fbpx
You are Here

Category: Sarah Parrish

What is the Safe Banking Act and Will Congress pass it this year?

by Sarah Lee Gossett Parrish,
Cannabis Lawyer

What is the SAFE Banking Act? The Secure and Fair Enforcement (SAFE) Banking Act is a piece of federal legislation that was first proposed in 2017 by Representative Ed Perlmutter, a Colorado Democrat representing the 7th District in that state. It passed the United States House of Representatives a total of six times before being added to the House’s bipartisan America COMPETES Act, which was passed on Friday, February 4, 2022, largely along party lines with a vote of 222-210.

Despite having 40 bipartisan Senate cosponsors, the legislation has not been taken up for debate or a vote in that body, ever. In the past, Senate leadership has either refused to move SAFE Banking as a stand-alone bill or has permitted the SAFE Banking language to be removed as an amendment from other legislation in conference committee – a scenario that most recently occurred in December 2021.

While Senate Majority Leader Chuck Schumer has stated that federal legalization of marijuana is a priority for him, he needs 60 senators to support it in the 50-50 Senate, and advocates have been lobbying to legalize it for quite some time. So…time will tell.

Most beltway pundits agree that the best hope for federal reform in 2022 is SAFE Banking, reasoning that if Congress cannot agree on SAFE Banking, which has bipartisan support, then it is unlikely Congress will pass a bill ending prohibition. Still, with only two states
where there is no legal use, meaning cannabis is legal for adult and/or medical use in 48 of the 50 states (currently, Idaho and Nebraska are the only states in which it is not legal for some purpose), it really is a question of WHEN, not IF Congress will end the federal ban. In the interim, we have a document that has become known as the FinCEN Memo, issued February 14, 2014, by the Financial Crimes Enforcement Network. The FinCEN Memo was intended to provide guidance for financial institutions that seek to provide services to marijuana-related businesses by clarifying Bank Secrecy Act expectations.

Oklahomas new Legislation and HIPPA incompatible

Generally speaking, The SAFE Banking Act would provide protections to financial institutions serving marijuana-related businesses in states where it is legal. The legislation would protect financial institutions from prosecution for money laundering (and potentially other charges) when they provide banking and other commercial services to marijuana-related businesses operating legally in states where marijuana sales are permitted. It would thus allow state-licensed marijuana-related businesses to engage freely in relationships with banks and other financial institutions, allowing them to accept credit-card payments, open checking accounts, and apply for loans.
An increasing number of banks and credit unions have started working with marijuana-related businesses in recent years. However, credit unions and banks that do choose to work with cannabis companies are forced to file onerous reports known as Suspicious Activity Reports with FinCEN.

Why do we need The SAFE Banking Act? Really, there are five reasons why the country needs it:

1. FINANCING.
Marijuana-related businesses need and deserve the option to borrow money, and the ability to work with a bank will present more opportunities to obtain funding. The lack of lending opportunities currently available to cannabis businesses perpetuates high costs along with the lack of access to capital – facts that are increasingly widening the gap between large and small businesses in the cannabis space when it comes to chances of success.

2. CREDIT CARD ACCESS.
Customers would be able to use credit cards to purchase marijuana and marijuana-related businesses would have better ways to track spending and income.

3. DIMINISH CASH VIOLANCE AND ADDRESS PUBLIC SAFETY CONCERNS.
The massive amounts of cash generated by marijuana-related businesses pose a danger to the business owners and their employees, the customers and patients, innocent bystanders, and those transporting the cash, the last of which, unbelievably, now includes armored car companies who have basically been hijacked not by criminals but by the FBI and local law enforcement authorities who have seized cash by weaponizing civil forfeiture.

4. IRS PAPER TRAIL.
Cash transactions are easier to conceal from the IRS, while funds deposited in financial institutions are much easier for the IRS to track and trace. One would think that this alone would have motivated Congress to enact The Safe Banking legislation years ago. Not so.
Of course, The Safe Banking Act does not reconcile the obvious hypocrisy of the federal government in refusing to legalize cannabis while insisting that marijuana-related businesses pay federal taxes to the IRS, a fortiori that they do so without the benefit of the usual deductions afforded to every other state legal business thanks to Section 280E of the Internal Revenue Code, which does not allow for ordinary and necessary business deductions. In fact, the only deduction allowed marijuana-related businesses is for the cost of goods sold. Other normal business expenses such as advertising, insurance, and salaries can be completely lost if not accounted for properly by a capable cannabis CPA. Notably, the lack of deductions results in potential tax liability on gross profit for marijuana-related businesses, instead of net profit—a situation that differs from that of any other state legal business in the country.

Nonetheless, if The Secure and Fair Enforcement (SAFE) Banking Act finally makes it into federal law, it will certainly be a step in the right direction for marijuana-related businesses and the financial institutions that work with them.

So, what’s the take-away? Stay tuned. This year may be full of surprises when it comes to cannabis legislation, not only at the state level but perhaps on the federal front as well.

Information contained herein provides general information related to the law and does not provide legal advice. It is recommended that readers consult their personal lawyer if they want legal advice. No attorney-client or confidential relationship exists or is formed between you and Ms. Parrish as a result of this article.

 

 FREE ENTERPRISE REIGNS IN OKLAHOMA’S MMJ SYSTEM! 

 FREE ENTERPRISE REIGNS IN OKLAHOMA’S MMJ SYSTEM! 

by Sarah Lee Gossett Parrish, Cannabis Lawyer1 

1 Information contained herein provides general information related to the law and does not provide legal advice. It is recommended that readers consult their personal lawyer if they want legal advice. No attorney-client or confidential relationship exists or is formed between you and Ms. Parrish as a result of this article. 

In the final days of 2021, a liberal newspaper on the East Coast published an offensive piece about Oklahoma and its medical marijuana system. Of course, anything one reads today in The New York Times (“NYT”) should be taken with a grain of salt, but this particular article, How Oklahoma Became a Marijuana Boom State by Simon Romero with photos credited to Brett Deering, published December 29, 2021, is especially offensive, even for that periodical. As a third generation Oklahoma attorney, I take such insulting words about my home state personally. 

The article epitomizes rubbish spewed by those who consider themselves the elite, the refined, the educated, and the holier-than-thou liberals who look down their proverbial noses at “poor”, uneducated, “trailer park” Oklahomans. Yes, the writer of the article has the audacity to use those words. The very reduction of such beliefs to words frankly flies all over this author. Clearly, Romero and his cohorts at the NYT know nothing of Oklahoma, of its hard-working people, many of whom are in fact better educated than they—whether it be through state or Ivy League institutions or the difficult, enduring lessons learned through living life itself. Indeed, many Oklahomans elected to return home after forays into other states upon the realization that Oklahoma is, in fact, an incredible place to live and work, enhanced by none other than its people.

A good lesson to learn from Oklahoma is that one’s value is not calculated by net worth, institutional degrees, or the landscape where one lives. 

The above-referenced article in the NYT, not unlike most of that paper’s content these days, is riddled with pejorative words and phrases, including those quoted above and, additionally, “old chicken coops”, “trailer parks”, “Pentecostal church” (not that a Pentecostal church is negative, but the NYT writer clearly intends that it be construed as such), “mobile homes”, “culture shock”, and unsupported claims that Oklahoma is “a state that remains among the poorest in the country” with “pressures on the state’s prisons”. These statements are not only appalling, but also are indicative of prevalent, misguided views that divide this nation—and here, I speak of America, not the Sooner Nation. 

In light of such rubbish clearly intended to depict Oklahoma and its hard-working people, including those in the medical marijuana industry (public and private), in a derogatory manner, it is important to take an unbiased assessment of Oklahoma’s outstanding medical marijuana (“MMJ”) system. What better time to do so than on the last day of calendar year 2021, the date of this writing. 

Oklahoma continues to stand alone in this country as the only free market medical program, enacted by the people and for the patients. State Question 788 (“SQ 788”) was passed on June 26, 2018, making medical marijuana legal in the state. The medical program was implemented in record time by dedicated state employees working overtime and likely underpaid, when the 

© 2021 Sarah Lee Gossett Parrish. All rights reserved. 

Oklahoma Medical Marijuana Authority (“OMMA”) launched its online application process for patients and businesses on Saturday, August 25, 2018. 

