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Sundie Seefried, President & CEO of Safe Harbor Financial

A Q&A with Sundie Seefried, President & CEO of Safe Harbor Financial

By Cannabis Industry Journal Staff
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Sundie Seefried, President & CEO of Safe Harbor Financial

As the former CEO of Partner Colorado Credit Union (PCCU), Sundie Seefried has been in the credit union space for 39 years. Established in 2015, Safe Harbor Financial is now a leading provider for banking and financial services in the cannabis industry.

Seefried founded Safe Harbor as a cannabis banking program for PCCU, and since then it has withstood scrutiny of 16 separate federal and state exams. Entering its ninth year as a cannabis banking program, they have almost 600 accounts in 20 states and have processed over $14 billion in transactions for the cannabis market. In September, Safe Harbor began trading on Nasdaq under the symbol SHFS. The company has also announced a definitive agreement to acquire Abaca, an industry-leading cannabis financial technology platform.

Seefried has seen it all in the cannabis banking world. We wanted to get her thoughts on some current events, the future of cannabis banking and lending, and what the next few years might hold in store for an industry ready to grow.

Cannabis Industry Journal: Tell us a bit about yourself. What is your background and how did you find yourself in the cannabis industry? How did you get to become president and CEO of SHF?

Sundie Seefried, President & CEO of Safe Harbor Financial

Sundie Seefried: I’ve been in banking in the credit union space since 1983. I became CEO of Partner Colorado Credit Union in 2001 and stayed there for 21 years. Everything I do, I have a very conservative nature just from being in the banking world and doing things methodically and building good foundations that endure long term. In 2014 when FinCen issued guidance, I was supposed to retire, and I had dinner with some old friends that were attorneys who couldn’t get bank accounts for their clients in the cannabis industry. They asked me to help and I looked into it for them. I assumed the regulator would shut me down but he didn’t; he actually encouraged me to move forward and look further into things. As I educated the board, we saw just how unsafe Colorado was and the serious need for the community to figure things out with respect to banking and cannabis. Coming from that credit union perspective, I said I think we can do this, let’s try and I’ll go through the third parties necessary. And that’s how we got into this, just looking to try and help solve Colorado’s problems and get banking access for cannabis companies. 

CIJ: Tell me about your company’s mission. What is your financing strategy in cannabis and of the companies you do business with, what do you look for most?

Seefried: Our mission remains the same, and that is to normalize banking in the cannabis industry as much as possible. Because the black market still exists, the issue becomes sorting the legal entities out from the illicit actors in the industry. We know that the illicit market is trying to hide amongst the legal environment, which really makes things difficult for upstanding cannabis businesses. We can normalize banking by making sure we help legitimize the compliant entities and sort out the bad actors. We really only want to work with legitimate players with licenses, who are fulfilling expectations on the regulatory level and have no problems with compliance. We have been able to do that on the depository side.

We have always been a low-cost provider and our clients count on that. As we move into the lending part of the industry, we’re looking to do the same thing. There are lenders who charge one-to-three percent per month, 18 to 36 percent per year. We, on the other hand, are targeting more of an eight to thirteen percent annual rate. More of a conservative approach. Real debt underwriting. No extremely high interest rates. We look for the collateral, we look for well-organized businesses and solid documentation. Those are the businesses we are trying to bring into the fold and offer them normal loans. Cannabis will always have a premium on it simply because it is illegal at the federal level and there are additional hoops we have to jump through. Because of the potential forfeiture and seizure, if there are bad actors, etc., it really behooves any clients coming to us to also place their depositary services with us so we can prove their legitimacy and provide loans to them.

CIJ: Let’s talk about the Canopy Growth news. They announced they are pulling the trigger on acquiring Wana Brands, Acreage Holdings and Jetty Extracts, under the Canopy USA holding company and ahead of federal legalization. On the surface, it looks like they are bypassing a lot of the hurdles American cannabis companies currently face with financial red tape. As a foreign company trading on the NASDAQ dealing with a schedule 1 substance, do you expect Canopy to have a significant, some would say unfair, competitive advantage with their early entry? Or is this perhaps more of a rising tide lifting all boats scenario? What effect will this have on the current market landscape?

Seefried: I find it a very interesting move on their part. Certainly, they have a big advantage in comparison to other companies. The consolidation in the industry is moving so quickly. Other players will keep up with this just as fast as Canopy is moving in. That’s my opinion in terms of what I see in the consolidation area of the market. I think what it really hurts is small businesses. My heart goes out to them. So many of them worked so many years to build excellent small companies with boutique shops, and this whole move will really change that part of the industry.

I see a lot of these small players, non-vertically integrated companies, being impacted in a negative way due to such mass consolidation and the entry of foreign businesses. We need to get more competitive on a global level in order for our companies to grow and thrive. This happened back in 2018, when so many companies started doing those reverse takeovers onto the Canadian Securities Exchange and suddenly, they were putting tens of millions of dollars into the U.S. market. People didn’t see that as a competitive disadvantage for American companies, but now this move by Canopy may really show that we have to look at things more globally.

CIJ: Biden’s announcement regarding the scheduling review for cannabis has a lot of industry folks very hopeful that federal legalization is closer to a reality than before. Do you share their optimism?

Seefried: Closer than before, yes. But how close? I am not convinced it will happen quickly. If they are really going to consider rescheduling or descheduling, everything happens in Washington very incrementally. Eight years and seven attempts at the SAFE Banking legislation and still no movement on that front. Tomorrow, we’re going straight to legalization? I have a hard time swallowing that one. I just don’t see that big of a jump all at once. I think it is interesting coming just before the midterms and votes are really needed now more than ever.

What Biden did was a great start. Especially for those people in prison for possession. The interesting part of it is, we are very serious about people who have used it, but the people who have sold it and are in prison might be in the same situation. Given how the laws worked for so long, just based on the amount of cannabis you had could get you automatically labeled as a dealer, which isn’t the case for a lot of incarcerated folks.

The fact is, the social equity and justice issue, who do you free or who do you not free from prison, is a very difficult issue to get through. I think it is a great step forward and it will help some people who were treated unjustly, but there is still a lot of work to be done.

“I believe we’ll start seeing pressure from the global market on the United States to move things along a little faster in our own country.”As far as rescheduling, if they go from a Schedule I drug to a Schedule II drug, that will do no good, but it certainly is a bone to throw to the industry if you want to look like you are making some progress. Schedule II is still subject to 280E tax code so it will only do so much. If they want to make things more equitable and actually level the playing field, they have to do something about the 280E issue hindering every cannabis business in the country.

As far as full legalization, I am not optimistic because of all the players that need to be involved. Full legalization will require a change to the IRS tax code 280E as well as other tax issues. I think there are too many players: The DOJ, FinCen, the DEA, the FDA, the IRS. All of these agencies will have to agree on full legalization and moving forward in unison. The DEA is trying to fight illicit actors and illicit drugs. FinCen is trying to follow the money to find illicit actors. As long as there is an illicit market it will make their job tough, and on top of all of that, we have politics in play. That is just my take on legalization. It is going to be a much more complex problem than just legalizing the plant and moving on. Rescheduling seems like lower hanging fruit, but they will have to move it higher than a Schedule II.

CIJ: With the midterm elections here, there are a number of legalization measures in a handful of states, along with political control of Congress on the ballot. How do you think a Republican or Democrat controlled Congress will affect cannabis legalization progress?

Seefried: I just finished doing some lobbying in September in DC and spoke to some Senator offices in person, and I heard a lot of interesting topics being discussed. One of the things that keeps popping up is that social equity and justice is a huge issue. If we can’t solve this injustice in our system that has been going on for decades and decades, maybe they’ll hold banking legislation hostage. You can’t correct 50-60 years with one piece of legislation. Everything has to be incremental, unfortunately, so there will be some give and take there. I think that was a primary focus, especially with the Democrats and I do think it is a worthy cause.

