Tag Archives: consumption

New Insurance Risks as Cannabis Lounges Open Across the US

By Jason Scheurle
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In a growing number of communities around the U.S., new cannabis lounges are offering a social setting where guests can openly use cannabis products. Colorado and New Mexico both saw their first cannabis lounges open in April, Michigan’s first cannabis lounge is set to open this summer, and officials in Nevada are currently discussing how the recently approved class of businesses should be regulated. In West Hollywood, California, where the state’s first cannabis lounge opened in 2019, multiple new lounges are now in the works after two years of slowdown due to the pandemic.

The bar-like establishments add a new dimension of potential revenue — and risk — to an industry that is expected to add almost $100 billion to the U.S. economy this year. This new and emerging segment within cannabis isn’t happening in every legal state, but more are starting to enact regulations to provide for some type of on-site consumption.

These new ventures need insurance policies tailored to address the risks of serving cannabis products, which could be looked at similarly to liquor liability for bars and restaurants.

Whether it’s alcohol or cannabis, these products impair people’s judgment, meaning everyone reacts differently to them. But how do you know when to cut someone off?

Cannabis lounges could be held liable & run risk of being sued for overserving

If a cannabis lounge faced a lawsuit alleging that it overserved a patron, leading to a third-party bodily injury, the business’ Commercial General Liability (CGL) Insurance and Products Liability Insurance could potentially cover costs such as legal defense, medical expenses and settlement amounts. Until such a case occurs, it is not yet known how exactly these lawsuits would be covered by insurance.

Because of the short history of cannabis lounges in the U.S., something like this is largely untested, making it hard to speak to exactly how a scenario would play out. Many of the existing cannabis insurance policies are highly exclusionary, meaning it could exclude a loss that is deemed to have arisen out of the use of cannabis.

Recent liquor liability lawsuits have shown the potential for a significant loss is clear. In early April 2022, a $20 million lawsuit was filed against a nightclub in Houston, Texas, alleging it overserved customers and allowed underage drinking, contributing to a drunk driving crash that killed a teenager.

In December 2021, a jury in Texas awarded the family of two drunk driving victims over $301 billion after a lawsuit alleged the driver was overserved at a bar before the accident; though largely symbolic, the settlement marked the largest personal injury award in U.S. history.

The Barbary Coast lounge in San Francisco

With these cannabis lounge establishments more or less encouraging intoxication of patrons on their premises, it’s very similar to a liquor liability type situation. If someone overindulges at a lounge, leaves and causes a crash resulting in injury or death, that could come back to the establishment.

While it remains to be seen how cannabis overserving lawsuits could play out in American courts, it’s worth noting Canada forbids on-site consumption of cannabis products and any loss or damage will not be covered by their insurance policies – despite it being legal country-wide.

Lawsuits possible over product issues, budtender advice

Even cannabis operations that do not allow on-site consumption can face liability related to the products they sell, making Products Liability Insurance and Product Recall Insurance necessary for growers and retailers. They should also consider Employment Practices Liability (EPL) Insurance to cover staffing-related allegations such as discrimination and ask their insurance broker whether budtender liability is included in their CGL Insurance policy.

Budtenders must walk a fine line between giving advice versus general information on products.

Budtenders, or individuals who work at cannabis retailers, are not allowed to offer medical advice to consumers. They must walk a fine line between giving advice versus general information on products. Although we are not aware of lawsuits that have been filed over a budtender’s advice, it would ultimately be up to the courts and lawyers as to how those proceedings would play out.

Budtender liability is not very different from professional liability insurance, and it’s more like an incidental coverage based off the budtender’s informal advice. There are, indeed, insurance carrier partners today that offer that service.

CGL Insurance can also cover in-store slip-and-falls and other third-party injuries and property damage. Because most cannabis retail stores are fairly small, these incidents have been rare, but GCL cannot be overlooked. Businesses must be prepared for anything to happen – and need to know that no risk is too small.

Theft, vandalism among top threats to cannabis businesses

Whether or not a cannabis business includes a lounge for cannabis use, any business in this industry may be more vulnerable to certain risks, including theft and vandalism.

In the U.S., where many cannabis companies operate on a cash-only basis because of banking difficulties tied to recreational products being federally illegal, a recent surge in cannabis shop robberies has led to calls for a new banking bill. Some of these incidents have even turned deadly, including an April 30 dispensary robbery in Los Angeles, California, during which one man was reportedly shot and killed.

Many insurance carriers require retailers to install alarm systems, video monitoring equipment or safes

Large amounts of cash are on-hand daily at these premises, and workers might have to make multiple bank runs throughout the day, leaving a heightened exposure and risk for robberies.

