Cannabis Law Group's Medical Marijuana Legal Blog

July 11, 2022

California Cannabis Tax Cuts May Help Ailing Industry

With the state substantially altering its cannabis tax structure, the California cannabis industry is expected to get a substantial tax break, which lawmakers are hoping will boost the legal industry left lagging by competition with illicit sales, extensive bureaucracy, and heavy taxation. cannabis tax lawyer

If the effort is successful, there is a potential for its impact to be global, given that California’s marijuana market is not only the oldest but the largest in the world. Thus, its influence across the industry is oversized.

The taxation changes will effectively erase a tax on cultivation of marijuana (which had been the source of about 15 percent of state marijuana taxes – roughly $166 million as of last year). The changes were part of a larger state budget agreement, which is also going to carve out some tax credits for certain marijuana companies, as well as expand labor rights in the industry and switch collection of a state excise tax from distributors to retailers. The tax will be paused at 15 percent for three years, at which point the state will have the option to raise it again to make up for revenue lost by ending the tax on growers.

Programs that benefit from marijuana taxes include youth and environmental programs, and the state says it must balance out these needs with those of marijuana cultivators and shops that are burdened by heavy taxes and tight regulations. As our Los Angeles marijuana business lawyers are aware, many companies are treading water – if they aren’t drowning – because they’re in direct competition for sales with black market dealers that can sell their products more cheaply because they aren’t taxed or responsible for screening their supply for harmful contaminants. This year especially has been tough, given last year’s bumper crop contributing to oversupply.

Many smaller operators are likely to fail or consolidate before the tax credit goes into effect, but it’s nonetheless a welcome windfall for those in the industry. It’s been largely recognized as an operational burden, as it was paid out by growers prior to obtaining any revenue for sales. So even if that product never sold, cultivators were still getting taxed. Continue reading

June 25, 2022

Study: California Cannabis Companies 100% Compliant With ID Checks to Prevent Youth Purchases

By Cannabis Law Group

Marijuana retailers in the Golden State have been doing an an amazing job impeding underage access to cannabis. That’s according to a new study just published in the Journal of Safety Research. marijuana business lawyer

This is excellent news because one of the core points of opposition to legalization of recreational marijuana sales in California was the potential for rampant youth access. This analysis shows that California cannabis companies are doing more than paying lip service to the promise of avoiding this outcome. They are – both in policy and in practice – keeping minors away.

As our Los Angeles marijuana business lawyers can explain, being lax with policies and protocol intended to block those under 21 from accessing cannabis can result in major legal headaches for pot shops. Adults over 21 can purchase, possess, and use small amounts of marijuana legally in this state. But California Health & Safety Code 11361 prohibits adults from selling, giving, or offering marijuana to a minor, inducing a minor to use marijuana, or employing a minor to transport, sell, or give away marijuana. To do so is a felony punishable by between 3-5 years in prison. The exact penalty depends on the age of the minor, the circumstances of the case, and the criminal history of the person accused.

According to the report, the researchers sought to analyze the industry’s compliance with state-level personal identification requirements in California. So they chose 50 randomly-selected retail outlets to determine if one could get in without presenting ID. But 100 percent of the time, the shop required ID be shown, and refused entry to anyone without identification showing they were older than 21.

The consistency of this compliance was something researchers noted with surprise – but it’s not all that shocking to our marijuana business lawyers, considering the penalties lawful operations face if they break the law. Retailers face being shut down completely for illegal activity if they allow access to youth. Police are allowed (and have been known to) use underage decoys to test cannabis business compliance with these rules. That’s why most often, licensed shops require identification upfront, before a person is even allowed into the main portion of the store. Continue reading

June 16, 2022

Feds Want Banks’ Marijuana Business Data to Bust Money Laundering Schemes

By Cannabis Law Group

Federal authorities with the U.S. Treasure Department want banks to begin collecting – and turning over – data from their marijuana clients so investigators can uncover potential money laundering schemes. cannabis money laundering lawyer

Although our Los Angeles marijuana business lawyers know this news might cause wariness among those in the pot industry, it’s worth pointing out that such data is already gleaned from businesses in other industries, such as convenience stores, car dealers, liquor stores, and casinos. It may in fact by a sign that the federal government is starting (albeit at a snail’s pace) to recognize the state-legal cannabis market as legitimate.

