As our Los Angeles CBD lawyers recognize, CBD has been on store shelves legally across the U.S. since the passage of the federal 2018 Farm Bill. Recently, advisory notes from the Substance Abuse and Mental Health Services Administration indicate its popularity has ballooned, now being available from some 270,000 retailers across the country. It’s sold in beverages, tinctures, topical ointments, food, and more.

The primary point stressed by federal regulators is that whatever CBD’s benefits, it’s not intended or recognized as safe for children unless expressly approved by the U.S. Food & Drug Administration (FDA) for a specifically stated purpose. As it stands, the only approved purpose for administering CBD to children is to help treat rare cases of epilepsy. Even then, only the purest form of CBD is recommended.

It’s estimated that one-third of Americans used CBD or a CBD-infused product at some point in 2020.

Among the main concerns listed by the federal agency:

• Lack of clear safety standards.
• Inconsistent quality control.
• Lack of uniformity in labeling.

All of these, the agency said, leads to additional concerns for accidental intoxication or overdose – primarily involving children. The primary health risks include potential for adverse drug interactions, adverse impacts to development and reproduction, and liver toxicity. These statements, however, lack the clinic research that might conclusively determine the safety (or lack thereof) with regard to CBD products. They simply haven’t been studied adequately – thanks to the U.S. government’s own rules.

What’s more, the FDA didn’t go out of its way to list the benefits of CBD – which include reduced reliance on powerful prescription medications like opioids for treatment of chronic pain and other conditions.

Despite this (and fervent calls from CBD industry advocates, stakeholders, and California lawmakers), the FDA has already stated it’s not going to issue rules specific to CBD that would allow it to be lawfully used as a food item or dietary supplement. The agency said it intends to rely on Congress to create these new rules.

The agency has also turned down numerous requests from Americans seeking FDA rules for CBD marketing. This has left California CBD retailers and manufacturers in the dark about what rules they need to follow – making it all the more imperative to rely on an experienced cannabis lawyer for guidance on walking the legal tightrope on everything from banking to advertising to sales to warehousing to order fulfilment.

It’s estimated that about 40 percent of CBD purchases are made directly from marijuana retailers. About a third are made from different retailers and another third are shopped online. The rest are gotten from some other sourcing.

It’s fairly well-established that because cannabis retailers are so heavily regulated and taxed, their products are going to be more uniform, more clearly labeled, and more pure. CBD products must contain no more than 0.3 percent of the THC, the psychoactive component in cannabis products. Delta-8 THC-O and Delta-9-THC-O have recently drawn the ire and enforcement arm of federal authorities for violating this rule.

If you have questions about the legality of your CBD products sold in the Los Angeles region or anywhere in Southern California, we can help.

The Los Angeles CANNABIS LAW Group represents growers, dispensaries, ancillary companies, patients, doctors and those facing marijuana charges. Call us at 949-375-4734.

Additional Resources:

SAMHSA Advisory – Cannabidiol (CBD) – Potential harms, Side Effects, and Unknowns, February 2023

More Blog Entries:

California Marijuana Sales & Use May Still Pose Landlord Legal Challenges, Feb. 14, 2023, Los Angeles Cannabis Lawyer Blog

This point was underscored recently in the California Appellate Court decision in Metsch v. Heinowitz. In this case, the appellate court refused to enforce a contract to produce and distribute marijuana edibles. The contract had been drafted in 2014 – at a time when cannabis wasn’t legal for recreational use in California. This factored significantly in the court’s ability to enforce it.

Plaintiffs had pursued a case against defendant for breach of contract, breach of fiduciary duty and conversion that arose from this contract. Plaintiffs indicated they were general partners with defendant in a company called Chronic Catering, a business that held intellectual property (recipes) and property. A year after the contract was signed, plaintiffs allege that defendant consigned the assets of the company for his own use and for the benefit of his own company – without plaintiffs’ consent. Plaintiffs sought to make defendant pay general damages as well as a general declaration from the court that the intellectual property defendant was using as his own actually belonged to their joint venture.

The trial court, however, noted that at the time the contract was drafted, both defendant and the plaintiffs were operating unlicensed marijuana businesses that made and sold cannabis edibles. That meant they formed an agreement based on illegal conduct and transactions, and thus plaintiffs had no right to seek recovery or enforcement of said contract.