Today, three short years after SQ 788 was passed, Oklahoma’s medical program continues to thrive in the face of inevitable obstacles—some anticipated and some not. And as human nature long ago established, when someone – or something – is successful and stands out, critics load and lock. In case you are wondering, yes, this is a nod to Oklahoma’s Second Amendment Sanctuary status. 

SQ 788 established a simple medical marijuana program with reasonable license application fees allowing everyday people with entrepreneurial dreams and a passion for the healing properties of cannabis to enter Oklahoma’s industry and thrive. What a blessed reality! 

To reiterate, Oklahomans created something unique to the cannabis industry—namely, the country’s only free market medical marijuana program. There are no qualifying conditions for medical marijuana patients here, and, in addition to the original adult patient, minor patient, and caregiver licenses, today short-term licenses, reciprocal patient cards, and temporary patient licenses are available. 

Mercifully, OMMA and Oklahoma’s Legislature have upheld the spirit of SQ 788 for the most part, refusing to smother the fledgling industry with over-regulation. OMMA officials demonstrated a remarkable ability to implement Oklahoma’s medical program in record time—a mere 30 days after passage of SQ 788 in late June 2018, to the first day of applications in late August 2018. Initially, OMMA had only 14 days to accept or reject any license application. It is difficult to comprehend what the working environment must have looked like during those early days. While the 14-day period for patient licenses remains unchanged, today the period within which OMMA can grant, deny, or reject a commercial business license application (“denials” differ from “rejections”, the latter of which can be rectified through resubmissions) is 90 days—a much more reasonable time period for such a process. 

Looking back, it is difficult to imagine how OMMA onboarded the entire application process in a mere 30 days and managed to process the plethora of patient, caregiver, and commercial business license applications in 14 days. OMMA’s dedicated state employees somehow managed to make it work, to the great benefit of Oklahoma patients and entrepreneurs. OMMA is “the little engine that could,” in a state where the wind still comes sweeping down the plain and the waving wheat, with some weed now from outdoor grows, can sure smell sweet. 

Today, it is interesting to reflect on how Oklahoma’s medical program has evolved and to contemplate what the future holds. It has been said that Oklahoma basically has an adult use system, given that there are no preexisting condition requirements and that doctors who will write potential patients a medical marijuana recommendation are plentiful. Perhaps this observation is correct. However, there are limits on how much medical marijuana a patient can possess, and patient licenses are required to legally purchase and consume medical marijuana products here. 

The NYT article correctly notes the plethora of medical marijuana businesses in Oklahoma, and that prices have decreased due to increased supply. However, here in Oklahoma we respect and 

© 2021 Sarah Lee Gossett Parrish. All rights reserved. 

encourage free enterprise and capitalism. The law of supply and demand is a fundamental tenet of both, and while some may choose to ignore those principles, we here in Oklahoma applaud and support them. After all, they have formed the backbone of America’s economy since its inception. 

While the NYT piece opines that “growers in Oklahoma . . . are feeding illicit markets around the country” – an assertion made with no objective criteria or documentation whatsoever, as is customary for that paper now, it is no secret that efforts by OMMA, the Oklahoma State Bureau of Investigation, and the Oklahoma Bureau of Narcotics have intensified to ensure this does not occur. Additionally, the scale of any Oklahoma illicit grows would assuredly pale in comparison with other states that boast more mature markets where production of illicit product has been the norm for decades, and here, we have a statute that actually prohibits ownership of agricultural land by foreign nationals. Hmmm…. 

So, what’s the take-away? 

Free enterprise still reigns in Oklahoma’s medical marijuana system, and when it draws fire from a liberal paper back East, that is a sure sign something is incredibly successful! 

P.S. 

It’s going to be a very busy spring here in the Wild, Wild West!I 

OKLAHOMA’S RESIDENCY REQUIREMENTS: WILL THEY SURVIVE ANOTHER FEDERAL COURT CHALLENGE? 

OKLAHOMA’S RESIDENCY REQUIREMENTS:

WILL THEY SURVIVE ANOTHER FEDERAL COURT CHALLENGE? 

by Sarah Lee Gossett Parrish, 

Cannabis Lawyer

I previously explored Oklahoma’s residency requirements applicable to medical marijuana business licensees in my article, “ARE OMMA’S RESIDENCY REQUIREMENTS UNCONSTITUTIONAL?”, where I commented on the change in residency requirements for OMMA licensees imposed by the Oklahoma Medical Marijuana and Patient Protection Act, nicknamed the Unity Bill (“UNITY”), which Oklahoma Governor Kevin Stitt signed into law on March 14, 2019, and became effective on August 29, 2019.

UNITY changed the residency requirements for OMMA licensees from the simple, easily-met standard in SQ 788, which required applicants to “show residency in the State of Oklahoma” by producing an Oklahoma state driver’s license, identification card, residential lease, mortgage, deed, or similar document, to a strict, two-year residency requirement or five years of continuous Oklahoma residency during the preceding 25 years immediately prior to the application date. Additional, substantial, documentary evidence has been required as proof, ever since.

As I previously observed, federal district courts across the country have started to invalidate residency requirements for cannabis business licensees on the basis that such protectionist statutes violate the dormant Commerce Clause of the United States Constitution (U.S. CONST. ART. I, § 8, cl. 3.), by explicitly and purposefully favoring state residents over non-residents. Indeed, this is the purpose of Oklahoma’s residency requirements set forth in UNITY, as well as the preexisting 75% Oklahoma ownership requirement.

At the time of my original article, an action had recently been filed in the United States District Court for the Western District of Oklahoma (where I served as a federal law clerk just after I first finished law school), by a Washington limited liability company, Original Investments, LLC d/b/a Dank’s Wonder Emporium. That legal battle concluded in June 2021 with United States District Judge Stephen Friot’s dismissal with prejudice of the action by relying on the federally-illegal status of marijuana under the Controlled Substance Act (codified in Title 21 of the United States Code). Specifically, Judge Friot refused to “facilitate the plainly criminal activity in which plaintiff proposes to engage in the State of Oklahoma.”

Nationally, the battle continues. In early October 2021, a case filed in the Maine federal district court, NPG v. Maine Department of Administrative and Financial Services, where the court struck down Maine’s residency requirements for marijuana business licensees as violative of the dormant Commerce Clause of the United States Constitution (despite the fact marijuana remains federally illegal), made its way to the United States Court of Appeals for the First Circuit, as the first federal case to reach a United States Court of Appeals, a feat which is no small matter in legal circles.

The NPG decision and its appeal occurred months after Maine had settled a similar federal action alleging Maine’s residency requirement violated the dormant Commerce Clause, by declaring Maine’s cannabis regulators simply would no longer enforce the residency requirement.

Notably, Maine U.S. District Judge Nancy Torrensen, who handed down the NPG decision, stayed her own injunction barring Maine regulators from enforcing the residency requirement, opining that long-term consequences could result if regulators were forced to grant cannabis licenses to non-residents pending appeal, and if the First Circuit reversed her decision.

Regardless of the outcome, it is clear that the First Circuit’s opinion in NPG will prove instructive for other federal courts in the country, given the lack of precedent from any other federal appellate court on the issue.

In the interim, federal district courts are taking notice. For example, earlier in October, U.S. District Judge Nanette Laughrey of the Western District of Missouri ordered a permanent injunction overturning Missouri’s residency requirements for cannabis licensees after an eight- minute bench trial in Toigo v. DHSS.

So…what’s the take-away?

Oklahoma has not seen the last of federal court challenges to its residency requirements for OMMA licensees.

Information contained herein provides general information related to the law and does not provide legal advice. It is recommended that readers consult their personal lawyer if they want legal advice. No attorney-client or confidential relationship exists or is formed between you and Ms. Parrish as a result of this article.

THREE CHANGES IN THE WORKS FOR OMMA LICENSED BUSINESSES 

THREE CHANGES IN THE WORKS FOR OMMA LICENSED BUSINESSES 

by Sarah Lee Gossett Parrish

Cannabis Lawyer

The past several months have seen numerous changes to Oklahoma’s medical marijuana system, including new OMMA Permanent Rules; Amendments to OMMA Permanent Rules by September 16, 2021 Emergency Rules; passage of new bills by the state legislature such as HB 2272, HB 3228, HB 2646, and SB 1033 among those impacting medical marijuana and signed into law by Governor Stitt, with varying effective dates; and litigation over OMMA’s selection of METRC for seed-to-sale tracking. 