The Treasury’s Office of the Comptroller of the Currency posted its notice in the Federal Register indicating that it plans to keep tabs on cannabis companies as part of its regular yearly filings required of banks. In addition to marijuana businesses, other markets of emerging interest to federal financial regulators are ATM operators and crypto asset traders. The Money Laundering Risk system used by the OCC boosts the ability of federal investigators and banks to flag and investigate potential money laundering risks.

Public comment on these proposed changes is open through early August.

We don’t know exactly how information gleaned from those bank-submitted Risk Summary Forms are analyzed, but the notice indicates the data is used to help authorities better pinpoint those that “may pose heightened risk” of money laundering activities.

As of last September, it was reported there were more than 750 banks and credit unions actively serving cannabis company clients. That was an uptick of 7 percent since the previous quarter.

Within the last year, the U.S. Census Bureau also began gathering information on state government revenues generated from state-legal marijuana. Also, the U.S. Economic Classification Policy Committee issued a recommendation to include marijuana companies as an official designation within the North American Industry Classification System. This system helps the government keep tabs on market and employment information on industries throughout all of North America. Continue reading

June 8, 2022

Off-the-Clock Cannabis Use Employment Bill Nears Passage in California

By Cannabis Law Group

A California bill that would ban discrimination of employees who use cannabis off-the-clock has passed the State Assembly and is now on its way to the State Senate. employee cannabis discrimination

Assembly Bill No. 2188 calls for revision of the state’s Fair Employment and Housing Act (FEHA) – specifically the provision that deals with employment antidiscrimination. It would make it unlawful for employers to take adverse employment action against adult applicants or employees based on the individual’s use of cannabis off the jobsite and while not working. Employees who test positive for non-psychoactive cannabis metabolites in their urine, blood, hair, or bodily fluids could not be discriminated against.

However, the law would not allow workers to be impaired by cannabis, use it at work, or violate employer rules in accordance with maintaining a drug-free and alcohol-free workplace, as outlined in California Health and Safety Code Section 11362.45. There would also be an exception for federal contractors, federal funding recipients, federal licensees required to maintain drug-free workplaces, and those who work in the building and construction trades. Any employer required by state or federal law to test employees for controlled substances would also be exempt.

As our Los Angeles marijuana lawyers can explain, if this bill passes, it would be the first California workplace law protecting cannabis users. When voters legalized the use of medicinal marijuana in 1996, there was no baked in provision to protect off-duty, off-premises medical marijuana use. Further, even after recreational marijuana was legalized in the state in 2016, a 2018 California Supreme court ruling in Ross v. RagingWire Telecommunications, Inc. held that a person with disabilities who used medical marijuana was NOT protected under FEHA. AB 2188 would represent a marked shift from that position – and protect not just medical marijuana users, but also those who use recreationally. Continue reading

May 28, 2022

Can California CBD Retailers Carve a Lasting Competitive Advantage?

By Cannabis Law Group

CBD business operators currently have a sizeable economic advantage when it comes to their high-THC cannabis/extract counterparts. Thanks to the 2018 Farm Bill, their operations are legal, (in many jurisdictions) lightly taxed, and available through online sales. California CBD business

But what will it mean for the CBD side of things when/if marijuana products of all (or at least higher) THC levels becomes legal? Specifically, we’re talking about legalization of recreational marijuana. Here in California, as well as in 17 other states, Washington, D.C. and Guam, that’s already the reality. Yet CBD businesses continue not only to operate, but to thrive.

