In a Nov. 3 meeting, the New York Cannabis Control Board (CCB) approved new rules for the state's hemp program, allowing for the sale of hemp flower but prohibiting the sale of delta-8 THC products in the state.
During the meeting, the CCB addressed several issues regarding the advertising, processing, manufacturing, testing and packaging of hemp and hemp-derived products in New York.
The state Department of Health (DOH) initially issued the regulations for public comment before they were formally filed by the Office of Cannabis Management (OCM), which was given oversight of the state's hemp program under the enactment of the Marijuana Regulation & Taxation Act (MRTA) earlier this year, Morning AgClips reported.
Changes in Place
The regulations allow for hemp flower products to be sold as long as they are not "marketed or advertised for the purpose of smoking or [are] in the form of a pre-roll, cigar or joint," the news outlet reported.
The new rules also prohibit the sale of delta-8 THC products because they contain "intoxicating qualities." According to the news outlet, the OCM believes these products should be regulated under the state's future adult-use program.
Other critical provisions discussed in the meeting for manufacturing, laboratory, packaging and labeling standards include:
All products must be manufactured using Good Manufacturing Practices (GMP) specific to the product form.
All products must be tested by accredited laboratories or a full panel of analytes, including cannabinoid profile, heavy metals, microbials, pesticides, mycotoxins and residual solvents before being sold to consumers.
All products must include the following information on the package and label:
Nutritional or supplement fact panel
List of all ingredients in the product
Total cannabinoids per product/serving, stating the amount of CBD and THC, if applicable
QR code or link to Certificate of Analysis
Required warnings for the consumer
Mechanism to report an adverse event
Expiration or best buy date
Chris Alexander, OCM executive director, said the regulations approved by the CCB are just a start for the state's hemp program. "We plan to soon propose for public and Board consideration further changes that will bring the program in-line with the regulatory structures in other states, ensuring New Yorkers have the highest level of protection while providing our businesses with the tools they need to compete," he said.
With the issuance of these regulations, businesses interested in processing, manufacturing, or selling CBD hemp products can now apply for a license. Additionally, the OCM can finally begin to issue licenses to businesses that "submitted the required application information and have been operating under provisional licenses or permits, with no additional fee or actions required by the licensees," according to the news outlet.
The regulations are effective immediately, but businesses have a six-month grace period to comply with the new rules.
"The hemp regulations we approved today will provide new and expanded opportunities for New York's farmers, processors, and retail businesses, including allowing the sale of hemp flower products and food and beverage products containing CBD," said Jen Metzger, a CCB board member. "We are opening the doors for the hemp program to grow responsibly, establishing standards and requirements to assure safe, high-quality products for the New York market and beyond."
South Dakota Supreme Court Justices Patricia J. DeVaney, from left, Janine M. Kern, Steven R. Jensen, Mark E. Salter and Scott P. Myren hear April 28 arguments about the constitutionality of voter-approved Amendment A, which would legalize adult-use cannabis in the state. They have yet to issue an opinion.
Keloland Media Group
Any Given Thursday: South Dakota Supreme Court’s Indecision on Adult-Use Cannabis
South Dakotans for Better Marijuana Laws is racing to hit a Nov. 8 signature gathering deadline for the 2022 ballot as a back-up plan.
Matthew Schweich has started every Thursday morning for the past six months by logging onto the South Dakota Supreme Court’s opinion page and hitting the refresh button.
Twenty-seven straight weeks, the campaign director for South Dakotans for Better Marijuana Laws (SDBML), a statewide ballot question committee based out of Sioux Falls, has been met by disappointment, as time and time again he finds that the five-justice court remains a no-decision on the constitutionality of Amendment A—the 2020 voter-approved adult-use cannabis ballot measure.
In addition to being the SDBML campaign director, Schweich also serves as the deputy director of reform organization Marijuana Policy Project (MPP).
SDBML | southdakotamarijuana.org
Matthew Schweich, Campaign Director, South Dakotans for Better Marijuana Laws.
