March’s Leafly HighLight: The prismatically delicious Z strain

This iconic candy-coated strain heralds the beginning of spring.

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Changing Interstate Cannabis Sales

As states slowly but inevitably continue to legalize cannabis medically or recreationally, we often need to be reminded that cannabis is still illegal on the federal level. Due to this widespread, ineffective prohibition, the cannabis industry and its many operators must follow a very extensive and strict set of parameters to ensure that they remain compliant on the state level. Because cannabis is illegal federally, technically every action and transaction of the American cannabis industry is violating federal law. However, there are numerous clauses added to various federal bills in recent years that provide theoretical legal protections, which ensure fully state compliant cannabis businesses won’t face the wrath of federal authorities. That is, as long as they do remain fully state compliant.

Local legislative and litigation strategies on interstate cannabis commerce

One of the notable examples of these limitations is the legacy policy to ban interstate cannabis deliveries and sales. Regardless of what state one currently resides in — even a cannabis mecca such as California that’s entirely surrounded by legal cannabis states — it’s still against federal law to transport cannabis of any kind cultivated and sold in California across state lines. Once state lines are crossed in the commission of any offense, the transportation is an additional federal offense. It is not necessarily any more or less a federal offense than any other act in manufacturing and delivery. However, from a policy standpoint, this has always been avoided because it is one of the prohibited activities listed under the rescinded Cole memo.

Still though, this strict prohibition doesn’t stop various cannabis operators and professionals from attempting to somehow overturn the very far-reaching and decades-old federal illegality of cannabis with a single state-level lawsuit. In November of 2022, Oregon cannabis distribution company Jefferson Packing House sued a number of power state officials, everyone from then-Governor Kate Brown to Attorney General Ellen Rosenbum and even the Interim Executive Director of the Oregon Liquor and Cannabis Commission Craig Prins. The goal of this lawsuit was initially to overturn a state ban on interstate cannabis commerce based on an interpretation of the U.S. Constitution’s commerce clause.

“We recognize that marijuana is still illegal under federal law, and that this lawsuit will not change that fact,” the company said in a letter to state officials when the suit was filed. “However, we believe that the State of Oregon should be fully aligned with supporting its local marijuana industry, and therefore that Oregon law should no longer prohibit the export of marijuana to other states.”

On paper, the lawsuit sounds like the logical next step for Oregon, which passed the 2019 law Senate Bill 582,  that allows for “The Governor, or the Governor’s designee, to enter into an agreement with another state for the purpose of cross-jurisdictional coordination and enforcement of marijuana-related businesses licensed to conduct business in either this state or the other state.” In the 2019 Legislative Session, SB 582 passed by a considerable margin of 43-16.

Oregon has always certainly been progressive with their legislation, but this bill passed nearly five years ago was undeniably groundbreaking and other states have since followed suit. Even if the bill was entirely dependent upon a long held federal law being reformed by a governmental body that is stubborn towards cannabis reform at best, the bill still sent the message that legal state operators are ready for interstate operations and commerce should the federal policy change.

While the Jefferson Packing House lawsuit did have relevant pieces of prior litigation and legislation to cite, the lawsuit was voluntarily withdrawn from the United States District Court of Oregon by the Jefferson Packing House party themselves towards the end of January.

“Plaintiff Jefferson Packing House, LLC hereby provides notice of its voluntary dismissal of the above captioned matter, without prejudice.”

Partially due to the legislative weight and the all-encompassing reach of federal law and due to previous cases that proved that the commerce clause protections don’t include the hundreds of legally operating cannabis businesses due to the federal prohibition, it seems that Jefferson Packing House decided this would be the best legal course of action.

Time for a new approach

The most disheartening issue regarding interstate commerce is the lack of political will on the part of the legislatures that have legalized cannabis. The industry should not need to sue the government. The government should be treating the industry like a partner. And in particular, a partner in crime. The keys to saving the cannabis markets on the West Coast is allowing the industry to export to other markets. The Cole Memorandum, which has been completely rescinded, is an imaginary constraint. If every act is a federal crime, and the states are already deeply embedded co-conspirators, the least thing legislature could do is give the industry a fighting chance to succeed. As it stands, by not acting, the legislature has created a revolving door of failure.

Although it’s not directly related to this specific case involving Jefferson Packing House in Oregon, the Boston University Law Review published a very thought-provoking and thoroughly researched report in 2021 that criticized the federal ban on interstate cannabis commerce from a heavily legal and economic standpoint that is certainly worth reading.

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The 7 best CBD gummies for sleep 2024

These CBD gummies for sleep are proven to help nurture a healthy night’s sleep. Learn more about the top CBD gummies for sleep with Leafly.

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California Cannabis Tax Collection and Penalty Nightmares

California’s cannabis taxes are a disaster, with no end in sight. I’ve written about the state’s tax problems extensively, but today I want to talk about what the state can do when it comes to tax collection.

Late cannabis taxes? Get used to hefty penalties

If a licensed cannabis business fails to timely or fully pay its cannabis taxes, it will owe a substantial amount higher than the actual tax amount. Specifically, the state’s cannabis laws mandate a penalty of 50 percent of the unpaid amount, on top of the 10 percent general penalty payable for late tax payments. The same licensees will also be required to pay interest on the unpaid amounts. If you’ve ever seen a California Department of Tax and Fee Administration (CDTFA) statement of account, you may have noticed an additional charge listed as “other,” which allegedly includes miscellaneous collection fees.

Imagine a company owed $100,000 and failed to timely pay. Given the above, that same company would owe at least $160,000 (and probably closer to $170,000 or more) considering the penalties. Additionally, when I say “timely,” I mean it literally – we’ve seen the CDTFA impose penalties when a licensee was a day late.

Now you may point out that the CDTFA does entertain payment plans, and may even waive some of the penalties in some cases. But – and this is a big “but” – waivers are never guaranteed, payment plans take time and resources (i.e., money) to negotiate, and failing to follow a payment plan to the letter could result in it being revoked.

The bottom line is that if a licensee fails to pay the state’s absurdly high cannabis taxes by even a day, the licensee will be in a world of pain.

Threatening notices and demands

Now let’s say the oppressive tax penalties are not enough to get a licensee to pay. What next? The licensee can expect to receive a “notice of state tax lien” that is filed with the California Secretary of State. The notice will tell the license that the assessed liability constitutes a lien on all personal property of the licensee. This will make it very difficult for the licensee to secure financing, given that its assets are encumbered.

The CDTFA may also issue a “notice of possible disciplinary action” threatening to report the licensee to the Department of Cannabis Control (DCC – the licensing authority) which can discipline a licensee for failing to pay taxes. And of course that discipline can include license revocation.

Threats of individual liability are possible

Let’s say a cannabis business faced with these demands decides to close up shop and wind down. Are the taxes discharged? Nope. In fact, if a cannabis business dissolves, terminates, or is abandoned, the persons who were in control of the business can be personally liable for the cannabis taxes of the former business. I’ve seen the CDTFA even demand that owners of a cannabis business negotiating a payment plan acknowledge in writing that they can be liable for unpaid taxes if the business folds before the tax is paid.

This puts businesses owners and operators in a real bind. On one hand, these folks know that they cannot continue to operate — bankruptcy is not a viable option and receiverships and other non-bankruptcy processes don’t go nearly far enough. The DCC may prevent them from operating and making money to pay back taxes, to boot. On the other hand, these owners can’t simply walk away without being personally liable.

When the state comes to collect

Sometimes, all of the above things fail to work, and the state comes to collect. The issue is that there may not be a whole lot for the state to collect and sell off, and you may end up with absurd situations like the state auctioning off seized bongs and snow cone machines for a whopping $2,075 in proceeds. This is a true story!