On the Republican side, economically improving our competitive advantage as a country. They are starting to see the jobs being created and the tax revenue coming in and the growth of the industry. They will have to make that decision at some point in time whether they are going to leave the American cannabis industry behind or allow them to compete on a global level. I really think everything will move slowly and continue as it has happened in the past.

I believe we’ll start seeing pressure from the global market on the United States to move things along a little faster in our own country.

CIJ: As we inch closer to 2023, what do you expect the next year to offer for the cannabis financing market?

Seefried: I would say, with or without legislation, they’re finding greater access to banking. And the reason they are getting better access to banking is because none of us have been prosecuted for simply engaging in cannabis banking. I think we have set a precedent over the past eight years, not only us but other service providers in the industry and that we are not being prosecuted.

I see more financial institutions entering the market slowly. The second reason access to capital and banking will increase is because every financial institution in the country wants that lending relationship. In order to get there, they want to start with the depository relationship, and they don’t want smaller players presently doing it and getting all of those relationships before they enter the market. I think the competitive nature of the financial industry to land that lending relationship is going to force them into the game sooner than later.

Registering Trademarks in the Cannabis Space

By Mike R. Turner, Joseph Sherling
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As the legality and availability of hemp and non-hemp cannabis products continues to grow, having strong, recognizable brands will become increasingly important in order to stand out from the competition. Unfortunately, strong brands invite knock-offs and can require aggressive policing. Registering your trademarks makes policing much easier, but registration of marks used to sell hemp and non-hemp cannabis products requires strategy and forethought.

Why Register?

Trademark rights flow from use, so a registration is not required for enforcement. However, “common law” rights based on use alone must be proven in each instance, and you must show that your use of the mark has been sufficient such that consumers recognize and associate it with your goods or services. This can be difficult, expensive and time consuming. Also, common law rights are territorially limited. Even if you can prove such rights in Oregon (for example), you may have no right to prevent use of your mark in other states. State trademark registrations are similarly limited, but are presently all that is available for marks used exclusively to sell non-hemp cannabis products.

By contrast, a federal trademark registration provides the registrant a nationwide, exclusive and presumed right to use the mark in association with the designated goods and services. In addition, counterfeit use of a federally registered trademark can lead to statutory damages. That is, you don’t have to prove an amount of harm—a court may simply award damages based on statute. Yet another benefit is the ability to file based on an “intent to use.” You can thereby reserve a mark nationwide for up to three years before you must show use. Federal registration is available for marks used to sell hemp products, but with some strict limitations as discussed below.

Use in Commerce Requirement

Federal registrations are issued by the United States Patent and Trademark Office (the Office) once an application is approved and use in commerce is demonstrated. To satisfy the “use in commerce” requirement, an applicant must show that a mark is being used in association with the sale of goods or services that are legal to trade under federal law. Sale of products not legal under federal law simply does not count to establish trademark use for purposes of federal registration. This is where the vast majority of federal trademark applications for use with cannabis products get rejected. A search of the federal registry shows that, of over 8000 trademark applications for products containing cannabis extracts, only about 1,300 have resulted in registrations. But these 1,300 illustrate that there is a path to success.

Allowable Goods

The Office traditionally rejected all applications for use with products containing any cannabis extracts under the Controlled Substances Act (CSA). The Agricultural Improvement Act of 2018, commonly known as the Farm Bill, created an exception to the CSA for hemp, defined therein as cannabis extracts containing < 0.3% THC by dry weight. Based on this, the Office began allowing applications provided they designate only goods having 0.3% THC content or less. But even that limitation isn’t sufficient for some types of goods.

FDAlogoUnless specifically disclaimed, the Office will assume the presence of CBD in products containing cannabis extracts, regardless of THC quantity. On that basis it will reject applications for hemp products that are ingestible (food, drinks, nutritional supplements, etc.), or that claim a medical or therapeutic purpose, under the Food, Drug & Cosmetic Act (FDCA). The FDCA requires Federal Drug Administration (FDA) endorsement to add “drugs” to such products, the FDA classifies CBD as a “drug,” and the FDA has authorized only a few products that include CBD. Thus, an allowable good that is ingestible or therapeutic must not only contain the low THC disclaimer, but must also state an absence of CBD. Notably, the Office has not been rejecting products on the basis that they contain CBG (cannabigerol) or other naturally occurring non-THC, non-drug cannabinoids.

Are the Goods Sold Really Allowable?

Of course this scheme of word-smithing designations to obtain allowance of federal trademark registrations invites error, if not fraud. Registrations are subject to cancellation if use of the mark with the designated goods is not maintained, or if it can be shown that the registration was fraudulently obtained. Thus, critical to a claim of use is that the applicant offers products that actually meet the designation description. The Office does not check for THC levels or CBD presence, and most purveyors of hemp products don’t either. Indeed, there is not even a standardized method for measuring these things. However, studies show that more than half of hemp products either purposefully or accidentally misrepresent their actual THC and CBD levels.i Though legally untested, this presents a potential problem for many existing federal registrations.

If a mark registered for use with goods having < 0.3% THC is found to be used only with products that actually have a greater amount of THC in them, the registration could be canceled. The same fate could befall a registration for goods claiming to have no CBD that, when tested, actually do contain more than trace levels. Even if non-hemp cannabis products are legalized under federal level, registrations obtained with THC and/or CBD limitations would still require the registrant to use the mark with products meeting such limitations.

Keeping Evidence for Insurance

So long as a registrant has maintained use of the registered mark “in commerce” in association with the designated goods, the registration is insulated from attack based on claims of non-use or fraud. The fact that the registrant also uses the mark for goods that are not legal on the federal level is of no consequence to the registration. Thus, it is wise to include in the product lineup under the brand to be protected at least some good that meets the present requirements for federal trademark registration.

One option is to include a product where the only cannabis extract is from hemp seed oil. Without even testing it, you can be reasonably assured that such a product will contain little or no CBD or THC. Another option short of testing is to obtain a certification or warrant from your supplier that particular ingredients truly are hemp, i.e., have < 0.3% THC by dry weight. This could be relied on as evidence should no original product be available for testing to show that use was legitimate at the time registration was obtained. If you can’t obtain such a certification, testing the occasional sample and keeping records over time would also work. Product samples can now be tested for THC content for around $100 per sample, with results back in about a week.ii

Zone of Natural Expansion

Though non-hemp cannabis products cannot be covered directly by federal registrations, a federal registration for CBD/hemp products can have spillover benefits. This is because the scope of a registration may expand to cover things similar to what is designated. The question comes down to likelihood of confusion. Imagine a company holds a registration covering LOOVELA for “nutritional supplements containing hemp seed oil having no CBD and < 0.3% THC by dry weight.” It would be logical for a consumer to assume that non-hemp cannabis products sold under the LOOVELA mark would likely be made by the same company. Thus, provided the company actually sold products complying with its designation, it could assert the CBD-based registration to prevent sale of LOOVELA branded non-hemp cannabis products. Also, should such products be legalized federally, the company would likely be the only applicant able to obtain an additional federal registration for LOOVELA for use with them, because any competing attempt would be confused with their pre-existing registration for CBD/hemp products.

In conclusion, it should be noted that the law in this space is evolving rapidly and is nuanced. Every situation is unique in some way, and there are many reasons an application may fail or a registration may be attacked that are not addressed above. But there is value in obtaining a federal registration for your hemp brands, and there is an overall strategy to be employed for brand protection in the cannabis space.

The content above is based on information current at the time of its publication and may not reflect the most recent developments or guidance. Neal Gerber Eisenberg LLP provides this content for general informational purposes only. It does not constitute legal advice, and does not create an attorney-client relationship. You should seek advice from professional advisers with respect to your particular circumstances.

