Newsworthy Highlights
Virginia Access to Medical Cannabis and Delta-8 Ban Moving Forward. Virginia Gov. Glenn Youngkin approved Senate Bill 591, which eliminates existing requirements for medical cannabis patients to formally register with the state Board of Pharmacy. The bill recently passed both houses of the state legislature; however, Youngkin’s approval includes additional amendments that lawmakers may consider during the April 27, 2022, veto session. The legislature will either accept or override Youngkin’s proposals. Youngkin’s amendments include, for example, expressly banning delta-8 THC products, prohibiting sales of products containing THC to persons under 21 years of age and increasing penalties for individuals caught possessing more than 2 ounces of cannabis. (For details, see McGuireWoods’ April 6, 2022 alert.) If enacted, the amendments become effective Oct. 1, 2022.
Pennsylvania Senators Announce Plan to Ban Delta-8 THC. On April 6, 2022, Pennsylvania Sens. Judith Schwank and Sharif Street announced their plan to introduce legislation banning the sale of delta-8 THC in the state. Speaking to a local news outlet, Schwank noted that “[t]he point is really to protect people,” adding that delta-8 “is sold in a way and marketed in a way to appeal to kids with flavors like lemon haze, blue skittles, and strawberry shortcake.” Schwank clarified that “[w]e are talking about legalizing marijuana in Pennsylvania, but this is a separate issue.” Many states have already banned or restricted the sale of delta-8 THC or are considering similar bans on delta-8 products.
New York Introduces Marijuana Banking Bill. On April 12, 2022, New York Sen. Jeremy Cooney introduced the Cannabis Banking and Disclosure Act, which would allow the Office of Cannabis Management to share information about an applicant or licensee with a financial institution interested in banking with the cannabis business. The bill attempts to ease the burden on financial institutions with respect to certain steps they must take to serve the cannabis industry, as required under the Financial Crimes Enforcement Network guidance.
Specifically, financial institutions must take the following steps to provide services to marijuana-related businesses (MRBs): (1) verify with the appropriate state authorities whether the business is duly licensed; (2) review license application materials; (3) request from the state regulatory agency information about the business and any related parties; (4) develop an understanding of the normal and expected activity for the business, including the types of products sold and the type of customers served (e.g., medical versus adult recreational use customers); (5) perform ongoing monitoring of publicly available information about the business and related parties; (6) perform ongoing monitoring for suspicious activities; and (7) continuously update the information obtained about the MRB.
Allowing the Office of Cannabis Management to share information will enable financial institutions to verify personal and financial information for prospective cannabis clients. This may facilitate federally required suspicious activity reporting. This bill is part of an effort at the state level to improve financial institutions’ access to the cannabis industry, while the federal Secure and Fair Enforcement Banking Act of 2021 stalls in the U.S. Senate after receipt from the U.S. House of Representatives one year ago.
New York Budget Allows Tax Deductions for Cannabis Businesses. New York state passed its fiscal year 2023 budget on April 9, 2022. The budget legislation includes language that allows adult-use cannabis businesses to deduct expenses and claim credits at the state tax level effective Jan. 1, 2022. Those deductions and credits are not allowed at the federal tax level. Under the Internal Revenue Code section 280E, cannabis companies cannot make certain federal tax deductions because cannabis is a Schedule I substance under the Controlled Substance Act. (For further details on IRS 280E requirements, visit McGuireWoods’ Edible Bites Video Series.)
Grassroots Federal/State Legislative Highlights
New Program Rules Released for Mississippi’s Medical Cannabis Act. In connection with the recent passage of the Mississippi Medical Cannabis Act (SB 2095), the Mississippi State Department of Health (MSDH) recently published program guidelines, which include a list of qualifying conditions, a specified process for obtaining a registry and identification card, and requirements for practitioners to prescribe medical marijuana.
To qualify for the program, patients must have at least one qualifying medical condition and a written certification from a healthcare practitioner with whom the patient has an existing bona fide relationship. According to the guidelines, qualifying conditions include cancer, Parkinson’s, Huntington’s, muscular dystrophy, glaucoma, spastic quadriplegia, HIV, AIDS, hepatitis, amyotrophic lateral sclerosis, Crohn’s, ulcerative colitis, sickle cell anemia, Alzheimer’s, agitation of dementia, PTSD, autism, pain refractory to opioid management, diabetic/peripheral neuropathy, spinal cord disease or severe injury, chronic medical treatment that causes cachexia or wasting, severe nausea, seizures, severe and persistent muscle spasms, or chronic pain.
To provide certifications for (prescribe) medical cannabis, medical practitioners must become “certifying practitioners.” The program permits physicians, physician’s assistants, nurse practitioners and optometrists to become certifying practitioners if they meet certain requirements. Certifying practitioners must obtain eight hours of continuing education on the topic of medical cannabis in the first year, and five hours each year thereafter.
To obtain a certification, patients must receive an in-person assessment and must be reassessed every six months. In addition, patients must pay a $25 registration fee each year. According to program guidelines, MSDH expects to make applications available to the public by June 2, 2022.
