Public acceptance of CBD and cannabis products has grown, use has expanded, and even the federal government has been steadily easing restrictions.

However, where companies are too often getting caught up in litigation and regulatory scrutiny is with respect to potency, mislabeling, and misbranding.

Let’s start with the risk of product liability claims. For those who are unfamiliar, product liability is when a consumer alleges that a product was defectively designed, defectively made, or the warning about the risks was inadequate. Claimants don’t need to prove negligence, but they do need to show the product was the cause or a major contributing factor to the plaintiff’s illness or injury.

The long-term adverse impacts of CBD (or lack thereof) aren’t really widely known because research on these products has been so restricted over the last several decades. The U.S. Food and Drug Administration has raised concern about the potential for CBD to interact negatively with certain medications, and that it might cause liver damage. But the extent to which this is true isn’t well-known because it hasn’t been thoroughly studied. These potential harms could end up being the subject of lawsuits in the future. President Joe Biden recently passed a law permitting advanced research on the risks and medical benefits of both cannabis and its derivatives – including hemp-derived CBD.

While CBD companies aren’t expected to have a crystal ball in knowing all the possible side effects, they would be wise to keep a close bead on emerging research, and ensure they’re both properly monitoring their product and any reported issues. They should also be communicating regularly with regulatory agencies.

The bigger issue in terms of product liability, at least in the short term, is labeling. Improper labeling – whether with respect to potency or mixed ingredients – has been the subject of major headaches for the cannabis and CBD industries the last few years. In 2022, the FDA handed out 33 warning letters to CBD companies for label issues like:

• Product potency didn’t match the numbers on the label. Sometimes these claims stem from lower potency than advertised. Other times, CBD companies have been called out for claims of containing “zero THC” when in fact, there was THC in the products.
• Misbranding, where the product labels provided inadequate instructions for consumer use.
• Making claims the product could be used medicinally for certain conditions when it legally couldn’t make such claims. Examples included promises to treat conditions ranging from diabetes to COVID-19. (Companies cannot make medical claims on non-FDA approved drug products.)
• Label mix-ups between THC and CBD products. (This is a major mistake that in several cases has resulted in big fines and a string of civil lawsuits and later settlements after a half a dozen people who were hospitalized for serious health issues when they consumed what they thought was CBD, but was actually THC. In one case, the family of an elderly man says he died as a result of such a mistake. In another, a Kentucky man drove into a bus after using a CBD vape that actually contained high quantities of THC.)

Product contamination is another legal issue to be wary of. A number of CBD product liability lawsuits have involved contamination of their products with pesticides. A Canadian company recently paid out $2.31 million in a class action lawsuit alleging just this.

Lastly, inaccurate spread of information through advertising – on websites, social media platforms, and more – can come with serious penalties. This includes fake celebrity CBD endorsements.

In general, CBD companies would do well to focus on quality control and pay close attention to the developing science. Also, contracting with a CBD lawyer is a smart, proactive way to ensure your operations stay above board and ahead of the curve on CBD litigation trends.

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:

Warning Letters and Test Results for Cannabidiol-Related Products, February 2023, U.S. Food & Drug Administration

More Blog Entries:

Twitter Marijuana Advertising Rules Still Restrictive, April 5, 2023, CBD Product Liability Lawyer Blog

As our Los Angeles marijuana business lawyers can explain, it’s not the first time pot shops have been subject to inspections. It’s just that officials handling it in the past typically gave companies a heads-up – often several days of notice – before showing up. But according to recent reports, there has been a surge of drop-in, no-notice inspections. The 24-to-48-hour heads-up is no longer something your company can count on.

Given that even minor transgressions or oversights might compromise your ability to keep your doors open, it’s imperative that licensed California cannabis businesses be ready for a DCC inspection out of the clear blue sky.