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California’s cannabis taxes and penalties are way, way too high, and basically guaranty that the state will not be able to collect and will have to spend good money chasing licensees. Licensees and the state are essentially designed to be in an endless game of negotiations, with licensees hoping that the law will change or that some of their penalties will be forgiven.

None of this is tenable. If the state wanted to change things, it could. But it hasn’t, and it’s failure to act speaks volumes.

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THC scores coming back down to reality in California in 2024

Numbers are dropping, and that's a good thing.

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FREE Webinar Tomorrow: Cannabis Loans and Investments

Register Here

Reminder! We are all set for our latest cannabis business webinar, tomorrow, February 28th, focused on “Cannabis Loans and Investments”.

In 2024, a constellation of factors makes things very interesting for both cannabis industry investors and businesses:

• More states are open for business and investment than ever before
• In the macroeconomic environment, interest rates are high (especially compared to a few years back), but rates are projected to come down again
• Many cannabis businesses are struggling, but marijuana may move to Schedule III at some point this year, increasing margins

Whether you’re an investor eyeing favorable debt or equity terms, or a cannabis entrepreneur seeking to secure finance, this webinar has you covered. Equip yourself with financial insights that can help you stride confidently in this ever-evolving industry.

Topics of focus:

• The intricacies of the cannabis financial landscape
• Risk management
• Navigating lending complexities
• Capitalizing on investment opportunities
• Potential impacts of the proposed re-scheduling of marijuana

We’ll also tackle some of the pressing issues such as regulatory challenges and how to navigate the cannabis industry with secure financial strategies.

Don’t miss out: this is your step towards becoming a well-informed player in the world of cannabis loans and investments.

Register Here

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Mississippi, Medical Cannabis Advertising and the First Amendment

Mississippi’s Initiative 65

Easily one of the biggest legislative surprises of the 2020 was the passing of Mississippi’s Initiative 65, a medical cannabis bill with an extensive qualifying conditions list. In arguably the reddest and most socially conservative state in America — where only one Democrat has served as Governor since 1992, and where Republicans have a considerable majority in both houses of the Legislature — 69 percent of Mississippians gave Initiative 65 a landslide victory.

It’s worth noting that this bill passed in a state where the governor called the implementation of medical cannabis a “liberal” ballot created by “stoners” — despite it being very hard to believe that 70 percent of Mississippians are stoners, much less liberal stoners at that. A medical cannabis bill passing by a margin that substantial is undeniable proof in the very present support for at least medical cannabis expansion among Republicans remains on solid footing.

Since early 2023, medical cannabis has been available for qualifying patients in Mississippi and has sold over $35 million in its first year of sales and there are over 180 licensed dispensaries throughout the state. From Corinth all the way down to Biloxi, there are plentifully stocked dispensaries that are ready to serve the public.

Although medical cannabis is readily accessible for Mississippians who qualify, the state’s industry is still facing the continuous issues that always seem to arise over properly marketing and advertising either a cannabis brand or store. Partially due to the federal status and the stringent policies of nearly every major social media platform, digital marketing strategies for fully licensed and compliant cannabis companies are extremely limited. Because of these restrictions, cannabis brands and dispensaries are finding both success and reliability in their advertising through non-digital means, those being print magazine advertisements and more notably, highway billboard advertisements.

Advertising for Cannabis Businesses

Still though, the troubles surrounding proper advertising persist. Recently, the ruling of a federal judge in Mississippi has made advertising for cannabis businesses within the state even more difficult. Back in November, the owner of the Olive Branch-located medical cannabis dispensary Tru Source, Clarence Cocroft II, filed a federal lawsuit against numerous departments in Mississippi challenging the strict regulations that put lawfully operating cannabis businesses at a significant disadvantage when trying to successfully advertise. The argument that Cocroft and his attorneys leaned on was that the banning of medical cannabis dispensaries from advertising in Mississippi violates the business owners’ First Amendment rights. The defendants in the lawsuit represent a number of governmental departments, from the Department of Health to the Alcoholic Beverage Control Bureau.

“All I want to do, like any other business owner, is have the opportunity to advertise. If I pay taxes in this business, which I do, I should be able to advertise,” Cocroft said at a news conference. “All I’m asking from this state is to provide us with the same liberty that they’ve provided other businesses.”

Apparently, the advertising regulations entirely prohibit the advertising of medical cannabis businesses in any medium, whether that be digital or physical. Whereas other states have either local or statewide cannabis magazines and sites that allow cannabis businesses to properly advertise, Mississippi forbids cannabis businesses to even place magazine ads according to the regulations. Worse even for the neighboring states, they also have similarly disadvantageous policies. Arkansas, Louisiana and Alabama all prohibit dispensaries from advertising through “public mediums.”

“Under the ban, Clarence can’t advertise in any media. He cannot place ads in newspapers or magazines, on television or radio, or even on billboards that he already owns,” said Katrin Marquez, one of Cocroft’s attorneys. “The First Amendment does not allow a state to completely censor a legal business. If it is legal to sell a product, it is legal to talk about that product.”

Unfortunately for Cocroft and his fellow Mississippi cannabis business owners, Judge Michael P. Mills of the United States District Court for the Northern District of Mississippi sided with the state in a late January ruling. In his ruling, Judge Mills cited the still active federal prohibition of cannabis and that due to cannabis businesses not being considered a “lawful activity”, those businesses are not rewarded the same constitutional protections that other types of commercial speech or advertising usually receive.

Mills described relaxing the prohibition of medical cannabis advertising as a “drastic intrusion upon state sovereignty” and that by legalizing medical cannabis, the Mississippi Legislature had ventured further with cannabis reform as a whole than the United States Congress. “In light of this fact, on what basis would a federal court tell the Mississippi Legislature that it was not entitled to dip its toe into the legalization of marijuana, but, instead, had to dive headfirst into it?” Mills rhetorically asked in his ruling.

Mississippi Court Cannabis Ruling

This isn’t the first time we have disagreed with Mississippi court cannabis ruling. And despite the lawsuit being dismissed, Cocroft remains optimistic. He plans to appeal the decision to the 5th U.S. Circuit Court of Appeals. Cocroft views this lawsuit as eventually monumental, especially if it can overturn the many stringently anti-cannabis policies that exist across almost all traditional advertising platforms and strategies. “I’m prepared to fight this fight for as long as it takes,” Cocroft said. “This case is bigger than me and my dispensary, it is about defending the right of everyone to truthfully advertise their legal business in the cannabis industry.”

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Prost! Germany legalizes cannabis. Here’s the inside scoop

25 grams and 3 plants, for starters.

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Australia Cannabis: Recreational Use Legislation Update

Australia is said to have one of the highest cannabis prevalence rates in the world and public attitudes to its use are shifting. North American, European and other cannabis companies looking for investment opportunities would do well to follow these shifts.

Growing cannabis for medicinal and scientific purposes was legalized under federal law in 2016. Low-THC hemp foods were then legalized federally in 2017. Recreational use, though, remains prohibited under federal law. Similarly, at the state and territory level it is mostly illegal to use, possess, grow, and sell cannabis. Despite these continuing prohibitions, there are legislative trends toward legalization.

If passed, the Legalising Cannabis Bill 2023 would change the federal landscape. It would legalize cannabis for adult recreational use in Australia. The Bill would establish the Cannabis Australia National Agency as a statutory agency to register cannabis strains and regulate cannabis activities. These activities include growing and possessing plants, manufacturing and selling cannabis products, operating cannabis cafes, and importing and exporting cannabis products.