From robberies and vandalism to fires and flooding, Commercial Property Insurance is a key protection for cannabis retailers. Equipment Breakdown Insurance may also be needed, particularly when the stores contain expensive refrigeration equipment. The potential loss is large in this industry, especially at growing facilities, and there’s a lot at stake with such high-value equipment.

Security systems, employee training can help reduce risks

Many insurance carriers require business owners to install alarm systems, video monitoring equipment or safes to help reduce potential property losses, and employees should be trained to use the alarm systems consistently. Policyholders and business owners should also know there is a lot they can do to curb some of the risks, such as businesses doing background checks on every hire and taking steps to ensure they are hiring individuals they can trust.

Installing bars on glass windows and doors is another loss prevention measure that is strongly encouraged because it adds an additional layer of security to get through – it won’t be an easy or quick process to break-in and will trigger the alarm system.

The importance of working with an insurance broker

Working with an insurance broker who is specialized in the cannabis industry can help business owners better explore available coverage options. With cannabis or any type of risk, you should always work with someone who has knowledge and expertise in that area. When you work with someone who knows the ins-and-outs of the regulations, you can have more peace of mind.

You might have a risk warranty that always requires two drivers in that vehicle, or GPS monitoring on the vehicle.

Understanding your policy in its entirety is also essential, as these policies have any number of different limitations and exclusionary forms that could preclude you from collecting if you had not understood and followed the language of the policy.

In a transportation situation, for example, you might have a risk warranty that always requires two drivers in that vehicle, or GPS monitoring on the vehicle. In the event of a claim, if the investigation determines the business did not have those items present at the time of loss, that claim will not be covered.

In a rapidly growing and changing industry, business owners should not underestimate the value of working with a team of insurance experts who keep a close pulse on the quickly evolving industry. Brokers are aware of the different legal environments in each state or even each city or county. Cities and counties can add different levels of compliance matters, so as a buyer, you can be confident that you have the most recent information and are in compliance with state law and any insurance requirements that may be present. Being able to explain the differences between the markets and the coverage options is beneficial to any business owner in this ever-changing industry.

Social Consumption: The Time is Now

By Dede Perkins
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Social consumption lounges are becoming increasingly popular in legal cannabis markets. Just what are social consumption lounges? They’re a safe, enclosed space where cannabis consumers of legal age can come together and enjoy cannabis products, much like a bar environment for consuming alcoholic beverages.

Social consumption lounges are particularly attractive for their potential to bring in cannabis tourists. Although adult use cannabis can help promote tourism, tourists typically can’t smoke in most places indoors (including their hotel accommodations) nor consume on the street or in public, due to strict public consumption rules set by state regulations. This leaves the perfect set-up for consumption lounges, which provide the appropriate and legal environment for tourists to consume cannabis.

What do social consumption lounges look like in practice? What are the rules and regulations that social consumption lounges must adhere to? How and where are social consumption lounges currently legal in the United States? Here’s what you need to know.

What are social consumption lounges?

Social consumption lounges—also known as consumption lounges, cannabis lounges, cannabis consumption area and cannabis consumption lounges—are retail lounges that permit on-site cannabis consumption, such as smoking and vaping cannabis flower as well as ingesting cannabis infused products like edibles and tinctures. Similar to a bar that serves alcoholic beverages, all consumers in a cannabis lounge must be at least 21 years of age. While smoking typically isn’t permitted in retail businesses, smoking is permitted in lounges.

Mellow Yellow in Amsterdam

While state-specific regulatory bodies are responsible for developing, implementing and enforcing the rules surrounding U.S. social consumption lounges, Dutch “coffee shops” may have served as the inspiration and model for U.S. industry. Contrary to the name “coffee shops”, patrons don’t go to Dutch coffee shops for coffee. Rather, they go because the sale and consumption (including smoking) of cannabis is permitted and socially accepted. According to travel resource Amsterdam.info, Dutch coffee shop culture emerged in the 1970s when the federal government made a clear legal distinction between “hard” and “soft” drugs. Soon after in 1972, the first coffee shop named Mellow Yellow opened. Although cannabis wasn’t clearly legal or illegal, Dutch law enforcement tolerated the growing number of cannabis coffee shops, focusing instead on prosecuting heroin and lethal illicit substances. Today, the Amsterdam City Council permits coffee shops to operate after they obtain a non-transferable license, which must be displayed in shop windows, thanks to an agreement with the coffee shop union Bond van Cannabis Detaillisten (BCD).

