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The 2020 Global Cannabis Regulatory Roundup

By Marguerite Arnold
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As a strange year heads to a final, painful finish, there have been some major (and some less so) changes afoot in the global world of cannabis regulation. These developments have also undoubtedly been influenced by recent events, such as the recent elections in the United States, state votes for adult use reform in the U.S. and the overall global temperature towards reform. And while all are broadly positive, they have not actually accomplished very much altogether.

Here is a brief overview of the same.

The UN Vote On Cannabis
Despite a wide celebration in the cannabis press, along with proclamations of an unprecedented victory by large Canadian companies who are more interested in keeping their stock prices high than anything else, the December 2 vote on cannabis was actually fairly indecisive.

Following the WHO recommendations to reschedule cannabis, the UN voted in favor of the symbolic move. Despite removing cannabinoids from Schedule IV globally, a regulatory label designed for highly addictive, prescription drugs (like Valium), the actual results on the ground for the average company and patient will be inconclusive.

The first issue is that the UN did not remove cannabinoids themselves, or the plant, from Schedule I designation. This essentially means that countries and regions will be on the front lines to create more local, sovereign policies. This is not likely to change for at least the next several years (more likely decade) as the globe comes to terms with not just a reality post-COVID-19, but one which is very much pro-cannabis.

In the meantime, however, the ruling will make it easier for research to be conducted, for patient access (for the long term), and more difficult for insurers to turn down in jurisdictions where the supposed “danger” of cannabis has been used as an excuse to deny coverage. See Germany as a perfect example of the same.

It is also a boon for the CBD business, no matter where it is. Between this decision and the recent victory in Europe about whether CBD is a narcotic or not (see below), this is another nail in the coffin for those who want to use semantic excuses to restrain the obvious global desire for cannabinoids, with or without THC.

The U.S. Vote On The MORE Act

While undoubtedly a “victory” in the overall cannabis debate, the MORE Act actually means less rather than more. It will not become law as the Senate version of the bill is unlikely to even get to the floor of the chamber before the end of the session – which ends at the end of this year.

The House voted 228 to 164 to pass the MORE Act.

That said, the vote is significant in that it is a test of the current trends and views towards big issues within the overall discussion, beginning with decriminalization and a reform of current criminal and social justice issues inherent in the same. The Biden Administration, while plagued with a multitude of issues, beginning with the pandemic and its immediate aftershocks, will not be able to push both off the radar. Given the intersection of minority rights’ issues, the growing legality of the drug and acceptance thereof, as well as the growing non-partisan position on cannabis use of both the medical and adult use kind, and the economy, expect issues like banking to also have a hope of reform in the next several years.

Cannabis may be taking a back seat to COVID, in other words, but as the legalization of the industry is bound up, inextricably, in economic issues now front and center for every economy, it will be in the headlines a great deal. This makes it an unavoidable issue for the majority of the next four years and on a federal level.

Prognosis in other words? It’s a good next federal step that is safe, but far from enough.

The European Commission (EC) Has Finally Seen The Light On CBD

One of the most immediately positive and impactful decisions of the last month was absolutely the EC decision on whether CBD is a narcotic or not.

This combined with the UN rescheduling, will actually be the huge boost the CBD industry has been waiting for here, with one big and still major overhanging caveat – namely whether the plant is a “novel” one or not. It is unlikely as the situation continues to cook, that Cannabis Sativa L, when it hits a court of law, will ever be actually found as such. It has inhabited the region and been used by its residents for thousands of years.

However, beyond this, important regulatory guidance will need to fall somewhere on the matter of processing and extraction. It is in fact in the processing and extraction part of the debate that this discussion about Novel Food actually means something, beyond the political jockeying and hay made so far.

Beyond this of course, the marketing of CBD now allowed by this decision, will absolutely move the topic of cannabinoids front and center in the overall public sphere. That linked with sovereign experiments on adult use markets of the THC kind (see Holland, Luxembourg and Denmark as well as Portugal and Spain right after that), is far from a null sum game.

Legal Challenges Of Note

The European Court of Human Rights

Against this changing regulatory schemata, court cases and legal decisions remain very important as they also add flavor to how regulations are interpreted and followed. The most important court case in Europe right now is the one now waiting to be decided in the Court of Human Rights at Strasbourg regarding the human rights implications of accessing the plant.

