Illinois Again Delays Awarding New Cannabis Licenses
The state had planned to issue craft grow, infuser and transporter licenses July 1, but Gov. J.B. Pritzker instead issued an executive order to delay the permits indefinitely.
The Department of Agriculture planned to issue 40 craft grow licenses, 40 infuser licenses and an undetermined number of transporter licenses July 1, the news outlet reported, but Gov. J.B. Pritzker instead issued an executive order to delay the permits, without specifying when they would be issued.
The new grow licenses will be the first opportunity for those not already operating in the state’s medical cannabis market—as well as many social equity applicants—to participate in the adult-use industry, and the transporter and infuser licenses create new categories of businesses that have not yet existed in Illinois’ cannabis market, the Chicago Tribune reported.
Kristina Blokhin | Adobe Stock
Whistleblower Alleges that U.S. Attorney General William Barr Launched Unfounded Antitrust Investigations into Cannabis Mergers
John Elias, a career employee at the Department of Justice, testified that Barr ordered the investigations due to his personal dislike of the industry.
A Department of Justice whistleblower has testified that U.S. Attorney General William Barr was motivated by his personal dislike of the cannabis industry when he launched multiple Antitrust Division merger investigations into nearly a dozen cannabis deals last year.
John Elias, a career employee at the DOJ, testified June 24 before the U.S. House Committee on the Judiciary, alleging that 10 Antitrust Division probes involving cannabis companies—which accounted for 29% of the Antitrust Division’s total merger investigations in 2019—were not bona fide antitrust investigations, as they did not meet the standard internal requirements for proceeding with a Second Request subpoena, which the DOJ must file to formally object to a merger.
Instead, Elias alleged that Barr ordered the investigations because of his personal animosity toward the cannabis industry.
For Matt Karnes, founder of cannabis-focused advisory firm GreenWave Advisors, cannabis’s federally illegal status, coupled with the fact that the industry is still in its infancy, should have prohibited the DOJ from launching these antitrust investigations in the first place.
“It’s very nascent, so it’s like beating up a toddler,” he said. “It doesn’t make any sense in any way, shape or form. If it’s illegal, don’t look at this from an antitrust perspective when they still say banking is not permitted, … [and] even if it was legal, it would be too early to scrutinize anything because it’s not even nationwide yet.”
Still, as any cannabis business navigating IRS Code 280E will attest, companies operating in state-legal cannabis programs are still subject to other applicable federal laws, such as those surrounding securities, employment, taxes and antitrust statutes, according to Eric Berlin, co-chair of Dentons' Cannabis Practice.
Although Berlin said it’s perfectly normal for the DOJ to issue Second Request subpoenas when legally justified, no matter the industry, he still found the probes into the cannabis mergers surprising.
“The DOJ’s actions never made sense from a legal perspective, and the claim that the DOJ needed information about a new industry, which is what they were saying, seemed like an abuse of power at the time,” he said. “It wasn’t even a plausible excuse to me at the time, knowing the industry. It was clear that there was no risk of monopoly or harm to competition, as the industry was and remains fragmented and competitive. In fact, in Mr. Elias’s testimony, we confirmed those facts. Even the DOJ was looking at it as fragmented and competitive, and these investigations were solely motivated by Attorney General Barr’s personal view.”
Berlin represented a party involved in a cannabis merger that was flagged for DOJ review, and at the time, he did not understand why the DOJ issued a Second Request subpoena to his client.
“I look back and it just confirmed my worst fears at the time,” he said. “The fact that it comes from basically just the personal animus of the highest legal officer in the nation is disturbing.”
Complying with Second Requests is very onerous, Berlin added, and any party going through this process can spend hundreds of thousands of dollars, if not upwards of a million dollars, to deal with the investigation and associated legal fees.
“The takeaway is that there’s no question that these companies that were under scrutiny that had these deals reviewed had to spend money … and use resources unnecessarily,” Karnes said. “Also, I think to some extent, investors may have suffered because … some of these companies assumed that these deals were going to go through, included them in the revenues in their guidance, and then when the deals were prolonged, … they weren’t able to meet their numbers, so the stock prices in some cases suffered and I’m sure some investors lost money.”
Many of the cannabis mergers under investigation did not get closed, Berlin said, due to these additional costs and time delays, and now, not only are the companies involved left with little to no recourse, but the DOJ’s actions have dramatically slowed the M&A activity in the industry.