Unlike Dutch coffee shops, U.S. social consumption lounges must adhere to numerous rules and regulations specific to their state and municipality. One major difference is who is permitted to own and operate a lounge. In some U.S. states, consumption lounges are operated by existing cannabis businesses, such as adult use and medical dispensaries. In these cases, the lounge may be required to be on the cannabis business’s existing premises. In New Jersey, this must be an “indoor structurally enclosed area of the cannabis retailer or medical cannabis dispensary that is separate from the retail sales or medical dispensary area” or “an exterior structure on the same premises as the cannabis retailer or medical dispensary, either separate from or connected to the cannabis retailer or medical dispensary,” according to the National Law Review. In many places within the U.S., “stand alone” lounges that aren’t attached to an existing cannabis business aren’t permitted.

In the Netherlands, coffee shops operate in a legal grey area with their products being supplied by an entirely underground cultivation market. Cannabis being consumed in coffee shops isn’t regulated or checked. Per regulations in the U.S. states that allow them, however, only legal cannabis may be consumed in these lounges. While consumers might be able to bring their own cannabis or cannabis products, consuming any cannabis or cannabis products obtained through the underground market is strictly prohibited.

Where are social consumption lounges legal?

The Barbary Coast lounge in San Francisco

Not all U.S. states with legal recreational, adult-, or personal-use cannabis programs permit social consumption lounges. Although it’s been a decade since Colorado and Washington voted in favor of legalization, consumption lounges are a fairly recent trend, likely because states without legal consumption spaces found out the hard way that they couldn’t accommodate tourists or anyone who wished to consume cannabis outside of their home. Here’s where social consumption lounges are legal in the U.S.:

  • Nevada: After the Governor signed a bill in June 2021, a new cannabis law permitting social consumption lounges went into effect in October 2021 and lounges are anticipated to open in early 2022, according to Nevada public radio station KNPR. Additionally, efforts are being made to prioritize minority-owned business owners of consumption lounges, reports local news station Fox5 KVVU-TV.
  • New Jersey: Although consumption lounges weren’t initially permitted in the recent regulatory framework, individual municipalities now decide whether or not to permit lounges within their communities. Atlantic City and Jersey City have approved social consumption lounges, reports Hudson County View.
  • New York: The state’s recently passed adult use cannabis law allows social consumption lounges, but the recreational market isn’t  expected to take off until mid-2023, according to Business Insider. Lawmakers still need to adopt a regulatory framework to how lounges (along with other cannabis businesses) will operate.
  • Illinois: Currently, two social consumption lounges have opened, and two others are planned to open across the state,” says the Chicago Tribune.
  • Colorado: Similar to New Jersey, individual municipalities decide whether to permit lounges in their communities. Denver and Aurora have approved consumption lounges.
  • California: Given the state’s rich history of an underground market, informal social consumption lounges aren’t particularly new. However, a recently approved law officially allows social consumption lounges, reports Marijuana Moment.

The number of states considering and/or permitting social consumption lounges is growing. Which states will likely legalize them next? As noted below, it looks like Michigan, Massachusetts and Maine will be next.

  • Michigan: The state doesn’t allow for them now, but they could come in the future, reports WZZM13.
  • Massachusetts: The state is considering them, reports Boston.com.
  • Maine: The state delayed them until 2023, according to MJ Biz Daily.

Why are social consumption lounges becoming increasingly popular?

Consumption lounges are becoming increasingly popular for many reasons. First and foremost, they’re a win for the cannabis industry because they provide consumers with a physical place to consume safely and legally.

The Original Cannabis Cafe by Lowell Farms in West Hollywood

Second, the tourism sector benefits from social consumption lounges. “The problem is people can buy marijuana products in states that have legalized adult-use cannabis, but they have limited options when they want to consume the cannabis that they purchase legally,” explains Cannabiz Media. For instance, Las Vegas has promoted itself as a cannabis travel destination since 2017, despite lack of adequate space for visitors to consume. Meanwhile, those who don’t consume cannabis have criticized the city for its growing public consumption, complaining especially about the odor of smoked cannabis. Social consumption lounges can potentially help fix these growing pains in the state’s cannabis market.

Additionally, lounges are a win for harm reduction. Lounges provide beginner cannabis consumers the opportunity to consume alongside experts, to be shown the ropes with professionals present. Being in a community with experienced consumers provides opportunities for novices to understand how to smoke, dose and overall consume properly and safely.

Lastly, MG Magazine emphasizes other benefits including de-stigmatization, social connection, industry partnerships and product innovation.

Regulation and compliance differences between states

Without federal cannabis legalization, states are tasked with regulating their own cannabis markets. Likewise, state regulatory agencies are responsible for drafting regulations for social consumption lounges.

California and Colorado have fewer limitations, likely because both states have more experience and overall comfort with the plant. In states with more lenient regulations, 420-friendly cafes, hotels, bus tours, paint nights and other businesses are tolerated.

New Jersey has notably strict regulations for social consumption lounges. For example, the current state law doesn’t permit any stand-alone consumption spaces independent of existing permitted cannabis businesses. Therefore, a cannabis cafe or bud and breakfast isn’t permitted.