Our CBD business lawyers recognize the retail landscape may inevitably shift once recreational marijuana becomes legal, but we also believe in the strong likelihood the two can co-exist. Not everyone wants high-THC products – specifically in the realm of pet products, beauty topicals, and cosmetics. Plus, there are a fair number of people who aren’t heavy users of THC, but may still want to indulge occasionally in a way that is safe.

Recent analysis reveal that the legal recreational marijuana market dwarfs the CBD market – $50 billion to $8 billion. Still, neither sector’s size is anything to sneeze at.

In shops that sell high-THC cannabis products, CBD product sales have fallen in recent years (at least so far as California goes). But it’s our theory that when adult use recreational marijuana becomes legal, there will be an increase in sales for both – particularly in mature markets. Continue reading

May 14, 2022

Feds to Return $1.1 Million in Marijuana Fund Seizures

By Cannabis Law Group

The U.S. Department of Justice has agreed to return more than $1 million in seized marijuana funds to settle a lawsuit filed last year by a California cannabis business lawsuit alleging “highway robbery.” California civil forfeiture cannabis business

Funds at issue belonged to Empyreal Logistics, an armored car company based in Pennsylvania that was targeted by local and federal task forces in San Bernardino County in November and December. As our Los Angeles marijuana business lawyers understand it, the cars were carrying cannabis business cash in conjunction with legal marijuana operations in California. A task force comprised of the Federal Bureau of Investigation (FBI), the Drug Enforcement Administration (DEA), and the San Bernardino County sheriff’s office resulted in confiscation of cash.

While the company was operating legally under state law, the problem is the conflict with existing federal forfeiture laws, which open the door to target even compliant businesses. This is not new. Civil forfeiture law has enabled law enforcement agencies to seize millions from legal business proceeds – with threats to keep it. That’s precisely what happened here – and Empyreal Logistics sued.

May 3, 2022

California CBD Regulations Imminent

By Cannabis Law Group

For years, the State of California dragged its heels on regulating hemp-derived CBD. Numerous legislative efforts had failed time-and-again – until last year, with the passage of AB-45, signed by Gov. Gavin Newsom, which allowed for the inclusion of hemp and CBD extracts in food, beverages, cosmetics, dietary supplements, processed pet foods and more – assuming they contained less than 0.3% THC. However, nothing has really happened since – until now. Just a few days ago, the California Department of Public Health (CDPH) has proposed emergency regulations – mostly dealing with registration for industrial hemp manufacturers. California CBD lawyer

As our Los Angeles CBD business attorneys can explain, the key points in the emergency action are as follows:

Hemp product manufacturers will be granted different types of registrations, licenses, and/or authorizations from the CDPH, depending on the type of product they make. Those that make many different types of hemp/CBD products may need numerous registrations.
Out-of-state hemp/CBD manufacturers that want to import products to California will need to register with the CDPH.
“Enrollment and oversight authorization” is required at each location, lasts one year, and cannot be transferred.
Applicants requesting oversight authorization must provide detained information about not only the type of product, but its sources, extract methods, etc. These must be signed under penalty of perjury.
Fees are based on gross revenue accrued in the 12 months prior. New applicants will need to estimate their fees, and the formulas for calculating them are a bit complex. The fee structures for CBD product types and extract manufacturers are different.

These are just the primary points of the emergency action. It’s imperative that anyone in the CBD business or hemp business in California consult with their business attorney to make sure all registration, oversight, and licensure paperwork is properly drafted and timely submitted. Continue reading

April 27, 2022

Expect Candy Corp. Cases Against Cannabis Companies to Compile

By Cannabis Law Group

A recent lawsuit the maker of Skittles candy against a California-based cannabis company is indicative of a trend our Los Angeles cannabis attorneys expect to continue if marijuana business brands continue to copycat big-name candies. Los Angeles cannabis lawyer

In Wm. Wrigley Jr. Company v. Terphogz, LLC, the Chicago-based candymaker of Skittles launched an advertising campaign that involved the slogan, “Taste the Rainbow.” The advertising and packaging for their fruit-flavored candy shows the slogan with a large S logo. The company alleges that a cannabis company in Medocino is selling merchandize under the name Zkittlez, with illustrations of its goods advertised as looking very similar to the Skittles candy. On its website, which sells cannabis-related items and goods nationally (as well as to residents of Illinois, where plaintiff is based), it sells goods under the brand name Zkittlez, with the similar logo.

