letter to the Hemp and CBD Industry Regarding the US Hemp Authority™ Certification Program

This letter is directed to participants in the rapidly expanding hemp and cannabidiol (CBD) industry in the USA (the Industry). The signors of this letter are active participants and stakeholders in the Industry. Collectively, we have decades of experience in all aspects of the Industry, from farming to processing and manufacturing to brand building to lobbying and navigating the rapidly evolving legal and regulatory landscape. We are all concerned by the proposed US Hemp Authority™ Certification Program (the Program) as developed and championed by the Hemp Roundtable (the Roundtable) and supported by the Hemp Industries Association (HIA). This letter is to provide notice of our concerns and our objection to any endorsement and/or adoption of the Program by the Industry or by any governmental and/or quasi-governmental agency.

Before stating our concerns, we believe it is important to note our agreement with the Roundtable and the HIA that high standards, best practices, and self-regulation are all necessary components to a safe, robust, and credible Industry. We further agree that these things generally increase both consumer and law enforcement confidence
in hemp products being sold in the market today and in the future. We also note that, while we appreciate the Roundtable’s engagement with many important Industry issues, we have significant concerns over what appears to be its unstated but apparent bias in favor of a small group of corporate interests to the detriment of other businesses in the Industry who are not part of the Roundtable’s Board of Directors. The Program is no exception and, in fact, further promotes those interests.

The Program operates on a “pay to play” system. Although audits are conducted by a third party, a company must pay thousands of dollars annually in order to participate in the Program and gain licensing and “certification”. The recently announced addition of two scholarships for auditing fees is insufficient. The fees and costs associated with participation in the Program are a severe impediment to participation by many small farmers and producers of quality hemp and CBD products. While we recognize the dangers of overregulation, the proper organization for determining compliance with quality standards is the US Department of Agriculture. Any “pay to play” system is
prejudicial to small operators and is also subject to “capture” by large operators who will fund the Program.

The Program lacks certain basic standards that we believe are important to a vibrant and quality-driven Industry in the USA. For instance, the Program does not address or denote hemp that was grown in the USA. The hemp provisions of the Agricultural Improvement Act of 2018 (Farm Bill) were largely premised on bringing back hemp as a cash crop for American farmers. While we acknowledge that hemp is rapidly becoming a global commodity, any certification program for consumers in the USA should, at a minimum, distinguish USA hemp and producers from foreign products. We are not advocating that only USA grown hemp receive certification. Rather, we believe that designating USA products should be part of any reasonable certification program. In another instance of the Program not promoting standards we believe are necessary and vital to the Industry, the Program does not address the use of genetically modified organisms (GMO). Given the rising global concern regarding GMO products for consumer health and safety, any fair certification process that purports to promote consumer safety through information should address GMO crops and ingredients. As with the above, we are not advocating that no GMO products be certified. Rather, we believe that use of GMO be taken into consideration that information be made available for the consumer.

Similarly, the Program does not address the use of organic materials and/or cultivation methods. Although we do not advocate certifying only organic crops and products, failure even to denote or distinguish products that are organic from those that are not is indefensible. Use of non-organic material and/or methods should not disqualify a
producer from receiving certification; however, their use should be taken into consideration and that information be made available to the consumer. There is a general consensus that non-plant derived CBD products should not be
certified. While there may be reasonable arguments that synthetic CBD derived from sources such as yeast have a place in the market, they have no place in a program specifically designed to certify hemp and hemp products. This significant issue is not addressed by the Program.

The proposed use of the American Herbal Pharmacopoeia (AHP) monograph for contaminants, while laudable, raises a number of important issues, both for crop failure and consumer health, that are not addressed by the Program. Additionally, the Program recommends using ISO 17025 as a “guidance” for laboratories performing testing, yet guidance does not mandate adherence. We question the Program’s use of the term “guidance”, rather than simply making ISO 17025 accreditation a requirement. Despite promoting itself to both the public and lawmakers as the certification program devised by the Industry, the Program was actually created by a small subgroup of the Industry without any meaningful input by respected and longstanding hemp experts. While we acknowledge that the Hemp Authority purported to seek public comment on the Program, its request for comments were largely circulated from within the Authority itself via emails to its supporters and on web pages that it controls. In fact, it appears Roundtable members who pay the $30,000 annual dues for membership into the “Board of Directors” are the primary proponents of the Program and whose input for the Program was used.

The Hemp Authority failed to reach out to a number of Industry experts for their input, yet it promotes the Program as one that was drafted by the Industry. At least one of the signors to this letter made significant contributions in the early stages of the Program for common sense metrics regarding self-regulatory organizations (SRO) such as the Authority. The recommendations were totally ignored. We also note that the Hemp Authority and, by extension, the Program, is deeply intertwined with a small group of corporate interests. We are concerned about an accumulation of power and authority by a small and well-funded group. In order to be truly effective in execution and national in scope the Program must have buy-in from stakeholders of all sizes, productions methods, and regions of the country. The concerns addressed in this letter are far from complete or comprehensive.