There is, however, one legal loophole in New Jersey for stand-alone consumption space. The microbusiness license model allows for temporary licenses, permitting a temporary social consumption lounge, such as for an event at a private venue. New Jersey permits them in Newark, Hoboken, Highland Park, Jersey City,Elizabeth, Long Branch Atlantic City and Trenton.

In closing, it is likely that social consumption lounges will become increasingly common especially in major U.S. cities with legal adult-use cannabis programs. While Dutch coffee shops may have inspired the emerging U.S. social consumption lounge model, their U.S. counterparts must comply with much stricter rules and regulations. Since regulations vary from state to state, it’s important to be on top of your state’s policies in order to stay compliant.

Flower-Side Chats Part 6: A Q&A with Fabian Monaco, CEO of Gage Cannabis

By Aaron Green
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In this “Flower-Side Chats” series of articles, Green interviews integrated cannabis companies and flower brands that are bringing unique business models to the industry. Particular attention is focused on how these businesses integrate innovative practices in order to navigate a rapidly changing landscape of regulatory, supply chain and consumer demand.

The Michigan cannabis market is making pace with big time cannabis players like California (#1) and Colorado (#2). For the first quarter of 2021, combined cannabis sales in Michigan were nearly $360 million. At that pace, Michigan could see combined sales of $1.4 billion — well outpacing 2020 sales of $984 million.

Gage is the exclusive cultivator and retailer of world-leading cannabis brands including Cookies, Lemonnade, Runtz, Grandiflora, SLANG Worldwide, OG Raskal, and its own proprietary Gage brand portfolio in Michigan. The company recently secured a $50M investment in an oversubscribed round which included a $20M investment from JW Asset Management.

We spoke with Fabian Monaco, CEO of Gage Cannabis. Fabian started Gage in 2017 after meeting his operating partners in Michigan. Prior to Gage, Fabian worked as an investment banker racking up a number of firsts in cannabis industry financing and M&A transactions.

Aaron Green: Tell me how you got involved in the cannabis industry.

Fabian Monaco: My background is in investment banking – specifically 10 years of capital market experience. I was fortunate enough to be part of the initial team that brought Tweed, now Canopy Growth public. In fact, I worked on a lot of firsts in the industry: the first acquisition, the first $100 million financing, the first IPO in the space. Shortly after that, I went to XIB Financial, which co-founded Canopy Rivers with Canopy Growth. I was working on that when I encountered these two phenomenal operators. At the time, I had visited over 100 of these cultivation facilities and these were some of the best operators in the business. So that led me to start Gage in 2017.

Green: Where is Gage currently operating?

Fabian Monaco, CEO of Gage Cannabis

Monaco: In the U.S., we are purely operating in Michigan. We do have a licensing agreement with a small producer in Canada, so you will see the brand there.

Green: Tell me about your choice to settle the company in Michigan initially?

Monaco: If you look at Michigan as a historical cannabis market, it was the second largest cannabis market from a medical card holder standpoint for nearly a decade, only behind California. This was probably the case until 2019, where they went to adult use. So, for us, we knew this medical base was going to be a great platform to an outsized adult-use market. And already we see that April was $154 million in sales, adding up to over a $1.8 billion dollar run rate. That’s the third highest run rate in the country, only behind California and Colorado.

Green: What is it that makes Michigan different? You talked about medical cannabis already. Is there anything else about the demographics in Michigan or the consumer base that makes Michigan special in that sense?

Monaco: In Michigan, over 70% of the population is old enough to consume. So, when you take a look at how much of the population is 21-years-old plus, relative to other markets, the total addressable market in Michigan is just huge. Then when you take a look at their consumption habits, especially when it comes to flower, Michigan is consuming some of the highest amounts on a per capita basis. Those two stats set up a scenario where we foresaw the potential of the market. To be honest, the market has exceeded our expectations. We didn’t think it would be this strong this quickly. Right now, the state is looking to be a $3 billion market by 2024 – and it could easily surpass that.

Green: Any plans for expansion beyond Michigan?

Monaco: We’ve been to eight or so different states in the past 60 or 75 days really trying to educate ourselves on the licensing structure, the markets there and the key players in those respective markets. What are some of the costs, in terms of acquisitions? We really want to branch out the Gage brand into other states across the US. The thing is, we believe in the model that Trulieve deployed. They really focus on being the number one player in a very, very big market. For instance, Trulieve is obviously one of the top players in Florida. We’re trying to mimic that strategy.

Trulieve is a dominant market force in Florida

Once we have that deep market penetration, that market share, then we’ll start to get into other states. But for now, why would you want to go and rush out to another state when you’re already in the third largest market in the country?

