Marijuana Law and Policy

The Ohio medical marijuana industry is ready to go live, with most of the pieces in place to complete the regulatory structure passed by the Ohio General Assembly in September of 2016. However, like the medical marijuana industry in general, the Ohio market will have a difficult time accessing banking services. This is because while marijuana may be legal under state law, it is still illegal under federal law, and thus banks are reluctant to offer banking services to the industry for fear of violating federal banking laws and rules to which the banks are subject.

However, there are signs in Ohio that banks may be beginning to give the medical marijuana industry a fresh look. Recently, Wright-Patt Credit Union in Dayton, through its board of directors, gave approval for the credit union to begin offering limited services to the medical marijuana industry. At this point, the nature of the services and what they might include have not been specified. Additionally, the Ohio Department of Commerce, through its Division of Financial Institutions, recently issued guidance for banks contemplating getting into the industry.

The decision by Wright-Patt, while isolated in Ohio, reflects a national trend in the industry. By the end of March 2018, 411 banks and credit unions in the U.S. were “actively” operating accounts for marijuana businesses, according to a report prepared by the Treasury Department’s Financial Crimes Enforcement Network (FinCEN). That’s up more than 20% from when President Trump took office.

The business reasons for the timing of the announcement are not entirely clear. Banks and credit unions in other states, mostly state chartered, have quietly served the industry to varying degrees for years. Some banks do increased due diligence on their marijuana clients to ensure compliance with a FinCEN memo of February 2014, while other banks may turn a blind eye. What is becoming clear is that as more states pass laws legalizing marijuana and the federal climate for rescheduling marijuana under the Controlled Substances Act and re-examining cannabis related issues continues to improve, many financial institutions want to be ready to jump into a large and growing marketplace that is woefully underserved.

 

Last week, a closely-watched trial involving a Colorado cannabis cultivator sued by a neighbor ended with a jury finding in the cultivator’s favor. In Reilly v. 6480 Pickney, LLC, the Reillys complained that their property’s value had decreased due to odor emitted from the cultivator’s property (an unfortunate, if not new, problem in legal cannabis markets) and increased crime in the area. Rather than file a state based standard nuisance claim, however, the Reillys filed claims under the federal Racketeer Influenced and Corrupt Organizations Act (“RICO”).
 
RICO was originally enacted in the 1970s to give law enforcement another tool to fight organized crime. Civil RICO lawsuits provide remedies where plaintiffs allege they have been harmed by “racketeering activity,” which, arguably, includes cultivating marijuana (because it remains illegal to do so under federal law). 
 
Last year, a ruling from the Tenth Circuit Court of Appeals allowed the Reillys to take their civil RICO case to trial, though the court noted that they still had to prove that the cultivator’s activity caused their property value to be diminished. In a landmark victory for the cannabis cultivator, though, the jury found that the Reillys did not make those required nuisance related showings. The jury’s verdict comes after a federal district court in Oregon refused to allow a civil RICO claim to proceed.
 
RICO suits are attractive to plaintiffs because, if they succeed, the plaintiffs can obtain treble damages and attorney fees. Perhaps that is why there appears to be a dedicated effort to use RICO in cannabis-related litigation. Given the increased risks associated RICO litigation, coupled with the fact that more of these cases are likely to be filed in the future, cannabis companies should be prepared to vigorously defend against these claims.

On January 4, 2018 the Department of Justice rescinded Obama-era guidance to United States Attorneys, including the 2013 memorandum issued by then-Deputy Attorney General James Cole, calling previous guidance “unnecessary” in light of general principles governing federal prosecutorial discretion. Up until this point, the 2013 Cole Memo was widely viewed as the biggest reason state-legal marijuana programs to flourished over the past 5 years, as it directed United States Attorneys to consider distinct federal enforcement priorities when deciding whether to utilize finite government resources to prosecute state-legal marijuana businesses or whether to rely on state and local law enforcement to address those concerns. Click here to read the full client alert.

Today, the Ohio Department of Commerce announced the 12 Level I medical marijuana cultivator provisional license recipients (with one recipient having a possibility of choosing from two different locations) and the 12th recipient of the Level II cultivator provisional license.