Prime Targets of California DCC Inspections

If a company isn’t following state marijuana law and guidelines to the letter, DCC can issue citations, fines, and even license revocation. As this new aggressive inspection campaign is under way, it’s unclear how nit-picky inspectors are going to be, but we do know the agency has expressly stated there are a few major compliance rules on which they’ll be devoting a heavy focus. Those include:

• Compliance with Track & Trace. Companies need to be fastidious about maintaining their METRC compliance records. That requires plants/batches to be correctly tagged, placed in storage, and submitted into the track-and-trace system. Our L.A. marijuana lawyers know it’s a tedious process about which many clients grumble. However, slip up on this front and it’s likely to cause problems during an inspection. Even seemingly inconsequential requirements like ensuring all tags are clearly visible to anyone within a certain radius of the plant can result in a track and trace violation.
• Property modifications. If you intend to change or update the physical facilities out of which you operate, you must obtain the DCC’s prior approval. This could be anything from knocking out walls to simply moving a certain part of your business operations to a separate side of the building. This is likely going to present the biggest headaches for growers, given that their government fees and size caps are based on their canopy square footage. Manufacturers, meanwhile, will want to make sure they aren’t overstepping the bounds of license by producing products that haven’t been previously disclosed/approved by the state DCC.
• Property access. Your premises needs to be secure. Retail facilities obviously allow patrons to enter off-the-street, but supplies should be adequately secured and there should be numerous protections in place for off-hours. Meanwhile, access to cultivation farms, manufacturing facilities, and lab sites should generally be limited solely to authorized personnel. Businesses should have proper gating, locks, cameras, and alarms.
• Workplace safety. If there are potential on-the-job hazards, they need to be addressed immediately – because of unannounced inspections but also just for the safety and well-being of your staff and customers. No doubt this is a unique industry with special considerations, but state Cal/OSHA workplace safety requirements still apply.
• Records. California cannabis companies can be compelled at really any point to turn over records they are required to keep – from certified lab test results to METRC records to auto insurance records to employee contracts to surveillance videos (which they must keep for a full 90 days). Businesses also need to have their license properly displayed on site.
• Transparent cultivation processes. Cannabis farmers are held to a high standard of accountability when it comes to providing DCC with detailed plans on practices ranging from light and energy consumption to managing pests. If your current operations deviate even in the slightest from the blueprints and plans that DCC has, the inspector is going to catch it. Make sure if you make changes to run it by your cannabis business attorney to see whether you need to submit a review request before pushing full steam ahead.

In a recent DCC informational pamphlet entitled, “What to Expect When You’re Inspected,” the agency conceded that establishing a cannabis company in California is complicated and often very challenging. The agency vowed to work with businesses that may not be compliant to make corrections within a certain time frame. Usually, you’ll have 30 days to respond to any citations. If you don’t already have an attorney on retainer at this point, it’s a smart move to get one before responding to a DCC citation. Ideally, if you work closely with a cannabis lawyer on a regular basis, you can avoid running into most of these issues in the first place.

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:

“What to Expect When You’re Inspected,”Canna Connect, DCC Inspection Checklist

If the effort is successful, there is a potential for its impact to be global, given that California’s marijuana market is not only the oldest but the largest in the world. Thus, its influence across the industry is oversized.

The taxation changes will effectively erase a tax on cultivation of marijuana (which had been the source of about 15 percent of state marijuana taxes – roughly $166 million as of last year). The changes were part of a larger state budget agreement, which is also going to carve out some tax credits for certain marijuana companies, as well as expand labor rights in the industry and switch collection of a state excise tax from distributors to retailers. The tax will be paused at 15 percent for three years, at which point the state will have the option to raise it again to make up for revenue lost by ending the tax on growers.

Programs that benefit from marijuana taxes include youth and environmental programs, and the state says it must balance out these needs with those of marijuana cultivators and shops that are burdened by heavy taxes and tight regulations. As our Los Angeles marijuana business lawyers are aware, many companies are treading water – if they aren’t drowning – because they’re in direct competition for sales with black market dealers that can sell their products more cheaply because they aren’t taxed or responsible for screening their supply for harmful contaminants. This year especially has been tough, given last year’s bumper crop contributing to oversupply.

Many smaller operators are likely to fail or consolidate before the tax credit goes into effect, but it’s nonetheless a welcome windfall for those in the industry. It’s been largely recognized as an operational burden, as it was paid out by growers prior to obtaining any revenue for sales. So even if that product never sold, cultivators were still getting taxed.