The point of this letter is not to address in detail the various concerns, problems, and issues we have with the Program. Indeed, when it comes to the Program’s details not all of us agree on every point. Rather, this letter is to put the public on notice that a significant disagreement with the Program exists in the Industry and that many important Industry leaders object to it. To that point, we are aware of former members of the US Hemp Roundtable who have terminated their membership based on the concerns shared in this letter.

We do not purport to have all of the answers. However, we believe that a full and fair system of Industry standards should, at a minimum, be devised by a wide range of experts, promote all business interests, provide meaningful information to consumers, and otherwise address the concerns we have expressed in this letter.

For these reasons, WE OBJECT to the U.S. Hemp Authority™ Certification Program.
Sincerely,
Andrew Bish,
Bish Enterprises and Hemp Harvest Works
Dr. Volker Bournemann,
Avazyme
Julianna Carella,
Treatibles and Auntie Deloris
Kevin Collins,
Global Widget, Hemp Bombs,
Nature’s Script, and Pure Paws
Dan Goldfarb,
Canna Pet
Tim Gordan,
Functional Remedies
Justin Hamilton,
East Coast Genetics, Hempleton,
and The Hemp Farmacy
Dr. Chris Hudalla,
ProVerde
Rod Kight and Kamran Aryah, Attorneys
Kight Law Office and
Kight on Cannabis legal blog
Margaret MacKenzie,
Salt Creek Hemp Company
Mike McGahey,
Seedworkx
Trent Paasch,
Third Wave Farms
Garrett Perdue,
Root Bioscience
Melissa Peterson,
US Hemp Expos and BoothBox
Bill Polyniak,
Kentucky Cannabis Company
Janel Ralph,
Palmetto Harmony
John Roulac,
RE Botanicals


Sean HockingSean HockingFebruary 15, 2019
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24min691

If you wish to re-publish this story please do so with the following accreditation
AUTHOR: Jordan Zoot / aBIZinaBOXinc
PUBLISHER:  CANNABIS LAW REPORT

We have written a number of articles in our blog[1] relating to the representation of cannabis businesses. We have also written to the California Attorney General as well as the General Counsel for all three of the agencies in California that regulate the cannabis industry regarding this topic. These three agencies are:

  • Bureau of Cannabis Control “BCC” [Retail, Retail-Delivery, Distribution – Packaging],
  • California Dept. of Public Health “CDPH” Manufactured Cannabis Safety Board “MCSB” – [Manufacturing, Processing, Extraction],
  • California Dept. of Food and Agriculture “CDFA” CalCannabis [Cultivation]

We are again writing on the topic of representation because the failure the above-referenced agencies to take into account the importance of qualified representation is one of the reasons California’s roll-out of the regulation of the cannabis industry has been described as maladroit. We are not qualified to make recommendations regarding the qualifications BCC, CDPH, and CDFA should establish for representatives, although we note that duly licensed attorneys have the authority as a matter of law to represent clients before administrative agencies.

Each of the BCC, CDPH and the CDFA in our opinion were remiss in not addressing representation at an early date. Each of these agencies was also remiss in not looking to the symbiotic relationship between the various taxing agencies and the representatives of taxpayers that are critical to the administration of tax laws at the federal, state and local levels. We are qualified to address the issue of representation with respect to financial and tax reporting issues.

Both the California Franchise Tax Board [“FTB”] which has jurisdiction over income and franchise taxes for individuals and businesses and the California Department of Tax and Fee Administration [‘CDTFA”] which has jurisdiction over sales tax, and cannabis cultivation [“CCT”] and excise taxes [“CET”] acknowledge the rights of taxpayers to representation. Both the FTB and the CDTFA have regulations and procedures that are a track with the rules promulgated by the IRS. The skills are required to engage in representation before a tax agency are recognized at every level of government. Professional regulatory structures exist for attorneys and certified public accountants [“CPA’s] in every state in the United States and its Territories.

What is now known the Enrolled Agent program is a special representation arrangement run by the IRS that was originally established after the Civil War to provide for a minimum level of competence and integrity for agents representing individuals submitting claims under federal legislation known as the “Horse Act.” Under this Act, individuals could recover compensation for horses appropriated by the army during the Civil War. The required level of education and experience for Enrolled Agents, of course, has evolved substantially since the period immediately after the Civil War, but the principles remain the same. Enrolled Agents are entitled to represent taxpayers in federal tax matters because they meet the requirements established by the IRS. The FTB and the CDTFA permit Enrolled Agents to represent taxpayers in connection with California tax matters.

The set of skills required to represent applicants and licensees before California’s cannabis regulatory agencies is a different set of skills from those skills required for representation before tax agencies. The need for qualified representation, however, is the same. As we mentioned above, each of the BCC, CDPH, and CDFA was remiss in not establishing an arrangement for the representation of applicants and licensees. These agencies should have looked first to the FTB and CDTFA and then examined on a coordinated basis the specific needs for representation before each of the agencies. The three agencies, however, must not lose sight of the goal of arranging for qualified representation. The goal is not more regulation. The goal is to ease the burden of compliance with onerous regulations by having the assistance of qualified representation. We will now discuss representation regulation in other areas as a basis for comparison.