“Eight o’clock sharp every Thursday morning,” Schweich said about when the South Dakota Supreme Court updates its issued opinions online each week. “I’d hate to count up all those Thursdays that there’s been no ruling on the Amendment A case.”
Last November, 54.2% of South Dakota voters cast ballots in favor of Amendment A, to legalize adult-use cannabis, but Republican Gov. Kristi Noem launched a taxpayer-funded lawsuit challenging the ballot measure, claiming it violated the state’s one-subject rule.
Without the Supreme Court’s decision, Amendment A currently sits unconstitutional, which Circuit Judge Christina Klinger ruled in February. Noem, who opposed legalization leading up to the 2020 election, nominated Klinger to the state’s Sixth Circuit Court in early 2019.
The Supreme Court heard arguments on Amendment A in late April, but the judicial body has remained silent since, putting SDBML in a tight position—a Nov. 8, 2021, deadline looms to gather roughly 17,000 valid signatures to qualify for the 2022 ballot, in case the Supreme Court upholds Klinger’s ruling that Amendment A is unconstitutional.
“Overall, we’ve got hundreds of volunteers all over the state, and we’ve got 40 signing locations all over South Dakota,” Schweich said. “And we’re just going to have to rely on our volunteers to come up big for us. Based on the level of frustration, and therefore motivation, I think there’s a very good chance we’ll get what we need and be able to submit [on Nov. 8].”
Schweich said he hopes SDBML will collect 22,000 to 23,000 signatures—to provide a 5,000 to 6,000 buffer—in case some of the signatures are not validated (i.e., signees who do not write their information legibly or who think they’re registered to vote when in fact they are not).
SDBML | southdakotamarijuana.org
Going through the same ballot initiative process two years ago, South Dakotans for Better Marijuana Laws staff and volunteers submit petitions for Amendment A and medical cannabis legalization Measure 26 to Secretary of State Steve Barnett on Nov. 4, 2019, in Pierre.
If the signature gathering campaign comes up short for the Nov. 8 deadline, then SDBML will extend its efforts for the statutory ballot initiative and try to submit by May 2022 instead, but there’s a slight risk in doing so, Schweich said. Initiative organizers plan to do their “big count” Nov. 6, and that’s when he’ll know where the signatures stand, he said.
“The ideal path forward is to submit on Monday,” he said. “However, a federal court has ruled that the Nov. 8 deadline is too early, and they have extended it to May. And so, we feel very confident that we have until May to submit these signatures; however, it is not 100 percent.”
The “slight risk” is that the May extension could be rescinded, but Schweich said everyone he’s talked to told him that’s very unlikely.
The steps taken toward putting an adult-use initiative on the 2022 ballot are part of a backup plan. Should the Supreme Court restore Amendment A as constitutional—overturning Klinger’s decision—then SDBML would call off its ballot campaign, Schweich said.
But no one really knows when that decision will come.
“There is no deadline [for the Supreme Court to make a decision],” Schweich said. “I don’t know what the timeline is. I expected that the South Dakota Supreme Court would have issued a ruling long before this. It’s been over six months since the final hearing, … and I think most people in the state are quite confused as to why it’s taking so long.”
The decision could become public on any given Thursday, Schweich reiterated. Every state has a different judicial branch system, he said.
Last year in Nebraska, for example, the team at MPP worked to get a medical cannabis initiative approved by Secretary of State Bob Evnen in August only for the Nebraska Supreme Court to rule less than a month later that it violated the state’s single-subject rule. At the time, Schweich said it was a deeply flawed decision that only ensured suffering medical cannabis patients, including veterans, would continue to be criminalized while trying to live healthier lives.
“Unfortunately, the Nebraska Supreme Court ruled against us, but they did so on a much quicker timeframe,” Schweich said this week. “So, I was never expecting that it would take this long to get a ruling in South Dakota, but we just can’t control that.”
While launching a signature gathering campaign for a 2022 ballot initiative is the responsible thing to do in South Dakota, he said, money being spent on another ballot process could all be for nothing should the Supreme Court rule to restore Amendment A.
