Thursday, May 2, 2024

Why Falling THC Test Results Matter

The fluctuating levels of reported THC (tetrahydrocannabinol) in cannabis products have sparked discussions and concerns within the industry. Contrary to popular belief, the decline in tested THC levels does not necessarily indicate a decrease in potency. We examine the reasons behind this phenomenon, exploring how changes in testing protocols, sample selection, and laboratory practices contribute to these findings. As an industry, we cannot lose sight of the importance of standardized testing practices to ensure transparency and reliability in the market.

Just a few years ago, Justin Bieber boasted that he gets his weed from California. But recent testing indicates that the level of THC in California cannabis has fallen dramatically over the last year. Is it time for Bieber to find a new source? Probably not—but the industry shouldn’t shrug this news off either. Let’s look at what’s happening with THC testing across the country and consider what it means for consumers, cannabis businesses, regulators, and the industry as a whole.

Yes, tested THC levels are falling. Here’s why

California isn’t the only state that’s seen a drop in THC test levels. One recent article analyzed the THC percentage for 23 cannabis flower samples sold in Colorado, finding that the vast majority, 18 of 23, tested lower than the claimed range. Three samples contained less than half as much THC as their sellers claimed. Does that mean that weed is getting weaker? Not at all. Falling test results are far more likely due to changes in testing than to changes in the true levels of THC in cannabis plants.

Some of this has to do with sample selection. Every individual plant has a distinct genetic profile. Even in a controlled environment, each plant is influenced by the precise amount of light, nutrients, and water it receives (“epigenetic factors”). Some plants within a given crop will always be superior in quality, just as some flowers on any given plant will be average, while others will be exceptional. Cannabis producers should be taking a random sample from each batch for testing, but it’s often easy to—intentionally or otherwise—select more test samples from the best exemplars than from the run of the mill.

But it’s not all sampling error; labs may produce different test results from the same sample due to the protocols they use, or the stringency of their methods. Do some producers “lab shop” to find a lab that will report higher potency results? Almost certainly. Do some labs inflate their results to try to win more business? Again, almost certainly.

As states have gotten stricter about policing both sample selection and lab accuracy, tested THC results have fallen. But that doesn’t mean the product is any less potent.

Cannabis potency is complex. Does THC testing matter?

Cannabis isn’t as straightforward as something like alcohol. There’s no single value that determines how “strong” a product is or what effects it’ll have on a consumer. The potency of any particular cannabis product isn’t driven just by its level of THC but also by its overall cannabinoid and terpene profiles, the form of consumption, and the individual traits of the person using it.

Why does THC testing even matter, then?

At a consumer level—especially for those who use marijuana medically—differences in THC levels may influence the amount they consume, and the therapeutic or recreational benefits they receive. Consumers may also use THC test results as a benchmark for quality or value and therefore the price that they’re willing to pay for a product.

At the state level, discrepancies in lab results have led to heightened scrutiny. California has been fining cannabis businesses and suspending operator licenses for overreporting THC content, while Massachusetts is sending out “secret shoppers” to check on producers and dispensaries.

More importantly, though, inflated THC test levels damage everyone’s trust in the cannabis industry. THC isn’t the only thing marijuana is tested for, or even the most important; consumers, businesses, and regulators should all be able to trust the processes and results of tests for pesticides, toxins, and contaminants like mold. But why should anyone believe those numbers are reliable if THC levels are consistently overreported?

That leaves us caught in a double bind: consistency is all but impossible to achieve within the current fragmented legal structure, but without consistency, the industry isn’t taken seriously.

It takes an expert to legally navigate the cannabis industry

Every ethical player in the cannabis industry—from growers to retailers to consumers—would benefit from uniform standards in testing methods, controls, regulations, and oversight (not to mention legalized banking!). As it stands, cannabis businesses must try to reconcile a morass of conflicting, often confusing guidance, paying exorbitant taxes — at least for now –without receiving many of the benefits that other businesses receive. We have been working with cannabis industry businesses to navigate these issues for well over a decade. Give us a call if you think we could help.

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Wednesday, May 1, 2024

Star signs and cannabis strains: May 2024 horoscopes

May is off to a great start with a federal decision to reschedule cannabis! We've picked these 12 strains to help each sign make the most of the month's cosmic energy, and celebrate a historic win.

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Yesterday’s Marijuana Rescheduling News, Explained

Yesterday, some big news dropped that the cannabis industry has anticipated since last summer. I take issue with some of the headlines, so here’s mine: “DEA Reportedly Agrees to Initiate Proposed Rulemaking to Reschedule Marijuana…”. Clearly, I’m a lawyer and not a reporter, but the “Reportedly” and “Initiate Proposed Rulemaking” are key considerations here at the Canna Law Blog.