We will begin our comparison with the Social Security Administration [“SSA”]. The requirements to represent a claimant in a proceeding with the Social Security Administration [“SSA”] expressly permit attorneys and just about anyone else that isn’t mentally defective or a criminal[3] to represent a claimant. The standards of “professional qualifications[4] and standards of conduct” for SSA representation are minimal. They are set forth in CFR 404.1740.[6] It is a stretch to refer to CFR 404.1740 as establishing professional standards. The provisions of CFR 404.1740 are substantially less than the qualifications required to practice before the Internal Revenue Service [“IRS”] under Treasury Circular 230 [“Circ. 230”]. Circ. 230 contain the rules that govern the professional conduct of Circular 230 Practitioners[7]. As the BCC, CDPH and CDFA a substantial number of “Consultants” saw California’s regulation of its cannabis industry as a business opportunity. Some were qualified; some were not. California’s regulatory agencies suffered as did many involved in the industry because the BCC, CDPH and CDFA did not recognize at the very beginning the need for qualified representation in connection with the licensing and regulation of this industry.

Cannabis regulation requires input from many specialized areas of expertise, including botany, water resource management, scientific measurement and analysis and a number of engineering disciplines. California’s cannabis regulatory agencies would be well served to follow the lead of the IRS with respect to actuaries, engineers and appraisers by creating specific standards that recognize other professions and other specialized bodies of knowledge. Individuals should be required to have some level of education and experience to represent before an agency. Each agency should set the requirements at a level that assures the agency the applicant or licensee is receiving effective and qualified assistance. Each agency should encourage representation by qualified individuals. Each agency should discourage undisclosed assistance and require disclosure of any assistance being received. Qualified representation before an administrative agency benefits both the agency and the applicant or licensee. Unqualified representation increases costs and causes damage.

There are numerous federal, state and local agencies that have their own sets of qualifications for individuals and firms to represent applicants, licensees and other parties subject to an agency’s jurisdiction. It is our opinion that the requirements for Circular 230 Tax Practitioners are sufficiently relevant to the cannabis regulatory agencies that such practitioners should be allowed to represent applicants and licensees before the BCC, CDPH and CDFA. We do NOT have the same view of the representation standards utilized by the SSA. The SSA professional standards described above are NOT professional standards.

We recommend that in some coordinated way the BCC, CDPH and CDFA establish their own recommended agency-specific additional qualifications the attorneys and Circular 230 practitioners and other groups of qualified advisors that the agencies deem suitable to applicants and licensees before the specific agencies. The California Tax Education Council [“CTEC”] program would be an excellent place for the BCC, CDPH and CDFA to start. The State of California has a long history as a leader in consumer protection. The CTEC program has been very effective in regulating tax preparers that lack the education and licensure of Circular 230 Tax Practitioners.

The BCC, CDPH and CDFA should act to protect applicants, licensees, and the people of California from the flood of self-designated “Consultants”, or “Licensing Consultants”, or “Certified Consultants” or other experts who have magically appeared in the landscape. Unfortunately, some otherwise competent people may be displaced by the imposition of rules relating to the presentation. However, in this situation, the “means appears to justify the end”.

Perhaps an organization like the Cannabis Trade Federation will decide to organize a national credential with state level augmentation.

[1] See Cannabis Regulatory Agency Representation and CA Cannabis Agencies Don’t Recognize Representatives?

[3] § 404.1705. Who may be your representative?

(a) You may appoint as your representative in dealings with us, any attorney in good standing who—

(1) Has the right to practice law before a court of a State, Territory, District, or island possession of the United States, or before the Supreme Court or a lower Federal court of the United States;

(2) Is not disqualified or suspended from acting as a representative in dealings with us; and

(3) Is not prohibited by any law from acting as a representative.

(b) You may appoint any person who is not an attorney to be your representative in dealings with us if the person—

(1) Is generally known to have a good character and reputation;

(2) Is capable of giving valuable help to you in connection with your claim;

(3) Is not disqualified or suspended from acting as a representative in dealings with us; and

(4) Is not prohibited by any law from acting as a representative.

(c) We may refuse to recognize the person you choose to represent you if the person does not meet the requirements in this section. We will notify you and the person you attempted to appoint as your representative if we do not recognize the person as a representative.

[45 FR 52090, Aug. 5, 1980, as amended at 76 FR 80245, Dec. 23, 2011]

[4] The qualifications to practice as a Circular 230 Tax Practitioner are contained in Sec. 10.3

“(a) Attorneys. Any attorney who is not currently under suspension or disbarment from practice before the Internal Revenue Service may practice before the Internal Revenue Service by filing with the Internal Revenue Service a written declaration that the attorney is currently qualified as an attorney and is authorized to represent the party or parties. Notwithstanding the preceding sentence, attorneys who are not currently under suspension or disbarment from practice before the Internal Revenue Service are not required to file a written declaration with the IRS before rendering written advice covered under §10.37, but their rendering of this advice is practice before the Internal Revenue Service.