The Senate Legal and Constitutional Affairs Committee is presently conducting an inquiry into the Bill. Submissions have now closed and public hearings have opened. The Committee’s reporting date is May 31, 2024. The Bill is expected to be debated in federal parliament later this year. At the same time, cannabis legalization bills are now being debated in several Australian states.

Despite shifting public attitudes, federal legalization may still be a way off. While the federal Bill has been promoted by a minority party, it does not enjoy the support of the ruling party or the major opposition party. It also lacks the support of the Australian Medical Association.

Stay tuned for updates on Legalising Cannabis Bill 2023 and all thing Australian cannabis. And please reach out to us if you are interested in doing business in Australia.

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California Cities: Prohibition Doesn’t Work

California has a population of nearly 40 million, six years of cannabis licensing, but only has about 1,200 licensed dispensaries. These stores are mostly spread out in highly populated areas like Los Angeles, San Francisco, and so on. The problem is that many California cities still prohibit cannabis licensing, even in places where a majority of the locals approved the state’s recreational cannabis program in 2016. This is a massive problem and is one of the key reasons the illegal market thrives. Let’s look at why that is the case and what these cities can do to change it.

Why prohibition doesn’t work

When the government prohibits something, there is an existing market for that thing, and a fear on the part of the government (justifiable or otherwise) that failure to prohibit it would lead to some kind of societal harm. Because there is an existing market for the thing, there is necessarily some kind of demand for it. If the government bans the thing, some people will realize that the potential cost (prison, fines, stigma, etc.) outweighs the benefit, and demand will go down.

But others will find that the benefit outweighs the potential cost, no matter how high it is — which is why people still roll the dice in countries like Singapore that will execute drug traffickers. So while prohibition may decrease demand, it won’t end it. And so long as there is some demand, again, some people will roll the dice.

This is exactly what has happened in the decades since cannabis was prohibited. If prohibition were an effective deterrent, then you would expect there not to be a high level of use or incarceration. But we’ve seen the opposite. There have been millions of people arrested and incarcerated for violating the Controlled Substances Act and state-law counterparts. It’s pretty clear then that these laws don’t have their intended effects, which brings me to the next point.

What problems are California cities creating?

When California voters passed the state’s flagship recreational licensing law in 2016, California cities were given an immense amount of control over the new industry. Perhaps realizing the initiative would face strong opposition if it took power away from cities, the drafters included provisions that allowed California cities to completely ban cannabis activities within their limits. These provisions led to local bans in vast swathes of the state.

While cities have slowly “come online” over the years, there are still vast swathes of the state without legal access to cannabis. In fact, many cities even sued the state when it tried to officially sanction statewide delivery rules. What this means is that there are still many California cities that prohibit cannabis.

If those cities are trying to eliminate local cannabis markets, I’ve got a bridge to sell them. Prohibition didn’t work before the state legalized cannabis, and it certainly won’t work when the state won’t lift a finger on enforcement. California cities that keep their bans alive are only bolstering their illegal markets and making it more difficult for the legal market to survive.

What California cities should be doing to combat the illegal market

I recently corresponded with Hirsh Jain of Ananda Strategy, who believes that the state needs 4,000 to 5,000 dispensaries to carry the legal market. And those dispensaries shouldn’t just be in Los Angeles or San Diego. They’d need to be dispersed across the state so that people have access and the legal dispensaries could compete with the illegal ones (and ideally put them out of business). If more California cities don’t end prohibition, illegal dispensaries and delivery services will continue to operate whether they like it or not.

That said, there are other things that California cities can do to combat the illegal market without allowing brick-and-mortar sales. One big one would be to allow outside delivery services to deliver into their borders. While the state did pass a law attempting to expand statewide access to medical cannabis deliveries, that fails to include the much larger recreational market. It also likely excludes potential medical cannabis purchasers who don’t want to or don’t have the resources to obtain a physician’s recommendation or medical marijuana ID card (MMIC).

Expanding retail deliveries would be a win-win for the legal market and cities alike. Yet for some reason, California cities fought it tooth and nail. While those cities may have thought they won, the real victory belonged to the illegal market, which continues to grow and grow.

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If the legal market is to survive, California cities are going to have to make compromises when it comes to cannabis prohibition. After all, cannabis is still being sold within their borders. For some of my thoughts on California’s problematic illegal market, check out these posts:

• California Gives Up on the Illegal Cannabis Market
• California Gives Up on the Illegal Cannabis Market: An Update
• California Gives Up on the Illegal Cannabis Market: Another Update

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Cotton Candy—True North Family Farms, NY, winter 2024

Cotton Candy scores 85 points.

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Lamb’s Bread—Happy Trails, CA, winter 2024

Lamb's Bread scores 88 points.

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Grading the Presidential Candidates on Cannabis: Donald Trump

Throughout the course of both of his initial candidacy and eventual presidency, the businessman-turned-reality TV star-turned-President and Republican frontrunner for the 2024 election, Donald Trump, had a rollercoaster of a political relationship with cannabis reform. From previous supportive comments to appointing people who were perhaps the physical embodiment of the failures of the drug war, pinpointing Trump’s true stance on cannabis seems to be a difficult task.

Overall Grade: C, possibly a C+ at best. Or any other possible letter.

Stance on marijuana

Unlike the incumbent President who has a nearly six-decade career in politics and spent several years authoring and sponsoring bills that exploded the scope of the Drug War, Trump’s actual political career has been very short in comparison. Therefore, he has never actually voted on a piece of cannabis legislation.

In a 2015 interview with Bill O’Reilly regarding cannabis, Trump made a comment that would certainly be construed as supporting at least medical cannabis usage. Even when O’Reilly, a longtime prohibitionist who utilized his massive platform to endlessly push drug war propaganda, referred to medical cannabis as a “ruse” for illicit usage, Trump deflected.

“But I know people that have serious problems and it (medical cannabis) really does help them. I do want to see what the medical effects are. I have to see what the medical effects are and, by the way — medical marijuana, medical? I’m in favor of it a hundred percent.”

During numerous interviews and rally appearances across America,  he repeated similar supportive comments for medical cannabis legalization yet skepticism at a fully recreationally legal cannabis marketplace, a stance very similar to fellow conservatives such as Texas Agriculture Commissioner Sid Miller. On several other occasions, Trump took the neutral 10th Amendment stance of letting the states individually decide whether or not to legalize cannabis. Which we have already noted as a failure to lead.

One clear reason that Trump doesn’t receive a higher grade on cannabis reform is largely because of one specific Cabinet appointment of a Southern Senator who openly despised cannabis. As Trump’s first United States Attorney General, Jeff Sessions did all he could within his grand power to go against state legal operators. His biggest measure in his failed crusade against legal cannabis was rescission of the Cole Memorandum, Obama-era guidance that had the practical effect of shielding fully state legal operators from federal interference. Unfortunately for the Attorney General, virtually no federal prosecutors went after state legal cannabis businesses and Sessions was essentially fired by Trump the day after the 2018 midterm elections.

Also, while it doesn’t necessarily mean that Trump is an ardent prohibitionist, he was endorsed by several different police unions and they’re notorious for wanting to keep the cannabis laws of yesteryear in place.

History with marijuana legislation

As mentioned above, it’s difficult to collect a history of legislation to determine exactly how Trump has previously voted on cannabis. There were notable cannabis bills filed in the United States Congress to deschedule and otherwise reform cannabis on the federal level during his presidency, but none of these pieces of legislation ever reached the Oval Office much less another house of the Legislature. Whereas Biden has decades worth of going against cannabis legalization and exponentially increasing the national prison population, Trump doesn’t have such history.