SDBML never wanted to launch another campaign, said Schweich, who believes his ballot question committee still has a very good chance of winning the Amendment A case.
When Cannabis Business Times reached out to SDBML attorney Brendan Johnson, who argued on its behalf in front of the Supreme Court in April, Johnson said he was unable to comment on the case until a final ruling is issued.
But SDBML fundraising efforts for its signature drive have been supported by those frustrated, not only with the Supreme Court’s indecision, Schweich said, but also with Noem’s use of taxpayer funds to challenge an amendment that 54.2% of voters backed, he said.
“I speak with the South Dakota voters every day when they come into our campaign office here in Sioux Falls, and I hear them express quite considerable frustration,” he said. “They are very frustrated with Gov. Noem after her decision to use taxpayer funds to file this lawsuit against Amendment A, and they are quite confused as to why it’s taken the state Supreme Court so long to issue a ruling.”
But the frustration is helping to motivate people to get involved and become engaged in the political process, Schweich said of a silver lining.
And it’s not just Noem opponents expressing their grievances.
“The frustration is very real—I have not seen anything like this before,” Schweich said. “There’s so many people who don’t just come in here because they want to sign, but they want to express how they feel. It’s interesting to listen because these people come from all different political backgrounds. We have liberal people and very conservative people, people in the center, libertarians—South Dakotans of all political stripes are coming in here and signing.”
With repeated legal battles that have ensued across the U.S. following recent cannabis legalization measures—not just in South Dakota and Nebraska, but also in Mississippi, where its state Supreme Court overturned a 2020 voter-approved medical cannabis ballot initiative in May—Schweich said the lone course of action is to keep on fighting with more due diligence moving forward. But it’s a continuous battle, he said.
Just this year, the Idaho Senate approved legislation to make it more difficult to get citizen-led initiatives or referendums on the ballot. But the Idaho Supreme Court rejected the law in August, ruling the legislation was so restrictive that it violated a fundamental right under the state’s constitution.
The South Dakota Legislature is attempting a similar tactic to make ballot initiatives more difficult through a “supermajority requirement” that it placed on the June 7, 2022, primary ballot, which, if approved, would require a three-fifths vote of approval by the Legislature before future citizen-led initiatives could be placed on the ballot.
Schweich called it a “disgraceful” proposal that has no place on a primary ballot.
“These attacks on the initiative process come in all different forms,” he said. “They can take the form of legislation, litigation, administrative rulings, proposed initiatives. For those of us who work very hard to uphold and effectuate the will of the people through the initiative process, we just need to be even more aware of potential risks, and we need to work together to fight back against these restrictions. And that is happening, but it is a real battle.”
While SDBML organizers originally filed five potential ballot initiatives for 2022, they since have decided to move forward with a short statutory legalization initiative because it is the most likely to withstand any future legal challenges, Schweich said.
That decision comes with a heightened awareness of potential risks associated with the current “era of assaults” on the initiative process going on throughout the country, he said.
“It just requires a higher level of due diligence on the initiative process and erroring on the side of caution,” Schweich said. “[It also means] having a line item in your budget for litigation and monitoring the Legislature for any changes they try to make for the initiative process and having a good relationship with whatever state agency oversees the initiative process. In South Dakota’s case, that’s the secretary of state.”
Since Klinger ruled Amendment A unconstitutional, and with the Supreme Court currently considering the case, the South Dakota Legislature formed a Marijuana Interim Study Committee, which recommended Oct. 27 that the state legalize adult-use cannabis through the legislative process.
The committee recommended levying a 15% sales tax on cannabis products, the creation of a state licensing system and allowing local governments to create restrictions and prohibitions for cannabis businesses.
“We’re ready to work with them. We want to help them get that bill passed,” Schweich said. “And if it gets passed, we can withdraw our initiative from the ballot. You know, we don’t have to be on the ballot again. In fact, it’s better that we’re not because that just means the people are waiting even longer for policy they already approved.”