The tax break is expected to help with issues of growers burning excess crop (to avoid paying tax on product they won’t actually sell) and problems with shady under-the-table deals intended to sidestep the tax payment. These issues have been especially prevalent given that taxes were based on weight, as opposed to the price at which the product was sold. This has made growers vulnerable whenever there are price declines, compelling them to simply burn the product rather than paying a tax on crops there was no guarantee of selling.

Hope is that the tax cut will filter through the cannabis industry to wholesalers and other distributors, then on down to consumers – incentivizing them to buy legal product over black market options.

Among the other details of the tax plan:

• Tax breaks for cannabis companies who pay more than 150 percent of the minimum wage.
• $10,000 in tax credits for the social equity operators in the marijuana industry (minority groups disproportionately impacted by marijuana arrest rates). These groups will also get a 20 percent rebate on taxes paid to the state, which they can use to reinvest in operations.

The goal here, of course, is not only to bolster the legal industry, but to cut down in the notoriously difficult to hit illicit industry – estimated to be some three times the size of the above-board market. As it stands, legal marijuana sales in California will generate about $6.4 billion just in 2022. A hit on the black market in California will be a benefit to cannabis companies across the country, who must compete not only with illegal operators in their own state, but the massive amount of illegal crop grown in California that is unlawfully smuggled in across state borders.

This isn’t the first tax relief effort aimed at the state cannabis market, though many of earlier packages were mostly handed down at the local level. Companies that need assistance wading through their tax obligations should be working with an experienced marijuana business attorney. 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: World’s Biggest Pot Economy Just Inhaled More Fiscal Stimulus, July 11, 2022, By Tiffany Kary, Bloomberg.com

The case, Northeast Patients Group et al. v. Figueroa, involves a challenge to the law in Maine (existing in many other states) that contains an in-state residency requirement for license applicants and operators. California doesn’t have a residency requirement law, but operators here may be barred from expanding into other regions due to their state residency requirements. This ruling could impact that barrier.

Last year, the District Court of Maine struck down the state’s residency requirement, finding that it was a violation of the U.S. Constitution’s Dormant Commerce Clause, a measure intended to block discrimination against interstate commerce. However, attorneys for the State of Maine appealed that decision, finding the federal law isn’t applicable to the cannabis industry, as trade remains technically unlawful under U.S. law.

Similar challenges have been brought before in other courts, but as our Los Angeles marijuana business lawyers can explain, this is the first to reach a federal appellate court. A ruling by the First Circuit could have a substantial impact for the cannabis industry throughout the country.

As it now stands, the cannabis industry in the U.S. is mostly governed by a ramshackle patchwork of state laws cobbled together with little federal direction or assistance.

The Dormant Commerce Clause was used in Tennessee a few years back to overturn the state’s residency requirement for liquor stores, the state supreme court in that case holding that the state had no compelling interest in preventing folks who didn’t live there from holding liquor licenses and operating alcohol-related businesses.

Yet when it comes to cannabis, dozens of states and cities have passed – and enforced – requirements of residency that prohibit outsiders from holding licenses or portions of licenses. In some cases, non-residents are prohibited from investing at all in local cannabis businesses. These statutes were primarily intended to boost local ownership, with the hope of also mitigating the potential for interference from the federal government in state-run cannabis programs.

For the most part, these laws have gone unchallenged. Even where it has been raised, some courts have seemingly been reticent to weigh in. For example, a federal court in Oklahoma recently granted a request from the state to dismiss a residency requirement challenge – ignoring the question of the dormant commerce clause altogether.

There have been a few examples, though, where such challenges have prevailed. For example, a federal court in Missouri stopped the state from enforcing the prohibition on non-residents serving as directors, officers, or owners of dispensaries. A federal court in Michigan stopped the City of Detroit from giving preferential treatments to residents in issuing cannabis licenses.

What makes the Figueroa case so noteworthy is that it’s the first time such a matter has made it to a federal appellate court.

It’s one our Los Angeles cannabis business lawyers will be carefully watching.

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:

NORTHEAST PATIENTS GROUP et al v. MAINE DEPARTMENT OF ADMINISTRATIVE AND FINANCIAL SERVICES et al, U.S. District Court for the District of Maine

The study solicitation encouraged study applicants to have a focus on the evolution of cannabis law and policy in the U.S., as well as globally, and the impact that has on public health. In particular, it’s looking for researchers who can help analyze the quality of various regulatory schemes for cannabis product sales, with a special focus on which elements or combos are concretely shown to minimize potential harm to public health.