This writing will discuss three important changes among the plethora of developments, of which all OMMA business licensees should be aware: 

1) implementation of OMMA on-site inspections to confirm all licensees are in fact operating and doing business; 

2) removal of the 2-year Oklahoma residency requirement for transporter agents; and 

3) allowing OMMA-licensed dispensaries and growers to package and sell medical marijuana as pre-rolls. 

1. OMMA’s OPERATIONAL STATUS VISIT 

Under OMMA’s Permanent Rules as Amended by the Emergency Rules, OMMA has implemented an “initial operational status visit” for all growers, processors, and dispensaries, effective September 1, 2021. Pursuant to this new provision, OMMA will be scheduling on-site visits at licensed growers, processors, and dispensaries to verify whether the licensee is “actively operating” or is “working towards becoming operational.” (See Title 310, Oklahoma State Department of Health Regulations, Chapter 681-5-4.1.) These visits shall occur within the first 180 days after a new licensee receives their OMMA license. 

If the licensee fails to provide proof that they are “actively operating or working towards operational status”, then OMMA will grant the licensee a grace period of an additional 180 days from the date of OMMA’s initial operational status visit, within which to become operational. Follow-up visits will occur and, in the event the required proof is not provided upon the second visit, then OMMA may grant a discretionary, additional 180 days to the licensee, to become operational. However, the grace period shall not extend beyond the one-year license term. If compliance is not established and/or OMMA elects not to grant an additional grace period, then OMMA will seek revocation of the commercial business license. 

2. REMOVAL OF THE CURRENT 2-YEAR OKLAHOMA RESIDENCY REQUIREMENT FOR TRANSPORTER AGENTS. 

OMMA’s Permanent Rules as Amended by the Emergency Rules remove “transporter agent” from the definition of a “commercial license” but still require that all transporter agents provide proof of 2-year Oklahoma residency. On November 1, 2021, this will change. House Bill 2646, which becomes effective on that date, clarifies the residency requirement to require that transporter agent applicants provide only proof of current Oklahoma residency, as opposed to the 

2-year Oklahoma residency requirement applicable to 75% of the ownership of medical marijuana commercial business licensees. 

3. DISPENSARIES AND GROWERS CAN PACKAGE AND SELL PRE-ROLLS. 

House Bill 2646, which becomes effective November 1, 2021, authorizes OMMA licensed dispensaries and growers to package and sell medical marijuana as pre-rolls, thus eliminating any confusion about whether they can do so. 

What’s the take-away? 

While there are many changes coming to Oklahoma’s medical marijuana system in the coming days, it remains the Wild, Wild West. 

Stay alert. 

Information contained herein provides general information related to the law and does not provide legal advice. It is recommended that readers consult their personal lawyer if they want legal advice. No attorney-client or confidential relationship exists or is formed between you and Ms. Parrish as a result of this article. 

DO OMMA’S NEW EMERGENCY RULES IMPACT PATIENTS?

DO OMMA’S NEW EMERGENCY RULES IMPACT PATIENTS?

by Sarah Lee Gossett Parrish

Cannabis Lawyer

 

The Oklahoma Medical Marijuana Authority enacted a new set of Emergency Rules that became effective on June 28, 2021. These new Rules implement numerous changes, most of which apply to OMMA-licensed commercial medical marijuana businesses. However, some of the Rules also impact patients, as discussed below.

 

  1. The new Rules prohibit caregivers from charging patients for cultivating medical marijuana “in excess of actual costs incurred in cultivating the medical marijuana.” OAC 310:681-2-3.
  2. The new Rules amend the definition of “marijuana” to exclude Delta 8 and Delta 10 hemp products, which allows individuals to purchase such products without an OMMA-issued medical marijuana patient license. Hemp is grown under the Oklahoma Industrial Hemp Program administered through the Department of Agriculture, Food, and Forestry, not OMMA, and it is legal federally, unlike marijuana—whether medical or adult usage.

 

Other provisions of the new Rules of interest to patients in particular, while not new to the June 28, 2021, version, include the following:

 

  1. A physician can recommend a patient for a short-term medical marijuana license lasting only sixty (60) days, instead of the standard, two-year patient license term.
  2. Out-of-state patients with unexpired out-of-state medical marijuana patient licenses may apply for a temporary patient license that is valid for a term of thirty (30) days from the date of issuance; provided, the temporary patient license for non-residents “may not extend beyond the expiration date of the underlying out-of-state medical marijuana patient license.” OAC 310:681-2-5(e).
  3. Patients whose licenses have been terminated on the basis that the recommending physician has determined the patient no longer meets the requirements for the license are entitled to notice and a right to hearing, as mandated not only by the Oklahoma Medical Marijuana and Patient Protection Act, 63 O.S. § 427.1, et seq., but also by the Oklahoma Administrative Procedures Act, 75 O.S. § 250, et seq.
  4. Patients shall not sell or otherwise transfer any medical marijuana or medical marijuana products to another individual or entity. First offenses may result in a $200.00 fine, and second offenses carry a $500.00 fine and revocation of the patient’s license if it is shown that the violation was willful or grossly negligent. The same applies to licensed caregivers, who may not sell or otherwise transfer any medical marijuana to any individual other than the licensed patient on whose behalf the caregiver is licensed to grow, possess, or purchase the medical marijuana.
  5. Patients and caregivers may only grow medical marijuana on real property owned by the patient or on real property for which the patient has the property owner’s written permission to grow. Patient grows shall not be accessible to the general public, and shall not be visible from any street adjacent to the property. The Rules define “visible” as “viewable by a normal person with 20/20 eyesight without the use of any device to assist in improving viewing distance or vantage point.” 310:681-2-9 (c).
  6. Patients and caregivers are prohibited from operating or otherwise using “any extraction equipment or processes utilizing butane, propane, carbon dioxide or any potentially hazardous material in or on residential property.” 310:681-2-9 (f).
  7. Patients smoking any smokable, vaporized, vapable and e-cigarette medical marijuana and/or products are “subject to the same restrictions for tobacco” as set out in the “Smoking in Public Places and Indoor Workplaces Act”, codified at Title 63 O.S. § 1-1521, et seq.

 

So…what’s the take-away?

 

Patients must be mindful of OMMA’s most current Rules, as they apply not only to OMMA commercial business licenses but also to licensed medical marijuana patients.

 

Information contained herein provides general information related to the law and does not provide legal advice. It is recommended that readers consult their personal lawyer if they want legal advice. No attorney-client or confidential relationship exists or is formed between you and Ms. Parrish as a result of this article.

 

 

BRAVO, JUSTICE THOMAS

by Sarah Lee Gossett Parrish

Cannabis Lawyer

 

If you are in the cannabis industry, you have a very powerful friend, a man who sits on the United States Supreme Court. The dissenting Statement respecting the denial of certiorari handed down on Monday, June 28, 2021, by United States Supreme Court Justice Clarence Thomas, one of the Court’s most conservative justices, proves he is a friend of the industry and even suggests that change may be in the air.

 

While numerous bills have been introduced in Congress to accomplish needed changes in federal marijuana policies (I previously have written about these), when a U.S. Supreme Court Justice basically opines that federal marijuana policies have become nonsensical, one must wonder whether the courts will implement change if Congress fails to muster the courage to do so.

Standing Akimbo, LLC, et al. v. United States

The case in which Justice Thomas issued his Statement arrived at the Supreme Court on appeal from the decision of the United States Court of Appeals for the Tenth Circuit in Standing Akimbo, LLC, et al. v. United States, No. 19-1049 (10th Cir. 2020). Notably, Oklahoma is one of the states under the jurisdiction of the Tenth Circuit.

 

This particular Tenth Circuit appeal arose out of a lower federal court (trial court) opinion issued by the U.S. District Court for the District of Colorado, granting the government’s motion to dismiss a petition filed by Standing Akimbo, LLC, a Colorado medical marijuana dispensary, to quash certain summons the IRS had issued to the Colorado Department of Revenue’s Marijuana Enforcement Division to confirm the dispensary owners’ tax liabilities under a civil audit of their federal tax returns.