Although he knowingly appointed Sessions who famously stated that “good people don’t smoke marijuana”, he didn’t agree with his Attorney General on everything cannabis related. In 2018, only a few months before Sessions was out of a job, Trump said that he’ll “probably” support the STATES Act. Furthermore, Trump signed the 2018 Farm Bill, which finally federally legalized the cultivation and production of industrial hemp and gave American farmers a new incredibly useful crop to grow.

In 2019, Trump signed the expansive and strongly bipartisan-supported First Step Act, which reformed certain federal sentencing guidelines which has caused the problem of American mass incarceration to reach the horrifying statistics that it has.

“This legislation reformed sentencing laws that have wrongly and disproportionately harmed the African-American community,” Trump said. “The First Step Act gives nonviolent offenders the chance to reenter society as productive, law-abiding citizens. Now, states across the country are following our lead. America is a nation that believes in redemption.”

Before leaving the White House in 2021, dozens of Trump’s last-minute pardons were convicted on non-violent cannabis charges and received steep sentences up to and including life imprisonment as well as other victimless drug offenders. On a personal level, Trump claims he does not consume either cannabis or alcohol and doesn’t advocate for intoxicant usage. He’s stated that a major influencing factor on his personal abstinence from intoxicants is due to the tragic fate of his brother Fred Trump Jr., an aspiring pilot who died of an alcohol-induced heart attack at only 42 years old.     

Past statements predict future outcomes

The reason Trump could have any other letter grade is because Trump could do anything, at any time. What he says on the campaign trail, or any other time, is not relevant. By the time he had reached the Presidency, he had taken 32 new stances on 13 different issues. From the time he was on the campaign trail, to the time he was in office, Trump had changed position on Immigration Reform, Entitlement Programs, Special Interest in Government and China, to name a few. Of course, not fulfilling campaign promises is a long-held tradition in American Presidents.

In and out of office, he has also shown that he will argue whatever legal principal meets his needs at the time. At least one person was able to find an opportunity by making actual flip-flops, out of Trumps flip-flops. In some sense, the grade seems almost impossible to give.

Conclusion

Trump’s exact stance on cannabis seems to flip flop and remain ambiguous. For just as many die-hard prohibitionists that he’s appointed and have otherwise supported or been supported by, he willingly signed the First Step Act and pardoned or commuted the sentence of several non-violent drug offenders. He frequently disagreed with Jeff Sessions’ fledgling crusade on cannabis and has cited his support for medical cannabis usage.

However, given his decades of experience as a businessman, economy and job creation naturally is Trump’s language. The Trump Organization employs thousands of people and as a candidate who ran so heavily on a platform of creating American jobs and bringing product creation back to American factories and facilities, Trump should be able to see that the American cannabis industry is the perfect example of all those values that he’s so familiar with. Perhaps his businessman mindset will be more at the helm of his 2024 campaign. He could easily make gains among the millions of moderate or more right-leaning Americans who openly support cannabis, including the economic benefits and criminal justice reform measures that legalization can provide.

For prior posts in this series, check out the following:

• Grading the Presidential Candidates on Marijuana: Joe Biden
• Grading the Presidential Candidates on Marijuana: Ron DeSantis
• Grading the Presidential Candidates on Marijuana: RFK Jr. 
• Grading the Presidential Candidates on Marijuana: Nikki Haley

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Missouri Tops $1.3 Billion in First Year of Recreational Sales

With every election season that comes, it’s become almost inevitable that at least one or two more of the states will legalize cannabis for either fully recreational usage or at least medical reasons. Even if it was but a midterm election, the 2022 election season still resulted in two more states legalizing cannabis for recreational purposes, those being Maryland and, more interestingly, the heartland state of Missouri. When Missourians passed the 2022 bill Amendment 3 by a 53-47 margin, which legalized cannabis for recreational use, activists and professionals alike knew that it would make for a very interesting state of affairs.

Due to several beneficial factors, the first year of recreational sales in Missouri broke the astronomical margin of $1.3 billion. In fact, every month of the 2023 fiscal year topped $90 million in recreational sales. The billion-dollar figure alone is a financial wonder, as the total population of Missouri was only 6.1 million as of 2021. Interestingly, the Missouri cannabis industry also reached $1 billion in annual sales during a period that was actually considered a three-month decline when compared to previous months.

According to MJBizDaily data, Missouri outsold Maryland, Connecticut and even the chaotic and problem-laden New York cannabis industry. Within the first month of 2024, the total amount of all-time cannabis sales in Missouri easily surpassed $2 billion. Compare that to Illinois, which sold approximately $670 million during their first year of recreational sales despite having over twice the population of Missouri, and having the very frequently visited and populated metropolis of Chicago. Although Missouri has half the population, they sold twice as much cannabis to recreational consumers in their first year of recreational sales.

While there admittedly is a geographic advantage that Missouri certainly possesses in terms of sharing a border with only one other state with recreational cannabis (Illinois), there are more factors at play when observing the undeniable success of the Missouri cannabis industry. First, the licensing and operating costs for a compliant dispensary or cultivation facility are far more affordable than other states. Second, the Missouri Legislature and the Division of Cannabis Regulation came up with the micro-licensing program, an innovative way for those who can’t afford the several thousand-dollar annual costs that come with running a full-scale cultivation facility or dispensary. With this program, prospective applicants would only have to pay a flat rate of $1,500 for each dispensary or wholesale license.

And Missouri is doing some good things with its influx of cannabis dollars. According to a Missouri Times press release on the first anniversary of retail sales:

“The tax revenues from these sales have helped fund more than 100,000 automatic expungements for past, nonviolent cannabis offenses from Missourians’ records. Today, 19,029 Missourians work directly in the legal cannabis industry, compared to only 9,838 jobs the month before the November 2022 legalization vote.”

Indeed, one of the most important provisions of Amendment 3 is where the estimated $100 million in 2023 cannabis tax revenue will be allocated: expungement. This legal mechanism will give a second chance at all aspects of life to many Missourians with cannabis convictions. Moreover, when the bill was signed by Governor Mike Parson, a mass expungement program instantly took effect, and without applicants having to fill out a single form towards the expungement process.

“Part of the 6% sales tax that Missourians pay on adult-use marijuana sales goes to fund automatic expungements of past, nonviolent cannabis offenses.” the Missouri Times press release explained. “Missouri became the first state in the nation to automatically expunge these marijuana charges by a vote of the people. So far, more than 100,000 marijuana offenses have been automatically expunged and that number will continue to rise over the next year.”

Going into 2024, Missouri will remain a state worth watching. Given its advantageous location when compared to prohibitionist neighboring states, The Show Me State will also continue to have many ongoing advantages and opportunities for economic growth.

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Thoughts on THCA, Interstate Sales…. and Oregon

Friend of the firm Andrew DeWeese published a recent LinkedIn post on Oregon’s outlying stance on THCA the other day, and the priorities of local industry advocates. I wanted to highlight that post and discuss today– it’s a compelling post and I have all sorts of thoughts about it. Here it is:

Let’s break it down.

“THCA flower is legal under federal law”

Maybe. This is something we have thought a lot about at the firm, privately and publicly. My colleague Griffen Thorne published a sensationally titled piece on this last summer: So Long for THCA Products. Griffen’s article is just one of many parsing the language of the 2018 Farm Bill and a 2023 DEA letter on the topic. See also: “THCA and the DEA: Rod Breaks Down the Latest News” from Rod Kight, an another attorney prominent in the space.

You probably don’t want to read all of that today. So here’s the answer I might give my aunt if she asked whether THCA flower is legal. I would say: “Someone over at DEA wrote a letter last year indicating that it’s not. But DEA is not a court and DEA hasn’t made a rule, either. And DEA often loses in court. Certain learned people also disagree with DEA, which isn’t doing much about THCA flower anyway. It’s on sale all over! Finally, Auntie, the law might change this fall when we hopefully get a new Farm Bill.”