Beyond that, in Germany, recent case law at a regional social benefits court (LSG) has begun to establish that the cannabis discussion is ultimately between doctors and their patients. While this still does not solve the problem of doctor reluctance to prescribe the drug, barriers are indeed coming down thanks to legal challenges.

Bottom line, the industry has been handed a nice whiff of confidence, but there is a still high and thorny bramble remaining to get through – and it will not happen overnight, or indeed even over the next several years.

Massachusetts Prepares for Adult-Use

By Aaron G. Biros
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Last month, the Cannabis Control Commission, the regulatory body overseeing Massachusetts’ newest industry, finalized their regulations for the market. At the beginning of this month, the state began accepting applications for business licenses. Now with the full implementation of adult-use sales on the horizon, businesses, regulators, consumers and local governments are preparing themselves for the legalization of adult-use cannabis. Sales are expected to begin June 1st.

On March 29th, the Cannabis Control Commission announced their finalized rules were filed, published and took effect. Leading up to the filing, the Commission reports they held 10 listening sessions, received roughly 500 public comments and conducted 7 hearings for roughly 150 policy decisions. The license categories that businesses can apply for include cultivator, craft marijuana cooperative, microbusiness, product manufacturer, independent testing laboratory, storefront retailer, third-party transporter, existing licensee transporter, and research facility, according to the press release.

What separates Massachusetts’ rules from other states’ rules are a few of the license categories as well as environmental regulations, as Kris Kane highlights in this Forbes article. Experimental policies, like the microbusiness and craft marijuana co-op licenses, Kane says, are some tactics the Commission hopes may help those affected by the drug war and those who don’t have the capital and funding required for the larger license types.This is a groundbreaking reform previously unseen in states that have legalized cannabis. 

The Commission will also establish a Social Equity Program, as outlined in the final rules (section 17 of 500.105). That program is designed to help those who have been arrested of a cannabis-related crime previously or lived in a neighborhood adversely affected by the drug war. “The committee makes specific recommendations as to the use of community reinvestment funds in the areas of programming, restorative justice, jail diversion, workforce development, industry-specific technical assistance, and mentoring services, in areas of disproportionate impact,” reads one excerpt from the rules (section 500.002) identifying the need for a Citizen Review Committee, which advises on the implementation of that Social Equity Program.

This is a groundbreaking reform previously unseen in states that have legalized cannabis. Massachusetts may very well be the first state to actively help victims of the prohibition of cannabis.Some municipalities are hesitant and skeptical, while others are fully embracing the new industry with open arms.

For environmental rules, Kane notes the Commission is taking unprecedented steps to address energy usage in the cultivation process, pushing the industry to think about environmental sustainability in their bottom line and as part of their routine regulatory compliance. He says the Commission mandates a 36 watts-per-square-foot maximum for indoor cannabis cultivators.

On Monday, April 2nd the state began accepting applications for businesses seeking licensure. Within a few days, nearly 200 businesses have applied. That number is expected to grow significantly over the next few weeks.

While businesses continue applying for licenses, local governments are preparing in their own way. Some municipalities are hesitant and skeptical, while others are fully embracing the new industry with open arms.

A couple weeks ago, the City Council of Springfield, Massachusetts passed a six-month moratorium on cannabis sales, citing the need for more time to draft local regulations for businesses first. “I believe the moratorium is in place to make sure that we get it right the first time,” Councilor Adam Gomez, chairman of the council’s Economic Development Committee told MassLive. “We don’t have a chance to get it right the second time. The residents of Springfield supported this.” There are also talks of a potential temporary ban in Truro, MA.

Meanwhile in the city of Attleboro, ABC6 News reports Mayor Paul Heroux is “working to make his city marijuana friendly as city councilors work to draft regulation ordinances.” In Peabody, two businesses just received approval to begin operating as medical dispensaries.

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Biros' Blog

Should PA Revoke a Cannabis License For Their Parent Company’s Past?

By Aaron G. Biros
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Pennsylvania Medical Solutions, LLC (PAMS), won a license to grow medical cannabis in Pennsylvania, but some think the Pennsylvania Department of Health (PA DOH) should reconsider awarding that license. PAMS is a subsidiary of Vireo Health, which has medical cannabis licenses in New York and Minnesota, as well as quite the blemish on their business record. In December 2015, two former employees were accused of breaking state and federal laws by transporting cannabis oil from Minnesota to New York. Because of that history, some are questioning why exactly they were awarded the PA medical cannabis license.

