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Oregon Cannabis: OLCC is Talking Tough

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Listen up friends. The Oregon Liquor and Cannabis Commission (OLCC) plans to drop the hammer on bad actors in the regulated Oregon market. Or so the Commission announced in a stern news release on Friday, July 29 (the “Release”). The Release is titled “Commissioners plan to tighten ‘change of ownership’ option.” For good effect, it is subtitled “Bad actors won’t get an easy off-ramp to sell their business.” Sounds pretty serious.

We’ve been waiting for this release to drop. Over the past year or so, we’ve watched OLCC case presenters take more aggressive positions in settlement talks following any notice of proposed license cancellation. The Commission is also giving stronger scrutiny these days to so-called “surrender to sell” transactions, especially where the seller will hold any sort of financial interest in the buyer licensee after closing (note: “financial interest” in this context is construed more broadly than in regular old licensing).

For anyone unfamiliar with how “surrender to sell” transactions work, the OLCC historically has allowed a licensee charged with serious offenses to “sell” their license interest to an unrelated third party– if certain criteria are met. The mechanics are simple. The OLCC and the subject party enter a stipulated settlement agreement, where the subject party gives up its right to an administrative hearing and accepts certain deadlines to find a replacement licensee (a buyer). If a buyer is found, lawyers like me may be called upon to draft up an asset purchase agreement and related sale documents. And if the buyer’s application is successful, the “bad actor” gets paid on their way out the door.

I’ll be interested to see how industry feels about this policy change. On the one hand, the Oregon market is struggling mightily. Flower prices are depressed due to production overcapacity and declining retail sales. Inflation is taking a toll on everything from wages to investment, and the classic struggles around taxation, banking, etc. continue unabated. All of this makes for an extremely competitive environment. As such, a further culling of licenses would serve the non-bad actors.

On the other hand, you have industry distrust around regulatory flex. Licensees only recently enjoyed enforcement reform gains at the legislative level, as well as administrative programs like “fix it or ticket” and Verification of Compliance (VOC). These changes were borne of industry complaints that licensees “deserve to be treated like businesses to be regulated, not criminals to be caught.” In a broader sense, many licensees will not welcome OLCC bearing down.

Our general advice–of course, as always–is to follow the rules. If you don’t want to do that, the OLCC market isn’t the right environment for your business (and neither is medical marijuana; and neither is hemp). If you follow the rules, you really don’t have to worry about OLCC compliance programs and pronouncements. Same deal if you’re really big– at least in this writer’s opinion. But that’s a story for another day.

If you find yourself in the OLCC crosshairs, give us a call. We’ve been doing this stuff forever.

In the meantime, check out the related blog posts below:



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International Hemp: Guyana Takes the Stage

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International hemp is big business. There are all kinds opportunities around import, export, production, processing, and sale of international hemp and hemp products. We handle these inquiries on a weekly basis, and have since 2018 when the federal government legalized the cultivation of hemp with the passage of the 2018 Agricultural Improvement Act (“2018 Farm Bill”).

Although the 2018 Farm Bill has led to bigger and better international hemp opportunities with import and export, it’s done nothing to improve the legal status of cannabidiol (“CBD“) from a federal perspective. Here in the U.S., the manufacture and processing of hemp into CBD is a robust industry that makes its home in a legal penumbra because of the Food and Drug Administration (“FDA“). We’ve written about the topic many times–see here, here, and here. Even though various states permit CBD in food and beverages, the FDA isn’t a fan and takes the position that CBD in food and beverages violates the Food, Drug, and Cosmetic Act.

Increasingly, the U.S. isn’t really a world-leader on things like the federal legalization of cannabis or progressive reform around international hemp and CBD on the federal level. Other countries are surpassing us (see here). One of those countries is now Guyana where the small South American nation recently legalized industrial hemp and “hemp related products”.