“The actions by the DOJ scared other parties from entering mergers and acquisitions,” Berlin said. “The stunning thing is Attorney General Barr, if these allegations are true, basically got what he wanted, which is a chilling effect on the industry. There is no great recourse other than I would hope these allegations now prevent the DOJ from bringing other spurious antitrust claims or allegations against other parties in the industry. … If it turns out that there are no repercussions for this sort of activity, then maybe that chill will remain.”
“It just underscores a lack of coordination at the federal level,” Karnes added. “It was just a complete waste of time and it appears to be a ploy to disrupt the growth of the industry. … And I don’t think there will be any more types of scrutiny. The whistle’s been blown.”
From a larger perspective, however, these accusations could have repercussions that expand beyond the cannabis industry.
“Using one’s office for personal gain or to implement one’s personal view at the expense of sound government policy and the rule of law is the definition of government corruption,” Berlin said.
The fact that Barr targeted a particular industry is not only corrupt, he added, but it also raises questions about perjury.
“The attorney general testified under oath in his confirmation hearing before the U.S. Senate that he would not … upset federal expectations … as a result of the Cole Memorandum,” Berlin said. “There were people relying on the federal government not entering this area, and he was saying, … ‘I’m not going to go after companies that are relying on the Cole Memorandum,’ and he did just that.”
For Karnes, however, if the allegations are true, it could signal a more positive message for the cannabis industry, one that underscores its resilience and, perhaps, its inevitability.
“If [Barr] was so opposed to pot like [former Attorney General Jeff] Sessions was, and Sessions came out with that statement when he first took office, then why didn’t this guy do it?” Karnes said. “I think it’s because he knows he can’t stop it legally. He can’t just come in and shut everything down, so what does he do? He tries to crumble it in another way, in an indirect way, to weaken it. To me, this is a net positive for the industry because it really signals that it is going to become legal. If it wasn’t, he would shut it down."
rcfotostock | Adobe Stock
Hemp Trading’s Panakeia CBG Variety Hits Canadian Market
Panakeia will be the first CBG and feminized seed to be on the list of approved cultivars by Health Canada.
After closing a deal with U.S.-based Front Range Biosciences and Tesoro Genetics to sell its Panakeia hemp variety in December, Spanish company Hemp Trading is partnering with Cannabis Orchards to bring the high-CBG, zero-THC genetic to the Canadian hemp market.
The partnership, officially announced on June 25, will make Ottawa-based Cannabis Orchards the first Canadian company to bring to the hemp market a genetic that is THC-free, has a high CBG content (testing reports from Hemp Trading show Panakeia testing at 18% CBG) and that also is feminized.
“Through partnership with Hemp Trading, we will be introducing the first THC-free and CBG variety onto the list of approved cultivars of Health Canada, expected in fall 2020,” said Cannabis Orchard’s CEO Jamie Ghossein in a statement.
With an advertised cannabinoid content of 18% CBG and 0.00% THC, “Panakeia will be groundbreaking for the majority of cannabis users seeking health benefits,” Ghosseing continued. “In fact, according to government data, we know most Canadians are using cannabis for medicinal purposes. Yet, the Canadian offering of medicinal cannabis varieties with high CBD or CBG content is very poor.”
Hemp Trading markets Panakeia as a variety that will “never fail a field compliance test.” If that claim holds true, it may well present a solution to a problem that has plagued the hemp industry. In an email to Cannabis Business Times and Hemp Grower, Hemp Trading explained that it “made different screenings with some hemp varieties from different parts of the world,” before identifying “an anomalous individual with chemotype which produced big amounts of CBG with no CBD and THC.”
Hemp Trading also gene-tested its variety and “the results confirm this plant [does not have] the genes of [neither] CBD synthase [or] THC synthase. And that’s why Panakeia doesn’t produce any of these cannabinoids and accumulates CBG.”
The genetic’s high-CBG content also presents an opportunity for Cannabis Orchard’s team to conduct research on the potential health applications of the “grandfather cannabinoid,” including for cancer treatment.
“At Cannabis Orchards, we are constantly conducting research in developing innovative varieties intended as therapeutics,” Ghossein said. “Through this partnership we know we can offer something new, not only to cannabis users but potentially to patients in hospital. We are seeking to conduct pre-clinical trials with this variety and others developed through our breeding program and private-public partnerships with Canadian universities.”