Green: Are there any criteria you look for in a potential expansion state?

Monaco: We look at consumption habits. We want states with similar demographics to Michigan. Close proximity states also allows us to quickly go from one state to the other without having to take a multi-hour flight to get there. States we’re considering are Northeast and Midwest states, like Illinois, Pennsylvania, Ohio, New Jersey, Massachusetts and Maryland.

Green: What kind of consumer trends are you seeing in Michigan as it relates to products?

Monaco: Flower continues to dominate. In a market like Michigan, we have some of the top flower consumers in the country on a per capita basis. We specialize in flower and flower only, so this created a perfect scenario where we are able to ramp up our brand quite quickly, from a flower standpoint.

Now that we have that brand equity, that brand power, we are going to potentially delve into other categories, including extract-based products, such as vape carts and concentrates. You hear talk about these new beverages, but we’re not seeing that take off in this market as much as people think it would. Flower still remains at the top and that’s something we highly anticipate going after for quite some time.

Green: Can you tell me about your vertical integration strategy?

Monaco: We’re one of the larger retail portfolios in Michigan right now. We have 13 locations. Nine are operational. So, we’re really in a great spot overall in terms of how big of a platform we do have – one of the larger ones – and, frankly, in one of the larger markets in the country.

The Cookies flagship dispensary in Detroit, Michigan

We actually have a little bit of a unique scenario on the cultivation side of things. We have our own three cultivation assets that are going to be producing, on average, about 1,000 pounds of product over the next couple of months as they fully ramp up. We’ve actually contracted out a lot of our cultivation. Cultivation is time consuming, and it’s also very, very costly to build out. Luckily for us, we’re a really well-established and strong brand. We had the opportunity to contract out our growing. So, we have 10 different contract growth partners. These are phenomenal cultivators, again, some of the best in the state. They grow Gage and Cookies branded product for us. We have a great breakdown from a financial standpoint. We share the retail revenue with them on a 50/50 basis. They pay a little bit too, for packaging and testing. So, basically for $0 we’re getting product on the shelf where we’re achieving 50% plus gross margins. It’s a phenomenal setup for us on the cultivation side where we went from two cultivation assets in the latter half of last year to now eight different cultivation assets, moving to 13 by the end of the year.

On the processing side, we’re just actually finishing our processing lab. We should have extract-based products launched in Q3. We’re really excited to have our own line of extract-based products. We plan to focus on vape carts to start – a very popular category in Michigan on the retail side of things.

Green: Are those cultivations all indoor?

Monaco: Yes, we’re big proponents of indoor flower. It allows us to control the quality of our flavors and consistency in our strains when we grow indoors. From our consumers, there is a very strong demand for indoor grown high-premium, high-quality products.

Green: What sets Gage apart from other competitors in Michigan?

Monaco: I think focus. We just focused on our flower. We focus on our post-production process. We hang dry everything, we hand trim everything, and we hand package everything. That’s a little bit more time consuming. It’s a little more costly. But all that effort shows in the end product which is key.

A lot of people think you can grow great quality product, you cut it down, you dry it and put it in the pack and it’s going to be great. You really need a strong attention to detail, especially in a big consuming market like Michigan, because again, they are a refined consumer. They’re looking for the best. They’ve already been consuming some of the best quality products in the country for many years now. So for us, we put a painstaking process in place for flower production, not only from the growing standpoint, but also through the end of that post production process.

Ancillary to our cultivation process is also consistently providing new varieties of flavors on the flower side of things to the consumers. When you look at the successful brands in California, what makes them special is that they’re consistently pheno hunting, coming out with new flavors. This is similar to the wine industry where the best wineries come out with a new kind of grape or mix and consumers get excited, they rush out and buy half a dozen bottles or a dozen bottles.

It’s a very similar scenario in the cannabis industry. I hate when people say that cannabis is a commoditized industry. It’s so far from the truth. You look at brands like us or Cookies, Jungle Boyz and you can see their constant innovation, their constant drive. They are always bringing something new for the consumers to try. That’s what really sets apart the best brands.

Green: What’s got your attention in the cannabis industry? What are you interested in learning more about?

Monaco: I’m always intrigued with new ways of consuming. Across the U.S. and well-developed markets like California and Colorado, you see all these interesting new ways to consume the product. You’ve got patches, sublingual strips, etc. There are so many unique ways. I am currently seeing how they play out. Are they fads? Do people get excited about them initially, and then go back to their vape carts, pens and typically dried flower pre-rolls? I’m always trying to educate myself to see what’s on the market. What’s new? Who has a new drink? How does it hit? Are people excited about it?

Also, I am constantly learning about new brands that come out. There are so many new small brands that don’t necessarily have the scale or the capital to really expand, but are producing some of the best products in the country in a cool, unique form of packaging, etc..