The appellate court affirmed this ruling. Justices highlighted the fact that in order for a contract to be enforceable, it has to be legal when it is made. That means that courts in California are going to look at what the laws were at the time both sides entered into the contract. If you had a marijuana business contract prior legalization, it may be difficult to enforce. Depending on your position, that might be a good thing. Or it might not, in which case, it’s time to have your cannabis lawyer review your position and help you draft a new one that is both up-to-date and enforceable.

All the defendant in this case had to do was probe that at the time the contract was signed by both parties, cannabis was considered a Schedule I narcotic (under federal laws), prohibited from possession, planting, harvesting, drying, processing, sale, transport, import or gift under marijuana law. Therefore, the contract wasn’t enforceable.

The decision isn’t published, which means it doesn’t set any binding precedent for others who may be embroiled in cannabis business contract disputes. Nonetheless, it can serve as a warning to those in the legal cannabis market that taking the time to review prior contracts and determine whether any should be revised, replaced or discarded is an imperative.

It should be noted that because cannabis is still considered a Schedule I drug under federal law, this argument pertaining to contracts might still crop up in a current dispute. It’s best to have your attorney review your contracts to make sure they are as airtight as possible.

The Los Angeles CANNABIS LAW Group represents growers, dispensaries, ancillary companies, patients, doctors and those facing marijuana charges. Call us at 949-375-4734.

Additional Resources:

Metsch v. Heinowitz, April 22, 2020, California Court of Appeals, Fourth District, Division One

More Blog Entries:

California Marijuana Delivery Lawsuit Slated for Next Month, June 12, 2020, Los Angeles Marijuana Business Lawyer Blog

Now, as our L.A. cannabis business lawyers can explain, companies are slated to receive a number of state benefits, and perhaps even federal aid in order to ensure their survival.

Marijuana Business Daily reports the state is planning to offer a number of extensions, relief and deferrals that should allow many pot shops, manufacturers and growers to keep operations chugging along and also meeting payroll. Many are hoping that this could ultimately lead to substantial, longer-term regulation – especially where taxes are concerned.

California Cannabis Tax Relief Measures

Among the relief issued by state tax agencies since early March:

• State tax return filings and payments less than $1 million have been extended until the end of July.
• Some tax interest and penalties will be forgive.
• There will be a two-month extension for filing annual reports, audits and refund claims and an additional two months to pay installment payments and annual fees.
• Tax appeals have been extended until the end of July.
• Sales and use taxes of up to $50,000 for businesses making less than $5 million in annual taxable sales has been deferred for a full year.
• The deadline for quarter taxes of businesses earning less than $1 million a year has been extended until the end of July.

For some entrepreneurs, this relief – which can amount to hundreds of thousands of dollars – is saving their businesses from going under. It’s even allowing some cannabis companies to invest in expansion, hiring and compliance.

It is a good idea to discuss these kinds of business plans with an experienced California marijuana business lawyer because such action will need to be strategic, particularly if the economy continues to fall or is slow to recover. If more Californians lose their jobs, it could result in prolonged revenue declines. With the black market factor still looming, it would make a lot of sense for the state to offer extended tax relief if they want to help the cannabis market from going under.

Federal Aid for Cannabis Companies Floated

More potential relief could come from the U.S. government – something that would be an unprecedented acknowledgement of the cannabis industry’s legitimacy from a system that still categorizes the plant and its derivatives as a dangerous, addictive Schedule I narcotic.

Legislation has been proposed by U.S. House Reps. Earl Blumenauer (D-OR) and Ed Perlmutter (D-CO) that would extend eligibility of the Economic Injury Disaster Loans, the Paycheck Protection Program and other emergency advances to cannabis companies.

Marijuana shops have been conferred essential business status, which has kept them in operation for both medical and recreational sales. But despite the state tax relief, they haven’t been able to apply for aid or loans through the federal government’s programs even if they otherwise meet the requirements. That includes payroll protection.

As Perlmutter explained, cannabis companies are substantial local economic contributors throughout the country, and there is no legitimate reason they shouldn’t be extended the same relief as other businesses.

The bill has been titled the Emergency Cannabis Small Business Health and Safety Act.

For more information on how our L.A. cannabis lawyers can help you with business plans and aid applications, contact us for a free, initial consultation.