 

The IRS had issued several summons in an attempt to uncover evidence that Standing Akimbo had claimed business deductions prohibited by § 280E of the IRS Code, and the dispensary asked the Court to quash (prohibit) the issuance of those summons. The Tenth Circuit rejected Standing Akimbo’s position and affirmed the trial court’s opinion allowing the various summons to be issued. Subsequently, the U.S. Supreme Court denied Standing Akimbo’s petition for a writ of certiorari in Standing Akimbo, LLC, et al. v. United States, No. 20-645 (decided June 28, 2021), 594 U.S. ___ (2021).

 

Justice Thomas’s 5-page Statement respecting the denial of certiorari

read it at https://www.supremecourt.gov/opinions/20pdf/20-645_9p6b.pdf, provides “…federal policies [to prohibit the local cultivation and use of marijuana] of the past 16 years have greatly undermined its reasoning. Once comprehensive, the Federal Government’s current approach is a half-in, half-out regime that simultaneously tolerates and forbids local use of marijuana. This contradictory and unstable state of affairs strains basic principles of federalism and conceals traps for the unwary.”

 

Citing the Department of Justice’s infamous Cole Memorandum dated August 29, 2013 (read it at https://www.justice.gov/iso/opa/resources/3052013829132756857467.pdf), wherein U.S. Deputy Attorney General James M. Cole advised federal prosecutors to refrain from

marijuana prosecutions in states where marijuana had been legalized (with eight exceptions), and a Ninth Circuit Court of Appeals opinion prohibiting expenditures on the prosecution of persons in compliance with state law (United States v. McIntosh, 833 F.3d 1163, 1168, 1175-55 [9th Cir. 2016]), Justice Thomas opined that “one can certainly understand why an ordinary person might think that the Federal Government has retreated from its once-absolute ban on marijuana[.]” (Statement at p. 3), and that “[o]ne can also perhaps understand why business owners in Colorado, like petitioners, may think that their intrastate marijuana operations will be treated like any other enterprise that is legal under state law.” Id. However, as the petitioners learned, “legality under state law and the absence of federal criminal enforcement do not ensure equal treatment.” Id.

 

Justice Thomas also noted that the “disjuncture between the Government’s recent laissez-faire policies on marijuana and the actual operation of specific laws is not limited to the tax context,” mentioning banking issues, among others, that state-legal marijuana businesses must face. Notably, Justice Thomas concluded that “[a] prohibition on intrastate use or cultivation of marijuana may no longer be necessary or proper to support the Federal Government’s piecemeal approach [to cannabis regulation and policies].” Statement at p. 5.

NORML’s Executive Director, Erik Altieri, commented that “Justice Thomas’s comments reflect what has been obvious to the vast majority of Americans for some time now…This intellectually dishonest position [of federal marijuana prohibition] … complicates the ability of states to successfully regulate and oversee state-legal marijuana businesses … It is time for Congress to end this untenable situation by removing cannabis from the Controlled Substances Act so that states can make their own decisions with regard to marijuana and marijuana commerce free from undue federal interference.”

 

 

REGULAR SESSION OF OKLAHOMA’S 2021 LEGISLATURE HAS ENDED: WHAT HAPPENED TO ALL THE MMJ BILLS?

by Sarah Lee Gossett Parrish, Cannabis Lawyer

 

Earlier this year I provided an introduction to some of the more substantive bills filed in the Oklahoma House and Senate pertaining to Oklahoma’s Medical Marijuana Program, and this spring I wrote about highlights concerning the more important bills that were passed by the legislative body in which they originated, and were referred to legislative committees in the other, non-originating legislative body at the time of my writing.

 

The regular session of Oklahoma’s 2021 Legislature ended on Thursday, May 27, 2021. The House and Senate adjourned after each passed last-minute bills that, should Governor Stitt sign one or both of them, would make minor changes to Oklahoma’s medical marijuana system. The Legislature passed several bills that the Governor has signed into law, which concern the MMJ program. Below are highlights.

 

House Bill 2272

 

HB 2272 is 7 pages long and becomes effective on July 1, 2021.

 

The most publicized aspect of this legislation concerned its original language that implemented a 2-year cap on any new OMMA commercial business licenses. This language was deleted from the bill as amended and passed. Thus, there remains no license cap in the State of Oklahoma.

 

HB 2272 does contain some provisions of which you should be aware, including the following:

 

1.HB 2272 addresses and requires the disclosure of foreign financial interests in MMJ business operations and includes new provisions concerning on-site “assessments” of a licensee or applicant to determine compliance, as well as limitations on inspections to twice per calendar year with 24-hours advance notice, unless OMMA determines an additional inspection “is necessary due to a violation or noncompliance”.

 

2.HB2272 codifies OMMA’s right to review relevant records and allows OMMA to interview persons affiliated with MMJ businesses, provided they are given time to secure legal counsel.

 

3.HB 2272 sets out circumstances under which disciplinary actions may be imposed on a MMJ business licensee, and monetary penalties for violations. It sets out what persons or entities may request a hearing to contest an action proposed or taken by OMMA, in accord with Oklahoma’s Administrative Procedures Act. In other words, OMMA will now be creating the framework for its administrative procedures.

 

4.HB 2272 provides that OMMA will begin scheduling on-site meetings and compliance inspections of your business starting September 1, 2021, for the primary purpose of confirming that you are “actively operating” or “working towards operational status.” If neither applies, then you will have a 180-day grace period to become operational. OMMA is authorized to grant one additional, 180-day grace period if needed.

 

Additional Bills Passed and Signed by the Governor, To Date

 

Additionally, the Legislature passed and Governor Stitt signed House Bill 2646, which is 90 pages long and becomes effective November 1, 2021. This legislation clarifies OMMA’s duties, among many other matters, and its provisions are simply too lengthy to discuss here.

 

Another notable bill signed but amended prior to its passage by both chambers is House Bill 2674, which is 16 pages long and becomes effective immediately under an emergency provision. Notably, the amended version of HB2674 does not impact Oklahoma’s MMJ system because a provision in earlier drafts of this bill that would have transferred OMMA from the Department of Health to the Alcoholic Beverage Laws Enforcement Commission was removed, prior to passage of the final version which Governor Stitt signed.

 

What’s the take-away?

Be alert as these new laws become effective in the coming months.

 

Harborside Decision

by Sarah Lee Gossett Parrish, Cannabis Lawyer

Harborside was brilliantly briefed and argued before the Tax Court by my International Cannabis Bar Association colleague, Henry Wykowski, an exceptionally talented cannabis attorney headquartered in the San Francisco Bay Area.

2021 Legislation Still in Play, by Sarah Lee Gossett Parrish

If you are in the cannabis industry in Oklahoma or, for that matter, anywhere in the United States, you likely have heard of 280-E and the infamous 2018 Harborside decision of the U.S. Tax Court. If not, you need to know about both, along with a new decision filed by the U.S. Court of Appeals for the Ninth Circuit on April 22, 2021, upholding the Tax Court’s Harborside decision.

What is the Harborside Decision?

In Patients Mutual Assistance Collective Corporation d.b.a. Harborside Health Center v. Commissioner of Internal Revenue, 151 T.C. No. 11 (November 29, 2018) 2, the Tax Court determined Harborside, a well-known dispensary and brand based in Oakland, California that was co-founded by cannabis legend Steve DeAngelo, owed approximately $11 million in back taxes because it took business deductions and exclusions “in connection with the sale of a federally illegal substance.”

Harborside appealed the decision in Patients Mutual Assistance Collective Corporation, d.b.a. Harborside Health Center v. Commissioner of Internal Revenue, No. 19-73078, filed April 22, 2021. On appeal, the issue considered by the Ninth Circuit was whether Harborside, a dispensary that purchases and resells marijuana and uses the cost method to value its inventory, must account for its inventory cost in accord with Section 1.471-3(b) of the Treasury Regulations.

While the issue sounds complicated, the impact on OMMA licensees is simple: for purposes of federal income tax, the only deduction available in calculating gross income is the cost of purchasing or producing the goods being sold (“cost of goods sold” or “COGS”). No standard business deductions are available to cannabis businesses in our country.

What is Section 280E and Who Cares?