References

  1. See, e.g., Bonn-Miller, Marcel O., et al., “Labeling Accuracy of Cannabidiol Extracts Sold Online,” Journal of the American Medical Association, Vol. 318, No. 17, pp. 1708-09 (Nov. 7, 2017); Freedman, Daniel A. and Dr. Anup Patel, “Inadequate Regulation Contributes to Mislabeled Online Cannabidiol Products,” Pediatric Neurology Briefs, Vol. 32 at 3 (2018).
  2. See, e.g., www.botanacor.com/potency/

Can Cannabis Get Even More Social?

By Mark Goldwell
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Cannabis has always had it tough when it comes to marketing. Part of it is simple logistics. A DTC playbook, heavily contingent on growing a brand’s audience and pushing folks to purchase products through digital marketing, isn’t a possibility for them. Despite its mainstream acceptance, most large ad platforms like Facebook and Instagram won’t touch it because of its tenuous legality. Banner ads don’t convert and only end up on specific platforms like Pornhub or Weedmaps anyway.

PlugPlay, a California cannabis brand, stays relevant with creative posts like these on Instagram

And because the legal status changes on a state-by-state basis, it’s extremely difficult for a brand to span across multiple markets. Just think: why would someone living in Florida care about a cool cannabis brand in Detroit if they weren’t in that industry or have ties to that state? This also makes influencer marketing tough because people aren’t finding the coolest people in their respective states to follow. They’re just finding people they think are interesting.

That leaves budtenders – point of sale experts – that hold a huge position of educating and steering folks towards products. Most folks are newer to cannabis – or cannabis has grown up a ton since their past casual experience with it. Budtenders offer an informative, hyper-local solution with extremely limited reach to a narrow market.

But the future shows promise. A new wave of platform marketing has emerged with new formats and lots of room to cultivate and grow for cannabis brands. With a little understanding of what’s driving the success of social media newcomers and evolving mainstays, cannabis companies can potentially find new avenues for marketing and brand-building success.

Going Native

There’s currently a lot of opportunity through the larger cannabis retail and native ordering apps – ones like Weedmaps, Leafly and others that have widespread brand recognition within the cannabis community and a growing array of social media-like features. These are places that already segment according to markets, with a built-in, educated audience open to creative approaches to branding and marketing.

These types of apps are also becoming the norm more and more. Especially since the pandemic, dispensaries are doing most of their volume through online orders and pickup. As a result, making sure you show up, look great and convey your unique position on these platforms is incredibly important.

Listening and Learning

Whether it’s Clubhouse or other upcoming rivals on the horizon, audio platforms are great because they can serve as a means to have an honest, direct and enlightening conversation about cannabis. This is great news for budtenders who can help a brand expand their reach by facilitating these sorts of conversational consumer relationships. As the cannabis market matures rapidly, people will need a safe place to normalize consumption, talk about dosage or about how normal consumers (not just stereotypical potheads, but every day, “constructive members of society”), are able to use cannabis effectively in their day-to-day lives.

A lot of other visually-based platforms are about curation or presentation of an ideal life and less about learning or sharing – a place where audio platforms can shine.

Old is New

In some cases, it’s not about just using new platforms but finding better ways to utilize old ones. For example, legal or not, a lot of folks are about discretion when it comes to their cannabis. They want to get questions answered and learn about brands and products via peers and experts, but they don’t want their bosses or grandparents knowing that they’re hitting a pen between meetings or before brunch.

That’s why time-based content platforms – Snapchat, Instagram, WhatsApp and others – that offer individuals and brands some measure of safety, as well as controlled messaging, will help continue to normalize cannabis.

Another non-cannabis example worth emulating is Psilodelic, a psilocybin gummy brand that’s super low-dose and decently branded, using Instagram in a creative way. Purposefully making their accounts private and going without a public hub, the only way to buy the product is to follow and DM them. “Hacking” the platform in this way means they have to shut down and open up new accounts all the time, but they’ve done an amazing job offering a product that, similarly to cannabis, is sometimes inaccessible, and have done it in a way that’s simple and feels more elite. That’s creative entrepreneurship.

In the end, using these changing platforms means approaching them as tools to foster a better relationship with people. The brands that succeed will have dead-simple instructions and information that really helps to empower folks to look at cannabis in a different way. Then, as we finally reach legalization, these brands will find themselves better equipped to step into the mainstream, confident in the meaningful relationships they’ve already cultivated.

The New Delta 8 THC Market: A Q&A with the Founders of DeltaVera

By Cannabis Industry Journal Staff
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Delta 8 THC (delta-8-tetrahydrocannabinol) sprung onto the scene late last year in a big way. While similar to the much more widely-known delta-9-tetrahydrocannabinol that produces a lot of the psychoactive effects associated with ingesting cannabis, delta 8 THC can be derived from hemp with less than 0.3% delta 9 THC. Given the legality of hemp-derived products following the 2018 Farm Bill, delta 8 THC can be produced in some states where delta 9 THC still remains illegal.

While delta 8 is considerably different in its psychoactive effects from its cousin, it does overlap in some ways. It can still produce some more manageable, less “heady” versions of delta 9’s effects like euphoria and relief found in the many medical applications of cannabis. DeltaVera, a company that launched less than six months ago, aims to share that more manageable THC experience with the masses.

The sharp rise of the delta 8 market means that DeltaVera is poised for growth. With distribution contracts inked, exciting partnerships in the works and a large surge in consumer demand, the founders of DeltaVera are at the ready to capitalize on this lesser-known molecule and bring it to the forefront of the nascent hemp industry. Starting out as a small family business, Sam and Craig Andrus launched DeltaVera with their third founder, PK Isacs.

We sat down with Sam Andrus and PK Isacs, two of the founders of DeltaVera, an award-winning brand, to ask them about their plans for expanding, how they became entrepreneurs and why they think delta 8 is the next big thing in cannabis.

Cannabis Industry Journal: Tell me about your company. How did you get started in the cannabis space?

Sam Andrus, cofounder of DeltaVera

Sam Andrus: I had an early start in the Delta 8 THC industry on the sales side. We knew we wanted to get into the market, but observed a number of aspects in the space that needed to be addressed: the most important being quality control, transparency and brand trust. With this as a backdrop we launched DeltaVera. Highly curated, approachable, transparent and value-oriented with a strong focus on reliability and trust. The DeltaVera family is made up of three operating managers and the sales team. We are three founders with complementary skill sets: Craig, who has domain expertise in finance, governance and startups, PK who has experience in business and marketing and my sales experience round out the management team.

We have yet to solicit outside capital and have funded ourselves internally as we create our brand and refine our product offering. That said, we are seeing numerous opportunities in strategic partnerships and expansion, which will require additional capital. And we are excited to start this expansion process.

CIJ: What makes the Delta 8 space so remarkable? Why are your SKUs primarily formulated with Delta 8?

Sam Andrus & PK Isacs: Delta 8 THC is an alternative/complement to delta 9 THC, CBD and other cannabinoids. Its status as non-federally scheduled and its less potent psychoactive effects make it appealing in its own right. Delta 8 THC can help with healthier sleep patterns and with pain management in a way that CBD can’t, without a strong “head high” that many of our customers like to avoid. Additionally, it’s shorter lived and doesn’t give you any negative residual effects, which makes it beneficial for people on tighter schedules. These factors make it easier for us to approach markets that are inaccessible to both delta 9 THC and CBD, such as older demographics. In a world where delta 9 is legal, there will still be a place for delta 8.

PK Isacs, cofounder of DeltaVera

While we are very proud of our suite of smokable products, we are currently focusing our efforts on edibles: our Delta Discs are our mainstay, though we are expanding our product line to include nano-emulsion products such as liquid shots and nano gummies. They strongly appeal to our target demographics; additionally, the edible market is growing very quickly in states that allow the sale of hemp-derived consumables.

CIJ: Continuing on the delta 8 front – right now it is considered a cannabinoid legal for interstate commerce, much like CBD, correct? Do you think that will change? 