Guyana takes the stage

With the passage of the Industrial Hemp Act 2022, the Guyana Parliament established the Guyana Industrial Hemp Regulatory Authority, which will be the governing licensing body in the country for makes of hemp and hemp related products.

“Hemp” now means any part of the cannabis plant with not more than .3% THC (just like here in the U.S.), and hemp has been removed from Guyana’s Narcotic Drugs and Psychotropic Substance (Control) Act. The Governing Board of the Authority is made up of, among others, Ministers from the Ministries of Agriculture, Health, and Home Affairs. The Board will be the arm of the Authority that oversees all licensing, enforcement, and hemp-related regulations.

Interestingly, the Board will be empowered to explore and implement things like “the number of licenses to be issued”, “collaborating with national, regional, and international organizations on matters related to industrial hemp,” import and export, including for scientific purposes, and “developing standards and prescribing codes of practice for licensees”.

Hemp licenses in Guyana

There are three kinds of licenses in Guyana for hemp–cultivation, manufacturing, and research. If you want a hemp license in Guyana, generally, then you must:

  1. be over the age of 18;
  2. not be filing for or in banktupcy; and
  3. be of “sound mind”.

All license applicants must also submit criminal background reports at the time of application. Further, for a cultivation license, you must be a resident of Guyana (as an individual), and if the applicant is a company, it must be registered to do business in Guyana.

Cultivation applicants must also “own, lease, or enter into a Sharecropper Agreement” for purposes of cultivation. And they must also have “proof of financial capability and an established seed or crop supply, whether individually or jointly with others” to meet the cultivation limits of a given license. Functionally, before planting, all hemp seeds or plants have to be tested to ensure that they do not contain more than .3% THC.

Manufacturing licenses will also be available, and they allow the applicant to undertake a variety of manufacturing activities including, but not limited to, the “processing of raw hemp materials into extracted or isolated products or the processing and manufacturing of industrial hemp related products including foods, textiles, furniture, medicines, and cosmetics . . .” Once issued, manufacturing licenses are valid for 15 years.

Licensees cannot hold more than one of each license type. All licenses outside of cultivation are valid for three years. And no acreage limit has been set yet for cultivation licenses. However, the Board may limit that in the future, and certain geographic areas across the country will be specifically designated for cultivation.

Regarding the advertising and labeling of hemp-related products, Guyana make no mention about being unable to make health-related claims (like here in the U.S.). The lone prohibition is that hemp products cannot be labeled or advertised as “psychotropic substances”.

Going forward

In the end, it’s great that Guyana is recognizing the legality of hemp cultivation and the processing and production of hemp products. The country is known for its natural resources, including its rainforests, sugarcane plantations, rice fields, and bauxite and gold reserves. I have no doubt that it will only be a matter of time before it adds industrial hemp to that list.



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The US Health Agency That Helps Block Cannabis Research Wants to Know Why There Is No Cannabis Research Getting Done

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no marijuana research

US Federal Health Agency Wants To Know What Barriers Are Hindering Marijuana Research

 

Last week, the National Institutes of Health (NIH), a federal health agency in the US, published a request for information, reports Marijuana Moment.

 

Entitled: “Investigators’ interests in and barriers to research studies on the health effects of cannabis and its constituents,” the notice states that the NIH acknowledges that 8 of their agencies are cooperating with the new efforts to determine what exactly is hindering research on the current Schedule 1 status of marijuana. They also want information on the limitations known about the products that are available for clinical trial use.

 

“Cannabis has been used medicinally for over 3,000 years,” explains the NIH. “Recently, there has been growing interest from health care providers and the public in the potential medicinal properties of cannabis-related products,” it reads.

 

Despite the fact that marijuana has been legalized in a majority of states (and continues to grow), plus the Food and Drug Administration has already approved the distribution and use of cannabinoid-based medications for certain conditions, the government’s stance on marijuana remains the same; as the NIH says, there is “often inadequate scientific research to support the benefit of their intended use” even in states where the plant is legal.