The Los Angeles CANNABIS LAW Group represents growers, dispensaries, ancillary companies, patients, doctors and those facing marijuana charges. Call us at 949-375-4734.

Additional Resources:

New bill calls for cannabis companies to be eligible for federal COVID-19 help, April 23, 2020, By Taylor Hatmaker, TechCrunch.com

That’s the question being asked of marijuana industry insiders in the region. High Times reported the FBI has declined to confirm or deny the existence of such an investigation. Yet in an FBI podcast broadcast titled “Corruption Threat Emerges in Marijuana Industry” in mid-August, supervisory special agents indicated unequivocally they had noted an increasing threat of public corruption in the burgeoning marijuana market in Southern California. They explicitly sought tips that might help direct such investigatory efforts.

Another investigation by city officials in Sacramento is examining how one cannabis company owner and those associated with him were able to score eight marijuana dispensary licenses in the city – roughly one-third of the allowable number of sellers within city limits. The man reportedly donated handsome sums to numerous local politicians in the city while they were running for election and re-election.

One of the Ukrainian businessman’s purported associates has already been indicted by U.S. attorneys for alleged involvement in a conspiracy to funnel foreign money to the campaigns of certain politicians as well as lawful cannabis companies in Nevada and several other states. Two others implicated in that alleged scheme are also associated with President Trump’s personal attorney Rudy Guiliani. They were allegedly involved in a reported scheme to discredit Democratic presidential candidate Joe Biden.

Sacramento officials say they want to get to the bottom of how the Ukrainian businessman was able to secure so many marijuana licenses, even though city regulations were specifically designed to ward off this kind of ownership concentration within the industry. The concern is that the system is being exploited.

Regardless, authorities say it’s likely the cannabis business licensing process in Sacramento (and probably elsewhere in California) needs to be re-evaluated and additional safeguards put in place.

Marijuana industry advocates like NORML say the flaw lies in state law, which gives local government agencies an enormous amount of power over lucrative licensing deals, which makes it ripe for public corruption.

Our Los Angeles marijuana business attorneys have seen that local officials tend to be more susceptible to corruption because they are under less journalistic and regulatory scrutiny.

State officials may be working hard to streamline the licensing process, but the local interests at play may be hindering the process, in addition to making it inherently unfair.

As state and federal authorities continue to weed through the growing evidence of corruption between government officials and certain cannabis industry players, we expect incidents like this will continue. The ever-present threat of black market sales to legitimate businesses means local markets can be incredibly cutthroat and competitive. This incentivizes backdoor political deals for those trying to break into the market and gain a firm foothold.

The Los Angeles CANNABIS LAW Group represents growers, dispensaries, ancillary companies, patients, doctors and those facing marijuana charges. Call us at 949-375-4734.

Additional Resources:

FBI Investigates Corruption in Sacramento Cannabis Industry, Oct. 21, 2019, By Addison Herron-Wheeler, Culture Magazine

was the first country to fully legalize marijuana, and the South American country has learned much as a result of trial-by-error. Cannabis was legalized there five years ago, but it wasn’t until last year that legal sales began. Since then, Uruguay has experienced a number of supply problems. Residents report having to travel long distances to licensed pharmacies, and sometimes once they arrive, the supply is dry.

According to a report from High Times, the issues are two-fold. First an excess in government oversight is creating supply chain issues. Only registered pharmacies can sell cannabis, and there have only been 14 licenses issued out of the 1,200 pharmacies in Uruguay. The government is also in charge of cultivation of marijuana, but only two cultivators have received licenses. Much like in California, when too many restrictions come between buyers and their marijuana, many consumers will choose black market options, even though there are legal options.

Second, the head of the Uruguay National Drug Council said there is an issue of farming capacity. Farming cannabis on such a large scale was not common, and there certainly was not a guidebook available. This led to a learning curve for cultivators to catch up on technology and processing on a mass scale. The two cultivators have just recently reached the allowed capacity of 4 metric tons per year.Meanwhile, demand for cannabis reaches an estimated 25 tons of marijuana in Uruguay annually. Government officials have discussed increasing the amount of cultivators. They are going to have to if they plan to encourage people to stick with legal purchasing options and keep the black market at bay. In fact, the black market was a huge motivator in legalizing cannabis in the first place. Violence related to gangs involved in drug trafficking contributed to a significant percentage of the murders in the country, but because the black market has been able to keep such a stronghold, the violence has only increased.