Sam & PK: That is currently the case. Delta 8 THC is newer, and as such, it has even more ambiguity in regards to its legal future. But what’s most exciting (and our most challenging task right now), is informing consumers about the benefits of delta 8. We are one of a few companies solely focused on the consumption of delta 8, because of its similar benefits to delta 9 and CBD – our products are the perfect happy medium: a high with less psychoactive effects and all the health benefits of both, making it a desirable alternative to all consumers.

In addition, we are looking at some combinations of delta 8/CBDA, delta 8/CBN, delta 8/THCV and are very excited to begin test marketing these combinations. These proprietary blends of minor/major cannabinoids can cater to a niche target demographic as they can be curated to have very specific and unique effects when combined in the right quantities with the right delivery system. They will also be able to serve a larger customer base as these cannabinoids can all be derived from hemp.

CIJ: How do you think the FDA would regulate your product? Do you welcome federal oversight?

DeltaVera gummy products

Sam & PK: Regardless of whether or not we are regulated we are committed to a high level of transparency and trust. As noted in unregulated markets, like the supplement market, you don’t always know what you are getting in terms of purity and potency. We are changing that paradigm by adding unique QR codes to our sustainable containers which reference COAs [certificates of analyses] specific to the contents of the case. A lot of the space is naturally trying to avoid that kind of regulatory interference, but we are currently doing our best to self-regulate and make sure that our consumers are fully informed about what they’re receiving.

We will be the first to say that there aren’t as many laws governing delta 8 THC as there could be, and that’s why we’ve spent so much time and money on self-regulation. All of our products have very clear nutritional information in addition to test results down to one hundredth of one percent. As for what category these products should fall under: we have a wide range of products, and each one has its place under a different umbrella of regulation. We hope that the federal government will take advantage of the vast array of studies that have been conducted on delta 8 THC since it was first extracted in 1942 to step up to this product that is, in our experience, helping so many people.

CIJ: Tell me about how your business has grown so far.

Sam & PK: When we sell to a retailer, we try to provide them with as much material as possible on what delta 8 THC is and what differentiates DeltaVera’s products. Still, we’ve had some difficulty in places with limited delta 8 THC exposure. That being said, when someone tries our product, there is a high likelihood that they become a repeat customer (and they tell their friends). Given our newness to the market (Our brand launched in January 2021) initial indications are – we have a good rate of repeat orders, and we’ve heard the same from our brick-and-mortar partners.

The DeltaVera Delta Discs

Our distribution network has grown tremendously; we’ve taken a three-pronged approach to distribution: partnerships with like-minded companies in compatible spaces, an e-commerce market on our website, and a commission-based sales structure to reach brick-and-mortar establishments. To date, most of our distribution takes place in the latter two spaces, due to the added time and commitment involved in forming partnerships. As a company we are taking a more creative approach on how we present our product and alternative ways to consume it. We have some exciting collaborations in the works; follow us on social media to stay up to date with everything on the horizon. We are very enthusiastic about our partnerships however, with our first collaboration with WaxNax, a Denver-based company revolutionizing the cannabis dabbing experience, hitting the shelves this week.

CIJ: What is your marketing plan?

Sam & PK: We are working on building a social media presence. Natalie, who is leading the charge on social media, recommended we take an organic approach to build our base. We want to avoid falling into the “paid ad”, “spam” vibe as long as we can. We are currently focused on building a community through delta 8. Our mission is making DeltaVera a brand for all lifestyles, athletes, creatives, travelers or business professionals. We’re confident in our product, and have faith that it can speak for itself.

CIJ: How do you ensure quality in your products?

Sam & PK: Our products are of guaranteed quality with our licensed growers and manufacturers. We provide COAs, informing the retailer & consumer about each product, displaying full panel tests on cannabinoids and heavy metals. These preliminary and secondary lab tests ensure our product is below 0.3% delta 9 THC in all our products. Through third-party labs, we run full panel tests which pick up a variety of cannabinoids; for most of our products we focus on the level/purity of delta 8. Our products are screened for both contaminants and heavy metals.

All this information is housed conveniently on our website that can be reached through our QR codes.

CIJ: What are your plans to grow the business in the future? 

Sam & PK: We feel very confident in our three methods of distribution: partnerships, e-commerce and a commission-based sales structure. We’ve made tremendous ground on partnerships, and are very excited about numerous partnerships we have in the pipeline. We’ve reached out to some incredible groups in the CBD space, the THC space and a few groups that you wouldn’t normally associate with cannabinoids, but with whom we’ve workshopped some really creative ideas that we’re really looking forward to bringing to market.

Readers can use promo code “CIJ” to get 15% off their first order here. 

MORE Act Passes the House – Is Legalization Around the Corner?

By Steve Levine, Alyssa Samuel
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On Friday, December 4, 2020, the US House of Representatives passed the Marijuana Opportunity Reinvestment and Expungement Act of 2019 (the MORE Act), which would effectively legalize cannabis by removing it from the Controlled Substances Act. The bill (H.R. 3884) has several key components:

  • Most importantly, the bill would remove cannabis from the list of controlled substances in the Controlled Substances Act, as well as other federal legislation such as the National Forest System Drug Control Act of 1986. This would effectively end many of the obstacles created by the federal illegality of cannabis such as the lack of access to banking, tax consequences such as 280E, adverse immigration impacts and threats of federal criminal enforcement.

    Rep. Earl Blumenauer (D-OR) donning his cannabis mask as he presides over the Congress
  • Second, not only does the bill preclude future prosecution for cannabis-related crimes, the bill is designed to be retroactive and would provide for the expungement of past non-violent cannabis offenses.
  • The bill creates a prescribed excise tax on cannabis and cannabis products. The funds collected from the taxes would be channeled into opportunity and reinvestment programs.
  • A Community Reinvestment Grant Program would be established aimed at the provision of services for “individuals most adversely impacted by the War on Drugs,” such as job training, education, literacy programs, mentoring, and substance use treatment programs;
  • A Cannabis Opportunity Program would be established providing state funds for small business loans in the cannabis industry targeted at social equity candidates; and
  • An Equitable Licensing Grant Program providing funds for states to implement equitable cannabis licensing programs aimed at minimizing “barriers to cannabis licensing and employment for individuals most adversely impacted by the War on Drugs.”
  • The bill would require all cannabis producers to obtain a federal permit. Cannabis businesses would need to be licensed at the state, local, and federal levels to operate.

This MORE Act is a substantial step in cannabis legislation. Reactions to the proposed legislation have been mixed. While the bill does include some measures aimed at social equity, critics of the bill claim it does not go far enough. Similarly, while the bill includes a federal permitting provision, this would be the beginning of a nascent federal regulatory scheme.

What does this mean for your business? 

While this bill passed in the US House of Representatives, it would still need to pass in the U.S. Senate this term, which by most accounts does not seem likely. However, the passage of this bill signifies the progress that has been made and provides insight on what further legislation may look like.

A Survey of State CBD & Hemp Regulation Since The 2018 Farm Bill

By Brett Schuman, Jennifer Fisher, Brendan Radke, Gina Faldetta
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Since the December 20, 2018 enactment of the Agricultural Improvement Act of 2018, better known as the Farm Bill, we have seen a number of new state laws addressing both the legality of hemp and products derived therefrom, most noticeably cannabidiol, better known as CBD. This piece provides a brief overview of some of the more interesting state laws concerning hemp and CBD, as well as recent developments.

Legality of Hemp

Since the passage of the Farm Bill, the vast majority of states have legalized the cultivation and sale of hemp and hemp products. However, certain states maintain laws barring some or even most forms of hemp.

The most stringent of those states is Idaho, where hemp remains illegal. In March 2020, Senate Bill 1345 – legislation that would have allowed for the production and processing of industrial hemp – died in the House State Affairs Committee, due to concerns that legalizing hemp would be the first step toward legalizing “marijuana”; that the bill contained too much regulation and that it was otherwise unworkable. As a result, Idaho is currently the only state without a legal hemp industry. Hemp with any THC, even at or below the 0.3 percent threshold under the Farm Bill, is considered equivalent to “marijuana” in Idaho and is illegal (see below for a discussion of CBD in Idaho).