In awarding the medical marijuana cultivator licenses, the Department appears to have placed a large amount of emphasis on experience, awarding many of the licenses to companies who have licenses in other states. The emphasis on experience was one of the reasons why the Department declined to include a residency requirement during the application process, which riled many Ohio medical marijuana advocates.

Level I cultivators may have up to 25,000 square feet of cultivation area in a growing facility, with the ability to increase that area up to 75,000 square feet with approval from the Department of Commerce.  Level II cultivators may have an initial cultivation area of up to 3,000 square feet, with an option to increase to up to 9,000 square feet with prior approval. The winners will have nine months from the date they were notified of selection for a provisional license to obtain a certificate of operation by passing all applicable inspections.

The winning applications may be seen here:  https://www.medicalmarijuana.ohio.gov/cultivation.

To learn more about Ohio’s medical marijuana industry, you can reach out to one of the firm’s Marijuana Law & Policy attorneys.

Two recent events serve as continuing examples of how attitudes towards marijuana are changing in the U.S. The National Football League (“NFL”), which strictly enforces its drug policies, may be changing its mind on medical marijuana. The NFL Players Association (“NFLPA”) has already been working on its own study for the potential use of medical marijuana for pain management. On August 1, 2017, the NFL wrote a letter to the NFLPA indicating its willingness to work together to study the potential use of marijuana for pain management and for acute and chronic conditions for players.

Further, former players have come out in favor of the use of marijuana for medical reasons. For example, on July 24, 2017, former New York Jets Defensive End Marvin Washington was one of five plaintiffs in a lawsuit filed in the Southern District of New York against Attorney General Jeff Sessions, the Department of Justice, and the Drug Enforcement Agency. See Washington, et al. v. Sessions, et al., No. 1:17-cv-05625 (S.D.N.Y.). The lawsuit seeks to remove marijuana from the list of Schedule I drugs, as it is currently classified under the Controlled Substances Act. Marijuana is classified in the same category as heroin, LSD, and Quaaludes, to name a few. However, drugs such as methamphetamine and cocaine are classified as Schedule II drugs and are subject to less strict enforcement.

The time between “legalization” and implementation seems to have caused confusion about the current use of medical marijuana in Ohio. HB 523 became “law” on September 28, 2016. Regulations for cultivators are set to be finalized by May 6, 2017. Regulations for physicians, testing laboratories, processors, patients, caregivers, employees, and dispensaries are scheduled to be finalized on September 8, 2017.

There is at least one medical center where a physician or physicians issue “recommendations” for medical marijuana to patients who are found to have a “qualifying condition” under H.B. 523. This center also issues an “affirmative defense card.” Since none of the procedures are in effect at this time, this practice presents several issues.

One issue is whether a physician can recommend marijuana to patients before he/she has a certificate to recommend. Currently, there are no final regulations in place for physicians to obtain a certificate to recommend medical marijuana. Additionally, according to H.B. 523, a patient can only legally obtain medical marijuana after receiving a written recommendation from his or her doctor that certifies a certain number of criteria are met. There are currently no regulations in place that would enable a physician to issue such a recommendation. Thus, it would seem to be currently impossible for a “certificated” physician to lawfully “recommend” the current use of medical marijuana in Ohio.

Under these circumstances, no individual can currently possess an “affirmative defense card” that would be valid in Ohio. Perhaps the “affirmative defense card” issued by this medical center is effective in states that have reciprocity with other medical marijuana states? The closest of these states to Ohio is Michigan. In Michigan, a visiting qualifying patient can only obtain medical marijuana if that patient has an ID card or its equivalent “issued under the laws of another state, district, territory, commonwealth, or insular possession of the United States.” Since the affirmative defense card is not issued by the State of Ohio, as that program is not yet operational, it is doubtful that Michigan dispensaries can legally dispense marijuana to patients who have been issued an ID card by a private Ohio medical center.

If Michigan dispensaries do dispense medical marijuana to Ohio patients with a private “affirmative defense card,” another related issue is whether patients are violating federal law by bringing marijuana across state lines to Ohio. Former Deputy Attorney General, James Cole, issued a memorandum to all United States Attorneys on August 29, 2013 to provide guidance on the proper prioritization of marijuana enforcement. One enforcement priority, where the Department of Justice may prosecute, is if there is diversion of marijuana from states where it is legal to other states.