But the South Dakota Legislature will not return to session until January.
In addition, if the Legislature gains enough votes to pass an adult-use bill in both chambers, there’s still the risk that Noem could veto the legislation, requiring a supermajority to override her pen.
“There’s a lot of unknowns,” Schweich said. “So, we have to keep collecting signatures and maintain that option of going to the ballot next year.”
If adult-use legalization all boils down to a 2022 ballot measure, he said SDBML will be ready to defend it.
“I think our opponents maybe thought we were just going to kind of walk away, but obviously we haven’t,” Schweich said. “We have the people of South Dakota on our side, and we’re going to keep working hard, and, in the end, we’re going to win. It’s just going to take longer than it should have and it’s going to cause a lot of frustration along the way, but, in the end, cannabis will be legal in South Dakota for adults 21 and over, and the people will be respected. It’s just a question of when.”
The Biggest Future Risk For Cannabis Operators: Lawsuits
There is an old saying about lawyers: A town too small to support one lawyer can provide a decent living for two and a feast for three.
If you are a cannabis business owner who believes it is only a matter of time before cannabis becomes federally legal, you also probably believe that competition from big pharma, big tobacco, or big alcohol will be your biggest worry when that day arrives. Or, you may think that the moment legalization happens, you have to sprint across state lines to grow quickly to defend your market share. Without minimizing any of these concerns, which I share, a much bigger risk, because it is not being discussed, is poised to jump you when you are not looking—this risk: being sued.
Indeed, federal cannabis legalization may just turn out to be a massive feast for many litigator-specialist lawyers.
This article is a call for cannabis operators to begin to plan for potential legal risks from within their organizations and to counter-intuitively plan for legal risk emanating from outside the company walls. When federal legalization arrives, cannabis will be a large and juicy target for lawsuits ranging from class action, intellectual property disputes, specific product liability, etc. In my opinion, it is inconceivable that lawsuits don’t spike and become a major expense and hassle for every cannabis company.
A Legal System Built For This
Please remember that our legal system is a very efficient system which encourages the use of its services. And with regards to class-action lawsuits, all it takes is for a single complainant to be attached to a single lawyer for an industrywide suit to be filed on a supposed aggrieved class of consumers. In a lot of cases, class-action lawsuits are thought up, designed, initiated, and prosecuted by lawyers while the class is of secondary importance. All this spells potential trouble for your firm.
In addition, multi-state product recalls, untrained budtenders dispensing advice which causes a perceived harm by a customer, the intentional mixing of distillate or flower from multiple farms (which is a no-no with regards to testing and product recalls), ambiguity as to why a flammable product (i.e., pre-roll, vape cartridge) emanates toxic fumes (potentially from unlisted added ingredients, porous metals used in the manufacture of the cartridge, or glue used in any product containing paper cones), and other ambiguous or nefarious activities all lay bare that liability can come for you from many directions. It is best to consider your pending liability as a “when” and not an “if.”
Proactive Defenses
There are three steps (probably more given your particular situation) you can take now to mitigate and hopefully remove the lawsuit target on your back: 1) be careful what you document; 2) be consistent in how you deal with consumers and other industry participants; and 3) always review any contracts you enter into with an eye to future problems.
Anything you document can be subject to legal discovery later: this includes emails, text messages, hand-written memos, and any other form of physical or digital notes. Meaning, if you become a target of a lawsuit, regardless of its merit, you open yourself up to legal risk even if what you are originally being sued for is not backed up by discovery directly, as other liability issues may arise from discovery which can be added to a lawsuit. Remember, when a lawsuit is filed, a plaintiff can include almost anything they want in their pleadings. Pleadings are supposed to detail the charges against you and be supported with evidence, whether included in the pleading or referenced. In practice, many pleadings are designed to be maximally alarming while being minimally informative. There is a term for this: “notice pleadings.” It is the equivalent to saying, “I know you are guilty of something,” so the pleading only includes vague, general claims.