  (b) Certified public accountants. Any certified public accountant who is not currently under suspension or disbarment from practice before the Internal Revenue Service may practice before the Internal Revenue Service by filing with the Internal Revenue Service a written declaration that the certified public accountant is currently qualified as a certified public accountant and is authorized to represent the party or parties. Notwithstanding the preceding sentence, certified public accountants who are not currently under suspension or disbarment from practice before the Internal Revenue Service are not required to file a written declaration with the IRS before rendering written advice covered under §10.37, but their rendering of this advice is practice before the Internal Revenue Service. 

 c) Enrolled agents. Any individual enrolled as an agent pursuant to this part who is not currently under suspension or disbarment from practice before the Internal Revenue Service may practice before the Internal Revenue Service.”

[6] § 404.1740. Rules of conduct and standards of responsibility for representatives.

(a) Purpose and scope. (1) All attorneys or other persons acting on behalf of a party seeking a statutory right or benefit must, in their dealings with us, faithfully execute their duties as agents and fiduciaries of a party. A representative must provide competent assistance to the claimant and recognize our authority to lawfully administer the process. The following provisions set forth certain affirmative duties and prohibited actions that will govern the relationship between the representative and us, including matters involving our administrative procedures and fee collections.

(2) All representatives must be forthright in their dealings with us and with the claimant and must comport themselves with due regard for the non-adversarial nature of the proceedings by complying with our rules and standards, which are intended to ensure the orderly and fair presentation of evidence and argument.

(b) Affirmative duties. A representative must, in conformity with the regulations setting forth our existing duties and responsibilities and those of claimants (see § 404.1512 in disability and blindness claims):

(1) Act with reasonable promptness to help obtain the information or evidence that the claimant must submit under our regulations and forward the information or evidence to us for consideration as soon as practicable.

(2) Assist the claimant in complying, as soon as practicable, with our requests for information or evidence at any stage of the administrative decision-making process in his or her claim. In disability and blindness claims, this includes the obligation pursuant to § 404.1512(c) to assist the claimant in providing, upon our request, evidence about:

(i) The claimant’s medical source(s);

(ii) The claimant’s age;

(iii) The claimant’s education and training;

(iv) The claimant’s work experience;

(v) The claimant’s daily activities both before and after the date the claimant alleges that he or she became disabled;

(vi) The claimant’s efforts to work; and

(vii) Any other factors showing how the claimant’s impairment(s) affects his or her ability to work. In §§ 404.1560 through 404.1569a, we discuss in more detail the evidence we need when we consider vocational factors;

(3) Conduct his or her dealings in a manner that furthers the efficient, fair and orderly conduct of the administrative decision-making process, including duties to:

(i) Provide competent representation to a claimant. Competent representation requires the knowledge, skill, thoroughness and preparation reasonably necessary for the representation. This includes knowing the significant issue(s) in a claim and having a working knowledge of the applicable provisions of the Social Security Act, as amended, the regulations and the Rulings; and

(ii) Act with reasonable diligence and promptness in representing a claimant. This includes providing prompt and responsive answers to our requests for information pertinent to the processing of the claim; and

(4) Conduct business with us electronically at the times and in the manner, we prescribe on matters for which the representative requests direct fee payment. (See § 404.1713).

(c) Prohibited actions. A representative must not:

(1) In any manner or by any means threaten, coerce, intimidate, deceive or knowingly mislead a claimant, or prospective claimant or beneficiary, regarding benefits or other rights under the Act;

(2) Knowingly charge, collect or retain, or make any arrangement to charge, collect or retain, from any source, directly or indirectly, any fee for representational services in violation of applicable law or regulation;

(3) Knowingly make or present, or participate in the making or presentation of, false or misleading oral or written statements, assertions or representations about a material fact or law concerning a matter within our jurisdiction;

(4) Through his or her own actions or omissions, unreasonably delay or cause to be delayed, without good cause (see § 404.911(b)), the processing of a claim at any stage of the administrative decision-making process;

(5) Divulge, without the claimant’s consent, except as may be authorized by regulations prescribed by us or as otherwise provided by Federal law, any information we furnish or disclose about a claim or prospective claim;

(6) Attempt to influence, directly or indirectly, the outcome of a decision, determination, or other administrative action by offering or granting a loan, gift, entertainment, or anything of value to a presiding official, agency employee, or witness who is or may reasonably be expected to be involved in the administrative decision-making process, except as reimbursement for legitimately incurred expenses or lawful compensation for the services of an expert witness retained on a non-contingency basis to provide evidence;

(7) Engage in actions or behavior prejudicial to the fair and orderly conduct of administrative proceedings, including but not limited to:

(i) Repeated absences from or persistent tardiness at scheduled proceedings without good cause (see § 404.911(b));

(ii) Wilful behavior which has the effect of improperly disrupting proceedings or obstructing the adjudicative process; and

(iii) Threatening or intimidating language, gestures, or actions directed at a presiding official, witness, or agency employee that result in a disruption of the orderly presentation and reception of evidence;

(8) Violate any section of the Act for which a criminal or civil monetary penalty is prescribed;

(9) Refuse to comply with any of our rules or regulations;

(10) Suggest, assist, or direct another person to violate our rules or regulations;

(11) Advise any claimant or beneficiary not to comply with any of our rules or regulations;

(12) Knowingly assist a person whom we suspended or disqualified to provide representational services in a proceeding under title II of the Act, or to exercise the authority of a representative described in § 404.1710; or

(13) Fail to comply with our sanction(s) decision.