Ohio has enacted a law that set forth a process that will make medical marijuana legal, but the details of that legalization are being phased in over a two-year period. This seems to have resulted in marijuana being recommended and dispensed to, and consumed by, citizens of the State of Ohio before these practices are lawful. We are not aware of any criminal prosecutions arising out of this situation, however, and we do know that individuals are acting as if they believe it is legal to consume medical marijuana in Ohio. We would say it is not.

Marijuana w Black BackgroundPresident-elect Donald Trump has nominated Senator Jeff Sessions from Alabama as the new Attorney General. Senator Sessions has previously expressed his opposition to the legalization of marijuana. Therefore, it seems that the Cole Memo may be revisited. The Cole Memo is a major reason why marijuana continues to be legal medically and/or recreationally in 29 states, but still illegal under federal law.

On August 29, 2013, Deputy Attorney General James M. Cole published Guidance Regarding Marijuana Enforcement (the “Cole Memo”). In light of the legalization of medical and recreational marijuana occurring in many states, the Cole Memo sought to clarify the Department of Justice’s (“DOJ”) enforcement priorities. Some of the most important DOJ enforcement priorities with respect to marijuana are the prevention of:

  • Distribution to minors
  • Interstate movement
  • Use of firearms in connection with marijuana
  • Drugged driving
  • Organized crime

Outside of the above enforcement priorities, the DOJ relies on state and local law enforcement to address marijuana activities.

However, under the incoming Attorney General, the Cole Memo might be revisited. Senator Sessions has been on record as saying there is a need to foster “knowledge that this drug is dangerous, you cannot play with it, it is not funny, it’s not something to laugh about… and to send that message with clarity that good people don’t smoke marijuana.” Further, he has also been critical of President Barack Obama even mentioning marijuana:  “You can’t have the President of the United States of America talking about marijuana…You are sending a message to young people that there is no danger in this process. It is false that marijuana use doesn’t lead people to more drug use. It is already causing a disturbance in the States that have made it legal.”

One potential way to steer clear of Senator Sessions’s statements that marijuana is dangerous and addictive might be to focus on cannabidiol (“CBD”), and not tetrahydrocannabinol (“THC”). THC is the main psychoactive component of marijuana, and one of the reasons it might be labelled “dangerous.” However, CBD has no psychoactive effects and is used for relief from seizures, anxiety, and inflammations.

In the end, because marijuana is now legal medically and/or recreationally in 29 states, it is possible incoming Attorney General Jeff Sessions will be hesitant to abrogate the Cole Memo and undo all of the progress in this arena, and shutter nascent small businesses with the resultant employment loss and loss of tax revenue. However, based on his prior statements and stances, we are in uncertain times.

Marijuana PlantMarijuana ballot initiatives passed in seven out of nine states on November 8, 2016. California, Massachusetts, and Nevada, states where medical marijuana is already legal, passed ballot initiatives to legalize recreational marijuana. A similar initiative in Arizona failed. Maine’s effort to expand beyond medicinal to legalize recreational marijuana is still too close to call. Arkansas, Florida, and North Dakota all voted to legalize medical marijuana. Montana voted to loosen restrictions on the existing medical marijuana laws.

The results were as follows:

Recreational

  • Arizona – 52% No, 48% Yes
  • California – 56% Yes, 44% No
  • Maine – 50% Yes, 50% No (local outlets are declaring victory for legalization, but it is still too close to call)
  • Massachusetts – 54% Yes, 46% No
  • Nevada – 54% Yes, 46% No

Medical

  • Arkansas – 53% Yes, 47% No
  • Florida – 71% Yes, 29% No
  • North Dakota – 64% Yes, 36% No

Loosened Restrictions on Medical Marijuana Laws

  • Montana – 57% Yes, 43% No

Medical marijuana is now legal in 29 states and the District of Columbia. In seven of those states and the District of Columbia, with Maine pending, recreational marijuana is also legal.

legalization-go-feds-09-01As the November 8, 2016 election deadline looms, marijuana legalization in one form or another is on the ballot in nine states throughout the nation. Seven states seek to expand what is already legal and two states seek to enter the medical marijuana field. Below is a list of what is on the ballot and where the current polling stands in these states.