People don’t like answers like that (“lawyer answers”) because lawyers tend to hedge and hate being pinned. Pin me down, though, and I will opine that I don’t think THCA is legal under federal law. THCA converts to Delta-9 THC when heat is applied, and I don’t believe Congress intended to legalize an intoxicating substance when writing the 2018 Farm Bill. I will also acknowledge that this is one of the more muddled areas of controlled substances law. It’s up there with the Federal Analogue Act, which arguably requires that chocolate must be recognized as the legal equivalent of heroin. These statutes are so miserable.

From a practical perspective, with respect to THCA, I think the three most important considerations are: a) there has been no federal enforcement to speak of with respect to THCA flower or products; b) federal law will likely change this year, because again, I don’t think Congress intended to legalize gas station weed back in 2018; and c) states have weighed in. Which brings us to the next statement.

“But not in Oregon”

Andrew is correct that Oregon is one of few states to require a total THC concentration testing standard. When Oregon adopted that standard in 2019, it seemed to fly under the radar, though we did our best to publicize it here on the blog. Almost five years later, I’m not sure how well understood this is. I still get frequent requests for representation from Oregon sellers of THCA products, and I must decline to represent those sellers given the lack of any safe harbor under Oregon’s lawyer ethics rules (at least in my view).

But it’s not just state testing requirements people need to understand. Several states outright prohibit products containing THCA from being bought, sold or consumed within their borders. This means that anyone trafficking in THCA products must pay very close attention to state and local law, in addition to getting comfortable with the problematic federal paradigm. Too many THCA advocates simply say “it’s legal federally” and turn off their brains. Which can be a regrettable course of action when you’re pulled over by highway patrol and your truck smells like weed… certificates of analysis, permits, etc. notwithstanding.

“Oregon could essentially have interstate commerce in weed, now”

To achieve parity with THCA friendly states, yes, Oregon would need to change its regulatory structure– starting with a repeal of the total THC concentration testing standard. But Oregon will not. This isn’t because the state lacks interest in interstate commerce solutions for the cannabis industry. Oregon was the first state to sign a marijuana export bill back in 2019. More recently, the OLCC seemed to support to an interstate commerce proposal on marijuana seeds and intoxicating hemp products.

So why don’t the doors open for THCA? The short answer is the two efforts I mentioned just above are on the marijuana side of the equation. Hemp has been hollowed out in Oregon, as I explained in in December. To that end, and in response to the LinkedIn post mentioned at the top of this article, cannabis economist Beau Whitney offered these dismal statistics:

Oregon hemp acres licensed (not necessarily planted or harvested)
2019: 64,142
2023: 2,417
2024: 55 (so far)

We don’t have much hemp being planted in the state anymore and hence, we don’t have much of a hemp lobby. All legislative conversations around hemp for the last several years have centered on local enforcement against THC growers masquerading as hemp licensees. And even when hemp was riding high five years ago, we somehow ended up with the total THC concentration testing standard.

“Instead the only cannabis bill in the short session is a license moratorium and a bunch more enforcement”

Fair statement. The reference here is to House Bill 4121, which has been moving briskly through the legislature and is headed for the ways and means committee. For more information, I gave a detailed tour of HB 4121 last week.

OLCC licensees seem bent on dealing with market saturation issues and protecting the value of their licenses. And for good measure: no one wants to deal with excessive competition, and the state treats these licenses like fungible commodities on a viable, secondary market. If OLCC starts issuing new licenses, the value of previously issued licenses drops from $20K or $30K or $40K to $0.

We’re now down to just one trade organization in Oregon, CIAO, whose board chair is on payroll for the state’s largest retailer. Big retailers have always pushed cannabis policy in Oregon, for better or worse; but this is one where everyone probably agrees. And to be honest, there just isn’t much energy for anything else nowadays. Especially the right to grow intoxicating hemp products of questionable legality under federal law.

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Cannabis M&A: Will California Allow License Transfers?

Cannabis M&A (short for mergers and acquisitions) in California is much more complicated and problematic than in other states. The biggest reason for this is that licenses are not transferrable, which all but eliminates the possibility of asset sales. In turn, this means that deals are much more complicated for both buyer and seller, and probably kills a lot of potential deals before they start. That might change soon, as the state is considering a bill that would allow license transfers.

Why are asset sales so important in cannabis M&A?

I recently wrote a post for one of our firm’s sister blogs on the top 5 issues buyers face when buying businesses in regulated industries. Here is what I wrote about the difference between “asset sales” and “business sales” in the M&A context:

[W]hen people talk about M&A, they often think of buying the entity (a “business sale”). However, it’s usually better practice to simply buy the assets of a business with a brand new entity (an “asset sale”). In an asset sale, the buyer will generally get all the assets, and not just the physical ones – IP, name, leases, etc. The advantage to doing it this way is that the buyer gets to continue operating the business but doesn’t inherit liabilities associated with the actual entity that sold the assets.

Let me flesh this out a little bit more. A business – say a corporation or LLC – has liabilities. Those liabilities may include taxes, debt, litigation, accounts payable, and so on. Those liabilities are “personal” to the business, meaning they are obligations of the business. If the business itself is purchased, the prior owner (seller) does not magically retain those liabilities and hand over the business free and clear. Even if the seller would agree to that, the buyer would have to get the creditors of the business to agree. And good luck with that.

There are some tools that business sale buyers have, such as making the sellers represent that there are no liabilities, requiring the seller to indemnify the buyer against disclosed or undisclosed liabilities, or even holding back some of the purchase price for a period of time after closing to deal with potential liabilities. To be clear though, these are not perfect solutions and we’ve seen cases where six- or even seven-figure liabilities come to light after the closing, with the seller nowhere to be found.

In asset sales, on the other hand, the buyer will buy some or all of the assets of the original business, including the license (more on that below). This means that the liabilities that are “personal” to the original business won’t follow it and the seller will have to deal with those on their own. This is hugely advantageous for buyers for obvious reasons.

Ok, asset sales are important…why not use them as a default?

The answer is pretty simple – regulation. Here’s what I wrote in that post linked above:

When it comes to regulated businesses, asset sales may not be an option. Regulated businesses may have licenses, permits, or other assets that cannot be sold to an unregulated entity. For example, in California’s cannabis industry, licenses are “personal” to the licensed business and can’t be sold. And the products that business owns can’t be transferred to an unlicensed buyer. In these kinds of regulated industries, asset sales are off the table.

In states like Oregon, where our corporate team has closed countless M&A deals, sales tend to be structured as asset sales. That’s because those states have processes in place to allow licenses to essentially move to different businesses and even possibly different locations.

California, on the other hand, doesn’t do that. For whatever reason, drafters of the state’s cannabis laws chose not to create processes for the transfer of licenses. And neither did state regulators at the Department of Cannabis Control (DCC). In fact, DCC regulations don’t even create an easy pathway for business sales – regulations regarding changes of ownership mandate that an original owner stay with the business for a time post-closing.

This same regulation makes clear that “Licenses are not transferrable or assignable to another person or owner” and, except in one very specific instance, “licensees may not be transferred from one premises to another.” This means that assets sales are off the table.

I should also mention here that California is a dual-licensing jurisdiction, which means that licensees must also have local licenses. Some (not many) localities have provisions in place to allow for license or location transfers, but doing so is difficult if not impossible given the DCC’s rules.

Will license transfers be allowed?

