New York Gov. Signs Smoking Ban in State-Owned Beaches, Parks

New Yorkers hoping to enjoy a smoke or a toke in one of the state’s beaches or parks might want to think twice.

Kathy Hochul, the state’s Democratic governor, signed a bill into law last month that will prohibit “smoking in all state-owned beaches, boardwalks, marinas, playgrounds, recreation centers, and group camps.” 

Those caught smoking in such areas could face a fine of $50.

“Smoking is a dangerous habit that affects not only the smoker but everyone around them, including families and children enjoying our state’s great public places,” Hochul said in a statement following the bill signing last month. “I’m proud to sign this legislation that will protect New Yorkers’ health and help reduce litter in public parks and beaches across the state.”

The new law applies to both tobacco and cannabis.

Recreational pot use has been legal in the Empire State since last year, when former Gov. Andrew Cuomo signed legislation.

The law permitted cannabis use wherever tobacco use is also permitted.

The bill signed into law last month “exempts the Adirondacks and Catskills from the [smoking] ban as well as parking lots, sidewalks adjoining parks, and areas not used for park purposes,” according to the governor’s office.

“Many municipalities and local governments already have restrictions or bans on smoking in public spaces. This additional penalty will enforce a statewide prohibition and includes a fine that will be collected by localities,” Hochul’s office explained in the press release issued last month. “In addition to the health risks posed by secondhand smoke, cigarette butts are a major environmental hazard due to the non-biodegradable filters that are discarded. They are the leading item found during cleanup projects. Through this prohibition, parks and beaches will be kept cleaner and safer as will our local ecosystems.”

The law was celebrated by several New York lawmakers.

“New York’s public parks are family friendly venues. No one, especially children, should be subjected to secondhand smoke while playing on a playground or enjoying the day at a public beach or camp site,” said Democratic state Sen. Toby Ann Stavisky. “Our parks also shouldn’t be tainted by non-biodegradable cigarette butts scattered throughout their grounds. I am proud to sponsor this legislation to protect and improve our beautiful network of parks and I thank Governor Hochul for helping New Yorkers enjoy the beauty of our parks by signing it into law.”

Fellow Democrat Jeffrey Dinowitz, a member of the New York State Assembly, said the law honors the spirit of public greenspace.

“New Yorkers head to our parks for fresh air and to foster a healthy lifestyle. Smoking is the opposite of that. I am very pleased the Governor Hochul has signed into law this important statewide ban on smoking in parks, and thank you to my colleagues for their vital support on this bill over the years,” Dinowitz said last month.

While New Yorkers aged 21 and older have been able to legally possess and use cannabis since last year, the state’s regulated weed market isn’t expected to launch until later this year.

Hochul took over as governor last summer after Cuomo resigned amid allegations of sexual misconduct, and she has taken a proactive role in shaping the state’s nascent legal cannabis industry ever since.

Last month, Hochul announced a $5 million grant in support of cannabis industry job training at New York community colleges.

“New York’s new cannabis industry is creating exciting opportunities, and we will ensure that New Yorkers who want careers in this growing sector have the quality training they need to be successful,” Hochul said in the announcement of the funding. “Diversity and inclusion are what makes New York’s workforce a competitive, powerful asset, and we will continue to take concrete steps to help ensure everyone has the opportunity to participate in the cannabis industry.”

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Massachusetts Lawmakers Pass Compromise Bill on Cannabis Industry Reform

Lawmakers in Massachusetts passed a bill late Sunday night that will bring a host of different reforms to the state’s recreational cannabis industry.

The legislation “aims to promote greater diversity in the legal marijuana industry, ratchet up oversight on the host community agreements that marijuana businesses are required to enter into with municipalities, and to lay the groundwork for cities and towns to green light on-site cannabis consumption establishments within their borders,” NBC Boston reported.

The compromise bill “emerged just before midnight Sunday after nearly a month of negotiations and quickly passed through both the House and Senate,” according to the station.

It will now head to the desk of Republican Gov. Charlie Baker, who expressed hope this month that lawmakers would get something passed.

Democratic state Sen. Sonia Chang-Díaz, who co-sponsored the measure, called it a “great bill.”

“It will rebalance the playing field, where so far wealthy corporations have been able to buy their way through the licensing process and too many local, small business owners and Black and brown entrepreneurs have been locked out,” Chang-Díaz said in a statement, as quoted by The Boston Globe.