 

The NIH is the primary federal health agency in the United States, with 27 various institutes underneath them. The notice indicated that there were 8 that were joining the efforts such as others that want to increase studies in minor cannabinoids and even terpenes. This is not the first time that the NIH posted a notice about more research into cannabinoids, but researchers and scientists are still facing numerous hurdles.

 

Bureaucratic Hurdles?

 

It’s no secret that researchers in the United States who wish to study cannabis are frustrated. The cannabis industry in the country is booming to say the least, and there are thousands of products to study. However, the federal status of marijuana prevents them from doing so.

 

A majority of studies focusing on marijuana’s therapeutic benefits have done so using synthetic versions of cannabinoids, and there are only a handful of studies analyzing the benefits of whole plant medicine for the management of chronic pain. Unfortunately, the lack of clinical studies analyzing cannabis that has actually been purchased from dispensaries is astounding.

 

Sure, consumers can self-medicate and do their own research. There’s not much of an impact here for recreational users. But the benefits of clinical studies would be tremendous for medical patients: clinical studies could save lives discussing dosage, exact cannabinoid therapies, specific ailments, potential side effects, and much more. Not all brands take the liberty of providing their customers with a Certificate of Analysis, and countless more take advantage of the fact that THC and CBD products are not regulated.

 

Without third-party laboratory testing, there’s no way for us consumers to really know what’s in each cannabis product we buy in a dispensary. Even when we buy flower, it would be helpful to know the cannabinoid and terpene profile as well as if there are any potentially dangerous contaminants such as pesticides, residual solvents, and metals. These are critical for medical marijuana patients or those who already have an immunocompromised system.

 

When scientists conduct clinical analysis of products the way they do with legal medications, we can have peace of mind that what we are buying is actually clean medicine.

 

“NIH is seeking to better understand these issues and potentially develop strategies to overcome them,” said the request for information. “To that end, NIH seeks input from the research community regarding these and additional barriers, scientific interests, and needs related to therapeutic cannabis or cannabinoid research,” it continues.

 

 

 

Poor Quality Cannabis Being Researched

 

For several years now, scientists and researchers have been complaining about the potency and quality of marijuana grown at the University of Mississippi. It’s the only legal type of cannabis that they can study, thanks to their contract with the National Institute on Drug Abuse (NIDA).

 

The cannabis that comes from the University of Mississippi is highly processed, has much lower THC than what is available in legal marijuana markets, and researchers have even come across mold growth. On top of that, the weed is immediately dried after it’s harvested then stored for months, sometimes even years, in a freezer. Anyone can tell you that freezing marijuana is not the best way to preserve its quality – and this is what the researchers are being forced to study.

 

The DEA has approved new manufacturers but the NIH wants to obtain a new contractor to supply marijuana for studies. Even then, researchers should legally be able to obtain cannabis sold in licensed dispensaries so that the findings of studies are more accurately represented.

 

Researchers interested in studying the plant will still need to get the green light from not one but three federal agencies, plus they have to fund it. Because of this, consumers and medical providers alike struggle to get an accurate picture of the benefits as well as potential risks of the vast variety of marijuana products that are legally available out there.

 

It seemed promising when President Joe Biden signed a bill last year that had provisions enabling researchers to study real marijuana that is available at state-legal dispensaries. Unfortunately, the bill focused too much on the legislation’s long term plans instead of immediately providing scientists with access to the plant.

 

Actions from the top are urgently needed to make these necessary changes for the entire industry, consumers, and medical providers.

 

HOW THE GOVERNMENT BLOCKS CANNABIS RESEARCH, READ ON…

NIDA BLOCKS CANNABIS RESEARCH

HOW THE NIDA BLOCKS MEDICAL CANNABIS RESEARCH OVER AND OVER!



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So You Want to Be a Cannabis Lawyer

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I like being a cannabis business lawyer. It took a while for me to get there. I certainly didn’t think I would be doing this while I was in law school, or at the start of my career. Like a lot of things in life, it just sort of… happened. And I’ve learned a lot along the way. Here are three areas of advice for anyone looking at a career advising cannabis businesses.