The defendants say they do not engage in cannabis sales, but rather license the intellectual property rights to cannabis companies in California nd Oregon. Defendants say they don’t engage in business in Illinois, run targeted advertising there, or run any companies or have professional contacts there. Three of the board members have never been to Illinois. Plaintiffs say, however, that prior to the website being shut down in May 2021, the Zkittlez branded goods were available for shipment to the entire U.S., with recorded gross proceeds somewhere around $32,000. The Wm. Wrigley Jr. Company is seeking treble (triple) damages for the alleged copyright infringement.

The defendants have tried to get the case dismissed. However in November, a judge rejected their motion to dismiss, meaning the case is continuing through the courts. Continue reading

April 17, 2022

Cannabis Company Alleges Government Overreach in Interstate Transport Lawsuit

By Cannabis Law Group

A cannabis money transport firm is suing the federal government in California Court over a civil forfeiture of cash by law enforcement officers in Kansas and California, who were working in conjunction with the U.S. Drug Enforcement Administration. As our Los Angeles cannabis company lawyers recognize, the case underscores the unique risked undertaken by those in the legal cannabis industry who are largely cut off from traditional banking resources, thanks to federal marijuana prohibition laws. Los Angeles cannabis business lawyer

The case is Empyreal Enterprises LLC v. United States, filed in January in the Central District Court of California.

Plaintiff is actually a Pennsylvania-based firm that offers cash collection and transport services to state-licensed medical cannabis businesses across the country. The company alleges that police and DEA agents in Kansas seized more than $165,000 in cash proceeds from a vehicle in Empryeal – money that belonged to a completely state-legal cannabis dispensary in Missouri that was being transported to another state.

Specifically, the plaintiff alleges numerous counts of something called ultra vires, which is legal jargon for actions that a government agency takes that go beyond its lawful authority. They further allege due process violations and violations of Fourth Amendment rights. The company is looking specifically to block the government from carrying out these stops, searches, and seizures from its property or possessions, which it alleges are not constitutional. An requested emergency order for that last was shot down by a U.S. District Court judge in January, but the case is still proceeding. Whether we’ll have a final decision on the matter this year remains to be seen, but it’s a case that will be worth watching as it progresses through the courts. Continue reading

April 7, 2022

1st Precedential U.S. Appellate Opinion on Out-of-State Cannabis Operators Expected This Year

By Cannabis Law Group

Residency requirements attached to state cannabis laws may not withstand challenges to constitutionality. The first precedential opinion on this issue is expected sometime in the next few months by the 1st U.S. Circuit Court of Appeal in Maine. Los Angeles cannabis lawyer

The case, Northeast Patients Group et al. v. Figueroa, involves a challenge to the law in Maine (existing in many other states) that contains an in-state residency requirement for license applicants and operators. California doesn’t have a residency requirement law, but operators here may be barred from expanding into other regions due to their state residency requirements. This ruling could impact that barrier.

Last year, the District Court of Maine struck down the state’s residency requirement, finding that it was a violation of the U.S. Constitution’s Dormant Commerce Clause, a measure intended to block discrimination against interstate commerce. However, attorneys for the State of Maine appealed that decision, finding the federal law isn’t applicable to the cannabis industry, as trade remains technically unlawful under U.S. law.

Similar challenges have been brought before in other courts, but as our Los Angeles marijuana business lawyers can explain, this is the first to reach a federal appellate court. A ruling by the First Circuit could have a substantial impact for the cannabis industry throughout the country. Continue reading