Earlier this week, California Assembly Member Phillip Chen proposed AB 2540. The proposed bill is very short, and the substantive change is to add the blue and italicized phrase to the following existing law:

“It being a matter of statewide concern, except as otherwise authorized in this division, the department shall have the sole authority to create, issue, deny, renew, discipline, condition, suspend, transfer, assign, reassign, or revoke licenses for commercial cannabis activity.”

This is literally all the bill in its current form states, and if the bill progresses through the legislature it is almost certain to be supplemented. While we don’t have a ton of information on AB 2540 just yet, we do have some information about what the purpose is from a 2023 effort by Chen to propose a substantially identical bill, AB 351, which died in committee. A committee analysis of the substantially identical bill from April 18, 2023 states:

Under existing law, DCC does not have explicit authorization to transfer, assign, or reassign a state-issued license. Currently, in order to acquire a license, one would have to acquire the entire company that holds the license (e.g., an LLC) and assume all of its liability. Subsequently, the owner of the company being bought would have to add the purchaser to the license. Once approved and added to the license, the purchaser could then offload the seller from the license. The author and sponsor contend that this process is overly burdensome and having the ability to transfer a license would improve continuity of operations.

I will just assume that this is the same logic behind AB 2540. If so, it hits the nail on the head. Business sales are problematic both because (1) they require the assumption of liabilities (many of which may be undisclosed by the seller or even unknown to the seller), and (2) the DCC has an irrational and unnecessarily complicated ownership change process, which requires at least one original owner to remain associated with a business for a length of time after it is sold.

What the future may hold

Given that Chen’s attempt to pass a similar bill failed last year, I think AB 2450 has a relatively rough ride going forward. That said, if the bill passes, it could open the state up for a host of cannabis M&A transactions that could completely change the industry. Cannabis M&A transactions will probably increase substantially if asset sales are permitted. This would be a huge relief for smaller business owners looking to offload licenses, retire, or just exit the industry.

As mentioned, the bill is in its infancy and has a long road ahead of it, during which time it could be modified or supplemented to the point where it is nearly a different bill. Whether or not that happens, if the bill passes, there is still the issue of local law, which the bill currently does not address. Unless cities or counties decided to follow suit, the state’s changes would be of minimal utility.

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No matter what happens with AB 2450, it’s clear that the legislature is beginning to wake up to the fact that the industry is clearly broken and in need of major regulatory overhauls. For just one example, a few days ago, I published a post on an effort to allow integration of the hemp and cannabis industries, which would be an immense change to the status quo. Stay tuned to the Canna Law Blog for more updates on changes to California’s cannabis industry.

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President Biden’s Cannabis Pardons

Similarly to many career politicians who now support criminal justice reform after decades of supporting the most unjust policing and sentencing laws, President Joe Biden has been notably lacking in keeping the pro-cannabis and criminal justice reform promises he ran on in the contentious and chaotic election that was 2020. Along with still referencing the widely disproven “gateway drug” theories, even on the campaign trail, Biden promised that federal cannabis reform would become a reality under his presidency.

Certain notable legislators from both sides of the aisle of Congress and the Senate such as Ohio Rep. David Joyce and Oregon Rep. Jeff Merkley continue to file and sponsor cannabis reform legislation on the federal level, yet all attempts never approach anything that resembles fruition. Cannabis reform polls extremely well, yet Congress and the Senate remain tribally divided on most issues, unfortunately including cannabis. And despite any action to implement cannabis reforms on the federal level, Biden seems to be attempting to judicially atone for the millions of wrongs and injustices committed by the 1994 Crime Bill.

Biden’s first round of pardons: October of 2022

In October of 2022, Biden announced his presidential pardon of thousands of Americans convicted of “simple possession” under federal law and in the District of Columbia. With this pardon, these thousands of Americans were finally free from the many socioeconomic disadvantages that come with a criminal conviction, especially one on the federal level.

“There are thousands of people who have prior Federal convictions for marijuana possession, who may be denied employment, housing, or educational opportunities as a result, my action will help relieve the collateral consequences arising from these convictions.”

While this mass pardon is undoubtedly beneficial, it does depressingly little for the thousands of inmates who are serving several-decade sentences or life imprisonment due to victimless cannabis charges on the state level. For many of the unjustly incarcerated individuals that organizations such as The Buried Alive Project and Last Prisoner Project advocate for the release of, the October 2022 announcement didn’t provide much alleviation. Because unless a cannabis conviction of any kind is on the federal level, the President of the United States can’t provide much of a pardon beyond a vocal recommendation.

Biden’s second round of pardons: December of 2023

In December, the 46th President announced another expansive wave of cannabis pardons that build upon the initial October 2022 pardons. In a detailed announcement by the Office of the Pardon Attorney, the Department of Justice discussed exactly how these pardons are an extension of the previous pardons from 18 months ago.

“On December 22, 2023, President Biden issued another proclamation that expanded the relief provided by the original proclamation.” the bulletin read. “The December 2023 proclamation adds to the list of pardoned offenses the following: offenses under federal law for attempted possession of marijuana; additional offenses under the D.C. Code for simple marijuana possession; and violations of certain sections of the Code of Federal Regulations involving simple marijuana possession and use.”

Once again, this bill does virtually nothing beneficial for anyone convicted and/or incarcerated for similar offenses on any state level. However in the official White House statement released on the same day, Biden directly addressed those thousands of individuals serving unnecessary years in prison for victimless drug charges and spoke to the governors of those states.

“Just as no one should be in a federal prison solely due to the use or possession of marijuana,” Biden explained, “no one should be in a local jail or state prison for that reason, either. That’s why I continue to urge Governors to do the same with regard to state offenses and applaud those who have since taken action.”

Still though, this new update to the previous mass pardon once again only applies to simple possession or use cases. If an offender is still incarcerated or lives with a conviction for any type of cannabis distribution-related charges, which are commonly added to many possession cases, then they’d still be ineligible for any type of pardon.

There were also 11 people that received clemency from Biden for non-violent drug-related offenses who received steep and unfair sentences due to either Reagan-era or 1994 Crime Bill-related sentencing guidelines. Some of these convictions were related to crack cocaine possession, a substance that received significantly longer sentences for the possession and distribution of when compared to sentencing for powder cocaine possession.

“These individuals, like so many others, were convicted of drug offenses and sentenced to decades in prison, including in some cases mandatory life sentences,” a White House official said. “Some individuals received sentences that are twice as long as they likely would have been today and could not benefit from subsequent changes in the law.”

Long road ahead

Reformative changes, especially those related to drug sentencing and the millions of lives affected by those policies, come in waves and won’t rapidly be enacted overnight. For an unjust decades-long and trillion-dollar failure that the War on Drugs truly is, it’ll take the work of several different Presidents and Congressional sessions to attempt to undo all the colossal wrongs. However, this recent December policy is a further step in the right direction for a President who ran so heavily on criminal justice reform and who’s facing reelection in November.

For more on President Biden and cannabis, check out the following posts:

• I Have Some Thoughts on this Biden Cannabis Play
• Grading the Presidential Candidates on Cannabis: Joe Biden (2024)
• Grading the Presidential Candidates on Cannabis: Joe Biden (2019)

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10 best cannabis lubes for Valentine’s Day and beyond 2024

Cannabis revs our engine inside and out. To pave your road to romantic bliss, here are 10 of the best cannabis-infused lubes coast to coast.

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Medical cannabis patients’ quality of life improved during 1-year study

The UK-based study of over 1,000 medical patients showed promising results, despite its limitations.

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California Bill May Change State’s Cannabis and Hemp Industries

On February 7, 2024, California Assembly Member Aguilar-Curry introduced AB 2223. The bill, if passed, would significantly change the state’s cannabis and hemp industries – for better or worse. Today, we’ll take a look at how AB 2223 could change both the cannabis industry and hemp industry in the Golden State.