A plaintiff files such a lawsuit to get to discovery and depositions. In many lawsuits, discovery and depositions are used as fishing expeditions. Lawyers use discovery to find the evidence which can be used to amend a lawsuit. Then they replace the vague claims with specific claims based on what is found. This is the danger of documenting everything for the sake of documenting and not having a proper records retention policy where documents are destroyed on a regular basis.
Think of a very detailed employee process manual with very specific procedures. Now imagine the process drifting over time wherein a step in the procedure is bypassed. Now further imagine a subpoena requesting your employee process manual and the step which has been skipped for years supporting a claim of the lawsuit against you. This is the way fishing expeditions can hook you.
Discovery is very cheap to deploy and very expensive to respond to, and sometimes just the requests for information can be a significant cost to you in your defense. Discovery is akin to being completely healthy, but if you go to enough doctors, you’ll eventually be diagnosed with some condition. If the plaintiff requests enough information, the odds are they will find something with which to justify their lawsuit.
Be Consistent
This brings us to consistency. Treat every customer, every business counter-party, every person and company you run into within cannabis on equal footing within a given type of relationship. You never want to be in a position where someone can accuse you of unfair dealings. Examples may be to include provisions in contracts, or assumptions in daily dealings, which can be considered unconscionable. For example, all your other clients are given specific repayment and late payment penalty terms which are all about the same. For a certain segment of your customers you use more onerous payment terms and penalties and you cannot back up why you have a separate policy for the aggrieved group.
If you have leverage in a business dealing, do not take advantage of somebody’s weak position by having them agree to higher costs, wider liability, less service or support, or anything else that would allow them to claim discriminatory treatment. If something goes wrong, you will be sued. If a business arrangement is too risky, it is better to pass on the opportunity than set yourself up for later headaches. Have standards, be consistent, and avoid exceptions that disadvantage someone or some company--this also includes your employees.
Check The Fine-Print
When federal legalization takes place, where you do business, with whom you do business, whether you have deep pockets (or not), will all come into play when the trial lawyers come knocking. One of the issues in all contracts is which set of laws the parties agree to operate under. Typically they are listed as states. “Parties agree that the laws and regulations of the state of California shall govern the interpretation of this agreement” or something similar.
This language is important when dealing with a bilateral agreement. The complication arises when your counterparty is contracted with another party with a different agreement on binding law and that third party is key for your counterparty to fulfill their responsibilities to you. Now you are in an indirect relationship with an unknown third party.
This is important because when lawsuits are filed that include defendants from multiple jurisdictions, this sets up the opportunity for the plaintiff to go “forum shopping,” looking for the jurisdiction that may favor plaintiff lawsuits of a particular kind. There is a whole consulting industry built around such decisions.
For you to be named in a lawsuit with cross-jurisdictional issues, the plaintiff’s lawyer will look for any point of contact you may have in the jurisdiction chosen for filing: Have you ever sold products or services in a particular state? Have or had a sales office open in the state? Stored product in the state? Almost any contact with a state will allow these long-arm jurisdiction issues to make your life very tough.
Legal uncertainty breeds litigation. Combine this uncertainty with contingency fees and the ability to solicit clients on television, billboards, emails, magazine articles, etc., and you have a situation ripe for litigation. The legal industry will trumpet the platitude sounding mantra that “we help plaintiffs win.” This sounds a whole lot better than “we make defendants lose,” even if the defendant is not directly responsible for the claims in the lawsuit.
Collecting damages is what most lawsuits are about. One of the tactics used in lawsuits to try to get a company to settle is to name third-party bystanders as defendants. This tactic is called an “add-on” and its purpose is to make the lives of the people in your life so miserable you will settle. This leads a cynic to conclude that our law is not pro-plaintiff, but pro-litigation. So, in practice, be very careful how much involvement you allow your investors to have in your company. Tell them they are possibly setting themselves up for liability. As a side benefit, this is an excellent tactic to scare off a meddlesome investor looking for a quick return on investment.