Indiana, Iowa, Louisiana, and Texas have enacted bans on smokable hemp. Indiana law prohibits hemp products “in a form that allows THC to be introduced into the human body by inhalation of smoke.” Iowa has amended its Hemp Act to ban products introduced to the body “by any method of inhalation.” Louisiana prohibits “any part of hemp for inhalation” except hemp rolling papers, and Texas law prohibits “consumable hemp products for smoking.”

Some of these bans have been challenged in court. In Indiana, a group of hemp sellers requested an injunction against the smokable hemp ban in federal court, on the grounds that the federal Farm Bill likely preempted the Indiana law. In September of 2019, the district court issued the requested injunction, but the U.S. Court of Appeals for the Seventh Circuit overturned that decision in July 2020, stating that the order “swept too broadly.” The Seventh Circuit noted that the 2018 Farm Bill “expressly provides that the states retain the authority to regulate the production of hemp” and remanded the case for further proceedings.

Similarly, in Texas, hemp producers have sued in state court over the smokable hemp ban, questioning its constitutionality and arguing that it would result in a loss of jobs and tax revenue for the state. According to those producers, smokable hemp comprises up to 50 percent of revenue from hemp products. On September 17, 2020, Travis County Judge Lora Livingston issued a temporary injunction blocking enforcement of the law until trial, which currently is set to commence on February 1, 2021. Judge Livingston had previously issued a temporary restraining order to that same effect.

State Laws Regulating CBD

State laws and regulation on hemp-derived CBD are varied, and the legality of a CBD product often comes down to its form and marketing.

FDAlogoAs an initial matter, it must be noted that notwithstanding the Farm Bill the FDA currently prohibits hemp-derived CBD from being be sold as dietary supplements, and food (including animal food or feed) to which CBD has been added cannot be introduced into interstate commerce. As discussed below, a substantial minority of states, including California, follow the FDA’s current position on the permissibility of putting hemp-derived CBD in food or dietary supplements.

Certain states include strict limitations on CBD, none more so than (once again) Idaho. Lacking any legal hemp industry, Idaho restricts CBD products to those having no THC whatsoever, rejecting the generally accepted threshold of not more than 0.3 percent THC. Idaho law also requires that hemp CBD be derived only from “(a) mature stalks of the plant, (b) fiber produced from the stalks, (c) oil or cake made from the seeds or the achene of such plant, (d) any other compound, manufacture, salt, derivative, mixture, or preparation of the mature stalks, or (e) the sterilized seed of such plant which is incapable of germination.”

Kansas similarly prohibits CBD with any amount of THC, though the law is murkier than Idaho’s. While Senate Bill 282 allowed possession and retail sale of CBD effective May 24, 2018 by removing CBD oil from the definition of “marijuana,” this was broadly interpreted to apply to THC-free CBD only. Later legislation, Senate Substitute for HC 2167, effective July 2019, allowed the farming of hemp with THC levels aligned with the Farm Bill definition (i.e., 0.3 percent THC or lower), but expressly prohibited the use of industrial hemp in: cigars, cigarettes, chew, dip, or other smokeless forms of consumption; teas; liquids for use in vaporizing devices; or “[a] ny other hemp product intended for human or animal consumption containing any ingredient derived from industrial hemp that is prohibited pursuant to the Kansas Food, Drug and Cosmetic Act or the Kansas Commercial Feeding Stuffs Act,” though this final section provides that “[t] his does not otherwise prohibit the use of any such ingredient, including cannabidiol oil, in hemp products,” the law’s only reference to CBD. The Kansas Bureau of Investigation has reportedly made statements indicating that CBD with any level of THC remains illegal.

Just some of the many hemp-derived CBD products on the market today.

Mississippi only recently legalized the cultivation of hemp via Senate Bill 2725, the Mississippi Help Cultivation Act, which was signed into law on June 29, 2020. House Bill 1547, passed on April 16, 2019, imposed content requirements upon CBD products within Mississippi: to be legal in Mississippi, a CBD product must contain “a minimum ratio of twenty-to-one cannabidiol to tetrahydrocannabinol (20:1 cannabidiol:tetrahydrocannabinol), and diluted so as to contain at least fifty (50) milligrams of cannabidiol per milliliter, with not more than two and one-half (2.5) milligrams of tetrahydrocannabinol per milliliter.” Moreover, CBD products produced in Mississippi must be tested at the University of Mississippi’s lab. However, subject to these restrictions, Mississippi allows the sale of CBD products, including edibles, contrary to the restrictions of many of states considered friendlier to hemp.

Perhaps more surprising is Hawaii, which restricts the sale and distribution of CBD, aligning with the FDA’s guidance. In Hawaii it is illegal to add CBD to food, beverages, as well as to sell it as a dietary supplement or market it by asserting health claims. It is also illegal to add CBD to cosmetics, an uncommon restriction across the many states with CBD-specific laws and regulations. Unlike Idaho and Mississippi, which have no medical marijuana programs, Hawaii has long legalized marijuana for medical purposes and in January 2020 decriminalized recreational possession. Hawaii very recently enacted legislation allowing the production and sale of cannabis-infused consumable and topical products by medical cannabis licensees effective January 1, 2021, but this legislation did not address CBD. Given the foregoing, Hawaii’s restrictions on CBD stand out.

The structure of cannabidiol (CBD), one of 400 active compounds found in cannabis.

Beyond broad CBD restrictions, many more states prohibit the use of CBD within food, beverages, or as dietary supplements. For instance, twenty states – including California, Georgia, Illinois, Massachusetts, Michigan, New Jersey, New York, and Washington – prohibit the sale of CBD in food or beverage. In California, a bill to overhaul California’s hemp laws, Assembly Bill 2028, failed when the legislative session concluded on August 31, 2020 without a vote. AB 2028 would have allowed CBD in food, beverages, and dietary supplements (though, interestingly, it would have banned smokable hemp). As a result, California remains a relatively restrictive state when it comes to hemp-derived CBD, notwithstanding the legality of recreational marijuana.

New York allows the manufacture and sale of CBD, but requires CBD products to be labeled as “dietary supplements.” This mandate conflicts directly with the FDA’s position that CBD products are excluded from the definition of a dietary supplement. Further, despite the state’s categorization of CBD products as dietary supplements, New York prohibits the addition of CBD to food and beverages. These regulations have resulted in a confusing landscape for retailers and manufacturers in the Empire State.

Several states also have labeling requirements specific to CBD products. Batch numbers and ingredients are ubiquitous, but an increasingly common requirement is the inclusion of a scannable code that links to specific information about the product. States imposing this requirement include Florida, Indiana, Texas, and Utah. Indiana is viewed as having one of the more comprehensive labeling requirements for CBD products – or, depending upon your perspective, the most onerous.

Best Practices for Workforce Reduction

By Conor Dale
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Due to anticipated contractions in the industry and concerns over a potential nationwide recession, cannabis industry employers may be planning on implementing large scale reduction in force (RIF) layoffs or employee furloughs to reduce payroll. While RIFs can provide business-saving cost reductions, they can subject an employer to substantial potential legal liability, including but not limited to class action lawsuits and enforcement actions from state and federal agencies. Understanding and addressing potential legal pitfalls before implementing an RIF can help in materially limiting an employer’s potential legal exposure.

Employers should first consider potential cost saving alternatives to implementing mass employee layoffs. Such steps can include reducing the salaries and/or work hours for current employees, temporarily freezing company operations for limited periods, or placing non-critical positions in a limited paid leave of absence at reduced wages. While each of these steps bear their own risks, they may assist in avoiding mass employee layoffs.