How did we get here?

In October of 2022, President Biden requested that the Department of Health and Human Services (HHS) review marijuana’s placement on Schedule I of the Controlled Substances Act (CSA). HHS followed that directive, recommending that marijuana be moved to Schedule III on August 30, 2023. My real-time analysis of what a Schedule III placement would mean can be found here. I’m not going to re-type much of that analysis today; but I stand by all of it, and I encourage you to click that link when you’re done.

What’s the next step?

I mentioned above that DEA “reportedly” has agreed to follow the HHS proposal. The very next step will be for DEA to confirm that reporting. We are likely to see a statement or press release, and a notice of proposed rulemaking should follow. Here’s an example of what that looks like, from a recent DEA rulemaking on prescribing controlled substances via telemedicine. I trot out that particular example because DEA received “a record 38,000 comments” on those proposed rules. In my estimation, the marijuana industry does more complaining than lobbying, but I’ll put the over/under on marijuana comments at 3x telemedicine.

How long will rulemaking take?

I don’t pretend to be an expert on the Administrative Procedure Act (APA). I can safely say, though, that much of this depends on exactly what rule or rules DEA proposes, and when. Right now, it’s reported that DEA has a draft rule out to the Office of Management and Budget for review. That process can take up to 90 days.

Once the rule is published, please know that DEA may extend timelines as ostensibly needed. For example, in the telemedicine rubric above, DEA and a related agency extended a temporary set of rules for a six-month stretch while DEA waited to instate its proposed final rule (the one that drew so much interest). Finally, even if DEA attempts to move briskly, I’ve mentioned the possibility of litigation and challenges to rulemaking. Someone is likely to sue.

Are you saying rescheduling may not take effect before the Presidential election?

Yes I am. In fact I doubt cannabis will be on Schedule III by November. And by extension there is always a possibility, however remote, of DEA backtracking on this reported decision. A reversal along those lines would be legally problematic, for what it’s worth. The CSA is clear that while the DEA maintains final authority to reschedule marijuana, HHS’ recommendations “shall be binding … as to [] scientific and medical matters.” I do believe marijuana to Schedule III will happen.

What about the Office of Legal Counsel?

Don’t even ask.

What’s the biggest win for industry if/when marijuana moves to Schedule III?

It has got to be tax relief. Taxes all the way. I explained in my August 30 post why springing the vise of IRC § 280E won’t fully cure the tax headaches faced by cannabis businesses, and why cannabis businesses still won’t be taxed like other businesses on a Schedule III status. But, wow!, a lot of these companies are going to see better margins overnight. Many will also find relief from thinking so hard about dicey, new-fangled tax avoidance propositions.

What are some other cannabis law markers?

There are quite a few. A New York Times article from yesterday mentions, in passing, the possibility of “softening of other laws and regulations that account for the use or possession of cannabis, including sentencing guidelines, banking and access to public housing.” I agree with all of that. However, a move to Schedule III appears less helpful for other, businessy areas, e.g. bankruptcy, trademark.

What would this mean for state-legal cannabis markets?

I got this question from a client yesterday (Hey Tom!). The answer is, “not a lot.” This is because interstate commerce will still be verboten under Schedule III. Yes, the likelihood of federal enforcement against state-licensed marijuana businesses will decrease (from FDA, DEA, wherever); but enforcement probabilities are vanishingly low already– at least with respect to basic business activity. Again, I think the benefits of Schedule III will be more on the tax treatment side, which should lead to ancillary benefits, like lower costs of capital.

If marijuana goes to Schedule III, will it stick?

My guess is it would, as a purely administrative matter. By that I mean that HHS and DEA wouldn’t revisit the plant’s status anytime in the next decade or two. That said, Congress could always intercede. Congress has the power to remove marijuana from the CSA entirely, at any time and for whatever reason. Someday, when marijuana is finally descheduled entirely — and treated at least as respectfully as cigarettes, alcohol, sugar etc. — we will have Congress to thank, not the D.C. cops or scientists.

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Stay tuned to the Canna Law Blog — and stay off social media — for developments here as they ensue. For previous posts on this topic, check out the following:

 

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Tuesday, April 30, 2024

MITA leads cannabis industry advancements with education & advocacy

Learn about MITA—Arizona's cannabis industry trade association. Education & advocacy drive this dynamic network of professionals.

The post MITA leads cannabis industry advancements with education & advocacy appeared first on Leafly.



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History: DEA agrees to move marijuana to Schedule III

The federal war on marijuana has entered the end game.