The bill will usher in changes to the state’s nearly six-year-old legal weed industry. According to NBC Boston, it will “direct 15 percent of the money in the Marijuana Regulation Fund, which is where revenue brought in by the state’s marijuana excise tax, application and licensing fees, and industry penalties is deposited, into a new Social Equity Trust Fund,” while also giving “the Cannabis Control Commission the authority to review and approve host community agreements before a business obtains its final license, and clarifies that a community impact fee in an HCA cannot exceed 3 percent of gross sales and must be ‘reasonably related to the costs imposed upon the municipality by the operation of the marijuana establishment.’”

Voters in Massachusetts approved a ballot initiative in 2016 that legalized recreational pot use for adults. Lawmakers in the state subsequently rewrote the law the following year, and it has been the subject of legislative dispute ever since.

As The Boston Globe reported, some legislators have “spent years lobbying for a rewrite, arguing a few straightforward fixes would address glaring problems,” most notably an “onerous municipal approval process that has been implicated in two federal corruption investigations, and a lack of institutional financing that has allowed larger corporations backed by wealthy private investors to dominate at the expense of smaller, locally owned businesses with more diverse ownership.”

Proponents celebrated the bill’s passage on Sunday night.

“Legislators tonight made history with this vital — and overdue — grant and loan fund,” said Shanel Lindsay, a cannabis attorney and the cofounder of advocacy group Equitable Opportunities Now, as quoted by The Boston Globe. “This bill is an important step forward in undoing the harms of prohibition and over-policing and will provide an important path for families of color to create jobs in their community and generate generational wealth.”

Despite the problems with the law, the cannabis industry is booming in Massachusetts.

Earlier this year, Massachusetts officials reported that the state collected more in taxes from pot sales than it did with alcohol sales, a first since the cannabis industry went live in the state.

The growth of the legal weed market has been accompanied by some concerns. Late last year, Baker introduced legislation aimed at curtailing stoned driving.

“This bill will provide law enforcement officers with more rigorous drug detection training and will strengthen the legal process by authorizing the courts to acknowledge that the active ingredient in marijuana can and does impair motorists. The bill draws on thoughtful recommendations from a broad cross-section of stakeholders, and we look forward to working with our legislative colleagues to pass this bill and make our roads safer,” Baker said at the time.

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NACAT Webinar: The Complex Universe of Cannabis with Hilary Bricken

Register HERE!

Join Harris Bricken attorney Hilary Bricken for a live discussion on strategies to build a scalable cannabis business, hosted by the National Association of Cannabis Accounting & Tax Professionals.

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Effectively serving cannabis companies as an accountant involves much more than just counting cash and paying the quarterly tax bills.

There are countless state and federal rules and regulations that must be followed just to keep your clients legally operational, let alone profitable. This is not an easy task, especially with the influx of investor capital and constant legislative changes making the business side of the industry difficult to navigate.

Accountants need to be present and proactive with their clients in defining and following the goals of company executives, whether that is opening new dispensaries in other locales, mergers and acquisitions of other cannabis businesses, or even a grand exit.

Join the National Association of Cannabis Accounting & Tax Professionals in welcoming attorney Hilary Bricken as she discusses strategies and roadblocks to effectively scaling cannabis businesses in the current legislative climate. Hilary will cover:

• Cannabis corporate structures
• Mergers and Acquisitions in the world of cannabis
• The regulatory impacts on every stage of the cannabis business
• Cannabis local and state rules

For more information, click here.

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Date: Tuesday, August 16th, 2022

Time: 10:00am PT

Register HERE!

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Canna Law Blog Cited by U.S. Senators in Letter to the Attorney General

Last week, we discovered that U.S. Senators Elizabeth Warren and Cory Booker cited our own Vince Sliwoski in a letter to Merrick Garland, the U.S. Attorney General, pressing for the end of cannabis prohibition. The Warren-Booker letter, dated October 6, 2021, advocates for DEA to remove cannabis from the federal Controlled Substances Act— which would decriminalize the plant at the federal level. The letter cites a 2018 blog post by Vince discussing international developments with cannabis at the United Nations level. Readers, we feel heard!

Warren has written a few of these high-profile letters on cannabis over the years, going back to 2016. Back then, her goal was re-scheduling “marijuana”, from Schedule I to Schedule II under the federal Controlled Substances Act. Vince critiqued Warren’s proposal at the time, explaining why rescheduling would have minimal effect and why descheduling is the far better course. Was Warren listening? We’d like to think so.