Virginia Will Decriminalize Cannabis on July 1
The decriminalization law will set the fine for possession of less than an ounce of cannabis at just $25
Washington, D.C., June 30, 2020 -PRESS RELEASE- Beginning July 1, Virginia’s cannabis decriminalization law will officially go into effect. In May, Gov. Ralph Northam (D) signed the decriminalization bill (SB 2/ HB 972) into law, making Virginia the 27th state to decriminalize simple possession. The law reclassifies possession of one ounce or less of cannabis to a civil penalty punishable by a fine of up to $25, the lowest fine of any decriminalization law in the country.
The bill also creates a work group to study legalization in Virginia which is to make recommendations by Nov. 30, 2020. Last week, the Virginia Legislative Black Caucus pledged to introduce legislation to legalize cannabis during a special session set for August, among other criminal justice and policing reforms.
“Decriminalizing cannabis will save thousands of Virginians from the trauma of arrest and the stigma of a criminal conviction,” said Steve Hawkins, executive director of the Marijuana Policy Project (MPP). “However, Virginia lawmakers should continue to work towards broader cannabis policy reform. As the Virginia Legislative Black Caucus has recognized, full legalization is needed. While decriminalization is long overdue, legalization is necessary to dramatically reduce police-civilian interactions and remove the pretext for countless police stops.”
Virginia’s decriminalization law goes into effect as cannabis policy reform continues to gain momentum in the southern U.S. Mississippi and North Carolina have had decriminalization laws on the books since the 1970s. According to Civiq, a majority of voters in every state in the South support cannabis legalization.
Recently, the governor of Louisiana signed a bill (HB 819) to expand the state’s medical cannabis program, and lawmakers in Georgia included a cannabis decriminalization provision in the Georgia Justice Act — a broad measure that has been introduced to address police brutality and racism. In November, voters in Mississippi will decide on medical cannabis legalization. Arkansas, Louisiana, and Florida already have comprehensive medical cannabis laws on the books, and Virginia has a more limited medical cannabis law, which the legislature and governor expanded this year.
“Twenty-seven states have now decriminalized cannabis, and Virginia’s decriminalization law is the strongest among them. Once the law is in effect, it will prevent Virginians from being criminalized and having their lives derailed for simple cannabis possession,” Olivia Naugle, a legislative analyst for MPP, said.
Mat Hayward
Federal Judge Presses U.S. Customs and Border Protection on Transparency in Cannabis Policy
An ongoing lawsuit seeks information on a federal policy that has barred Canadian cannabis industry stakeholders from entering the U.S.
A federal judge is setting new deadlines for U.S. Customs and Border Protection (CBP) to respond to an ongoing lawsuit seeking specific policy language on the agency’s approach to cannabis at the U.S-Canada border. For the past few years, Canadian cannabis industry employees and investors have been turned away at the border—and, in some cases, barred from the U.S. outright.
CBP has never articulated why that’s happening, though. There is no record of an overt policy that might dictate such actions. In 2018, Seattle-based law firm Davis Wright Tremaine filed a lawsuit to find out what’s going on.
Chris Morley, associate with Davis Wright Tremaine, says that the judge’s recent opinion is a move in the right direction.
In short, Judge Ricardo Martinez asserts that the CBP has not adequately searched for the supporting documents that might explain the agency’s cannabis policy. The judge gave CBP until July 31 to track down its own policy.
What the agency comes up with next month will answer the fundamental question: Is there even a formal policy dictating CBP arrests and other border actions?
“The central question is the public’s right to know CBP’s policy,” Morley says. “We think it’s a simple issue. CBP has announced a policy and they’ve been us, essentially, they can’t find records of that policy. The court agreed with us that CBP hasn’t done an adequate search and has ordered them to do more. … We’re left asking ourselves: How hard can it be?”
The flip side of the CBP policy question, as Morley points out, is that “they’re acting in an ad-hoc manner all over the northern border.” In the absence of a formal policy, new questions arise as to how CBP is organizing itself with regard to the cannabis industry.
Cannabis Business Timesfirst reported on this issue in 2018. In May of that year, we filed a FOIA request with CBP, seeking much of the same information cited in the Davis Wright Tremaine lawsuit. Our request remains unfulfilled, despite the estimated date of completion listed as June 6, 2018.
“FOIA prioritizes the public’s right to know, the public’s right of access to government records,” Morley says. “The federal agencies have an obligation to respond to FOIA requests. They serve the public. To do that, the public needs to know what they’re doing.”
Cannabis Business Times’ interactive legislative map is another tool to help cultivators quickly navigate state cannabis laws and find news relevant to their markets. View More
Melissa Schiller
Brian MacIver
Eric Sandy