First though, a brief caveat. AB 2223 was just proposed. The bill is certain to undergo changes as it winds its way through the state legislature. Those changes could be so significant that we end up with a different law at the end of the day. And of course, the bill may not end up becoming law. So take all of the following with a bit of a grain of salt.

#1 The cannabis industry could be allowed to use hemp

AB 2223’s most significant change would be a change to MAUCRSA (the state’s cannabis law) that allows cannabis licensees from selling or incorporating products that include industrial hemp or its derivatives. Manufacturers could procure industrial hemp or derivatives from California Department of Public Health (CDPH) registered persons (including potential out-of-staters), and eventually would be able to procure a CDPH registration at the same premises once regulations are adopted.

Products containing industrial hemp would still have to comply with all legal requirements for cannabis products and would have to be tracked and traced as separate batches. If the law passes, the state has until July 1, 2025 to implement regulations.

#2 The battle over “synthetic cannabinoids” will be fought

If AB 2223 passes, cannabis licensees could not use “incorporate delta-9 tetrahydrocannabinol that has been converted from a hemp-derived cannabinoid.” Additionally, retailers would be forbidden from selling “cannabis, a cannabis product, or an industrial hemp product that contains converted delta-9 tetrahydrocannabinol.” Similarly, the term “industrial hemp” (with respect to existing hemp regulations” will be defined to exclude any “synthetically derived cannabinoid”.

Anyone in the hemp industry is well aware over the myriad issues concerning the precise definition of “synthetic” (see here or here, for example). So it probably won’t come as a surprise to learn that AB 2223’s proposed definition is complicated. Let’s take a look:

“Synthetically derived cannabinoid” means a substance that is derived from a chemical reaction that changes the molecular structure of any substance separated or extracted from the plant Cannabis sativa L. A synthetically derived cannabinoid does not include any of the following:

(1) A naturally occurring chemical substance that is separated or extracted from the plant by a chemical or mechanical extraction process, as long as that naturally occurring chemical substance does not undergo a change in molecular structure.

(2) Cannabinoids that are produced by decarboxylation from a naturally occurring cannabinoid acid.

(3) Any other chemical substance approved by the department in regulation.

This is a lot to unpack, but the bottom line is that changes in molecular structure would deem a cannabinoid synthetically derived. Simply processing hemp won’t count unless there’s a molecular change. With respect to exception (2), this seems like it could provide a state-law carveout for THCA (read here for some of my thoughts on THCA). And notwithstanding all of this, the CDPH would have authority to exempt even some cannabinoids that meet this definition by regulation.

#3 California reinforces its restrictive total THC standards for the hemp industry

Anyone in the hemp industry is also familiar with the many problems that arise from the USDA’s definition of total THC. California’s last major hemp law (AB 45) adopted a definition that is much more restrictive: the sum of THC + THCA, with THC defined to include any THC (delta 8, 10, etc.) or any other cannabinoid that the CDPH deems “intoxicating.” Ab 2223 reworks these provisions, which essentially appear to have the same effect.

In sum, a product with a high level of any cannabinoid that is intoxicating will be very likely to have a total THC in excess of the state’s 0.3% limit. This means that virtually any hemp produced product (such as THCA flower or delta 8) will be banned. It appears that California is going out of its way to make clear that the state won’t stand for intoxicating hemp products.

#4 New product requirements for the hemp industry

AB 2223 would impose some new standards for hemp food and beverages as follows:

(1) A single serving of an industrial hemp product shall be based on the amount of food or beverage customarily consumed in one eating occasion for that food or beverage.

(2) A single serving of an industrial hemp dietary supplement in pill, tablet, or capsule form shall be one unit.

(3) A product shall not exceed five servings per package.

The bill would also put a total THC cap on final form products, but the drafters forgot to fill in the specific number! (“An industrial hemp final form product shall not have a level of total THC that exceeds _______. A qualified testing laboratory shall establish a limit of detection of ______ or lower for total THC and a sample shall pass if total THC does not exceed the limit of detection.”) In all likelihood, the state will put a low limit on there to once again restrict intoxicating products.

Conclusion

I won’t break down all of the provisions of AB 2223 today, for the reasons I expressed above. The point of this post was to highlight some of the key provisions and to show how it will affect both the cannabis industry and hemp industry. Stay tuned to the Canna Law Blog for more updates on this proposed bill.

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Pop seeds 2024-Part II: Attack of the Sours

Sours, OGs, Tangies, sativas, Cheeses, and Purps—oh my.

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DEA’s Post on the Start of Black History Month

As America celebrates and commemorates Black History Month, it’s important to remember exactly how Black Americans have been disproportionately impacted by the criminal justice system in our country. From the crack vs. cocaine sentencing disparities to the fact that Black Americans are on average four times as likely to be wrongfully convicted of a serious crime based on statistics provided by the Innocence Project and the many ways that cannabis prohibition has directly damaged and devastated Black communities, these punishments and subsequent penalties have ranged from unjust to clearly unconstitutional.

Besides the countless examples of unjust and unnecessary sentencing and policing practices that unfairly targeted Black communities across generations, the longest lasting impact of President Richard Nixon’s trillion-dollar and multi-decade failure was the creation of the Drug Enforcement Agency. Formed in 1973 and serving as the successor to the equally as unnecessarily authoritarian Federal Bureau of Narcotics which itself was founded by the most notorious yet influential prohibitionist of them all, Harry Anslinger, the DEA was the enforcement arm of the endless draconian policies of the Drug War that only increased in severity as both Ronald Reagan and Bill Clinton took office. Worse even, both George H.W. Bush and his son didn’t do much to reform these dangerous and ineffective policies either.

One of the most unexplainable and continuously disproven series of laws that the DEA have enforced for decades is the illogical Controlled Substances List. “Marihuana”, a plant with clearly proven medicinal remedies for some and legal for approved medical usage in the majority of American states, is designated as the highest and most deadly class of Schedule I. According to the Controlled Substances List, this plant is far more deadly than fentanyl, a synthetic opiate killing thousands of Americans across all socio-economic and geographic demographics every year. OxyContin, the main culprit along with Purdue Pharma in causing the catastrophic opioid epidemic that has taken hundreds of thousands of lives and is still ongoing today, is a Schedule II substance and therefore considered less dangerous according to the DEA.

Throughout decades of enforcement of deeply flawed policies that resulted in the unjust incarceration of countless individuals for decades or life sentences in the most severe cases, the DEA’s actions and operations in their clearly unsuccessful attempt to rid America of drug abuse have conclusively been a failure and haven’t resulted in any sort of widespread abstinence from the drugs on the Controlled Substances List. Tragically still though, thousands went to American jails over these decades for drug-related offenses that were non-violent and even victimless in some cases.

Just last week for the start of February, nationally recognized as Black History Month which is a month to honor the innumerable contributions by Black Americans to this great nation, the DEA decided to post a dedication on their Twitter account. Not a dedication to a famous and influential Black American throughout political or legal history such as Thurgood Marshall, but rather a bizarrely timed tribute to the only American president to ever resign from the position and a supposedly prestigious award that he was gifted in the first few months of the Drug War.

“On Dec. 14, 1970, at the White House, the International Narcotic Enforcement Officers’ Association presented President Nixon with a “certificate of special honor” in recognition of the outstanding loyalty and contribution to support narcotic law enforcement.” the caption read.

If this photo of Nixon and caption were posted on the first day of any other month, then this strange tribute post would have been only considered random at best and a painfully cheesy praise of ineffective policies at worst. However, because of the posting date of February 1st, the first day of Black History Month, many cannabis and drug policy reform organizations found this post to be both astoundingly tone deaf and poorly timed.