Green: Alright, great. That concludes the interview!

Monaco: Thanks, Aaron.

EU Regulations Address Heavy Metals In Consumer Products

By Christopher Dacus
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RoHS 3 (EU Directive 2015/863) adds a catch-all “Category 11” of regulated products that includes electronic nicotine delivery systems (ENDS), e-cigarettes, cannabis vaporizers and vape pens. This category becomes effective July 22, 2019. The most significant restricted substance applicable to this category is lead, and RoHS requires regulated products to contain less than 1000 parts per million (ppm). This follows on the heels of California’s new 2019 regulations requiring the testing of contents of cannabis vape cartridges using even stricter limits for lead (which makes sense because it applies to the product being consumed, not the separate electronic components). These regulations may seem unrelated, but anecdotally there have been widespread reports of higher than expected lead content in China-sourced electronic components, including both cartridges and related electronics. Whether metal used in e-cigarette type products is the source of any lead in the actual nicotine, cannabis or other concentrated product is an entirely different topic, but new laws, and in particular the new RoHS catch-all category, make 2019 an important year for any company responsible for certifying or testing lead levels in e-cigarette or vape products.

Background on EU RoHS

RoHS (Restriction of Hazardous Substances) originated in the EU in 2003 as a restriction on hazardous substances in specified categories of electronics and electronic products. Other countries have passed laws styled after RoHS, but only the EU RoHS is addressed here. Unlike some environmental laws, RoHS is not only focused on the safety of products during their life cycle of consumer use, but is designed to keep restricted substances out of landfills and recycling centers.

The original RoHS restricted the use of lead, cadmium, mercury, hexavalent chromium, PBB and PBDE. RoHS now restricts the use of a total of ten substances after the EU added four types of phthalates to its restricted substance list. Compliance with RoHS became a requirement for the use of the CE mark in 2011, and replaced a RoHS compliant mark on restricted products.

RoHS specified categories for regulation include large household appliances, small household appliances, computer equipment, lighting, power tools, toys, certain medical devices, control equipment (smoke alarms, thermostats and their industrial equivalents), and ATM machines. Newly added Category 11, the “catch all” category, includes all other electronic and electrical equipment not covered in the previous categories, including electronic nicotine delivery systems, cannabis vaporizers and vape pens.

RoHS Lead Exemptions Complicate Compliance

RoHS provides numerous exceptions to its strict 1000ppm lead standard that are slated to expire in phases from 2021 through 2024. Most Category 11 exceptions will not expire until 2024. For example, RoHS permits different levels of lead for lead in glass and ceramics, lead in high temperature solders, and lead in copper and aluminum alloys. So, an e-cigarette may contain some parts that are held to the highest level of lead restriction, it may but contain isolated components that (at least through 2024) are held to more permissive standards. While this leeway may reduce manufacturing costs for certain components, it creates greater complexity in testing. Anecdotal reports suggest that especially for products that compete heavily on price, sourcing from lesser-known Chinese foundries has resulted in unpredictable lead levels.

Take Away Points

As vape and e-cigarette companies compete with new features and design elements each year, and companies rely on new manufacturers, keeping up with regulations has proven to be difficult for both U.S. and for EU regulated products. For example, a company has to comply with numerous regulations regarding the oil or concentrate that will ultimately be inhaled by a consumer, and with regulations like RoHS that regulate parts a consumer may never touch or see. Each year, some company comes out with a new set of electronic features that may interact with newly formulated oils or concentrates, other companies compete for features or price points, making these products a moving target when it comes to testing.

Adding lead to many metals makes them easier to work with and therefore cheaper. Anecdotal reports suggest that especially for products that compete heavily on price, sourcing from lesser-known Chinese foundries has resulted in unpredictable lead levels. This can be the result of any number of causes: changes in sub-contractors, uses of industrial equipment for other products that permit higher lead content, or simply unscrupulous management that is willing to risk a contract to save money manufacturing a batch of components. There is speculation that some lead may leach into oil or concentrates in e-cigarette and vape products from the contact between the oil or concentrate and internal heating elements in certain type of products. RoHS compliance with regard to lead levels may reduce the chance of inadvertent lead contamination by such means, and compliance may therefore yield benefits on several regulatory fronts.

Compliance with RoHS for each part of an e-cigarette or vape therefore requires knowing your supplier for each component, but given increased regulation of these products (both the hardware and consumable elements) this can only help compliance with regulations in every relevant jurisdiction.

Illinois Legislators To Introduce Legalization Bill

By Aaron G. Biros
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It is not news that Illinois Governor J.B. Pritzker favors recreational cannabis legalization. But State Senator Heather Steans (Chicago-D) and State Representative Kelly Cassidy (Chicago-D) introducing a formal bill to legalize recreational cannabis is certainly news. With what they hope will be bipartisan support in the legislature and a Governor on their side, Illinois seems poised to pass legislation legalizing recreational cannabis for adults.