Advocates still attest that the plan could work; it just takes time. California has also had its fair share of experience with the cannabis black market, though top concerns generally revolve around damage unlicensed growers are causing to the environment and public lands, making deliveries to states where marijuana is illegal, and creating unfair competition for marijuana businesses who are playing by the rules.

Our Orange County cannabis lawyers know plenty of challenges in California are certainly different. Uruguay, for example, is not still battling their federal government on the basic issue of marijuana’s safety, while the U.S. Controlled Substances Act still classifies cannabis as a Schedule I narcotic. In many ways, however, despite this, marijuana is more accessible in California, particularly if you live in a city that permits sales. Our state has managed to thrive and build a budding marketplace in spite of challenges we have faced. This level of success doesn’t come easily. It takes hard work, dedication, and a foundational understanding of creating a solid business plan amidst cannabis regulations and laws. Our attorneys can help you set that foundation with consultations and business plans and guide you toward a thriving future.

The Los Angeles CANNABIS LAW Group represents growers, dispensaries, collectives, patients, defendants, workers and those facing criminal marijuana charges. Call us at 949-375-4734.

Additional Resources: Uruguay Struggling to Meet Demand for Legal Marijuana, June 13, 2018, By Leonardo Haberkorn, Associated Press

More Blog Entries:

Uruguay Lifts Prohibition of Marijuana – Joins Colorado and Washington State, Dec. 25, 2013, Orange County Marijuana Attorney Blog

In response to this, a number of Sessions’ fellow Republicans – including Colorado Attorney General Cynthia Coffman – are urging Sessions to reconsider.

Specifically, Coffman told The Denver Post she extended an invitation to Sessions to come to Colorado and see how the state has managed and regulated its recreational marijuana industry. Coffman’s invitation was reportedly extended in a meeting with some of Session’s top staffers in Washington D.C. Coffman noted that Colorado is a good place for Sessions to start any inquiry on the matter, as Colorado is the state with the longest history of recreational marijuana in the country.

Coffman had been attending a meeting for the National Association of Attorneys General, for whom Sessions gave a speech indicating his firm believe that drugs are at the core of criminal activity. He further voiced his fierce opposition to marijuana legalization, and voiced skepticism that “marijuana sold at every corner grocery store” makes us a healthier, better country.

Still, Coffman reported Sessions’ staffers did express interest in coming to Colorado and reviewing the regulatory framework for recreational marijuana. She said his comments appeared to be broad policy statements, absent any specific plans for how he would address legalized marijuana in his new role.

The remarks offered by Sessions weren’t much different than what was revealed by White House Pres Secretary Sean Spicer days earlier, when he told reporters the Department of Justice is likely to bolster enforcement of federal anti-marijuana laws, even in states that have legalized the drug.

Coffman opined the Trump administration hasn’t determined yet an exact approach, or whether they will do anything starkly different from the Obama administration. She said the sense she gets at this juncture is that legal marijuana may be left alone in states where it is legal, but that federal government agents will be dogged about ensuring the substance doesn’t cross state lines.

The U.S. Drug Enforcement Administration has made halting the flow of black market marijuana from Colorado to other states a top priority over the last two years. The agency has partnered with local law enforcement agencies to halt marijuana grow operations – mostly in residential homes – that exist for the purpose of providing supply for out-of-state distributors. The DEA has launched numerous investigations, served search warrants and seized large amounts of marijuana.

The Colorado attorney general said that if conflicts arise between the federal government and the state on the issue of recreational marijuana laws, she plans to uphold state laws. However, our cannabis lawyers understand she did warn there could be situations in which her office would not have the authority to intervene. For example, if there were cases that involved specific businesses or individual marijuana users, action would likely be under the federal government’s purview. That would mean the state wouldn’t have standing to be a plaintiff or even a party in certain cases.

The Los Angeles CANNABIS LAW Group represents growers, dispensaries, collectives, patients and those facing marijuana charges. Call us at 949-375-4734.

Additional Resources:

Colorado AG invites Jeff Sessions to come visit a recreational marijuana state and “see what we have done”, March 1, 2017, By Jesse Paul, The Denver Post

More Blog Entries:

Sessions Focus on Cannabis Appears to be on Cartels, March 6, 2017, L.A. Cannabis Lawyer Blog