Legalization of Recreational Marijuana

  • Arizona – Although medical marijuana is already legal, Proposition 205, which would legalize recreational marijuana for adults 21 years or older and institute a 15% tax, has a 50% approval among registered voters against a 40% opposition, while 10% of voters are undecided, according to a recent Arizona Republic/Morrison/Cronkite News poll.
  • California – Medical marijuana has been legal in California since 1996. Proposition 64 would legalize recreational marijuana for adults over 21 and establish a 15% sales tax at the retail level and a $9.25 per-ounce cultivation tax.  Proposition 64 has a 60% approval in a Field Poll/Institute for Government Studies against a 31% opposition, while 9% are undecided.
  • Maine – Medical marijuana has been legal in Maine since 1999. Question 1 is a ballot initiative to enact the Marijuana Legalization Act which legalizes recreational marijuana and allows individuals over the age of 21 to possess, transport, transfer, or furnish 2.5 ounces of marijuana or 6 immature plants or seedlings and imposes a 10% retail tax. In a Portland Press Herald poll, 53% of registered voters would vote in favor of Question 1, 38% would vote against, and close to 10% are still undecided.
  • Massachusetts – Medical marijuana is legal in Massachusetts. Voters will decide on Question 4, The Regulation and Taxation of Marijuana Act, which would legalize recreational marijuana and allow people 21 and older to possess up to 10 ounces of cannabis and to grow up to six plants for non-commercial purposes. According to a new poll by WBUR/MassINC Polling Group, 55% are in favor of Question 4.
  • Nevada – Nevada already has legalized medical marijuana. Question 2 is a legislative initiative to legalize recreational marijuana by allowing a person 21 or older to purchase, cultivate, possess, or consume up to an ounce of non-concentrated marijuana or 1/8 of an ounce of concentrated marijuana, to cultivate up to six plants, and establish a 15% excise tax on wholesale sales of marijuana. A recent poll by Suffolk University showed that 57% are in favor of the initiative, while 33% oppose.

Expansion of Medical Marijuana

  • Florida – Florida already allows patients with severe seizures to obtain low-tetrahydrocannabinol (“THC”), high cannabidiol (“CBD”) oils, and terminally ill patients to obtain full scale medical marijuana. Amendment 2 to the Florida Constitution would greatly expand the list of allowed medical conditions and requires a 60% super majority to pass. Of the eight polls conducted since January of 2015, all eight show an approval rating of at least 60%.
  • Montana – Montana legalized medical marijuana in 2004. However, Senate Bill 423, which went into effect on August 31, 2016, implemented laws that banned medical marijuana advertisements, limited dispensaries to three patients, and required a review of doctors who prescribed medical marijuana to more than 25 patients per year. Now, Initiative 182 is on the ballot and it would repeal the three patients per dispensary limit and the doctors’ review. Although there is no current polling on Initiative 182, over 65% of voters support allowing dispensaries based on an August 2015 poll conducted by Public Policy Polling paid for by Marijuana Policy Project.

Legalization of Medical Marijuana

  • Arkansas – Arkansas has two competing medical marijuana ballot initiatives, Issue 6 and Issue 7. Issue 6, the Arkansas Medical Marijuana Amendment, is an amendment to the Arkansas state constitution, while Issue 7, the Arkansas Medical Cannabis Act, is an initiated state statute. The two issues also differ in that Issue 7 would allow patients to grow their own marijuana and Issue 6 would not. A 2012 medical marijuana ballot initiative narrowly lost, and a major organizer of that effort believed the reason to be the “grow your own” provision. He split off from the Issue 7 organizers and formed the competing Issue 6 that doesn’t contain the “grow your own” provision. The Talk Business & Politics-Hendrix College poll found that 49% favor Issue 6 and 43% oppose. Further, 36% favor Issue 7 while 53% oppose.
  • North Dakota – Initiated Statutory Measure 5, the North Dakota Compassionate Care Act, would legalize medical marijuana in North Dakota not to exceed three ounces per patient, and all dispensaries would have to be vertically integrated non-profit entities with not more than 1,000 growing plants and 3,500 ounces (218.75 pounds) of “usable” marijuana at any given point. Like Montana, there are no recent polls regarding medical marijuana in North Dakota, but a 2014 poll by the University of North Dakota College of Business and Public Administration found that 47% of voters supported legalizing medical cannabis, with 41% opposed and 9% neutral.