According to the Herald & Register, State Sen. Steans says that public opinion polls show that roughly two-thirds of voters in Illinois favor recreational legalization. “We have a huge opportunity in Illinois to do this right and carefully,” Steans told an audience at a town hall meeting in Springfield, IL yesterday. From what the lawmakers told the public during that town hall meeting, the legislation sounds like it mirrors programs in other states.

Illinois Governor J.B. Pritzker

The bill “would allow Illinoisans 21 and older to purchase and possess up to 30 grams, or about 1 ounce, of marijuana,” Steans and Cassidy said. “Nonresidents would be able to buy and possess half that amount. Use of the drug in public wouldn’t be allowed.” The bill would expunge previous criminal records with respect to cannabis, make it harder for minors to access it and raise an estimated $350 million to $750 million, providing funding for “community development of impoverished neighborhoods,” says Cassidy. “If we don’t address the social-justice issues of this, if we don’t address the collateral consequences of the ‘war on drugs,’ we will have failed,” Cassidy added. The bill would also allow people to grow up to five plants at home, would not allow for public or social consumption, and municipalities, employers and landlords would be able to prohibit possession and use, according to the lawmakers.

In 2015, the state legalized medical cannabis and there are roughly 42,000 patients currently in the medical cannabis program, with roughly 40 qualifying conditions approved for use. Some critics have argued, according to the Chicago Tribune, that before the state legalizes recreational use for adults, they should first expand the list of qualifying conditions for patients. This would provide greater access to those in need while the state implements a regulatory framework for recreational use, which could take upwards of a year to establish the program.

Massachusetts Recreational Consumer Council Launches Education Program

By Aaron G. Biros
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The Massachusetts Recreational Consumer Council (MRCC) is an interesting nonprofit that recently launched an educational campaign, called Consume Responsibly Massachusetts. For many cannabis advocates who watched their states legalize the drug, consumer education is a very important part of moving forward. As states across the East Coast implement regulatory frameworks for the cannabis industry, there is a sense of urgency to make sure the rules are right the first time, and that cannabis businesses become responsible stewards of their new market.

In the wake of pesticide recalls in the west and related public health concerns, the issues surrounding consumer safety and how states protect that are now front and center. “The purpose of Consume Responsibly Massachusetts is to keep adult-consumers informed of their rights in the state,” says Jefferson. “It’s also an ongoing effort to bring consumers into the world of cannabis politics and science.”

The MRCC’s mission is to help protect the safety of recreational cannabis consumers by bridging the information gap between businesses, legislators and communities. “We work at the state and local level advocating for sensible recreational marijuana policy and regulations,” reads a press release. According to Kamani Jefferson, president of the MRCC, bridging that gap requires a lot of community engagement. “I was a field organizer on the Campaign to Tax and Regulate Marijuana here in Massachusetts so this is extremely important to me,” says Jefferson. “MRCC participated in this year’s Cambridge 5K Freedom Run.” He says getting out in the community like this is one of many ways to help provide educational opportunities, help promote local cannabis businesses and get rid of the “lazy stoner stigma.”

Kamani Jefferson, president of the MRCC

For the MRCC, the issue of craft cannabis is a significant part of the organization’s philosophy, in addition to product safety and others. “Craft Cannabis will benefit the consumer in an entirely new way,” says Jefferson. “Members of the community will have a chance to provide products and directly affect the economy.” Because local owners tend to be more involved in their towns, Jefferson says residents will get to make more of an impact than nonlocal owners. And he’s right- small, local businesses contribute substantially more to local economies and communities than large companies. Between 1993 and 2013, small businesses created roughly 63% of all new jobs in the United States. With the new cannabis market comes a promising opportunity for local economies.

“The Massachusetts cannabis industry is developing and growing fast,” says Jefferson. “Aside from the medical marijuana production sites, the new recreational marijuana law grants production participation in the regulated recreational marijuana industry to farmers, in the form of craft marijuana cultivator cooperative systems.” While he thinks this is a good opportunity for small businesses and communities alike to gain a foothold in the market, Jefferson is hesitant to endorse Massachusetts’ regulatory policies. “A lack of regulatory oversight from the CCC [Cannabis Control Commission] places the cannabis industry in a vulnerable position,” says Jefferson. “If we want clear, consistent standards for clean and safe products prioritized, then we need consistent testing data.” Jefferson is arguing for more regulatory oversight for safety issues, such as contaminant testing. This is one of a handful of issues they are pressing for sensible cannabis policy in Massachusetts.