It’s worth pointing out that this seems to indicate the agency is no longer fighting against an end to prohibition, but rather leaning in to the general consensus that is likely inevitable at some point. The agency outright conceded that cannabis product policies and legislation in the U.S. and around the world have outpaced the public health knowledge we have on the subject.

It doesn’t help that because of marijuana’s status as a Schedule I narcotic, the process for conducting studies on it is onerous. All researchers must comply with the standard 5 milligrams of THC per unit when conducting studies on human subjects. (That rule was put in place last year.)

Shifting Legalization Stances

Legalization of marijuana has been spreading incrementally since 1996. That is, of course, when California became the first state to legalize medicinal marijuana. Now, as of this writing, 18 states allow for recreational adult-use marijuana and 36 allow for medicinal use marijuana. The 2018 Farm Bill passed by Congress legalized hemp (including hemp-derived CBD) growth and sales.

In 2021 alone, we had New York, New Jersey, Virginia, Connecticut, and New Mexico all legalize adult-use marijuana. This is while 68 percent of Americans surveyed by Gallup believe marijuana should be legal for recreational use. What’s more, 18 percent of Americans freely admit to using it – up from 10 percent in 2005. There was also the House’s passage of the Safe Banking Act (which would have given marijuana businesses easier access to banking and axed the punitive tax rules currently applied to them). Even though it didn’t pass in the Senate, its progress was noteworthy. We also saw a proposed draft of a bill that would end federal prohibition – something our Los Angeles cannabis business lawyers and others have been waiting on for decades.

Legal cannabis sales in the U.S. last year crossed the $25 billion threshold – and it’s estimated to quadruple within the next 10 years.

The NIDA study is a strong indicator of what’s to come. But businesses may see some big changes before that. Political experts opine the SAFE Banking Act has a 50-50 chance of passing this year – noteworthy because its chances before this were always an uphill battle. Comprehensive reform at the federal level is unlikely to make progress until the SAFE Banking measure passes with bipartisan support, so our Southern California cannabis legal team will be watching it closely.

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:

Top Federal Drug Agency Funds Research On Differing Legal Marijuana Regulatory Models, Feb. 21, 2022, By Kyle Jaeger, Marijuana Moment

Congress is currently mulling the 2023 Farm Bill, while state lawmakers across the country are slated to hold their yearly sessions. Many are expecting hemp extract sales and shipments – particularly those happening online and across state lines – are likely to get attention from both federal and state lawmakers.

As our Los Angeles marijuana business lawyers can explain, the concern with delta-9 products is that they possess intoxicated properties, yet aren’t being taxed, overseen by safety regulators, and are being shipped across state lines with little oversight.

For those who may be unfamiliar, delta-9 products are different than delta-8. Delta-8 THC products are manufactured in labs. Lawmakers have set limits on delta-8 products. So now, some hemp manufacturers have concentrated the delta-9 THC that already exists in hemp plants, allowing them to make tinctures, edibles, and vapes that are intoxicating – and then sell those online. Delta-9 is the THC compound created when raw hemp is heated, but in smaller amounts than what one might find in a cannabis extract.

Some manufacturers doing this have gone on record to say that doing this allows them to operate in currently-underserved markets. Some marijuana businesses contend that purveyors of this practice are cutting corners unfairly by using hemp – which is legal at the federal level – to make THC – which is not. The intoxicating properties of THC are what led to prohibition of it in the first place, and what continues to be a sticking point for overturning stringent federal laws against marijuana sales.

The sudden popularity of hemp-derived delta-8 over the last few years was largely unanticipated. Hemp farm operators and retailers saw a sudden new potential in a part of the plant few had previously paid attention to.

Still, many hemp operators have been careful to remove any trace of intoxicating THC from their CBD products, for two main reasons:

• To avoid unwanted attention and oversight from federal authorities.
• To attract consumers who don’t want to be intoxicated/who may be drug tested.