A provision in the Internal Revenue Code known as Section 280E prohibits cannabis companies from claiming deductions and exclusions available to every other business in the country. Section 280E was enacted in 1982 after a U.S. Tax Court decision allowed a drug dealer to deduct expenses associated with his illegal business activities and provides:

No deduction or credit shall be allowed for any amount paid or incurred during the taxable year in carrying on any trade or business if such trade or business (or the activities which comprise such trade or business) consists of trafficking in controlled substances (within 2 the meaning of schedule I and II of the Controlled Substances Act) which is prohibited by federal law or the law of any state in which such trade or business is conducted.

Since marijuana remains a Schedule I illegal substance under the federal Controlled Substances Act (“CSA”), then OMMA licensees doing business within Oklahoma’s medical marijuana system are considered to be “trafficking in controlled substances” under the CSA and, as such, are not allowed any deduction or income tax credit for amounts paid or incurred in the course of their business activities.

To simplify how this impacts Oklahoma cannabis businesses, it means that the only deduction available in calculating gross income for purposes of federal income tax is the cost of purchasing or producing the goods being sold by that business (COGS). This would include, for example, the wholesale price of medical marijuana a dispensary owner pays to a grower or processor, or the cost a grower incurs from actually growing medical marijuana. It does not include expenses such as wages or rent.

In practice, Oklahoma medical marijuana companies (and cannabis businesses across the United States) often pay a tax rate of 80% to 90% to the IRS, unlike other businesses. Even if an OMMA licensee has a net loss on its books, the company will still incur significant federal tax liability.

So…what’s the take-away?

The Harborside decision, along with the IRS’s admission it has been training agents for at least eight years “in the finer details of auditing marijuana companies, using PowerPoint presentations that outline everything from legal precedents to questions that should be asked during interviews with business owners” should send you running to your cannabis CPA—which, by the way, is a must-have member of your team.

Information contained herein provides general information related to the law and does not provide legal advice. It is recommended that readers consult their personal lawyer if they want legal advice. No attorney-client or confidential relationship exists or is formed between you and Ms. Parrish as a result of this article.

 

Oklahoma’s Medical Marijuana Program – 2021 Legislation Still In Play

by Sarah Lee Gossett Parrish | Cannabis Lawyer

Earlier this year I provided an introduction to some of the more substantive bills filed in the Oklahoma House and Senate pertaining to Oklahoma’s Medical Marijuana Program. What follows are highlights concerning the more important bills that now have been passed by the legislative body in which they originated, and have been referred to legislative committees in the other, non-originating legislative body.

HOUSE BILLS PASSED AND SENT TO SENATE

Highlights of the provisions included in several bills passed by the Oklahoma House of Representatives, sent to the Senate and referred to a Senate Committee, include, but are not limited to the following.

House Bill 2272

House Bill 2272 creates the Cap on Medical Marijuana Businesses Act of 2021. It passed the House on March 10, 2021, and has been sent to the Senate, where it passed in the Business, Commerce and Tourism Committee and is now under consideration by the Senate Appropriations Committee.

A METRC Primer, by Sarah Lee Gossett Parrish

Notably, this bill provides for a two-year cap on OMMA dispensary, processor, and commercial grower licenses beginning September 1, 2021, and ending September 1, 2023. The bill caps those licenses “at the total number of licenses active in each category as of September 1, 2021, combined with the total number of applications pending in each category with the Oklahoma Medical Marijuana Authority which were submitted prior to September 1, 2021. In order to determine the final amount of authorized medical marijuana dispensary licenses, medical marijuana processor licenses and medical marijuana commercial grower licenses in this state, the Authority shall first process all pending applications for each license category received prior to September 1, 2021, and add that number to the total number of active licenses in each category as of September 1, 2021.”

This bill also allows for submission of a commercial business license application without a Certificate of Compliance (“CoC”), giving each applicant one hundred eighty days from the date of a provisional license approval (available without the CoC) to submit the required CoC to OMMA.

The bill calls for an automatic reduction in the number of dispensary licenses, such reduction to be based on the number of medical marijuana dispensary licenses surrendered, canceled or otherwise terminated, until such time as the total number of active medical marijuana dispensary licenses is equal in number to two thousand, beginning September 1, 2021, and ending September 1, 2023.

House Bill 2646

House Bill 2646 clarifies the duties of OMMA. It was sent to the Senate on March 15, where it has been referred to the Senate Appropriations Committee after passing in the Senate Business, Commerce and Tourism Committee.

House Bill 2004

House Bill 2004 concerns licensing, taxes, and also clarifies OMMA’s duties and functions. It passed the House and has been referred to the Senate Business, Commerce and Tourism Committee.

Notably, this bill allows patients with medical marijuana licenses to legally possess twelve mature plants instead of the current cap of six mature plants. It also provides for a temporary patient license for residents of other states, and seals all patient and caregiver records and information to protect privacy, specifically providing that “such records shall not be shared with any other state agency or political subdivision without a warrant”.

House Bill 2674

House Bill 2674 would transfer the Oklahoma Medical Marijuana Authority to the Alcoholic Beverage Laws Enforcement Commission. This bill passed the House and was referred to the Senate, where it has been assigned to the Public Safety Committee and then to the Appropriations Committee. If passed by the Senate and signed into law, it would mandate significant changes to Oklahoma’s existing medical marijuana system.

SENATE BILLS PASSED AND SENT TO HOUSE

Highlights of the provisions included in several Oklahoma Senate bills that have been passed and referred to the state House of Representatives include the following.

Senate Bill 459

Senate Bill 459 addresses workplace drug and alcohol procedures and modifies safety-sensitive positions, including additional rights of medical marijuana patients. The bill also modifies definitions of “batch number”, “cannabinoid”, “clone”, “caregiver” and “child-resistant” packaging (among others). It also adds “volunteers” to the classification of individuals who serve in safety-sensitive positions and may be subject to a workplace drug and alcohol testing policy. The bill was referred to the House Business and Commerce Committee on March 22, 2021.

Senate Bill 1033

Senate Bill 1033 amends language contained in State Question 788 to protect medical marijuana license holders from discrimination under certain circumstances by schools, landlords, and employers.

Significantly, this bill also prohibits municipalities from unduly changing or restricting zoning laws to prevent the opening of dispensaries. The bill grandfathers-in certain licensed locations, clarifies how to measure the 1000-foot setback distance required for dispensaries from any public or private school entrance, and allows license transfers under certain conditions. It has been assigned to the House Alcohol, Tobacco, and Controlled Substances Committee.

Senate Bill 522

Senate Bill 522 requires the Oklahoma Medical Marijuana Authority to contract with one or more third-party vendors to provide certain licensing services for medical marijuana education facility licensees, medical marijuana business licensees and employees of such entities. This bill passed the Senate and has been referred to the House Alcohol, Tobacco, and Controlled Substances Committee.

So…what’s the take-away? Stay tuned!

There may be some significant changes in Oklahoma’s Medical Marijuana System by May 2021!
Information contained herein provides general information related to the law and does not provide legal advice. It is recommended that readers consult their personal lawyer if they want legal advice. No attorney-client or confidential relationship exists or is formed between you and Ms. Parrish as a result of this article.

A METRC Primer

by Sarah Lee Gossett Parrish |

Many months ago, OMMA announced that it had awarded METRC its seed-to-sale contract. Now, implementation is in full swing, with initial training and credentialing classes available and completion required by March 26, 2021. Notably, OMMA also has announced that it will require beginning inventory to be completely reported into METRC by April 30, 2021. Perhaps this spring’s million-dollar question in Oklahoma is, “What does METRC mean for OMMA commercial business licensees?”.

What is METRC?

METRC is a privately owned track-and-trace system that depends on 1) physical, proprietary RFID tags that must be purchased only from METRC, and 2) METRC’s online, cloudbased software. This software requires an internet connection and computer for access, and supports an open “Application Programming Interface” (“API”) that allows licensees to use METRC with any third-party point of sale systems (“POS”) that have the appropriate API to integrate with METRC. However, such a third-party POS is not required, because a licensee can input its sales data into METRC directly, if they so desire.

Changes In the Wind, by Sarah Lee Gossett Parrish

METRC’s implementation by OMMA is not for the benefit businesses or patients. Instead, the METRC system benefits the governmental agency who has contracted with it—here, OMMA. METRC offers online training, inventory and lab testing guides, and an Oklahoma-specific supplemental guide. METRC’s website states that it has provided track-and-trace solutions for 13 other states and the District of Columbia. Thus, while it is not in use by all medical (or adult-use) programs, it certainly has a significant stake in the market share.