[7] The authority for Circ. 230 is derived from

31 U.S.C. §330. Practice before the Department (a) Subject to section 500 of title 5, the Secretary of the Treasury may — (1) regulate the practice of representatives of persons before the Department of the Treasury; and (2) before admitting a representative to practice, require that the representative demonstrate — (A) good character; (B) good reputation; (C) necessary qualifications to enable the representative to provide to persons valuable service; and (D) competency to advise and assist persons in presenting their cases.

 


Mark TaylorFebruary 15, 2019
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5min1020

The European Union has taken a big step towards creating a formalized set of laws for governing medicinal cannabis within the bloc.

Members of the European Parliament’s health committee on Tuesday adopted a resolution, which is the first step necessary for drafting legislation, designed to better support the industry.

The directly elected legislative members called for “properly funded” scientific research in the non-binding motion, and will seek to incentivize member states to advance the study of medical marijuana, prioritizing scientific research and clinical studies.

Cannabis Law Report revealed in January the EU is preparing to create a set of medicinal cannabis guidelines that will apply across all member states in an effort to stop regulatory arbitrage occurring as different countries steam ahead with their own legislation.

Several EU countries have already legalized the medical use of some form of cannabis or cannabinoids or are considering changes to their legislation, in a bid to capture a multi-billion dollar industry.

The rules on which products are allowed and how they should be used vary widely, although no EU country authorizes the smoking or home-growing of cannabis for medical purposes.

Recently, the World Health Organization officially recommended that the cannabis compound cannabidiol (CBD) should not be classified as a controlled substance, rolling back decades of red tape.

Presently there are no EU-wide rules for either the medical or recreational use of cannabis.

During the EU debate, members said that cannabis and cannabinoids may have therapeutic effects in stimulating appetite (for weight loss linked to Aids) and in alleviating the symptoms of mental disorders or epilepsy, asthma, cancer and Alzheimer’s, amongst other illnesses.

It could also help to ease menstrual pain and reduce the risks of obesity and diabetes, they said, agreeing that much more research is necessary.

In the resolution, Parliament is asking for a legal definition of medical cannabis in order to clearly distinguish it from other uses.

It also says that research and innovation on medical cannabis should be strengthened and properly funded, while effective cannabis-based medication should be covered by health insurance schemes.

MEPs said a stable and clear legal framework would improve the quality of medical cannabis and the accuracy of its labeling. Patients would be able to use it safely, with particular precautions in place for young people and pregnant women, they said.

At EU level, legal rules would help to control points of sale and limit the black market, while preventing substance abuse and addiction among minors and vulnerable groups, according to the resolution.

In addition, comprehensive rules would encourage better knowledge about medical cannabis, by ensuring training and access to literature for medical professionals.

“MEPs call on member states to allow doctors to use their professional judgment in prescribing cannabis-based medicines,” the Parliament’s press service said. When effective, these medicines are to be covered by health insurance schemes in the same way as other types of medicine, members said.

“The regulation of cannabis-based medicines would translate into additional revenue for public authorities, would limit the black market and ensure quality and accurate labeling,” the statement added.

The Parliament’s press service also included a handy table for the uneducated, entitled “What is cannabis?” Which we have reprinted below.

What is cannabis?

  • The cannabis plant is made up of more than 480 compounds, including more than 100 cannabinoids, the best-known being THC (D9-tetrahydrocannabinol) and cannabidiol (CBD)
  • THC is the main psychoactive and addictive constituent of cannabis; CBD has no intoxicating or addictive properties
  • The medical use of cannabis and cannabinoids can refer to a wide variety of plant-based and synthetic preparations and products
  • Many countries use the Mexican term marijuana to refer to cannabis leaves. The unpollinated female plants are called hashish

Nice.


Mark TaylorFebruary 15, 2019
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7min2070

A landmark moment for the UK’s cannabis industry occurred this week when the first bulk shipments of marijuana were imported into Britain since legislation changed in November.

In a development that would surely make Howard Marks (RIP) nod in approval, British medical cannabis start-up Grow Biotech, investors European Cannabis Holdings (ECH) and unlicensed medicine manufacturer IPS Specials announced on Friday that 800 grams of medicinal cannabis was legally brought in from The Netherlands.