Delta-9 has somewhat confused matters. A fair number of marijuana business advocates assailed D-8 products because they were made in a lab through a chemical conversion process that lacked health and safety oversight. It was those criticisms that largely fueled the delta-9 hemp extract market. Technically, a 5-gram gummy can contain more than 15-milligrams of delta-9 THC and still comply with federal regulations because it still comes in under 0.3 percent THC by dry weight. Being able to market it as both natural and legal was a compelling point for some hemp growers, manufacturers, and retailers. However, many California marijuana businesses have viewed this as unwelcome competition. Many had seen a bright-line partition between hemp and cannabis. Of course, hemp is cannabis – and always was (just like marijuana). But delta-8 and delta-9 products blur the lines between marijuana-derived products and hemp-derived products.

Those in the hemp industry may be enjoying something of a free ride for the moment, but that’s because they aren’t operating under the same crushing weight of taxes, regulation, and black market competition those in marijuana growth and sales.

Hemp industry insiders, however, insist they aren’t in competition with marijuana companies. Rather than respond to concerns by quickly imposing the same taxes on hemp-derived products, they urge an easing to the marijuana business taxes.

Those on all sides of the table will closely be following the discussions regarding the Farm Bill, as this will be the first time it’s been revised since it opened the doors to hemp and CBD in 2018.

It should be noted that even if the THC content meets the federal definition of hemp, states still have the authority to oversee the safety of ingestible products sold within their borders. Some have noted that if you change the composition of hemp, it may no longer be considered legal in certain states.

Those that are selling d-9 products should do so with great care, particularly if they’re doing so through online sales/the mail. Consult with an experienced cannabis law attorney to ensure you are in compliance.

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:

As hemp THC sales boom online and by mail, cannabis industry braces for crackdown, Feb. 9, 2022, By Kristen Nichols, Marijuana Business Daily

The Department of Cannabis Control, managed by state officials, designated the funds be sent to 17 cities and counties where there are a disparate number of provisional marijuana business licenses (as opposed to full year licenses). As our Los Angeles marijuana business lawyers can explain, those provision licenses were intended to help quickly prop up the adult-use market, but the entire category was set to expire Jan. 1, 2022. That deadline has since been extended, allowing more municipalities time to kick-start the permitting process, while also meeting stringent environmental requirements.

The $100 million in grant money is intended to further accelerate progress – in turn squeezing out black market operators. The thinking goes that the more competitive, state-legal operations there are in a district, the fewer opportunities there will be for underground pot purveyors.

Applications to receive money through the Local Jurisdiction Assistance Grant Program, opened four months ago. Municipalities that were awarded the additional funding were those that had significant license processing backlogs. Funding is also available to implement social equity programs.

Goals for funding were outlined as followed:

• Hire or designate additional staff to help wade through the sizable workloads necessary to transition businesses into a well-regulated local market.
• Create streamlined license processing with dedicated IT systems.
• Complete thorough environmental assessments to ensure water is protected and energy is renewable.

Municipalities can use their funds in other ways, but they must be approved by the state. One example is in Long Beach, where part of the funds are going to be used on website design, technology updates and training.

Other California Cannabis Business Funding

In addition to this program, cannabis companies may be eligible for other non-profit funding to help bolster operations. For instance, nearly $30 million in was awarded to nearly 60 non-profits focused on addressing the fallout of the ill-conceived war on drugs. The state’s Department of Fish & Wildlife solicited proposals for a program aimed at helping small cannabis growers on environmental clean up and restoration.

Elsewhere in the country, there have been hundreds of millions of dollars in public-private funds designated for the promotion of social equity in the marijuana business market.

Cannabis Companies Generate Billions in Tax Revenue

Although such programs are generous, it’s important to note that the legal market in this country have generated billions for state governments. According to the Marijuana Policy Project, states with legal cannabis have generated $10.4 billion in state sales taxes since adult-use marijuana first hit the legal market in Washington State and Colorado in 2014. That figure includes the more than $3 billion+ generated in sales taxes last year.

Bottom line: States with legalized marijuana for adult sale are seeing substantial financial benefits, which can help to fuel education, construction, conservation, and community reinvestment. Ensuring communities that want to introduce a thriving legal cannabis market to do so is in the best economic interests of not only the businesses, but also the state and local governments.

