On May 10, 2017, Attorney General Jeff Sessions issued a memorandum establishing revised charging and sentencing policy applicable to the Department of Justice (the “Charging Memo”). The Washington Post quotes the Attorney General as saying “We are returning to the enforcement of the laws as passed by Congress, plain and simple.” Further, “These are drug dealers, and you drug dealers are going to prison.” The Charging Memo advises that prosecutors should charge and pursue the most serious, readily provable offense. The policy directs prosecutors to consider whether an exception is justified.  All exceptions require documentation for the exception reasoning and approval.

The Charging Memo also requires that prosecutors disclose all facts that affect sentencing guidelines or mandatory minimum sentences. Prosecutors should recommend sentencing within the applicable advisory guideline range. Prosecutorial discretion advising a sentence outside the range also require documentation and approval.

The direct impact of the Charging Memo on state-regulated adult-use cannabis is unclear. There is probably little immediate impact to state-regulated medical cannabis programs because of the Rohrabacher-Blumenauer amendment to the FY 2018 appropriations bill. See our earlier coverage here.

The Charging Memo states that any inconsistent previous policy is “rescinded.” It footnotes other policy-oriented memoranda issued during the Obama presidency, but notably does not reference the 2013 Cole Memorandum. As of the date of this post, the Cole Memo remains posted on the DOJ website. Remaining on the website provides little comfort because the two footnoted memoranda, “Guidance Regarding § 851 Enhancements in Plea Negotiations” and “Department Policy on Charging Mandatory Minimum Sentences and Recidivist Enhancements in Certain Drug Cases” both remain posted. Further, the DOJ webpage for former Attorney General Eric Holder’s Smart on Crime initiative notes that information may be outdated. Therefore, remaining on the website should not imply that any particular document reflects current policy.

The Cole Memo states that it applies to all federal enforcement activity, including civil enforcement and criminal investigations and prosecutions, concerning cannabis in all states. Some careful readers might conclude that the Cole Memo is arguably inconsistent with the Charging Memo. Specifically, the Cole Memo provides that prosecutors should use discretion in using its enforcement resources, and consider whether a cannabis operation is compliant with state law consistent with the outlined enforcement priorities. Notably, even the Cole Memo explicitly states that individuals and businesses cannot rely on it to avoid investigation or prosecution, even in the absence of the enforcement priorities.

At a minimum, the recently released Charging Memo reminds us all that the prosecutorial discretion framework outlined in the Cole Memo could face similar “reconsideration” by the new Attorney General. At the same time, it is inconceivable that this new guidance simply overlooked its impact on state-legal cannabis regimes. It is possible that the Charging Memo’s silence with respect to the Cole Memo is positive sign instead of a warning shot, but only time will tell.

Lane Powell supports the Cannabis Investor Network (CIN) in Seattle.  The mission of CIN is to connect accredited investors with state-legal cannabis businesses that need additional capital.  Lane Powell hosted the inaugural event in our Seattle office earlier this year with about 40 guests, and hosted the second event last night with about twice that number.  Pitches from several segments of the cannabis industry were very well received and everyone seemed to welcome the opportunity to connect with other business people in the industry.  CIN is based in Seattle and open to Accredited Investors and cannabis businesses seeking capital.

How it works:

Those interested in pitching their company to the Cannabis Investment Network begin by submitting their application and materials online through this Deal Funding page. Companies must be beyond the idea phase though they need not have revenue. Candidates for presentation should submit a comprehensive pitch deck, which includes your business plan, financial projections and other relevant company background and information.

Following submission of your application and supporting documentation, CIN will review and evaluate your proposal to ensure it has everything needed to make an informed decision. During this review process, CIN representatives will be in contact with you to source additional details about your company, the management team, operations, marketing plans and financial projections. Once CIN has what it needs and thinks your company would be a good fit to present to its Investor Network, CIN will schedule an in-person meeting or phone screen with you where you walk through your pitch deck.

After the screening meeting, if CIN decides to proceed, CIN will schedule your company to present at an upcoming meeting.

At the investor event, you will be given approximately ten minutes to present and five minutes for Q&A. You should expect that you will be participating with several other companies at the meeting.

In the past five years, twenty-nine states and the District of Columbia (DC) have voted to legalize medicinal marijuana; and seven states and DC have legalized recreational marijuana use.  The federal government has historically classified cannabis, whether in the form of marijuana, hashish or hash oil, as an illegal controlled substance.  However, in 2011, the Department of Justice (DOJ) changed its policy regarding the enforcement of the Controlled Substances Act in states where marijuana is legal.  The Cole Memo explained the DOJ’s new policy of not prosecuting or seizing assets from marijuana businesses and users that complied with state law.

Continue Reading Medicinal marijuana patients’ protection from federal enforcement extended through the end of the fiscal year on September 30.

On April 28, 2017, the Oregon Liquor Control Commission (OLCC) approved rules allowing licensed recreational cannabis growers to also grow for Oregon Medical Marijuana Program (OMMP) cardholders.  The OLCC’s authority to regulate canopy sizes, including the authority to shrink sizes, is found in ORS 475B.075(c).  The rules go into effect May 1, 2017, and will meet the compliance guidelines of the federal Cole Memorandum.

This is a big and welcome development for OLCC licensed recreational cannabis growers.  With agreement between the producer and cardholders, what the new Oregon rule means is that licensed recreational producers will be allowed to grow additional canopy above what their recreational grow license allows.

Under the new bump-up rules and upon cardholder consent, 25 percent of the medical yield may be sold by the producer to both OMMP dispensaries and processors.  Of course, all such production and transfer of excess product must be tracked in the Cannabis Tracking System (CTS).

In order to qualify for bump-up registration, a processor must submit a control plan to the OLCC describing how the producer will segregate the medical canopy and the recreational canopy, segregate harvested usable cannabis from the medical and recreational canopies, and provide the OLCC with copies of all medical patient agreements.  Here are some rules that the licensed recreational producer must bear in mind if it seeks the benefit of the bump-up registration opportunity:

  • Limited to agreements with twenty-four (24) patients during any one calendar year.
  • Canopy limits of 240 sq ft per patient for outdoor producers — 3,360 in total and 60 sq ft per patient for indoor producers — 840 sq ft in total.  Note:  the bump-up rules do not address their application to mixed-production producers.
  • Transfer of excess product must be tracked in the Cannabis Tracking System (Metric).
  • Limited to transferring three (3) pounds of usable cannabis to each patient named in an agreement, and each patient not named in an agreement.
  • Transfers to a registered processing site or registered dispensary are limited to 25 percent of the total annual yield from the producer’s medical canopy.
  • Must notify the OLCC upon termination of a patient agreement.

In sum, bump-up rules allow licensed recreational producers to expand sales — with cardholder agreements — to OMMP dispensaries and processors.

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.

Continue Reading Chaos Theory, the Butterfly Effect and One More Banking Hurdle?

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.

Continue Reading Oregon Cannabis Producers Need to ‘Grow Up’ and Respect Boundaries

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.

Continue Reading If More States Vote ‘Green’ This November, Some Believe It Could Be ‘The Beginning of the End of the War On Marijuana’

Money backgroundIs 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.

Continue Reading Cashed Cannabis: Required Reports for Amounts Exceeding $10,000

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.

Continue Reading OLCC Eases Transition From Medical to Recreational Marijuana Sectors (and Releases Related Business Resources)

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.

Continue Reading The DEA Is Getting Past Just Saying No: Scientific Research Into Medical Uses of Marijuana Is a Bridge Toward a Policy Shift