METRC charges licensees $40 per month, per license, as a reporting fee to access the platform and for ongoing support, maintenance, training, and the like. In addition, METRC’s proprietary RFID tags are 45 cents per plant tag and 25 cents per package tag. These tags are not interchangeable or reusable. They contain barcodes and chips that uniquely identify each plant and package, as the case may be, operating like serial numbers for each plant. These RFID tags must be read with an RFID tag reader. Here in Oklahoma, where we have only a medical system, the tags will be yellow. Blue tags are used for adult-use/recreational systems. Users must manually enter additional information, including weight, custody transfers, and test results into the METRC system. All information is only available to each specific licensee and to OMMA.

Training Requirements

OMMA requires all licensees—those currently operating and those with commercial business licenses that are not currently operating—to complete METRC training and credentialing classes. METRC began offering daily training classes for employees on March 1, 2021, and all METRC training and subsequent credentialing of businesses into OMMA licensees’ user accounts must be completed by March 26, 2021.

After completion of the training and credentialing, then licensees will have access to a Beginning Inventory Guide, which provides the information necessary for licensees to enter their initial plant and/or package inventories into METRC’s system. Given the short time fuse on full integration requirements mandated by OMMA, licensees should complete their METRC training and credentialing, and review the Beginning Inventory Guide as soon as possible.

Impact on Licensees

OMMA requires all commercial business licensees to enter and report their beginning inventory into METRC by April 30, 2021. What does this mean, exactly? On April 30, 2021, the beginning inventory period for METRC closes and OMMA commercial business licensees who are actually operating must report all inventory transactions to, and into, METRC. In other words, the last monthly report OMMA commercial business licensees (who are actually operating) will submit to OMMA will be the April 2021 report, which will be filed by licensees in May 2021. However, OMMA licensees who are not actually operating will continue their filing of “zero inventory” monthly reports with OMMA.

Every licensee must have a designated “METRC Administrator” in the METRC system, to complete the credentialing process. The METRC Administrator must be an owner or a designated manager of the OMMA licensee, and must complete METRC’s new business training course, which is provided in a webinar-format at this time. OMMA has advised that advanced training classes will become available in the future, and will be tailored for administrators according to license type. Licensees should select the METRC Administrator with great care, given that these persons will have complete access to, and control over, the licensee’s governmental reporting system. Any missteps or sabotage by a disgruntled employee could prove fatal to the licensee’s compliance and could likely result in fines or loss of the license.

While OMMA has not overtly stated this, it is axiomatic that METRC will lock down genetics statewide. What does this mean? As of April 30, 2021, no out-of-state genetics will be considered acceptable under OMMA standards and Oklahoma law. While the issue of out-of-state seeds has arguably remained somewhat of a gray area, METRC’s implementation transforms the gray to a clear black and white. OMMA’s statewide track and trace system will easily flag any seeds that cannot be accounted for as having originated in the State of Oklahoma, and genetics acquired from outside the state will not be acceptable or legal.

So…what’s the take-away?

It could be a stressful spring here in the Wild, Wild West.

Changes In the Wind

by Sarah Lee Gossett Parrish | Cannabis Lawyer

Has the pandemic given Oklahoma legislators too much time to ponder what changes they would like to see in Oklahoma’s medical marijuana program? Perhaps. As of January 22, 2021, they have filed a combined number of approximately 38 bills (some are only one-page titles and several are arguably redundant) relating to medical marijuana in some form or fashion.

Authors of Bills Filed

Authors in the House of Representatives filing bills relating to medical marijuana include Representatives May, (Josh) West, Roberts (Dustin), Davis, Frix, Kannady, Echols, Ford, Pfeiffer, Sneed, West (Rick), Fetgatter, Townley, and Humphrey. Authors in the Senate of bills filed that relate to medical marijuana include Dahm, Paxton, Daniels, Standridge, Rader, Bergstrom, Leewright, Montgomery, Taylor, and Hicks.

Whether some of these bills actually make it out of committee and to a floor vote in either legislative body, much less approval by both bodies and signed into law by the Governor, all remains to be seen. However, it is important to track what has been filed and each bill’s ultimate fate in the upcoming 2021 legislative session.

Highlights

The bills filed by the above-named state legislators cover a plethora of topics related to Oklahoma’s medical marijuana program. Descriptions of several substantive bills filed in the state House of Representatives include the following: revenue and taxation changes (House Bill [“HB”] 1908); delivery by dispensaries to certain private residences (HB1960); referendum to Oklahoma voters for the “Oklahoma Adult Access to Marijuana Act of 2021 (HB1961); and clarification of OMMA’s duties and functions with amendments to S.Q. 788 via the “Oklahoma Marijuana Act of 2021” (HB2004).

Congress Boards the MJ Research Train, by Sarah Lee Gossett Parrish

Descriptions of some substantive bills filed in the state Senate include the following: directing OMMA to contract with one or more third-party vendors to provide licensing services (Senate Bill [“SB] 522); criminal penalties for OMMA-licensed patients who carry or use firearms when “under the influence of medical marijuana” and additional preclusions for Oklahomans eligible for a handgun license under the Oklahoma Self-Defense Act (SB442); amending current restrictions on smoking medical marijuana in certain areas including: airport restrictions on medical marijuana use “in any area that is open to or used by the public” indoors or outdoors if within 175 feet from an entrance, same as to an “indoor workplace”, basically designating all state-owned, county or municipal-owned buildings and educational facilities as tobacco and marijuana free (SB445); modifying workplace drug and alcohol procedures and safety-sensitive positions, including additional rights of medical marijuana patients (SB459); amending definitions in the Oklahoma Medical Marijuana and Patient Protection Act (“Unity Act”) concerning testing laboratory licenses, requiring testing of medical marijuana waste prior to transfer and separation of such waste into waste batches, and clarifying or revising certain definitions (SB680); permitting pharmacists to compound products containing marijuana or THC in the event marijuana becomes legal under federal law (SB696); and basically prohibiting schools and landlords from refusing to enroll or lease, respectively, to OMMA-licensed medical marijuana patients, unless doing so would cause the loss of monetary of licensing-related benefits under federal law (SB1033).

As the 2021 legislative session progresses, it will be interesting to see whether Oklahoma’s legislature chooses to avoid the traps that have snared so many other states’ medical and adult-use marijuana programs—chief among them over-regulation, over-taxation, and unduly burdensome regulatory requirements with little, if any, benefit to medical marijuana patients and state-licensed medical marijuana businesses.

So…what’s the take-away?

Once again, it’s going to be a very busy spring here in the Wild, Wild West.

Congress Boards the MJ Research Train

by Sarah Lee Gossett Parrish, Cannabis Lawyer

In the wake of passing the MORE Act, which I wrote about in my December 2020 column, two other Acts related to marijuana were passed by Congress at the end of 2020. The U.S. House of Representatives approved the Medical Marijuana Research Act (“MMRA”) on December 9, 2020. MMRA is bipartisan legislation introduced by U.S. Representatives Earl Blumenauer (D-OR) and Andy Harris (R-MD) that addresses the burdensome impediments to legitimate medical research. Subsequently, on December 15, 2020, the U.S. Senate approved its own bipartisan bill, the Cannabidiol and Marihuana Research Expansion Act (CMREA). The CMREA also promotes cannabis studies and addresses current impediments.

More Act by Sarah Lee Gossett Parrish

A 2017 report by the National Academies of Sciences, Engineering, and Medicine found that “research on the health effects of cannabis and cannabinoids has been limited in the United States, leaving patients, health care professionals, and policy makers without the evidence they need to make sound decisions regarding the use of cannabis and cannabinoids.” Thus, passage by the House and Senate of MMRA and CMREA is good news moving into 2021. It appears that Congress finally recognizes the value of cannabis research, and plans to encourage studies by removing antiquated federal roadblocks. The caveat is that, in order for federal legislation to become law, it must be passed by the House and the Senate, and signed by the President. Hopefully, Congress will reach an agreement on a unified version of these two bills during the early months of 2021.