Here are some of the issues they support:

  • Local Cannabis: Equitable licensing for small and medium sized local businesses from members of the community.
  • Quality Control: Access to a variety of clean and safe cannabis products in retail dispensaries, tested for harmful contaminants, mold, pesticides and fungicides.
  • Responsible + Safe Consumption: Access to educational materials about proper dosage, methods of ingestion, quality analysis, understanding product labels and general cannabis information.
  • High Potency Flowers, Edibles, & Concentrates: Access, non-restriction to high potency marijuana products of all forms.
  • Home Grow: Ability to grow at least 6 plants per person, 12 per household as stated in Question 4.
  • Social Use: The ability to consume in designated establishments outside of the household.
  • Expungement: Sentence commutation and record expungement for convictions involving non-violent marijuana charges that are now legal.
  • Research: University supported biological, behavioral and cognitive marijuana research to further our understanding and capabilities of the cannabis plant.

Greece Legalizes Medical Cannabis

By Aaron G. Biros
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According to the Independent, Prime Minister Alexis Tsipras announced last week that Greece will legalize medical cannabis, allowing doctors to write prescriptions for it. “From now on, the country is turning its page, as Greece is now included in countries where the delivery of medical cannabis to patients in need is legal,” says Prime Minister Tsipras at a press conference.

Parthenon, Athens, Greece
Photo: Kristoffer Trolle

Greece joins six other European Union nations to legalize forms of cannabis, signaling a growing trend in Europe, where cannabis markets are just beginning to proliferate.

Barcelona, capital of Catalonia
Photo: Bert Kaufmann

Catalonia, an autonomous region in Spain, legalized consumption of recreational cannabis and cannabis clubs last week. The government voted in favor of the measure with wide support after a 67,500-signature petition brought the debate to the center stage.

According to the Independent, the rules seem relatively restrictive, with measures in place to prevent the capital of Catalonia, Barcelona, from turning into a cannabis tourism capital, such as Amsterdam. One of those rules requires a waiting period for new members of clubs before they can purchase and consume cannabis. However before this measure passed the vote, cannabis clubs were in a legal gray area, with fines for public consumption. These European markets could present excellent opportunities for cannabis companies, which could cause other EU countries make the plunge into legal cannabis.

For Here or To Go? Social Consumption of Cannabis

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In November 2016, residents in Denver, Colorado voted to pass Initiative 300, allowing businesses to seek social marijuana use permits if neighborhood or business groups also agreed and signed off. In the very near future, the process for how cannabis consumers purchase and consume cannabis will no longer be restricted to only going inside a dispensary to make your purchase and returning to a private residence to consume. Instead, it may be as simple as visiting a drive-thru and then going to a cannabis bar or social club to enjoy.

Cities such as San Francisco have had on-site consumption laws in place for some time, with notable locations including sparc, a well-known dispensary with two locations in the city, and the recently announced Power Plant Fitness, a gym slated to open in late 2017 that will allow members to consume cannabis while working out.

Social consumption of cannabis is not a new topic of discussion—just look at Amsterdam’s cannabis coffee clubs—but it is undoubtedly a legalization trend that will continue to be at the forefront as more states pass legalization or convert to adult-use markets. There remains one reoccurring theme, however: a lack of clarity on how these laws will be structured and how social consumption regulation will be put in place.

In Colorado’s state legislature, there was bipartisan agreement that the state needed to allow for venues to let patrons consume cannabis in order to deter residents and tourists alike from consuming in public places such as sidewalks and parks. A Republican-sponsored measure proposed in the state legislature would have allowed for the regulation of cannabis clubs in a similar format to how cigar bars are managed, but that legislation was put on hold for rewrite.

Within the state, there also exists a heated debate over whether or not the creation of social cannabis clubs would instigate federal intervention by the new administration, especially in light of Attorney General Jeff Sessions’ comments in opposition of the adult-use cannabis industry.

One thing is clear: since Denver’s passing of the social use ballot measure in November, there have been numerous halting attempts to put a law in place and the current law is vague. There remains much work to be done before Initiative 300 may be enacted.

For those interested in learning more or joining the discussion, the National Cannabis Industry Association (NCIA) will be hosting a panel titled “For Here or To Go? Evolving Regulations on Social Consumption of Cannabis” at its 4th annual Cannabis Business Summit & Expo in Oakland, June 12-14. The panel will be led by Sam Tracy of 4Front Ventures, who supports the company’s business development and communication efforts.

You can learn more about the Summit and see the full conference agenda on the Cannabis Business Summit & Expo website. In celebration of 4/20, NCIA has extended the early bird pricing deadline for conference registration from April 21 to April 24 to allow for busy cannabis business owners and operators to take advantage of the savings.

Cannabis Industry Journal readers may use discount code CIJ15 to save 15% on registration.