Under strict manufacturing and pharmaceutical standards, 400 grams of Bedrocan cannabis and 400 grams of Bedica grown by Dutch biopharmaceutical firm, Bedrocan, was imported by IPS Specials following prescriptions issued for chronic pain at a cost of £695 per private patient.

(In case you were wondering, Marks, at his peak, claimed to have been smuggling 30 tons of the drug in each consignment.)

Aurora Cannabis Inc. (ACB) announced Monday that it had completed its first commercial export of medical cannabis oil to the United Kingdom from a certified pharmacy.

The Canadian company, which is currently building out its UK operations, said the product was successfully dispensed from Canada under the UK’s new legal framework.

“Being one of the first Canadian companies to commercially supply cannabis-based medicines into the UK under the new legal framework reflects Aurora’s ability to do business in international markets that have complex and evolving regulatory systems,” said Neil Belot, chief global business development officer, in a company statement. “Aurora continues to grow its international footprint, which now includes the UK, a country with a population of approximately 66 million people.”

“We are thrilled to have successfully navigated the complexities of the UK’s new regulatory framework to be able to supply high quality, pharmaceutical grade cannabis-based medicines into the UK from one of our EU-GMP certified facilities in Canada,” said Dr. Shane Morris, senior vice president of product development and regulatory affairs for Aurora.

Aurora, headquartered in Edmonton, Alberta, is one of the world’s largest cannabis producers and has a funded capacity in excess of 500,000 kilograms a year and sales and operations in 22 countries across five continents. It has 15 wholly owned subsidiary companies.

The Grow Biotech/ECH/IPS Specials shipment represents about 30 patient prescriptions for a month and there are currently four patients whose prescriptions will be fulfilled, the trio said.

“If manufacturers and producers are willing to take a measured approach, we can and will continue to navigate a pathway for medical cannabis in the UK,” said Ashok Patel, Founder and Executive Chairman of IPS Specials.

Until now, the very few people given permission to access medicinal cannabis in the UK (as in, you can count them on one hand and not include your thumb) actually had to travel to the Netherlands to claim it. And even then they risked having it seized at customs.

Grow Biotech’s team of specialists worked alongside doctors to address their concerns regarding quality assurance and compliance for the prescriptions they have written, bridging the gap between existing cannabis medicines and accepted pharmaceutical standards.

The shipment has been exported by the Office of Medical Cannabis of the Netherlands and will be delivered directly to the patients from a pharmacy in the UK, with additional stock retained to ensure continuity of supply.

The stock includes Bedrocan Flower Afina, and Bedica Flower Talea, which are used to treat a range of conditions including chronic pain and multiple sclerosis.

“The fact that we are now in a position to write prescriptions that can actually be fulfilled is a huge achievement,” said Dr. David McDowell, who sits on ECH’s medical board said. “Patients no longer need to worry about how they can access their medication, which will mark a positive step change in their journey and finally provide the relief that they are looking for, and we can now finally provide.”

The group said it will “lay the cornerstone for the British medical cannabis industry’s international supply chain” and proves that challenging regulations can be adhered to through innovation and creativity.

“We are building a team that will help take the UK medical cannabis industry’s infrastructure to the next stage, constructing a scalable and reliable system to meet patients’ needs and to support doctors’ understanding of medical cannabis as a potentially valuable treatment for particular conditions,” added Dr Henry Fisher, R&D Project Manager at Grow Biotech.

Last November, the UK government gave specialist doctors permission to prescribe medical cannabis to patients with certain conditions.

Individuals with conditions such as multiple sclerosis, severe childhood epilepsy and those undergoing chemotherapy may be eligible, however, they must be assessed on a case-by-case basis.

The debate is continuing to rage over medical cannabis and CBD in Britain after two severely epileptic children made headlines last year when their families revealed their struggle to access cannabis oil.

The drug significantly improved their condition, the families said, however, they were continually denied access to medical cannabis and fighting with UK authorities.

The Home Office eventually changed rules to allow prescriptions, but there has been little movement until now.

Somewhat perversely, despite its draconian stance and unfriendly customs attitude, UK is the largest producer and exporter of legal cannabis in the world, with British Sugar growing about 20 tons a year.

Lobby group Health Poverty Action predicts a legal cannabis market could make the UK government between £1bn ($1.29bn) and £3.5bn ($4.50bn) a year in tax revenues, meaning legalizing the drug could be a significant boost for the national economy.


Sean HockingSean HockingFebruary 15, 2019
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7min1570
If you wish to re-publish this story please do so with following accreditation
AUTHORS: Darren Kaplan, Garrett Graff, Keenan Jones Hoban Law Group
PUBLISHER:  CANNABIS LAW REPORT

 

The new House of Representatives has announced its first cannabis-related hearing, “Challenges and Solutions: Access to Banking Services for Cannabis-Related Businesses,” which will take place on February 13 before a sub-committee of the House Financial Services Committee.