Next, federal law and the laws of certain states require employers to provide written notice to employees and local governments at least 60 days before implementing mass layoffs. For example, under the federal Work Adjustment and Retraining Notification (WARN) Act, an employer must generally provide a written notice to employees regarding an impending reduction in force when it: (1) permanently or temporarily shuts down a worksite which results in an employment loss of 50 or more employees; (2) lays off between 50 to 499 workers at a single worksite when such layoffs constitute at least 33% of the employer’s workforce; (3) lays off at least 500 employees within a 30 day period; (4) implements a wide scale temporary layoff of more than 6 months; or (5) reduces the work hours of 50 or more employees by at least 50% during each month of any six month period. Please note that the WARN Act aggregates layoffs over 90 days; thus, an employer conducting a series of smaller layoffs may still need to provide employees with a WARN notice. An employer who fails to provide a required notice could owe each impacted employee up to 60 days’ back pay, which includes but is not limited to the cost of potential employment benefits.

An employer should also take steps to limit potential discrimination claims based on an RIF. It is illegal for an employer to select an employee for layoff because of their protected characteristics, including but not limited to race, religion, gender or age. The primary defense to such a discrimination lawsuit is to prove the legitimate, nondiscriminatory reason for the layoff decision. As a result, employers are strongly encouraged to create a formal RIF plan which documents the legitimate reasons for layoff decisions. The RIF plan should expressly articulate the cost-saving grounds for the RIF and the goals to be achieved by its implementation; these grounds and goals should be the sole reason for any subsequent layoff decision.

Employers are strongly encouraged to consult with legal counsel before implementing an RIFFor example, an employer should identify all necessary positions and employee skills needed for a company’s current and future business operations in order to identify non-essential positions that may be subject to position eliminations or layoffs. Similarly, employers should create standards to select employees for a RIF when multiple employees hold the same or similar jobs. These standards commonly include considering employees’ education, skills, unique knowledge, previous job performance and seniority. Most importantly, an employer should make actual layoff decisions that are consistent with its articulated RIF plans; under both state and federal law, a termination decision that is inconsistent with or contradictory to the articulated reasons for a layoff decision may provide an employee with considerable evidence that that his or her termination was at least partly motivated by their protected characteristics.

Even when making and implementing a reduction in force plan based solely on legitimate business reasons, employers must be aware of the adverse impact those decisions have on certain groups of employees. It is illegal for an employer to implement policies and practices that are facially neutral but have an unintentional discriminatory effect on protected groups of employees if those policies and practices are not job related or required by business necessity. Before implementing an RIF, employers are strongly encouraged to perform a statistical analysis of the protected characteristics of individuals selected for layoffs to determine whether they are being selected for layoffs at a significantly higher rate than other employees. If an employer does discover that certain groups are being selected for layoffs at a disproportionate rate, an employer should review its layoff decisions to confirm that these decisions are in fact required by business necessity.

Finally, employers will commonly provide severance packages to laid off employees to assist in their transition to other employment. A key factor in these packages is an employee providing an employer with a full release of potential legal claims in exchange for a severance payment. Employers are strongly encouraged to ensure that they obtain full and complete legal releases in any severance agreements they provide. For example, under California law, an employee can only provide a full and complete release of legal claims when a separation agreement specifically cites and waives a specific provision of California’s civil code. Additionally, an employer cannot obtain a legal release of federal age discrimination claims when it offers a separation package to multiple employees over 40 during an RIF program unless it provides specific information regarding the job positions and ages of employees who were and were not selected for layoffs.

While a reduction in force layoff program may help ensure a business’ survival, employers are strongly encouraged to consult with legal counsel before implementing an RIF to detect and avoid potential future legal claims.

Q&A with Adam Smith, Executive Director of the Craft Cannabis Alliance

By Aaron G. Biros
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The Craft Cannabis Alliance is a values-driven industry association whose mission is to define, promote, and celebrate authentic Oregon craft cannabis. Though it has only recently launched, it already counts many of Oregon’s most important local brands among its members, and looks poised to help lead a craft cannabis movement both within the industry and among consumers.

When recreational cannabis was originally legalized in Oregon, according to the Portland Mercury, there were residency requirements for obtaining a license, but in 2016 those rules were removed. In the wake of that decision, Adam J. Smith, founder and executive director of the Craft Cannabis Alliance, saw the prospect, and, increasingly, the reality of out-of-state businesses with deep pockets buying up local cannabis businesses, expanding out of state brands into the market, or financing new brands here. It was quickly apparent to Smith that the big money threatened to overwhelm the market, push Oregon-owned companies off of shelves and eventually dominate Oregon’s much-anticipated export market.  In May, drawing on his experience as an organizer and drug policy reform advocate, as well as several years working in with Oregon craft industries, he launched the Craft Cannabis Alliance.

Adam Smith, founder & executive director of the Craft Cannabis Alliance

Smith has a long history of taking aim boldly at seemingly implacable interests. In 1998, Smith launched the Higher Education Act Reform Campaign (HEA Campaign), which successfully won back the right to federal financial aid for students with drug convictions. That campaign led to the founding of Students for Sensible Drug Policy, now the world’s largest student-led drug policy reform organization, active in more than 40 states and 26 countries. Since then, he has participated in a number of public policy and civic engagement campaigns and organizations, serving on the  founding boards of the League of Young Voters and the Oregon Bus Project. He’s also written for dozens of publications on drug policy.

The Craft Cannabis Alliance is a membership-based industry association of cannabis businesses with like-minded values, who believe that cannabis is, in fact, Oregon’s next great craft industry.  And they want to make sure that means something.  We sat down with Smith to learn more about his organization and why he wants to fight big cannabis.

CannabisIndustryJournal: How exactly do you define craft cannabis?

Adam Smith: In the beer industry, the Brewers Association defines a craft producer as one who produces fewer than 6 million barrels per year, and is not more than 25% owned by a larger brewer.  And that’s fine for beer, but with cannabis just emerging from its own prohibition, there are broader concerns that we believe a craft industry needs to be responsive to.  So we’re less concerned with the size of a company’s production than how it’s producing that product, and how it’s contributing to communities and a healthy industry.

Here in Oregon, there’s a core of the cannabis industry that cares deeply about people, place, planet, and plant. As someone who has spent considerable time writing about and organizing around ending the drug war, it is important to me that cannabis’ first foray into the post-prohibitionist world is not only successful, but that it reflects a shared set of values.  When I started talking with people in the industry who take their values seriously, I asked a lot of questions. I wanted to go from “we know it when we see it” to something that could be defined and therefore legitimately promoted.  Pretty soon, it became clear that there were six major areas of agreement.

  1. Clean product
  2. Sustainable methods
  3. Ethical employment practices
  4. Substantial local ownership
  5. Community engagement
  6. Meaningful participation in the movement to end the disastrous drug war.

The first three requirements, clean, sustainable, and ethical employment practices, are pretty obvious core values for craft producers, and we believe for many Oregon consumers as well.

Substantial local ownership, particularly in a place like Oregon, is an essential component of what the Alliance is trying to organize and represent. We grow some of the finest cannabis in the world in Oregon, and while we’re a small market, we know that eventually, probably sooner than most people realize, the federal walls will come down and we’ll be able to export our products to other states and internationally.  At that point, Oregon will be home to a multi-billion dollar industry. The question then, is who will own that?

We are already seeing big out of state and international companies and investment groups buying up brands or starting their own brands here.  With tens of millions of dollars behind them, they have the marketing and distribution muscle to push locally owned companies, even those producing superior product, off of shelves.  And if foreign-owned companies are dominating shelf space here when those federal walls crumble, those are the companies that will own the export market, and who will ultimately own the Oregon Cannabis brand globally.  And if that happens, we will never buy it back.

Southern Oregon, in particular, is a region that has seen little economic growth since the waning of the timber industry.  The communities there have a huge stake in how this plays out.  Will the cannabis industry build wealth, and economies, and institutions here? Or will Oregon become a low-wage factory for out of state and international corporations.