This more recent Warren/Booker letter does take the recommended course, and is a great example of how high-profile politicians have evolved on cannabis policy over the past half-decade. The best news of all is that Warren, Booker and others continue to press. Most recently, Warren signed onto yet another letter with several others, again addressed to Garland–and President Biden, and HHS Secretary Xavier Becerra–pressing for cannabis descheduling along with pardons. We’re pretty skeptical any of that is happening anytime soon. That said, relentless advocacy is critical.

We should also note that the Warren-Booker letter is not the first time our cannabis business lawyers have had the U.S. Government’s ear on cannabis. In 2019, our law firm was hired by the National Credit Union Association (NCUA) to help write guidance for federally chartered credit unions serving the hemp industry. Vince and our practice group chair, Hilary Bricken, flew to D.C. to advise NCUA during the process. Vince also has advised the Office of U.S. Congressman Earl Blumenauer on federal cannabis law and policy going back to 2017.

We have been publishing the Canna Law Blog daily for over a decade. In that time, our cannabis business lawyers have established the gold standard for analysis on cannabis law and policy. It is gratifying to be cited and even hired at the highest levels of government. We will keep pushing to advance the cannabis industry, including at the highest levels. Please reach out if you think we can help.

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Cannabis Litigation: What is “Alter Ego” liability?

When going into business—whether cannabis or otherwise— the first step is to create a business entity. (This seems obvious but still eludes many in the cannabis industry.) One of the principal purposes of establishing a business entity to limit the personal liability exposure of the founders. Typically, the business entity itself and not the investors, owners, or managers of the entity, is liable for the debts of the business in nearly all circumstances. One exception is the alter ego theory of liability.

The alter ego theory of liability attempts to reach pockets beyond the putatively liable business entity. Doing so is known at piercing the corporate veil. The alter ego theory of liability is not limited just to piercing a company to reach into the pockets of the owners. It may also be used to reach into other entities. And veil piercing may be accomplished in few different ways.

• Vertical piercing refers to piercing the veil between a subsidiary and its parent to hold the parent company liable.
• Horizontal piercing refers to using the alter ego theory of liability to hold sister company’s liable.
• Reverse piercing refers to using the alter ego theory of liability to hold a company liable for the conduct of its owners.

A recently filed Oregon cannabis case demonstrates uses of the alter ego theory in its traditional and horizontal forms. The plaintiff is a well-known purveyor of cannabis candies, licensed by the OLCC. The plaintiff markets its candies to licensed marijuana dispensaries throughout Oregon. The dispensaries sell the candies to their customers. Since 2019, plaintiff has done business with a set of dispensaries that operate under the same brand and have the same or substantially the same owners. (In other words, this brand operates numerous dispensaries throughout Oregon which have the same owners.) Each dispensary operates is its own entity. But each is under the common control of the same two individuals.

According to the complaint, defendants failed to pay for approximately $390,000 of cannabis candies. The candies allegedly were delivered by plaintiff to the various defendants, who accepted the candies without complaint and sold them to retail customers. After demanding and not receiving payment, plaintiff filed suit against more than 20 companies and their two principals. In the absence of an alter ego theory of liability, each defendant is liable only for the candies for which it did not pay. So the plaintiff’s recovery for each dispensary is limited.

But the plaintiff pleaded a traditional and horizontal claim for alter ego liability. In other words, plaintiff seeks to hold each defendant—all of the dispensaries and the two owners—liable for the candies purchased by the other. A claim for alter ego liability is not typically available to an aggrieved party. A claim for alter ego liability is also not available just because the same individuals own multiple companies. Similarly, a claim for alter ego liability is not available just because all of the companies all operate under the same brand or operate in the same industry.

So in what circumstances can a plaintiff allege a claim for alter ego liability?

Well, the specifics differ from state to state. But generally, for the horizontal alter ego theory, a plaintiff needs to allege that the defendants had common supervision, control, management and unity of interest. For all theories, a plaintiff usually must allege the defendants failed to follow corporate formalities. That’s a way of saying that the owners/companies did not act as though the companies were separate entities or separate from themselves. This conduct may include failing to hold board meetings, comingling business and personal monies, or comingling between companies earnings, expenses, and losses. It may also include owners treating company accounts as mere “piggy banks” rather than properly issuing dividends or distributions. Other factors may include insufficient capitalization, insolvency at the time of the transaction in question, siphoning funds by one or more owners, the absence of corporate records, or non-functioning officers or directors.