Philadelphia, Mississippi, Will Opt Out of Medical Marijuana for Now. On Feb. 2, 2022, Mississippi’s governor signed a bill to legalize medical marijuana, making Mississippi the 37th state to legalize a medical-use program. Under the bill, local governments cannot ban medical cannabis businesses outright but may opt out of the program altogether within 90 days of enactment.
On April 5, 2022, the Board of Aldermen, which makes policy decisions on behalf of Philadelphia, Mississippi, through the Neshoba County Board of Supervisors, announced the city’s intention to opt out of the medical marijuana program.
The Board of Aldermen had until May 3, 2022, to either opt in forever or opt out temporarily. The Board of Aldermen generally cited “uncertainty” around how the state law would be implemented as the reason for the decision to opt out. Specifically, the Board of Aldermen noted three concerns: (1) the anticipated increase in impaired driving due to medical marijuana use and the need to train officers on roadside field sobriety, (2) the increase in dispensaries’ impact on bootlegging or black-market sales, and (3) anticipated increases to call volume from county residents complaining of the smell of burning marijuana, which the Sheriff’s Office currently does not have the capacity to field.
Under the state law, notwithstanding the Board of Aldermen’s vote to opt out, citizens can petition for an election to decide the matter on the ballot.
Ohio Board of Pharmacy to Issue 73 Additional Medical Cannabis Dispensary Licenses. The Ohio Board of Pharmacy is working to more than double the number of medical cannabis dispensary licenses, after a review revealed the current number of dispensaries was inadequate to meet patient demand.
Last year, the board voted to make 73 more medical cannabis dispensary licenses available, in addition to the 58 existing licenses. The board released a Request for Applications and Dispensary Application Instructions, which set forth the timetable and requirements for applications. It also identified the number of provisional dispensary licenses available for each district.
The board received more than 1,450 applications for these 73 licenses. It ranked applications using a random drawing, conducted by the Ohio Lottery Commission in January 2022. The board is now conducting a full review of applications to ensure they comply with all medical marijuana dispensary license rules.
The ranked order list released by the board will be used to award provisional dispensary licenses for each district. The board will begin its evaluation at the top of the list, and if an applicant is found ineligible for licensure, the board will proceed to the next application on the ranked order list, until all available provisional dispensary licenses for that district are awarded.
Louisiana House Passes Bill to Prohibit Smoking (Marijuana) and Driving. With the introduction of new legislation, Louisiana drivers soon may be prohibited from smoking or vaping marijuana while operating a vehicle. In early April 2022, the Louisiana House of Representatives approved House Bill 234, which would categorize smoking marijuana (or a substance classified in Schedule I as marijuana) as a primary offense, allowing law enforcement to make traffic stops for suspected violations.
While driving under the influence and possession of non-medical marijuana is already illegal in Louisiana, this new legislation would add a layer. The bill defines “smoke” as inhaling, exhaling, burning or carrying any activated aerosol or vapor or any lighted cigarette, cigar, pipe, weed, plant or other combustible substance in any manner or in any form, and includes a fine of $100.
Proponents of the bill believe the prohibition will make highways in Louisiana safer while opponents are concerned the bill will increase unwarranted police stops and make it difficult for law enforcement to distinguish between drivers smoking legal substances and those smoking illegal substances behind the wheel. The bill will advance to the Senate for approval.
Massachusetts Senate Attempts Tough Stance on Excessive Cannabis Fees. The Massachusetts Senate is evaluating several cannabis reform bills, including one that restricts the number and amount of fees many municipalities charge to licensed marijuana business operators. The bill also allows the state Cannabis Control Commission to approve or reject host community agreements (HCAs) that all prospective marijuana business operators must sign to do business within the municipalities. The bill aims to ensure transparency, prevent municipal overreach and provide more regulation to the marijuana market.
Currently, Massachusetts law allows municipalities to collect up to 3% of a marijuana business’s gross sales to offset any negative impacts the sale of marijuana may cause in the community. Many marijuana business operators believe municipalities exploit the business operators through the current structure of the HCAs. Along these lines, the proposed bill would allow a marijuana business to sue a municipality for breach of contract if the community impact fee is not reasonably related to the actual costs imposed upon the town. The bill could signal growing support among states to provide more protections for marijuana business operators.
Investment Highlights
Investment Entity Related to Scotts Miracle-Gro to Acquire New York Female-Owned Cannabis Business.
RIV Capital Inc., an investment entity related to Scotts Miracle-Gro, recently announced a definitive agreement to acquire Etain LLC, a New York-based, female-owned cannabis cultivation and medical dispensary operation, for $212 million payable through a combination of cash and newly issued Class A common shares of RIV Capital. The innovative investment makes sense, as cannabis is one of the largest agricultural growth areas in recent history. The acquisition will place RIV in control of New York cannabis licenses, a new state entrant into the recreational cannabis space. RIV’s acquisition is important, given the relationship to Scott’s and is an example of a major player in one industry seeing potential in another. The acquisition is subject to, among other things, receipt of all required regulatory approvals.