Beyond local ownership, community engagement is another important component of craft cannabis. The industry, which still faces PR challenges, many of them well earned, needs ambassadors who can demonstrate what a healthy cannabis industry looks like, and who will build the relationships and the credibility necessary to gain the loyal support of their neighbors, local media, and public officials.

Finally, participation in the anti-drug war movement, beyond the self interest of simply opening up the next market, is a must. This industry stands atop a mountain of eighty years of ruined lives and destroyed communities. If you are in the industry, and you are not looking for ways to support drug policy reform, you are profiteering, plain and simple.  The drug war is teetering on the brink of the dustbin of history, but it is not over yet.  The very existence of a legalized industry is the product of decades of work by many, many individuals, most of whom will never earn a dime from the end of prohibition, and never intended to. We view a healthy legal cannabis market as an important platform for social progress on this front, and we are going to use it.  

CIJ: Doesn’t capitalism guarantee that the big money will win out? That striving to maintain one’s values in the face of competition that is laser-focused on profits above all else is inefficient and doomed to failure?

Adam: Believe me, when your name is Adam Smith, you spend a lot of time thinking about capitalism.  Let’s be clear, our members are committed to profits. We just don’t believe that nihilism is going to be a profitable strategy in Oregon cannabis, nor should it be.  Our goal is to monetize our values by offering a win-win proposition to consumers, opinion makers, political leaders, and everyone else who will benefit from a visionary, responsible, and successful Oregon industry feeding into the local economy.

The choice is not between capitalism and something else.  It is between an extractive model of capitalism and a value-adding model of capitalism. Between an industry that seeks to bleed value from the earth, and communities, and employees, and consumers, and one that adds value to everything it touches at every level while producing the best cannabis in the world.  

In the end, consumers are the key.  If we can be the coolest thing happening in Oregon cannabis, if we can bring consumers into this movement, we will succeed.  There’s simply no reason for Oregonians to be buying cannabis grown by a Canadian bank account, even if it’s physically produced here.  That is SO not cool.  And what’s cool in Oregon will be what’s cool and in demand nationally and internationally as we are able to expand the reach of the legal Oregon industry.

We believe that offering the world’s best cannabis, grown responsibly, by Oregonians who are actually committed to the environment, to their communities, and to social justice is a going to be a powerful marketing proposition here.  More powerful than having a famous person on your label or weak attempts at greenwashing.  

Within the authentic Oregon craft universe will be super high-end products, as well as more value-oriented offerings, and everything in between. We’re going to make it easy for Oregonians to recognize and support the kind of industry that we’d all like to see here.

CIJ: Why do you think this could be successful in Oregon? Is the industry receptive to this idea?

Adam: Not only the industry, but the media, elected officials, and most importantly, we believe, consumers.

Oregon sees itself, not unjustifiably, as the birthplace of the craft movement in America. Our craft beer, artisan wine, and craft distilling industries are world-class by any standard, and are very well supported locally.  Include in that list our local food scene and the myriad artisans of all stripes who ply their trades in the region, and it’s pretty obvious that there will be strong support for a values-driven, locally owned cannabis industry.

Craft is about people making something they love, as well as they possibly can, for themselves and their friends, and to share with others who will love it too.   It’s not a coincidence that those products tend also to be of the highest quality.  

The key, as I’ve mentioned, is for craft cannabis is to build a partnership with consumers. Let them know who we are, and what we are trying to build, which is an authentic, and authentically Oregon craft cannabis movement.

There are quite a lot of people in the Oregon industry who share this vision, including many of the best and most important brands in the state. The are people who got into cannabis for the right reasons, with a craftsperson’s dedication to quality and mindfulness on all fronts.  To truly be a craftsperson is not only to make an exceptional product, but also to be cognizant of the historical and social context of your craft, with a respect for what has come before, and a commitment to setting an example for those who will follow.

Those are our people, and they are well represented in the industry here.  Our goal is to organize them and help insure a path to their success.

CIJ: Tell us about how you are educating the industry, consumers and political leaders.

Adam: Well, we launched at the end of May, from the stage at the Cultivation Classic, which highlights and honors the best cannabis in Oregon, grown sustainably and regeneratively. That was a great opportunity for us to introduce ourselves to the part of the industry that we’re targeting, and we were very grateful to Jeremy Plumb of Farma, who is also an Alliance member, and who puts on that incredible event, for that stage.

Right now, we are still a manageable group, size-wise, and we are doing a lot of personal networking in the industry, seeking out the right people to join us.  It’s been a lot of “who do we like and trust, who is making great product?”  As a long-time organizer, I believe in starting out by putting together the strongest possible group of leaders who are also good people and fun to work with.  I’d say that that’s going very well, since we have just an incredible group, who I am honored to stand beside.  Over the past several weeks, as we have started to be a bit outward facing, we have had more and more folks in the industry reaching out to us, rather than the other way around. So we’re in a great spot to grow.

On the political side, we really launched the project at the very end of the most recent state legislative session, and so we purposely did not engage that process this year. But over the past several months, we have been seeking out and introducing ourselves to key public officials.  Their response has been extremely positive.  Here we are, a group of companies who are substantially locally owned, and committed to being transparent and accountable to the health of our employees, our communities, and our state.  In an industry that is still very chaotic, and not well organized, with plenty of shady players, I think that they see us as a compelling partner going forward.    

CIJ: Some of these standards seem pretty difficult to quantify. How do you expect to judge new member businesses?

Adam: Well, in the areas of clean product, sustainable methods, and ethical employment practices, we will adopt standards being developed and promulgated by third-party certification efforts such as Resource Innovation Institute (energy, water, carbon footprint) and the Cannabis Certification Council (“organic” and fair labor standards).  There are others as well, some that exist, things like Clean Green, and some that are still in development.  We are beginning to meet with these folks to gauge where they are, and to give input on their standard-setting processes. In the end, hopefully within the next year as more third-party standards come online, we will choose which of those standards to adopt or accept.  

Community engagement and anti-drug war participation will be things that we undertake as an alliance, as well as providing support for our members to do these things individually behind their brands

As for “substantial local ownership” we are already discussing the parameters of what that means.  Certainly, here in Oregon, there is a need for outside capital.  We are not going to fund a robust industry, especially one that is prepared to take advantage of the coming interstate and international markets, with all local funding.

That said, there is a huge difference between having an out of state partner who owns a piece of a local business, and having an out of state or international corporate overlord with a 90-100%  ownership stake.  And the distinction is important for the future of the industry and for Oregon’s economy.  

The temptation is to set the bar at 50% in-state ownership. But what if you are a large cannabis brand, selling in four or five or six states, that is 35% or 40% Oregon-owned?  That would likely meet the definition of “substantial.”  It is a difficult line to draw, in some sense, but not impossible.  As we move forward, we will develop guidelines on this, and we will have a membership committee that can look at an individual company and say “yes, you are substantially Oregon-owned” or “not you are not” as well as a process in place to insure fairness in that decision.  Right now, every cannabis company in the Alliance is majority Oregon-owned, and I would expect that to continue except in very rare cases.

CIJ: One of your standards for membership requires participation in the movement to end the drug war. Some might see this as a given, but could you shed some light on this?

Adam: As I mentioned earlier, we see reform movement participation as a moral imperative, and since a lot of my background is in drug policy reform, it’s important to me personally.  As an alliance, we hope to partner with organizations like Students for Sensible Drug Policy and NORML, and within the industry with groups like the Minority Cannabis Business Association to both advocate for broad drug policy reform,  and hopefully to provide opportunities and support for communities that have been most negatively affected by Prohibition.  We believe that those of us participating in the legal, regulated cannabis market have both a responsibility and an opportunity to use our voices to point out the difference between the chaos, corruption, and violence of prohibition, and the the sanity, humanity, and opportunity of a post-prohibitionist world.

Soapbox

Cannabis Business Owners: How To Legalize It!

By Kay Smythe
4 Comments

If you have never heard of the terms social capital or social homophily, you are not alone. To many in the cannabis space, these terms are quite foreign to them, but as we’ll find out, also quite crucial to them.