As the name suggests, the “alter ego” theory of liability ultimately concerns whether the members or shareholders have treated the corporate entity as a “mere instrumentality” or “alter ego” of themselves. Typically the bar to pierce the veil is high, and a court’s use of its equitable powers is exercised only when there is clear evidence that those in control of a company have used the corporation for improper means such as fraud.

Keep in mind that a plaintiff must have a reasonable good faith belief that its allegations are true. Oftentimes a plaintiff does not have enough information to allege a claim for alter ego theory liability. But where a plaintiff does have such information, a claim for alter ego liability is a powerful one. It allows the plaintiff to reach past the ordinary limitations of liability into the pockets of shareholders, members, or sister or parent companies.

For more and related information, see:

• California Cannabis Litigation: Who Should Be Sued?
• Oregon Cannabis Litigation: Business Between Friends Leads to $4.2 Million Lawsuit
• Marijuana Companies: Better To Be Formal

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Poll States 28% of Americans Have Tried At Least One Psychedelic Substance

The poll asked 1,000 adults to answer questions online between July 22-25, which revealed that 28% of Americans have used at least one of the seven psychedelic drugs included in the questionnaire. In order of most used to least used, the list of substances included LSD (14% of participants), psilocybin (13%), MDMA (9%), ketamine (6%), DMT (6%), and salvia (5%).

The poll notes that psychedelic acceptance is increasing, and more legislation is being proposed. “Recent shifts, both in policy and public opinion, suggest the tide in the United States may be turning toward increasingly favoring psychedelic drugs,” YouGov states. “In the past few years, a number of cities across the U.S., such as Oakland, California, have decriminalized psilocybin, also known as psychedelic mushrooms. This November, Coloradans will vote on whether to legalize the drug state-wide, and by January 2023, Oregon is expected to begin allowing its use for mental-health treatment in supervised settings.”

According to the poll, 42% percent of those who have tried psychedelics at least once have a family income of $100,000 or more, while only 34% have an income of $50,000 to $100,000, and 23% reported having an income of $50,000 or less. Forty-two percent also said they had earned a postgraduate degree, with 26% having graduated with an undergraduate degree, and 24% who have a high school degree or less.

In terms of age, 39% of participants who have tried psychedelics range between 30-44 years old, whereas 35% range between 18-29 years of age, and only 14% were over 65. Thirty-four percent of participants who have tried a substance identified as men, while 22% identified as women.

Regionally, the pattern of acceptance follows areas that have enacted psychedelics-related legislation. Thirty-seven percent of participants who have tried substances live in the western United States, with 34% in the Northeast, 23% in the South (other regions were not specified). Those who have experimented with psychedelics often live in cities (36%), compared to those who live in suburbs (26%), and rural areas (19%).

Other categories of definition explored people from different religions, those who live in other regions of the country, age, and other identifiers such as “very conservative,” “conservative” or “liberal.” The poll data shows that those who are liberal, which is defined by the 52% of participants, said that they have tried at least one psychedelic drug.

However, many of the participants still showed opposition to decriminalizing of some of these substances. Forty-four percent oppose decriminalization of psilocybin, 53% oppose decriminalizing LSD, and 53% oppose MDMA decriminalization. Overall, those who have tried one of these substances are more likely to agree that it should be decriminalized. “And while support for legalizing psychedelic drugs is relatively low among Americans overall, it’s much higher among people who have personal experiences with the substances—especially in the case of people who have used mushrooms.”

Those who have tried these substances also expressed support for medical initiatives that promote psychedelics as a medical treatment. “Recently proposed bipartisan amendments to the annual National Defense Authorization Act, suggested by Reps. Dan Crenshaw and Alexandria Ocasio-Cortez, relax federal restrictions on research into psychedelic-assisted post-traumatic stress disorder (PTSD) treatment for veterans,” YouGov wrote. When participants were asked about their support of research such as that initiative, 54% said they supported it and 18% said they were opposed. Sixty-three percent of those who hold a college degree supported research efforts for at least one psychedelic drug, but 49% of those without a college degree also support research. Sixty percent of participants who aligned as Democrat said they were more likely to favor psychedelic research, versus 54% of Independents and 45% of Republicans.