Given that Nixon was the president who started the Drug War that rapidly spiraled into subsequent decades of mass incarceration and even stricter policies in the presidencies since his resignation, this Twitter post was heavily criticized due to those policies being so destructively discriminatory towards Black Americans.

As would later come out according to the testimony of former White House Counsel John Ehrlichman, that was the underlying goal of those laws and policies.

“We knew we couldn’t make it illegal to be either against the war or black,” Ehrlichman said, “but by getting the public to associate the hippies with marijuana and blacks with heroin, and then criminalizing both heavily, we could disrupt those communities. We could arrest their leaders, raid their homes, break up their meetings, and vilify them night after night on the evening news. Did we know we were lying about the drugs? Of course we did.”

While any social media post from the DEA probably wouldn’t be met with overwhelming praise, this post was particularly ill-timed. Especially after the federal government agency openly admitted themselves that the agency was created due to prejudicial laws and policing practices, the fact that the DEA posted this strange throwback photo on the first day of an important month meant to remember and celebrate the indelible and incredible contributions of Black Americans shows how out-of-the-loop and aloof that some governmental agencies can still be.

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How to get a medical card in Illinois

Wondering how to get a medical card in Illinois? With Leafwell, it's easier than ever to get approved and start enjoying the benefits.

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Sweeten your Valentine’s Day with 3CHI’s romantic treats

The season of love is best celebrated with sweet treats in hand. Check out 3CHI's romantic treats for delta-9 products made with passion.

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Superb Bowls 2024: America’s best bongs for the Big Game and beyond

Andy Roth, Tako, and Toro top our list of borosilicate badassery.

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11 weed strains that bang for 2024 and beyond

Our Leafly experts and readers concur: These 11 strains make them go Prrrr.

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The top 6 CBD brands of 2024

Looking for the best CBD products from the most trusted brands? Leafly has you covered. Check out our list of the top CBD brands.

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Dark Web—Alien Labs, CA, winter 2024

Zoap bagseed scores 95 out of 100 points.

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California Gives Up on the Illegal Cannabis Market: Another Update

California publishes quarterly data concerning its “enforcement” efforts against the illegal cannabis market. Over the last couple of quarters, I’ve gotten in the habit of analyzing this data (see here for Q3 2023, and here for Q2 2023). I’ve been blogging here since 2018 and my opinion is that the state is doing very, very little to stop the illegal market. And I’ve got data to support me.

What does California’s Q4 2023 data show?

California published Q4 2023 data just a few weeks ago. In a press release, the Department of Cannabis Control (DCC) director claimed (without strong evidence, I should say) that the state was “effectively decreasing the illegal cannabis market”. Here is the state’s own data for Q4 2023 and 2023 as a whole:

UCETF Operations	Q4 2023	CY 2023
Search Warrants Served	24	188
Pounds of Cannabis Seized	13,393.65	189,854.02
Retail Value of Cannabis Products Seized	$22,294,571.41	$312,880,014.35
Cannabis Plants Eradicated	20,320	317,834
Firearms Seized	26	119
Money Seized	$35,195.25	$223,809

For reference, here is the data from Q3 2023 as compared to Q2 2023:

UCETF Operations	Q3 2023	Q2 2023
Search Warrants Served	60	92
Pounds of Cannabis Seized	61,415.75	66,315.01
Retail Value of Cannabis  Products Seized	$101,349,657	$109,277,688.94
Cannabis Plants Eradicated	98,054	120,970
Firearms Seized	69	19
Money Seized	$0	$223,809

 

First off, I don’t really think we should pay much attention to the retail value columns, since it’s not clear how the state is calculating retail value. Obviously, the state has an interest in calculating it in a way that increases the number and makes it look like a “win.” So unless they give us the formula, I think it’s safe to discard that information.

Now let’s break the rest of this down. With respect to search warrants served, within the last three quarters, the state went from serving 92 search warrants, to 60 search warrants, to a depressingly low 24 search warrants. This means that Q4 saw fewer than 1/3 of the search warrants of Q2.

Likewise, the amount of pounds seized went from approximately 66,000, to approximately 61,000, to approximately 13,000 over the corresponding period. Like with the retail volume, I am a little skeptical over the “pounds seized” category because I don’t know how the state calculates this – does it only mean harvested pounds? How does it treat the difference between dried and non-dried cannabis? You get the picture. But either way, the numbers just keep going down.

We see a similar trend with cannabis plants seized. The amount of money seized is up from Q3, but is far less than Q2. And the amount of firearms seized greater than Q2, but way less than Q3.

What to make of all this data? Well, the bottom line is that the state is doing a lot less. I think the most critical point here is the number of search warrants served, which has gone way down. Q4’s 24 search warrants means that the state served about one every three days. That’s in a state where the illegal market is orders of magnitude larger than the legal one. There’s really no good reason why the state is doing this little.

New proposals, but none pan out

California always seems to have some new proposal to tackle the illicit market. Last fall the state proposed a local enforcement program that would draw on the state’s attorney general for support. I predicted that the program wouldn’t work. Now, months later, I don’t have any data on the success of that program, but it was by definition very limited in scope. And if it had been a huge success, we’d have heard a lot more about it.

The state is now considering passing more laws to allow for enforcement. For example, SB-820 would allow the DCC or local jurisdictions to seize property used in connection with illegal cannabis activities. Like we’ve seen over the last few years, expect lots more of these efforts. But don’t expect them to do a whole lot.

The issue here is not that the state does not have tools to adequately combat the illegal market – it does. It’s that it does not use them.

Meanwhile, the illegal market festers

While the state is busy passing laws it probably won’t use effectively, the illegal market continues to grow. Occasionally, a story related to the illegal market makes its way into the mainstream news. For example, the San Bernardino Sheriff recently discovered six dead bodies in a remote area deep within the high desert – all of whom were killed by gunshot wounds. The Sheriff recently announced that the incident appears to relate to the illegal cannabis trade. I recently talked to the Associated Press about this news, and you can read that story here.

It’s important to take a step back and realize that the illegal market isn’t just composed of people who don’t want to deal with the expense and burden of a vastly over-regulated state market. The illegal market can be a pretty grim place, as evidenced by this newest reported development.

Where thing stand on California cannabis enforcement

I expect that some of you might read this and think that I’m an enforcement hawk. I’m not. Here’s what I said in one of my last posts on this matter:

To be clear, I am not a fan of enforcement. I think that incentives work a lot more than disincentives. If the state wanted to eliminate the illegal cannabis market, it should have never required costly licensing or allowed local control. But at this point in time, it’s not really realistic to think that the state will ever do things like eliminate licensing or taxes or do away with local control. Even putting aside the difficulties in changing the law, too many people have spent too much money getting licenses. Can you blame them for wanting to keep the market small?

If the state’s not going to do that, then it needs to embrace enforcement, but with a big caveat. Enforcement on its own didn’t work during prohibition, and it won’t work here. If the state wants to ease up on the illegal market, it will combine incentives and disincentives. In this model, it would eliminate nonsense requirements such as the 6AM to 10PM sales window that the illegal market obviously ignores. It would also be much more aggressive about seizing unlicensed product, even if it didn’t necessarily put people behind bars for decades (which it shouldn’t).

To me, it seems clear that the best way to defeat the illegal market is to widen the tent and make legal participation easy. But if that’s not going to happen, then the state has an obligation to its stakeholders who pay taxes and license fees. And for now, it’s not living up to that obligation.

The post California Gives Up on the Illegal Cannabis Market: Another Update appeared first on Harris Sliwoski LLP.

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