This is what I always told the law students passionate about the space. Learn business transactional law, or civil litigation, or real property, or intellectual property, or whatever regime seems interesting to you for the purpose of advising cannabis businesses. If you’re a new lawyer and you gain exposure to civil litigation–inside or outside of the cannabis space–this is especially valuable. You’ll be a much better transactional lawyer in the end.

In the early days of cannabis lawyering, new lawyers could get away with advising primarily on compliance and conflicts in law issues. Those days are gone. Most of the state regimes are relatively settled, and the incoming states are mostly variations on a theme. You may see a rush of compliance and licensing work at the outset, but it’s tough to make a career out of that.

As to criminal law work, there’s still a need for those services (unfortunately). And there probably always will be, even after cannabis is decriminalized at the federal level. But it’s best to pick a lane. To analogize, if someone were arrested for cannabis possession in an unfriendly jurisdiction, and I were required to represent that person, I’m guessing they’d end up with 10 years in prison if the maximum sentence were 5. I simply have no idea what goes on in drug court or how any of that works. I’ve seen the reverse of this play out many times with criminal lawyers doing business deals.

Get to know regulators

Notwithstanding that first piece of advice (“don’t try to build a career off of compliance”), it’s a good idea to get to know your regulators. Invite them to speak at things, sit on committees, drop a line to weigh in on anything they may find useful– even when you don’t exactly need anything. Some of this is easier in smaller jurisdictions than large ones, but reaching out never hurts. The same advice holds true, I imagine, for lawyering in any heavily regulated industry.

If you’re reasonable and solutions-oriented, regulators may come to trust you. You’ll get a feel for where to go and what to say, how to get valuable information, how to help shape rules and policy, and how to cut a deal. That’s not to say you must accept every position a regulator takes. They definitely get it wrong sometimes. Since the early days in Oregon cannabis, for example, we’ve told OLCC we expect to get along and work together, and that we may sue them here and there. That’s just how it works. People get it.

Be professional

You don’t have to wear a suit and tie every day (or maybe ever). Sometimes it may be awkward or inappropriate to do so, in fact. You also don’t have to wear cannabis pins or take strong positions on issues like indoor versus outdoor production. The key is to know your audience in each setting. More than that, your analysis, advice, and adherence to the rules of professional conduct must remain above reproach. Cannabis businesses pay lawyers a lot of money and they deserve value in return.

The rules of professional conduct are a big deal when it comes to cannabis lawyering. For attorneys, cannabis is an outlying industry on everything from a lawyer’s ability to advise in the first place, to the endless client conflicts analyses you will need to run in the walled garden of a state cannabis industry. Beyond the rules themselves, you will end up dealing with very informal (and unusual) clients from time to time. Some of these clients will not appreciate the need for basic business formalities, and communications with those clients and counterparties can be challenging. It’s up to you to make it work, or to walk if you have to (and if you can).

Finally, I still think some stigma still exists with cannabis business lawyers. A lot of people have issues with lawyers; others have issues with cannabis; still others have issues with both. When I left a well regarded law firm to do this work early on, a lot of people, and especially other lawyers, seemed to look down on the work. I still think that’s true some extent, and more so for lawyers in conservative geographies (I’m thinking of my home state of North Dakota right now, which may finally come online for adult use cannabis this year). Anyway, those perspectives are just part of lawyering in the industry: hopefully you’re doing it because you like it or you want to make a living. Not to win admirers.

______

All in all cannabis lawyering isn’t for everyone. However, it’s a dynamic field and it’s an interesting place to be– especially where most other areas of law are comparatively static. Over the past five or six years, it also has been encouraging to see the level of professional services rise to meet the needs of industry. In the next five or six years, it seems certain that many opportunities will arise for cannabis industry lawyers all around the U.S., and even internationally.

Hope to see you on a deal.



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