 

The hearing will address, as the name suggests, the practical issues that cannabis businesses face in accessing banking services in states with lawful and regulated cannabis industries because of the backdrop of federal marijuana prohibition, given that the prior Congress consistently blocked votes on cannabis-related measures. Thus far, despite guidance from the Financial Crimes Enforcement Network, financial services providers have been hesitant to provide banking services in the cannabis industry for fear of implicating themselves in federal money laundering or other anti-drug laws.

 

According to lawmakers close to the committee’s process, Rep. Maxine Waters (D-CA) – the committee chair – has made this an urgent priority, citing the public safety threat that exists while the cannabis industry is forced to operate in cash only. Committee members state that there are bi-partisan solutions on the table which would not only allow regulated marijuana businesses access to the banking services they need, but also establish a safe financial system that can be effectively monitored by law enforcement.

 

While it is unclear what, if any, concrete measures may arise from Wednesday’s sub-committee hearing, it is very unlikely that this will be the last cannabis-related discussion to be taken up by the new Congress.

 

Last October, Representative Earl Blumenauer (D-OR) released a memorandum entitled “Blueprint to Legalize Marijuana,” which stated: “Congress is out of step with the American people and the states on cannabis,” but “[t]here’s no question: cannabis prohibition will end.” Rep. Blumenauer’s memo suggested that, beginning in January 2019, a new Congress should take a step-by-step approach to full marijuana legalization, beginning with the holding of a series of hearings on cannabis-related issues. By the spring, Blumenauer seeks committees to begin passing laws that “narrow the marijuana policy gap – the gap between federal and state marijuana laws.”

 

This momentum at the Capitol seems to indicate lawmakers are already laying the groundwork for full legislation to pave the way for cannabis businesses to access banking services. The key takeaway suggests that members of Congress are seemingly now prepared to recognize that the regulated cannabis industry is here to stay, rather than ignore it, and instead to solve the obvious problems holding the industry back.

 

While there is no “safe bet” on what comes next, that the new Congress is talking about cannabis is both encouraging and an important conversation to pay attention to.

 

 

Darren Kaplan : Hoban Law Group

Darren Kaplan is an associate attorney at Hoban Law Group in Denver, Colorado. Darren has worked on several legal issues in the cannabis space, specializing thus far in industrial hemp, regulatory compliance (hemp and marijuana), and civil and commercial litigation.

https://hoban.law/team/darren-kaplan

Garrett Graff Senior Attorney Hoban Law Group

Garrett Graff is a senior attorney at Hoban Law Group in Denver, Colorado, nationally recognized as a Cannabis Law Trailblazer by National Law Journal. Garrett specializes in representation of both the marijuana and industrial hemp industries. His practice involves corporate and M&A, real estate, regulatory/compliance, FDA/FTC compliance, intellectual property protection, and civil and commercial litigation.

Keenan Jones Hoban Law Group

Keenan Jones is a senior associate attorney at Hoban Law Group in Denver, Colorado. Keenan focuses his practice on commercial litigation, and has prosecuted claims pertaining to the fallout of cannabis businesses not being permitted to access standard financial banking services. His practice also includes corporate formation and governance, and intellectual property protection.

 

 

This article has been prepared for informational and general guidance purposes only; it does not constitute legal or professional advice. You should not act upon the information contained herein without obtaining specific professional advice. No representation or warranty (express or implied) is made to the accuracy or completeness of the information contained in this publication. Hoban Law Group, its members, employees, and agents accept no liability, and disclaim all responsibility, for the consequences of you or anyone else acting, or refraining to act, in reliance on the information contained in this publication or for any decision based thereupon.

 

 

 

 


Sean HockingSean HockingFebruary 14, 2019
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10min560

FIRST CONGRESSIONAL HEARING HELD ON CANNABIS BANKING

 

From Rep Heck’s Office

Feb 13, 2019 
Press Release
Despite 47 states plus DC permitting some form of marijuana, legal and legitimate businesses forced to operate in cash

Washington, D.C.– Today the House Financial Services’ Subcommittee on Consumer Protection and Financial Institutions held the first-ever congressional hearing on the issue of cannabis banking. Today, 47 states plus the District of Columbia permit adult recreational, medical or limited-medical use of marijuana. In fact, every member of the subcommittee represents a state where some form of marijuana is permitted.

Because cannabis is considered illegal under the federal Controlled Substances Act, financial institutions providing banking services to legitimate and licensed marijuana businesses are subject to criminal prosecution. Since state and federal law are not aligned on the issue, legal and legitimate businesses are forced to operate on a cash-only basis creating a serious public safety risk for employees, businesses and communities, as well as providing an opportunity for tax evasion, money laundering and other white-collar crimes.

“Today’s hearing was a big deal for the thousands of employees, businesses and communities across this country who have been put at risk because they have been forced to deal in piles of cash while Congress sticks its head in the sand,”said Rep. Ed Perlmutter (CO-07). “The American voters have spoken and continue to speak, and the fact is you can’t put the genie back in the bottle. The SAFE Banking Act is focused solely on taking cash off the streets and making our communities safer, and only Congress can take these steps to provide this certainty for businesses and financial institutions across the country.”