That’s okay. You’re not a social scientist, human geographer, macro nor micro sociologist, so why would you? However, I can guarantee that your life has been influenced by these two sociological paradigms, and if you’re a working member of the cannabis industry, these are the two theories that could result in your business failing, you ending up in jail or even bankrupt.

Don’t like capitalism? Tough.Let’s talk in layman’s terms.

Social capital: this wonderful theory can, in its essence, be described as the science behind “street cred.” Social capital refers to the lived social networks and relationships that you are a member of. Examples include: family, friendship groups, work colleagues, et cetera.

Social homophily: this even more excellent theory decides your social groups before they solidify. Homophily is the ability of the individual to only associate, and subsequently bond with, those that have similar interests, passions…

Together, these two theories work together to first decide upon your social groups (homophily), and subsequently lead to the building of tighter social networks (capital).

So, how does this relate to cannabis?

Unfortunately, like any other billion-dollar industry, cannabis will eternally depend on politics, the economy and men in suits. For want of a more succinct phrase, the cannabis industry depends on capitalism. Why? Because it’s a business, just like any other, and businesses live and die by whom you’re friends with.

Don’t like capitalism? Tough.

Herein lies the issue with the big players leading the cannabis industry: you guys play horribly with the people that control your fate.

The easiest way to normalize a trend is to have all of the most important people in the world doing itCannabis is still federally illegal, and the general belief is that it has remained this way because the United States government does not yet have a big enough reason to legalize it. Ask any left-leaning sociologist, economist, or political scientist and they’ll tell you the honest truth: the people who run the cannabis industry do not have any influence over bankers, oil tycoons, major industry leaders, or any of the men in suits that you need to be friends with to get anything done in this country.

Think of it like this: the argument for the legalization of cannabis in Europe centers around alcohol. If you were walking home one night and you cut through an alleyway, who would you rather bump into: a drunk looking for a fight, or a stoner looking for a box of chocolate cookies? It’s a logical argument that plays to both the lowest common denominator, and the highest ranks of British government.

The thing is though; as we discussed in my last piece, cannabis is normalized across Western Europe, and so we don’t have the same issues as the United States.

In the United States, the sensible person wouldn’t walk down the alleyway in the first place. Therefore, we have to first normalize cannabis with normal Americans, and then look to legalize.

The easiest way to normalize a trend is to have all of the most important people in the world doing it. However, the cannabis industry is wrought with incompetence that consistently marginalizes the space from societal norms, which is precisely why cannabis is still illegal, and why you’re killing your future business endeavors before they’ve begun.

The End Goal

I was recently told that I didn’t know enough slang to write for a cannabis company. Firstly, I had actually taken all of the slang terms from another member of the company (which was just plain embarrassing for the wannabe industry leader, but I wasn’t surprised – I mean, this is what I do), and secondly, can we all please read the article I wrote a couple of weeks ago about how using slang is one of the most detrimental moves that the cannabis consistently makes that further reduces legalization efforts.

Put on a suit, talk to your local councilman, pay your taxesDo you see HSBC or Chase using slang in their advertising campaigns?

What major political leaders have you seen trying to create divisions between them and those not “cool” enough to be in their gang?

I have no evidence to back this up, but I’m fairly confident that the Koch brothers have never used a skateboard as a consistent mode of transportation to or from work.

As a macro and micro sociologist, I can’t stress this enough: if you want your business to become legitimate, then you have to stop being legit. Most folks in the cannabis industry don’t want to be friends with big bankers, oil tycoons and billionaire businessmen, but creating such an inherent divide between the cannabis business and the rest of the working world ensures that our children will still go to jail in more than half of US states just for smoking a joint.

Time to Swallow Your Pride?

If you are reading this, and are currently an active member or leader in the cannabis industry, then please put your version of ‘street cred’ to the side. Your actions are the reason that most of your businesses fail, the reason you get robbed and don’t have the law on your side, why we have such huge numbers of minority men in our prisons, and more importantly its the reason that the rest of the real world sees you as irresponsible potheads, and not the innovators you could be.

You have the tools to make one of the biggest political changes for two-thousand years, so why not grow up, take one for the team, and have you and your business’s legacy revolve around the good you did for your fellow man, not as the ‘cool kid.’

Social homophily: You and the big business world want the same thing- legalization. Even Monsanto is getting in on the cannabis game, and I’d rather work for them and see actual change than sit in a room full of men smoking at their desks while they sell cannabis from a dark, illegal dispensary.

Social capital: Unfortunately, the big business world wins here. Put on a suit, talk to your local councilman, pay your taxes, realize that the world doesn’t revolve around you, but it will if you play by their rules. You can still be a weekend hippy, but stop doing it in public. The world isn’t ready… yet.

Supreme Court Denies Challenge to Colorado’s Cannabis Laws: Industry Outlooks

By Aaron G. Biros
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The Supreme Court shut down a lawsuit on Monday brought by two states against Colorado for its recreational cannabis laws. Nebraska and Oklahoma brought the case to the Supreme Court, claiming that the recreational cannabis industry in Colorado is responsible for the illegal exportation of cannabis outside of Colorado. “Colorado has facilitated purchase of marijuana by residents of neighboring states by issuing licenses to an unusually high number of marijuana retailers perched on Colorado’s borders,” the two states told the court in a supplemental brief.

In that brief, the two states argue that Colorado’s cannabis industry led to more cannabis illegally crossing state lines. They argue because of that influx of cannabis, they spend more on law enforcement and state resources, which is a detriment to their citizens. The Supreme Court did not provide an explanation for why they refused to hear the case.

Many view this as a big win for the legal cannabis industry. “The Supreme Court has protected the will of the people today and I believe the court has demonstrated that it understands legal cannabis is a fundamental right,” says Andy Williams, president of Medicine Man, the largest cannabis dispensary in Denver.

Still others see this simply as business as usual. “While I’m pleased to see the Court reject the challenge to Colorado’s cannabis law, this decision isn’t really a win for cannabis advocates- it only maintains the status quo,” says Aaron Herzberg, partner and general counsel at CalCann Holdings, a medical cannabis holding company specializing in real estate and licensing. “We are struggling with diversion in California, so hopefully states will continue to be on track to create a more regulated and taxed environment where cannabis can be manufactured and sold through channels where it is safe and tested,” continues Herzberg.

Adam Koh, chief cultivation officer at Comprehensive Cannabis Consulting (3C), warns that the Court’s denial to hear the case is not necessarily an affirmation of state’s cannabis programs. “It is evident that some diversion is taking place, which of course is against the provisions of the Cole Memorandum,” says Koh. “In order to avoid being implicated in such activities, legally licensed cannabis businesses in Colorado should not take the SCOTUS decision as a signal to relax, but should instead work to make sure that inventory control and record-keeping protocols are in place and even exceed the standards required in state regulations.”

The fact alone that Nebraska and Oklahoma even brought the case to the Supreme Court means that diversion is a major issue facing the cannabis industry. “Only by going above and beyond in terms of compliance will this controversial industry make itself credible in the eyes of its detractors,” says Koh. Some cannabis industry leaders take it upon themselves to help guide rule makers in crafting standards.

Lezli Engelking, founder of the Foundation of Cannabis Unified Standards (FOCUS), believes the Cole Memo is currently the best guidance for states and business owners to follow by the federal government in regards to cannabis. “Gaping holes in cannabis regulations are glaringly identified via the pesticide issues and recalls recently,” says Engelking. “These issues showcase each state being in violation of the Cole Memo’s expectation that they will implement strong and effective regulatory and enforcement systems that address the threat to public safety, public health, and other law enforcement interests.”

The Supreme Court’s denial of the two states’ challenge to Colorado’s cannabis legislation suggests the federal government’s intentional avoidance of involvement in current state cannabis issues. The government’s inaction does not, however, indicate their support.