Barriers to Cannabis Research

Federal law severely limits studies concerning health benefits of cannabis. There is a burdensome registration procedure, protocol reviews are redundant in many instances, security requirements are onerous and unnecessary, especially given that approximately ninety-nine percent of Americans now live in a state where marijuana is legal in some form, and there is just a complete lack of significant research. Limitations also apply to where marijuana for research can be obtained and unfortunately, the quality of that marijuana has been poor—a recognized fact now—which has inevitably hampered accurate results of any significant research studies concerning its health benefits

Cannabis Testing by Sarah Lee Gossett Parrish

Source Limitations for Marijuana Used in Research Since “marihuana” remains a Schedule I substance under the federal 1970 Controlled Substances Act (“CSA”), the Drug Enforcement Administration (“DEA”) regulates its cultivation for research purposes. The DEA controls registration requirements and establishes annual aggregate production quotas under the authority of the CSA. Unbelievably, the DEA has issued only one registration for research marijuana cultivation—to the University of Mississippi. Thus, only the University of Mississippi has been authorized to grow marijuana for use in research studies. Every few years, the University designates the land where marijuana crops are grown based on current and expected demand. Then, the marijuana is grown, harvested, stored, and made available in bulk or as particular elements of the plant, for use in research. The subpar quality of the University-grown marijuana renders it almost useless in conducting serious studies that might yield reliable, usable data leading researchers to significant conclusions about marijuana’s health benefits.

Additionally, studies have shown that this marijuana has lower levels of THC and CBD as compared to commercial grade cannabis products and is, in fact, genetically closer to hemp than the marijuana varieties sold at dispensaries in states where marijuana is legal. Given that marijuana and hemp are genetically distinct, reliance upon the low-grade marijuana cultivated at the University of Mississippi for research about its health benefits is problematic. Participants in studies who consume the varieties cultivated at the University may experience vastly different effects than patients and adult-use consumers that obtain their marijuana product from dispensaries, yielding unreliable results and faulty conclusions. However, efforts by the DEA to expand the number of federally authorized marijuana cultivators for research purposes are underway, and passage of the above pieces of legislation will likely ensure that higher quality marijuana becomes available for research purposes.

Medical Marijuana Research Act

The MMRA achieves four main goals. It addresses the poor quality and inadequate supply of medical-grade marijuana available for use in research; provides a clear path for researchers to study cannabis products used by patients and adult-use consumers pursuant to state-legal programs; streamlines the unduly burdensome, redundant process that researchers must navigate before obtaining a license to conduct marijuana research while guarding against misuse and abuse; and requires that the Secretary of the U.S. Department of Health and Human Services provide a report on the status and results of new research concerning the health benefits of marijuana.

The full text of the MMRA can be found here.

Cannabidiol and Marihuana Research Expansion Act

The CMREA, passed by the Senate, is primarily intended to streamline the application process for researchers to study marijuana and to encourage the Food and Drug Administration to develop cannabis-derived medicines. The congressional summary of the Act states that it allows “accredited medical and osteopathic schools, practitioners, research institutions, and manufacturers with a Schedule I registration” to cultivate their own cannabis for research purposes. This provision would insulate researchers from the requirement of using the poor quality marijuana cultivated at the University of Mississippi.

The Act also specifies that physicians can discuss the risks and benefits of marijuana with patients, and, in similarity to the required report under the MMRA, requires the U.S. Department of Health and Human Services to submit a report concerning the potential health benefits of marijuana and addressing barriers to cannabis research and how best to overcome those barriers. The CMREA has been endorsed by mainstream medical organizations, including the American Academy of Pediatrics, the American Medical Association, the American Psychological Association and the American Society of Addiction Medicine.

The full text of the CMREA can be found here.

 

Differences in MMRA and CMREA

One major difference in the MMRA and the CMREA is that the House bill (MMRA) allows scientists to obtain marijuana from dispensaries in legal states for research purposes, whereas the CMREA allows them to cultivate their own marijuana for such purposes. Both provisions are clearly designed to circumvent current federal requirements that marijuana used for research purposes must be cultivated at the University of Mississippi. Another difference in the two pieces of legislation is the provision in the CMREA protecting physicians from penalties under the CSA, to allow discussion of risks and benefits of marijuana products with patients.

Will we see more federally-approved marijuana research projects in 2021?
Stay tuned.

Information contained herein provides general information related to the law and does not provide legal advice. It is recommended that readers consult their personal lawyer if they want legal advice. No attorney-client or confidential relationship exists or is formed between you and Ms. Parrish as a result of this article.

More Act

WILL THE MORE ACT LEGALIZE MARIJUANA ACROSS THE COUNTRY?

by Sarah Lee Gossett Parrish, Cannabis Lawyer

One of the questions I often am asked is whether, or when, Congress will legalize marijuana. Federal legislation has been introduced to accomplish this—either for medicinal purposes (CARERS Act of 2019) or for whatever purposes each particular state has legalized marijuana (STATES Act). The MORE Act decriminalizes marijuana and recognizes the rights of states to enact their own laws concerning it.

Significantly, the MORE Act is set for a floor vote in the United States House of Representatives the first week in December 2020, somewhere between Wednesday, December 2 and Friday, December 4, 2020. This upcoming floor vote is historic because it is the first ever Congressional roll call concerning a bill that would end federal marijuana criminalization, and by the time you read this, that vote likely will have occurred.

What is the MORE Act?

The Marijuana Opportunity Reinvestment and Expungement Act (“MORE Act”) would remove marijuana from the federal Controlled Substances Act of 1970. Currently marijuana, like heroin, is listed as a Schedule I controlled substance under that Act.

Decriminalization vs. Legalization
Cannabis Testing by Sarah Lee Gossett Parrish

The MORE Act would decriminalize marijuana at the federal level. However, decriminalization is not the same as legalization. Decriminalization is the removal of criminal penalties, whereas legalization is the removal all penalties.

However, the MORE Act would also recognize each state’s law concerning marijuana, thereby permitting states to enact their own regulation policies so that marijuana would continue to remain illegal in some states while legal in others. If the Act passes, then those states which have legalize marijuana for medical or adult (recreational) use, including Oklahoma’s medical system, would no longer have to live under the threat of federal interference with their marijuana laws or federal prosecution for the use, possession, or distribution of marijuana.

Assistance for Victims of The War on Drugs

Notably, the MORE Act would expunge and seal previous nonviolent federal marijuana-related arrests and convictions for those not currently serving their sentences. Those currently serving sentences for federal marijuana arrests and/or convictions would have the opportunity for a review of their sentences, with the potential to have their records expunged and their sentences vacated. As such, this aspect of the MORE Act represents a welcome reprieve for those adversely impacted by the war on drugs.

Are OMMA’s Residency Requirements Unconstitutional?
by Sarah Lee Gossett Parrish

Additional provisions include the establishment of an Office of Cannabis Justice within the Department of Justice. This Office would be responsible for administering grants to aid communities negatively affected by the war on drugs, including an “Opportunity Trust Fund” and a “Community Reinvestment Grant Program”. The Act would prohibit the denial of any federal public benefits, like housing, on the basis of marijuana use, and prohibit any adverse impact under federal immigration laws for those who use or possess marijuana. The MORE Act would also impose a five percent commercial sales tax on marijuana, the proceeds of which would be designated, at least in principle, to assist those adversely impacted by the war on drugs.

Paul Armentano, Deputy Director of NORML, stated back in August 2020, when House lawmakers were originally preparing for a September floor vote on the MORE Act, that “Passage of the MORE Act is essential in order to truly right the wrongs of federal marijuana criminalization, and to once and for all allow the majority of states that have legalized cannabis for either medical or adult-use to embrace these policies free from the threat of undue federal prosecution or interference.”

Will we see federal policy change by 2021?

Stay tuned.

 

Information contained herein provides general information related to the law and does not provide legal advice. It is recommended that readers consult their personal lawyer if they want legal advice. No attorney-client or confidential relationship exists or is formed between you and Ms. Parrish as a result of this article.

Cannabis Testing

Inexact Methods Amidst Exact Science

by Sarah Lee Gossett Parrish – Cannabis Business Lawyer
Cannabis Testing Series Part I

Recently OMMA amended its Rules concerning testing requirements for medical marijuana and even generated a one-page diagram to illustrate the guidelines for ease of compliance. However, these amended rules fail to address the overall issue that plagues cannabis testing across the country—inexact methods amidst exact science. Clearly, the lack of standardized protocols to assess cannabis products for potency and safety poses a huge problem for testing laboratories, patients, and, in those states where adult use is legal, recreational users.