“We listened to hours of testimony today about the dangerous position we put store owners and employees in by forcing them to do all of their business in cash. We can fix this. We don’t have to force them to operate in a way that makes it difficult to secure and track their funds,”said Rep. Denny Heck (WA-10). “Regardless of our views of marijuana use, the voters have decided in states all over this country that they want recreational and medicinal markets. To continue to do nothing to protect public safety would be negligence.”

In his testimony on behalf of theLaw Enforcement Action Partnership (LEAP), Major Neill Franklin, Ret.stated, “Although extremely important for business owners and the people they employ, my greatest fear is not the loss of profits due to theft. It is the potential for serious assaults and death to the people attempting to protect that cash, or who are merely responsible for it. I fear dispensary employees being at great risk. I fear for the safety of those transporting the cash and I fear for the well-being of employees on payday. Two weeks of pay for one employee can easily exceed a few thousand dollars. That one employee trying to get home safely from work is an attractive “score” for any criminal, and a very easy target for those who know what to look for. Beyond any concern for protecting profit, we have a duty to protect the lives of community members working to earn a living.”

Rachel Pross, Chief Risk Officer at Maps Credit Union, in testimony on behalf of the Credit Union National Associationreferenced a 2015 analysis by the Wharton School of Business Public Policy Initiative which found that, “in the absence of being banked, one in every two cannabis dispensaries were robbed or burglarized – with the average thief walking away with anywhere from $20,000 to $50,000 in a single theft.”

To date, the leading, bipartisan legislative solution focused on the cannabis banking issue is the Secure and Fair Enforcement (SAFE) Banking Act, authored by Reps. Ed Perlmutter (D-CO-07) and Denny Heck (D-WA-10) and cosponsored by Reps. Warren Davidson (R-OH-08) and Steve Stivers (R-OH-15). Perlmutter and Heck first introduced a legislative proposal to allow marijuana-related businesses in states with existing regulatory structures to access the banking system on July 10, 2013 and have introduced similar bills every Congress since 2013.A draft version of the SAFE Banking Act of 2019was discussed during Wednesday’s hearing, with Perlmutter and Heck planning to formally introduce the legislation by the end of February. TheIndependent Community Bankers of America, theCredit Union National Associationand19 Attorneys Generalendorsed the SAFE Banking Act in the last Congress.

Support for the SAFE Banking Act was vocalized by several witnesses, including in testimony fromCalifornia State Treasurer Fiona Ma, “To sum, an effective safe harbor mechanism in federal law promotes the safety of the public, improves the efficiency of collecting the taxes and fees we use to regulate the industry, and does not allow the banks and credit unions to totally abdicate their responsibilities to know their customers and avoid illicit money laundering.”

In advance of today’s hearing, theAmerican Bankers Associationalso submitted a statement for the record stating that “leaving this [marijuana] industry unbanked is no longer a viable option” and called upon Congress to develop a solution, specifically consider the SAFE Banking Act “which will improve the ability of banks to meet the needs of their local communities.”

February 14th marks the 5th anniversary of the release of official guidance from the U.S. Treasury’s Financial Crimes Enforcement Network (FinCEN) regarding how the financial industry can best serve marijuana-related businesses. The guidance has played an important role in encouraging safe commerce and discouraging illegitimate, unregulated markets, however many financial institutions remain on the fence about whether it is worth the risk to provide services to legal, legitimate marijuana businesses. Heck and Perlmutter sent aletter to FinCENrequesting they preserve the 2014 guidance after the U.S. Department of Justice announced the withdrawal of theCole memorandumon January 4, 2018.

The full list of witnesses and testimony from today’s hearing can be foundhere.

DRAFT BILL PDF

BILLS-116pih-SAFEBankingAct-U1

 

Full meeting package available 

Here https://we.tl/t-PhSr34yuxV


Sean HockingSean HockingFebruary 12, 2019
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2min710

Gleam Law is a Cannabis Law Firm that operates in  California, Oregon, and Washington. They have created this great quick guide infographic on Marijuana Law: Past, Present, and Future.

What’s it got in terms of takeaways?

A) Usefully. a current map of legalized states, things are changing so quickly snatch a look before things move on.

The takeaways.

Unsurprisingly all the action is still on the west coast.

There are now only 4 states without any regulation and surprise surprise they are in the midwest.

What’s interesting is the picture of growing CBD regulations. That patch of light green will spread and we’d guess turn darker sooner than most might think.

They’ve also  created a national price map and a quick world map explaining where other jurisdictions currently are or not as the case may be

B) Although there’s only the first draft bill in DC going to committee now it’s interesting to note that 360 banks already operate in the space

C) there’s also a quick explanation of US state & federal law positions if you need that

Learn more about the firm at https://www.gleamlaw.com/marijuana-law/



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The Green Market Report focuses on the financial news of the rapidly growing cannabis industry. Our target approach filters out the daily noise and does a deep dive into the financial, business and economic side of the cannabis industry. Our team is cultivating the industry’s critical news into one source and providing open source insights and data analysis


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