Wrapping Up
Lawyers are considered officers of the court and, as such, are deputized by the courts to stir-up trouble. This may sound harsh, but it is true. It is important you understand this fact. Lawyers are private sector actors that can initiate a compulsory process—nothing is more compulsory than having to respond to a lawsuit. If you don’t, you will be subject to a default judgment. You can try for a summary judgement, in which you attempt to have the lawsuit thrown out, but anything found in discovery (or via deposition), even if not in the original pleading, can be used to create a factual dispute, and thus an amended suit, resulting in the plaintiff’s attorney arguing the suit must continue.
To help prepare yourself for the future, you should consult your own attorney. In doing so, you will take a big step in being a business person who anticipates risk instead of just responding to events.
How to Prepare Your Outdoor Cannabis Grow for Early Winter Storms
As the climate changes and becomes more volatile, growers must learn to expect the unexpected, such as fierce hailstorms or unseasonably early snowstorms.
As the climate changes and becomes more volatile, growers must learn to expect the unexpected, such as some geographic locations having fierce hailstorms or unseasonably early snowstorms.
Last growing season, I saw social media posts in which outdoor farmers dealt with both situations: plants beaten down and destroyed by hailstorms, as well as snow-covered plants a few days before harvest. In Canada, I saw a video of a grower harvesting outdoor plants in an October sleet storm that was earlier than any previous storm on record.
With that in mind, outdoor growers in areas prone to extreme winter conditions may want to proactively design and construct frames that allow them to easily cover plants in the event of unseasonably cold weather and/or extreme weather conditions.
While this is not a solution for cannabis farmers, Napa Valley vineyards have 20-foot wind machines/air movers in them; these are essentially 20-foot-tall round poles with two propellers attached to motors on top. Among the grape vines are smudge pots (also known as orchard heaters), oil-burning devices used to prevent fruit trees from freezing. These smudge pots can be filled with diesel fuel and set ablaze to keep crops warm. The smudge pots create heat, and the propellers move the warm air throughout the vineyard. While tempting to try, the smoke from the burning fuel could contaminate cannabis crops.
Temperatures are not likely to get so low for so long before a cannabis harvest that it would require the use of heaters, but weather patterns can be problematic. Cannabis growers can use quick-rising hoop houses to protect their crops from snow and/or ice storms. Covering crops is a time-tested solution used in other large-scale produce industries, including blueberry farms.
JPMorgan Chase & Co. has issued a letter to its prime brokerage clients informing them that they can no longer purchase certain U.S. cannabis-related securities, according to a Reuters report.
The restrictions pertain to businesses with U.S. operations that are not listed on the Nasdaq, the New York Stock Exchange or the Toronto Stock Exchange, and have a “direct nexus to marijuana-related activities,” according to the news outlet.
Effective Nov. 8, the bank will not allow new purchases or short positions in the related businesses, Reuters reported, although clients with existing positions can liquidate them.
“J.P. Morgan (JPMS) has introduced a framework that is designed to comply with U.S. money laundering laws and regulations by restricting certain activities in the securities of U.S. Marijuana Related Businesses," the bank wrote to clients, as reported by Reuters.
Other banks have taken similar action, according to the news outlet, after a high-profile collapse of private fund Archegos Capital earlier this year prompted financial institutions to evaluate how much risk they are willing to take on in their prime brokerage businesses.
“JPMorgan’s move to block its customers from buying securities in fully legal, regulated cannabis companies is beyond disappointing,” U.S. Cannabis Council CEO Steven Hawkins said in a public statement following the news. “Publicly-traded cannabis companies operate entirely within the law, and the industry is poised for tremendous growth. JPMorgan’s new policy is regressive and at odds with the majority of Americans, who want legal, regulated cannabis. What's more, it's self-defeating. The end of federal cannabis prohibition is within site, and the industry is already growing rapidly. I imagine more than a few JPMorgan customers will take issue with being blocked from one of the hottest industries on the market today. JPMorgan is on the wrong side of history on this and will come to regret its decision."
Legislative Map
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
Andriana Ruscitto
Tony Lange
Melissa Schiller