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Denver Weed Delivery Services Face Mile-High Challenges

When city officials in Denver, Colorado authorized home delivery of cannabis products in April of last year, licenses for cannabis delivery services were reserved for social equity businesses for a period of three years. Under the plan, delivery services owned by entrepreneurs who have been negatively impacted by the War on Drugs would partner with the city’s licensed marijuana dispensaries to complete customer deliveries.

The goal of the plan was to help create a diverse cannabis industry in the city while giving people who had been harmed by marijuana prohibition policies a path to business ownership in the regulated market. To qualify, owners or a family member had to have an arrest or conviction for a marijuana offense, or applicants had to meet certain residency requirements. But more than a year into the program, the social equity cannabis delivery service business owners in Denver are facing challenges that threaten the viability of their enterprises.

The business owners and regulators cite high licensing costs, a saturated cannabis market and a lack of support from retailers as some of the barriers to success in the industry. Of the 206 licensed cannabis dispensaries in Denver, only nine have opted to partner with a social equity business to provide delivery service for their customers. Molly Duplechian, the executive director of the Denver Department of Excise and Licenses, said that many dispensaries might be waiting for the three-year exclusivity period for social equity delivery services to expire before launching their own home delivery programs.

“What we’ve heard is that some of the existing industry may have been waiting the exclusivity period out, or they could have been investing in a social equity transporter and then planning to move to do their own delivery in two years,” Duplechian told local media.

The High Cost of Getting People High

Some retailers cite the high permitting fees associated with launching home delivery services while others note steep delivery fees and difficulties updating existing software for placing orders to integrate with the delivery partners’ operations. Others say with so many weed shops in town, most customers would rather shop in person than pay extra to have it delivered. Whatever the reason, the challenges have become unsurmountable for some delivery business owners.

In August 2021, the marijuana delivery service Dooba made news when it became the first company to deliver cannabis in Denver legally. Ari Cohen, the owner of the business, qualified as a social equity applicant because of a past marijuana conviction. But less than a year after the initial headline-grabbing delivery, Cohen’s business is faltering and he is shutting Dooba down.

“About a month before licenses were due for renewal, we decided not to go forward,” Cohen told Westword. “There were significant costs associated with it, and we’ve had limited and stagnant growth.”

“The more regulations we have to follow and fees that pile up, the harder it is for businesses, and the more resources it takes to meet those requirements,” explained Cohen. “Cannabis is one of Colorado’s most highly regulated industries, and that comes with a lot of high costs. Businesses are closing down because they can’t make ends meet. You’re seeing it with store groups and cultivations out here already.”

At least one additional business, Mile High Cargo, is also declining to renew its license, according to Eric Escudero, a spokesperson for the Excise and Licenses Department. Michael Diaz-Rivera, a social equity owner who operates the Denver-based Better Days Delivery, said that the fact that Dooba is ceasing operations does not bode well for other cannabis delivery services in Denver.

“[Cohen] had the business chops. … He had more dispensary partners than me,” Diaz-Rivera told Politico. “Am I just throwing money into a bottomless pit because I’ve been sold this dream of generational wealth that might already be gone?”

Noting how few cannabis dispensaries in Denver have partnered with social equity delivery services, Diaz-Rivera believes that many retailers are waiting for the three-year exclusivity period to end before they launch their own cannabis home delivery services.

“A year and a half has already gone up [with] this exclusivity. And the dispensaries are just waiting it out,” Diaz-Rivera said. “What good does it do for us if they know that they can just wait?”

Denver Proposes Extending Social Equity Exclusivity for Cannabis Delivery

To help support the city’s social equity cannabis delivery services, Denver officials have proposed making licenses for cannabis delivery services exclusive to social equity businesses on a permanent basis.

“We’re one year into one adopting delivery, but also adopting our social equity program. And based on feedback we’ve heard from our transporters and the industry, there’s just not a high level of industry participation,” said Molly Duplechian, Denver Department of Excise and Licenses executive director. “So what we want to do is we want to provide certainty to our social equity transporters that they have a path going forward beyond just the next two years.”

The proposal also includes a reduction in licensing fees for social equity delivery services and the retail dispensaries that partner with them to provide home delivery.

“Some fees are going from $2,000 all the way down to $25. So we’re really trying to reduce and remove any barrier that stands in the way,” Duplechian said.

The Excise and Licenses Department expects to finalize its proposed changes to the social equity program before presenting them to the Denver City Council. If the proposal is adopted by the council, it would go into effect within a few weeks, according to media reports.

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