A part of the PAMS application

In that school of thought is Chris Goldstein, a Philadelphia-based cannabis advocate and author of an article on Philly.com, which calls PAMS’ license into question. According to Goldstein, Vireo Health could lose their licenses in New York and Minnesota, and those former employees involved might even face federal prosecution. “On the surface it would seem that Vireo broke every rule in the book,” says Goldstein. “Not only could the company lose its permits in both of those states, but employees could face federal prosecution for interstate transport and distribution.” But does that previous wrongdoing by two former employees have any bearing on their application in PA? In Maryland, it did. According to The Baltimore Sun, concerns surrounding MaryMed’s parent company, Vireo Health, is the main reason why their permit to grow medical cannabis was revoked.

In response to some of those concerns about their PA license, Andrew Mangini, spokesman for Vireo Health, issued the following statement, which appeared in Goldstein’s article: “While we’re aware of allegations against two former employees of an affiliate, those individuals have never had a role in our application or in the management of PAMS,” says Mangini. “It’s also important to note that our Minnesota affiliate and our parent company Vireo Health have not been accused of any wrongdoing in connection with those allegations.”

Below is a timeline of events leading up to the PA DOH defending their decision to give PAMS a license:

  • December 2015: Two former employees of Minnesota Medical Solutions, a subsidiary of Vireo Health, transported a half-million dollars worth of cannabis oil from Minnesota to New York, violating state and federal laws.
  • February 9th, 2017: The two former employees were formally charged with crimes in Minnesota for illegally transporting cannabis across state lines.
  • February 20th-March 20th, 2017: PAMS submitted a license application to the PA DOH between these dates, listing their business state as Minnesota on the application.
  • May 2017: Maryland DOH suspended the licenses of MaryMed LLC, a subsidiary of Vireo Health, over concerns that the company did not provide information related to the Minnesota and New York licenses on their application, according to the Washington Post.
  • June 20th, 2017: PA DOH releases a list of license winners; PAMS was listed among winners for a cultivation license in Scranton.
  • June 26th, 2017: PA DOH officials defend their decision to award PAMS a license, according to a Philly.com article. That same day, The Baltimore Sun reported the Maryland Medical Cannabis Commission revoked MaryMed, LLC their license, citing concerns about Vireo Health.

April Hutcheson, spokeswoman for the PA DOH, told Philly.com in June, “Remember, the permits are given to business entities, not people.” The point she is making refers to the charges being filed against former employees, not any of the businesses who hold medical cannabis licenses.

Steve Schain, Esq. practicing at the Hoban law Group

Steve Schain, Esq., an attorney with Hoban Law Group in Pennsylvania, has seen no objective evidence of anything wrongful in either PAMS’ application or the DOH’s processing of it. “Marijuana related businesses often have distinct, affiliated components and the Department of Health faces two critical issues,” says Schain.

“First, whether grow applicant PA Medical Solutions, LLC (PAMS) had a duty to disclose alleged wrongdoing on its application, failed to fulfill this duty and, if so, whether PAMS’ application should be amended, re-scored or disqualified. Second, as part of its ongoing license reporting requirements, whether grow licensee PAMS has any duty to disclose the alleged wrongdoing. The answer to much of this hinges on whether criminal or administrative charges were leveled against just Vireo Health’s former employees or also included the entity and whether these individuals or enterprise fell within Pennsylvania Medical Marijuana Organization Permit Application definition of an “Applicant” (“individual or business applying for the permit”) or applicant’s “Principals, Financial Backers, Operators or Employees” of PAMS. Either way, it does not presently appear that the [PA] DOH missed anything.”

The list of permit winners in PA

This does raise the question of whether or not Vireo Health is under investigation, which is yet to be determined. According to Goldstein in his Philly.com article, the Minnesota DOH declined to comment on Vireo Health and the New York DOH says the department’s investigation is ongoing. “The selection of a Vireo Health affiliate to grow and process medical cannabis in Pennsylvania has cast a serious shadow over the integrity of the program even before it has started,” says Goldstein.

In Maryland, the DOH revoked their license as a direct result of those former employees in Minnesota committing crimes, according to The Baltimore Sun. Commissioner Eric Sterling said there is “a reasonable likelihood of diversion of medical cannabis by the applicant.” So should Pennsylvania do the same? Do those crimes by former employees have any bearing on their application? This story raises a number of questions regarding applications for state licenses that are largely left unanswered. One thing we know for certain: each state handles applications very differently.