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Navigating Cannabis Commercial Lease Agreements in Washington

Cannabis commercial lease agreements

Signing a commercial lease can be an exciting step toward realizing operational goals in your Washington cannabis business. However, if a lease is not analyzed and completed correctly, the agreement can leave either the landlord or the tenant, or both, with additional headaches and liability. Understanding the nuances of the cannabis commercial agreements is crucial for both parties alike.

Whether you are a small business owner looking to secure your first retail or business space, or a property investor seeking to maximize your returns, having a firm grasp of the legal framework surrounding cannabis commercial leases can make the difference between a successful business venture and a costly endeavor. It’s important to note that usually, both parties have the same goal and that is to use the property for the stated purpose in a way that benefits both landlord and tenant alike. If the agreements are negotiated correctly, you’ll be left with a situation where when one succeeds, the other will likely succeed as well.

For the most part, commercial landlord-tenant relationships are governed by statutes and basic fundamentals of contract law in Washington state. More often than not, courts will defer to the Commercial Lease Agreement and other applicable agreements between the parties before looking to any statutory default provisions. This stance makes lease agreement negotiations and drafting more important than other instances such as residential lease agreements.

Key points in Washington cannabis commercial leases

In order to ensure your Washington cannabis commercial lease is a mutually beneficial endeavor, here are some key points that both sides need to consider:

  • Lease term and renewal options

    The lease term is the backbone of any commercial lease agreement. It outlines the duration of the lease and sets forth the rights and obligations of both parties during that period. In Washington state, lease terms are highly customizable and can range from short-term agreements to long-term leases spanning several years. Additionally, both parties should pay close attention to renewal options to ensure there is flexibility to extend their lease if desired and needed.

  • Rent and additional costs

    Negotiating rent and additional costs is often a sticking point in commercial lease agreements. Landlords typically seek to maximize their rental income, while tenants aim to keep costs manageable. It’s crucial for both parties to clearly define the base rent, any annual increases, and the allocation of additional expenses such as property taxes, maintenance fees, and utilities.

  • Use clause

    The use clause specifies how the leased premises can be utilized by the tenant. It’s essential for both parties to ensure that the intended use aligns with the zoning regulations and any restrictions outlined in the lease agreement. Additionally, landlords may include provisions to protect the integrity of the property and surrounding businesses.

  • Cannabis friendly provisions

    The cannabis industry is well known for its regulatory oversight and compliance requirements. Both parties should be aware of applicable state and local regulations and compliance requirements. Many of these requirements can be specifically addressed in the lease agreement so there is no question as to the rights and obligations of each party.

  • Repairs and maintenance

    Determining responsibility for repairs and maintenance can prevent disputes down the line. Commercial leases often allocate these duties between landlords and tenants, with landlords typically responsible for structural repairs and tenants responsible for interior maintenance. Clarity on these obligations can help avoid confusion and ensure that the property remains in good condition throughout the lease term.

  • Assignment and subletting

    Businesses evolve, and sometimes tenants may need to assign their lease or sublet the premises to another party. Landlords usually retain the right to approve or reject assignments and subleases to maintain control over their property and ensure the new tenant is financially stable.

  • Termination and default

    Despite best intentions by both parties, lease agreements can sometimes be terminated prematurely due to unforeseen circumstances or breaches of contract. It’s essential for both parties to understand the conditions under which the lease can be terminated and the remedies available to each party in case of default.

  • Notaries and other compliance

    Even though most commercial lease disputes are determined by the contract, commercial lease agreements must still comply with state and local laws governing landlord-tenant relationships. In Washington, lease agreements must be notarized to have their full force and effect. Additionally, other use-specific statutes and regulations should be considered and incorporated into the drafting of commercial leases. As noted above, one example is for licensed cannabis businesses in Washington. These businesses must have additional protections and oversight to remain in compliance with state and local laws and regulations.

Ensuring a successful relationship

Navigating the complexities of commercial lease agreements in Washington requires attention to detail and a thorough understanding of not only the legal landscape, but also the goals, aspirations, rights, and obligations of both the landlord and the tenant.

Negotiating and drafting a well thought out commercial lease can make the difference between a thriving business and a beneficial relationship between the landlord and tenant or a costly nightmare.

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For more on cannabis commercial leases, check out the following posts:

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Monday, April 29, 2024

Royal Queen Seeds & Mike Tyson are the double bill your grow needs

Tyson 2.0 strains have all made a splash and now, thanks to Royal Queen Seeds, you can finally grow them for yourself. 

The post Royal Queen Seeds & Mike Tyson are the double bill your grow needs appeared first on Leafly.



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