Although prosecution of state-legal sales by licensed and compliant cannabis businesses may not be a current priority for federal law enforcement, prosecution of corruption in the industry clearly is. Consider the following, all of which have occurred within the last three months: The indictment of alleged Rudolph Giuliani associates Lev Parnas and Igor Fruman for, among other things, a scheme to make illegal campaign finance donations in connection with a planned recreational marijuana business in Nevada (according to various reports, they were also interested in licenses in New York, California and Florida); An announcement by the FBI that, “As an increasing number of states change their marijuana legislation, the FBI is seeing a public corruption threat emerge in the expanding cannabis industry”;  A public request by the FBI that, “If you suspect a dispensary is operating with an illegally obtained license, or suspect public corruption in the marijuana industry, contact your local FBI field office”;  The September indictment of the Mayor…

The Federal Trade Commission (“FTC”) announced on September 10, 2019 that it sent warning letters to three unidentified companies for making claims regarding their products that contain cannabidiol (“CBD”), a compound derived from cannabis. The products, which range from “gummies,” and creams to oils, tinctures and capsules were advertised with claims that the products could treat serious diseases and conditions. In prior posts, we have mentioned Food and Drug Administration (“FDA”) regulation of drug claims. When claims are made regarding the diagnosis, cure, mitigation, treatment, or prevention of disease or that a product affects the structure or function of the body, the product’s intended use switches to being a drug –which requires pre-approval by the FDA based on detailed clinical evidence. The FDA and FTC both have some jurisdiction over marketing and advertising with the FDA taking the lead with respect to labeling under the Federal Food, Drug and Cosmetic Act (“FD&C Act”) and the FTC with respect to advertising under…

The uncertainty of the legal regime governing cannabis makes thorough due diligence on prospective business partners essential for those who want to ensure that they are complying with state law and minimizing their risks of federal investigation. In this two-part series, we first discuss some key compliance lessons from recent events and then offer a checklist for use when conducting due diligence on potential partners. Lesson I: Even “legal” companies sometimes violate state law “It’s o.k. – they’ve got a license.” But it may not be o.k. Several recent cases have shown that mere possession of a license is not a guarantee that a cannabis business will comply with all state laws. For example, Pennsylvania regulators recently revoked the cultivation permit of Agrimed Industries, a licensed medical marijuana grower, due to a “flagrant disregard” of regulations, “grossly mismanaged” plants and the possibility that some plants had been diverted to the black market. In Massachusetts, regulators recently froze the operations of licensee…

On June 20, 2019, the House approved by a vote of 267 to 165 an “Appropriations Minibus” amendment sponsored by Rep. Earl Blumenauer (D-Oregon) that would prohibit the Department of Justice (“DOJ”) from using appropriated funds to prevent any state, U.S. territories, or Washington, D.C. “from implementing their own laws that authorize the use, distribution, possession or cultivation of marijuana.”  This amendment builds on a prior appropriations rider, originally enacted in 2014 and renewed every year thereafter, which prohibits the DOJ from using federally appropriated funds from prosecuting state compliant medical businesses.  The current measure goes beyond the prior amendment by expanding protection to all state compliant businesses, medical and recreational.  On June 27, 2019, as a follow-on to the House vote, Sen. Ron Wyden (D Oregon) and Blumenauer introduced in the Senate and House respectively, the State Cannabis Commerce Act which provides in pertinent part: No funds authorized or appropriated by Federal law, and none of the funds in any…

The 2018 Farm Bill removed industrial hemp and all derivatives (including hemp derived CBD) from Schedule I of the Controlled Substances Act (CSA). It also provided that intentional violations of the Farm Bill, including unlicensed production of industrial hemp, must be reported to the U.S. Department of Justice (DOJ). But what can DOJ do with such reports if hemp trafficking is no longer a crime? Relevant Provisions The Farm Bill (officially entitled the Agricultural Improvement Act of 2018): Removal of Hemp from CSA defined hemp as “the plant Cannabis sativa L. and any part of that plant, including the seeds thereof and all derivatives, extracts, cannabinoids, isomers, acids, salts, and salts of isomers, whether growing or not, with a delta-9 tetrahydrocannabinol concentration of not more than 0.3 percent on a dry weight basis” (Section 297A); amended the Controlled Substances Act (CSA) to clarify that “marihuana” as used in the CSA does not include hemp as defined in the Farm Bill (Section…