Oregon Gov. Kate Brown recently signed into law Senate Bill 863. The bill attracted bi-partisan support as it moved through the legislature and is well intended. The bill protects consumer names, addresses and other personally identifiable information. Patrons of adult-use cannabis retailers in Oregon no longer have to worry about whether or not their information will be recorded or transmitted to a third party. The obvious benefit to consumers is that their personally identifiable information is not available to unscrupulous persons or government bodies. Maintaining privacy in the face of potential federal investigations sometime in the future is a welcome development.
The regulated cannabis industry is growing exponentially. Regulators, with the help of industry leaders and advisors, are demanding that the industry “grow up” and embrace the realities of functioning in a highly-regulated environment. Adolescent behavior will not be tolerated.
The OLCC is responsible for limiting the size of cannabis canopies. The term canopy is defined as “the surface area utilized to produce mature plants calculated in square feet and measured using the outside boundaries of any area that includes mature marijuana plants including all of the space within the boundaries.” The “square footage of canopy space is measured horizontally starting from the outermost point of the furthest mature flowering plant in a designated growing space and continuing around the outside of all mature flowering plants located within the designated growing space.” Therefore, canopy limitations apply to mature plants located within a two dimensional space.
Next month, voters in five more states will decide whether to legalize recreational marijuana. As reported by The New York Times in an insightful article on this issue, some legalization advocates hope a (green) thumbs up from voters in these states (California, Massachusetts, Maine, Arizona and Nevada) will blow enough smoke in the face of “the war on marijuana” to help bring about nationwide legalization. In fact, the lieutenant governor of California is quoted in the article as believing that legalization in California’s ginormous economy will “put more pressure on Mexico and Latin America” to also consider legalization.
Is your cannabis business ready for an IRS exam? IRS examinations are increasingly focused on IRS Form 8300 reporting requirements. These requirements are the result of USA PATRIOT Act provisions requiring all trades or businesses to report their receipt of more than $10,000 in currency in a single transaction or in two or more related transactions. 31 USC §5331 and 31 CFR §1010.320.
The required currency filing must be made in accordance with IRS Form 8300 instructions. The instructions provide that the form must be mailed to the IRS Detroit Computing Center or electronically filed within 15 days of receipt of the currency. Filers must also provide each person named on its filed Forms 8300 with a specified written statement by January 31 of the year following the calendar year in which the currency was received. The statement must show the name, telephone number, and address of the information contact for the business, the aggregate amount of the reportable cash received, and note that the information was furnished to the IRS.
The Oregon Liquor Control Commission (OLCC) recently adopted new rules designed to ease the transition from the Oregon Medical Marijuana Program (OMMP) to the OLCC regulated recreational marijuana industry. The rules address concerns about a shortage of OLCC licensed retail outlets, which impacts the viability of licensed growers and processors, as well as concerns about a shortage of supply as those growers and processors get up and running.
The rules (OAR 845-025-2910 and -3310) allow OMMP dispensaries and processors to transfer OMMP inventory acquired before October 1, 2016, to OLCC licensed retail and processing operations. Transferred inventory will enter the seed-to-sale tracking system and must be sold by March 1, 2017.
The U.S. Drug Enforcement Agency (DEA)’s recent decision declining to reschedule cannabis is a step bridging the national discussion — a step toward a possible agreement on medical cannabis through scientific research. The federal agencies are calling for more research and “work to … ensure support by the federal government for the efficient clinical research using marijuana.” These calls create an opportunity for research scientists in Oregon, Washington and elsewhere, as well as opportunities for universities and initiatives like the University of Washington Cannabis Law and Policy Project. They are also a reminder not to squander first-mover benefits.
The U.S. Drug Enforcement Agency (DEA) recently denied a petition to initiate proceedings to reschedule cannabis under the Controlled Substances Act (CSA). Thus, cannabis will remain a Schedule I substance under the CSA. Prior to the announcement, there was a good deal of speculation that the DEA was considering rescheduling cannabis to Schedule II.
Considering diversifying with a high-risk investment? Heard the lure of the “green rush” toward a possible $100 billion legal marijuana industry?
Before you write that check:
- First, research the company, related persons, and the business, industry and legal risks.
- Next, if you decide to make the leap, consider having legal counsel assist you in documenting your equity position.
Pressing escape or reboot can be difficult, after you have already signed documents. If you’re investing in a partnership or limited liability company, state law imposes default rules, unless you have an agreement modifying them. If the business — or you — fail to comply with the state’s rules on ownership and investors, the state regulator may impose penalties including cancellation or suspension of license and fines.
Over the last year, the Washington state marijuana industry has anticipated the transition from an unregulated medical marijuana market to an integrated, medical-recreational market on July 1, 2016, under the Cannabis Patient Protection Act.
A month before the roll-out date, a medical doctor and marijuana patient sued the governor and others to block the merger. On June 30, the federal court refused to stop the merger. The doctor and terminally-ill patient argued that the new rules will chill their medical communications in violation of the First Amendment. But the court validly rejected their request for an injunction on jurisdictional grounds. They had no private claim under the Controlled Substances Act, First Amendment and Supremacy Clause. The doctor and patient also failed to establish injury supporting a pretrial injunction.
Find more information on the history of the two merged industries, the recent suit and some takeaways.
Monday, June 20, 2016, was summer solstice. But in Washington, there were two other things to celebrate: a day to recover after the Fremont Solstice weekend, and, for legal marijuana businesses, the first day for the licensed marijuana industry to obtain funds from out-of-state financiers under the new rules from the Washington State Liquor and Cannabis Board (WSLCB).
This post describes the regulatory framework governing loans to Washington-licensed marijuana businesses and the penalties for noncompliance.