Disharmony in state regulations and the processes used by state-licensed laboratories that test cannabis is extremely disconcerting.

When it comes to determining maximum residual limits (MRLs) of contaminants and adulterants, and specifying the levels of tetrahydrocannabinol (THC), cannabidiol (CBD), terpenes, and the other currently-known constituent components in cannabis (which exceed 80 in number), it is possible that two certified labs could utilize two different testing methods on identical samples to reach two similar, but not identical conclusions.

In fact, a 2018 report by Marijuana Business Daily disclosed that there are numerous accounts of labs producing starkly different potency measurements for identical products, with results varying by as much as 40%. This information is troubling and confirms that the issue must be addressed by the industry as a whole and by our own OMMA.

Are OMMA’s Residency Requirements Unconstitutional? by Sarah Lee Gossett Parrish

Ideally, such lab certification requirements and the testing processes and protocols would be developed for the cannabis industry as a whole, at the national level. However, given marijuana’s continued status as an illegal, controlled substance under federal law, a national, standardized set of testing regulations is unlikely to be developed in the near future. But that does not preclude the development of same here in Oklahoma. This standardization would reduce product recalls and make it more difficult for rogue labs to engage in pay-for-results schemes like the recent debacle involving an OMMA-licensed laboratory that was stripped of its license upon discovery of its dishonest testing methods.

While many labs consider their processing and protocols to be proprietary, confidential information, arguments to the contrary are substantial. Standardization of testing methods would eliminate the variability in test results for marijuana potency and in testing for contaminants. Lab protocols often differ in the specific solvents or reagents used during extraction and analysis, and the instruments used by labs can have different manufacturers and calibration standards, both of which will contribute to variations in testing results.

When labs arrive at different results for tests run on identical samples, chances are high that each laboratory is analyzing its sample using a different method.

Without properly validated methods and laboratory certification programs, this lack of uniformity in test results will continue, to the detriment of patients and medical marijuana businesses here in Oklahoma.

Additionally, the wide variety of cannabis products can, in and of itself, complicate testing and contribute to the lack of uniformity in test results, particularly when those conducting the testing do not have formidable scientific backgrounds and/or degrees. Some cannabis products are easier to analyze than others, and each product must be subjected to a customized cannabinoid extraction method before ingredients can be successfully tested. Many employees in Oklahoma testing laboratories are not steeped in scientific degrees or backgrounds. Thus, differences in test results are all too common.

Oklahoma Seed-to-Sale Tracking by Sarah Lee Gossett Parrish

While safety testing is, at least in principle, more standardized than potency testing because labs can rely on methods federal agencies have approved as to other botanical products, there remains a serious concern about the lack of uniform directives as to safe levels of contaminants and application of those levels to smokables versus edibles, the former being a mode of consumption that poses different risks than edibles.

More studies are needed concerning thermal combustion and degradation of pesticides prior to inhalations, to ensure safe threshold levels are known and enforced.

OMMA should consider this variant in its requirements for the testing of smokables versus edibles, and develop standards applicable to each type of medical marijuana product to ensure proper testing and regulation of same.

While lab certification procedures and uniform testing standards should be a top priority for every state, every patient, and every cannabis business, this does not seem to be the case in Oklahoma or in any other state, currently. Efforts must be focused on these important issues to ensure that cannabis products available to patients here in Oklahoma are safe, and that the laboratories licensed by OMMA who are testing those products place integrity above profits, are operated by knowledgeable persons with backgrounds in the sciences relevant to cannabis testing, and are equipped with clear and concise regulations that specify uniform testing methods and outline acceptable potency and safety testing results.

What’s the take-away?
Stay tuned.

ARE OMMA’S RESIDENCY REQUIREMENTS UNCONSTITUTIONAL?

by Sarah Lee Gossett Parrish, Cannabis Lawyer

The first major piece of legislation concerning medical marijuana was signed into law by Oklahoma Governor Kevin Stitt on March 14, 2019, and became effective on August 29, 2019. The bill was known as the Oklahoma Medical Marijuana and Patient Protection Act, nicknamed the Unity Bill (“UNITY”), and I have written about UNITY on numerous occasions. It is time to address what arguably has become one of the most controversial aspects of Oklahoma’s medical marijuana landscape—residency requirements for OMMA licensees.

UNITY changed the residency requirements for OMMA licensees from the simple, easily-met standard in SQ 788, which required applicants to “show residency in the State of Oklahoma” by producing an Oklahoma state driver’s license, identification card, residential lease, mortgage, deed, or similar document, to a strict, two-year residency requirement or five years of continuous Oklahoma residency during the preceding 25 years immediately prior to the application date. Additional, substantial, documentary evidence is now required as proof.

For nonresidents eager to enter Oklahoma’s medical marijuana industry, UNITY marked the end of an era. Post UNITY, it has become more important than ever for those who are not Oklahoma residents to cultivate strong relationships with Oklahoma partners if they hope to obtain one of OMMA’s coveted licenses. It is important to note that UNITY did not alter the ownership percentage requirements—a minimum of 75% ownership by Oklahoma residents. However, exactly who would qualify as an Oklahoma resident changed significantly.

Recently, federal district courts across the country have started to invalidate residency requirements for cannabis business licensees on the basis that such protectionist statutes violate the dormant Commerce Clause of the United States Constitution (U.S. CONST. ART. I, § 8, cl. 3.), by explicitly and purposefully favoring state residents over non-residents. Indeed, this would seem to be the intended purpose of Oklahoma’s residency requirements set forth in UNITY, as well as the preexisting 75% Oklahoma ownership requirement.

Now, such an action has been filed here, in the United States District Court for the Western District of Oklahoma (where I served as a federal law clerk just after I first finished law school), by a Washington limited liability company, Original Investments, LLC d/b/a Dank’s Wonder Emporium.

The Washington company’s declaratory judgment action contends that Oklahoma’s residency requirement for OMMA-licensed businesses “unconstitutionally prohibits non-residents from receiving an Oklahoma medical marijuana business license and from owning more than twenty-five percent (25%) of any Oklahoma company that holds an Oklahoma medical marijuana business license.” The action also asserts that the residency requirement violates the dormant Commerce Clause of the U.S. Constitution “by explicitly and purposefully favoring Oklahoma residents over non-residents.”

It certainly would seem so.

Notably, the allegations in this federal court complaint are supported by the June 26, 2019, decision of the United States Supreme Court in Tennessee Wine and Spirits Retailers Association v. Thomas, where the Court struck down a two-year residency requirement as to initial applicants for retail liquor store licenses and a ten consecutive year residency requirement for renewal applicants, in the State of Tennessee. In pertinent part, our nation’s highest court relied on the dormant Commerce Clause, which provides, “if a state law discriminates against out-of-state goods or nonresident economic actors, the law can be sustained only on a showing that it is narrowly tailored to advance a legitimate local purpose.”

In the Thomas case, the Supreme Court reasoned that, since the residency requirement for liquor retail sales licensees had little, if any, relationship to public health and safety, and blatantly favored Tennessee residents, it violated the dormant Commerce Clause and was unconstitutional.

The same can be said for UNITY’s two-year residency requirement for OMMA licensees and for OMMA’s requirement of 75% Oklahoma ownership in any OMMA-licensed commercial business. Neither has any relationship to public health and safety, and both blatantly favor Oklahoma residents. Thus, it seems that these residency requirements for OMMA licensees violate the dormant Commerce Clause and are unconstitutional.

Of course, marijuana remains illegal under federal law, so reliance on the dormant Commerce Clause could be problematic for cannabis businesses. In fact, a federal district court could decline to even exercise jurisdiction over such a case, on that basis. However, given the recent decisions of several federal district courts that have invalidated similar residency requirements for cannabis businesses, I like the Washington company’s chances here.

What’s the take-away?

Stay tuned. Oklahoma’s Wild, Wild, West may get a little bit wilder in the near future.

 

Information contained herein provides general information related to the law and does not provide legal advice. It is recommended that readers consult their personal lawyer if they want legal advice. No attorney-client or confidential relationship exists or is formed between you and Ms. Parrish as a result of this article.