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:

California Awards $100 Million To Support Local Marijuana Business Development, Jan. 7, 2022, By Kyle Jaeger, Marijuana Moment

More Blog Entries:

California Cannabis Companies Eye Tax Revolt, Dec. 15, 2021, California Marijuana Business Attorney Blog

As reported by Reuters, this approach breaks some ground on numerous fronts. Small investors, for the first time, can put up as little as $100 or as much as $500,000 to buy a stake in the outcome of the civil litigation. Although the U.S. Securities and Exchange Commission has long allowed individuals to invest in litigation finance deals, those individuals had to meet SEC accreditation criteria. This approach of sidestepping those rigorous requirements is allowed under an SEC provision that permits up to $5 million in litigation financing through crowdfunding. Furthermore, to the best of our Los Angeles cannabis attorneys’ knowledge, this is a first for tokenizing litigation funding through blockchain. What that means is if the firm ends up winning the case and getting paid, investors will be paid their share of the verdict in tokens from the company.

Within a day of the request going live, the company had raised more than $156,000 from 85 investors – more than 60 percent of the target minimum of $250,000.

This is an interesting approach that we imagine many California marijuana business lawyers are going to be watching closely, as it may allow a greater number of plaintiffs of all sizes to pursue civil litigation for unfair regulatory action, such as destroying crops or license revocation.

There is some concern that smaller investors may not have enough savvy in terms of litigation to make informed choices about which investments are likely to pay off. However, commercial litigation investors are likely investing millions, while individual investors chipping in $100 here and there may be less risk averse. This particular deal reportedly shields investors from losses in case the matter is immediately dismissed.

The case in question involves the sheriff’s office in Kern County as well as the state Department of Fish & Wildlife. The government reportedly ordered 500 acres of the company’s hemp harvest to be bulldozed. The company not only grows the hemp but conducts research and even partners with two local community colleges. Attorneys for the firm insist the product was lawfully grown and unlawfully destroyed. It claims violations of both federal and state constitutional rights. Both the county and state governments are pushing to have the matter dismissed, arguing that the firm was growing marijuana (not hemp) unlawfully for commercial distribution. They argue that because the crop was contraband, there is no constitutional or valid property right claim.

As longtime marijuana business attorneys in California, it’s apparent that not only the facts but the underlying laws are complex, particularly given that there were community colleges involved and interpretations of federal law that have exempted hemp from the U.S. Controlled Substances Act.

If the government is successful in having the claim dismissed, investors will lose 20 percent of their investment, while the rest of their money would be refunded. However, if the case is lost at a later stage, investors would lose all their money. If the company wins, however, investors will be entitled to a cut of the damages awarded.

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:

Cannabis, crypto and crowdfunding in first of its kind litigation finance offering, Oct. 27, 2021, By Alison Frankel, Reuters

More Blog Entries:

California Cannabis Company Sues State Regulators Over High Taxes, Illicit Market, Oct. 21, 2021, Los Angeles Marijuana Business Lawyer Blog

As the cannabis delivery market represents a ripe post-pandemic opportunity, those companies considering adding cannabis delivery to their roster of services should have a Los Angeles marijuana business lawyer on retainer.

The mass shutdowns of the COVID-19 pandemic saw huge spikes in all kinds of delivery services, as the public was eager to avoid shopping center crowds. Grubhub, DoorDash, UberEats, Instacart and Drizly soared. Meanwhile on the cannabis front, the CA-based cannabis delivery app Eaze saw its customer base jump by 70 percent. In the last 12 months, Eaze execs estimate a California cannabis order was placed every eight seconds. Our state accounts for the lion’s share of the $17 billion in legal pot sold in the U.S. last year.

The Snoop Dogg-backed Eaze has more than 800,000 customers and has made millions of deliveries since its founding seven years ago. However, it’s far from the only delivery service option. An increasing number of these centers offer delivery to smaller regions.

However, as our Los Angeles marijuana business lawyers know, there can still be significant red tape.

Legal Considerations of California Cannabis Delivery

For example, California drivers delivering cannabis products direct to consumers must be W2 employees of the dispensaries. Further, vehicles are required to be open, like a scooter. Other states require cameras. It’s also prohibited to delivery cannabis with food or with alcohol.

Despite the challenges, companies like Uber are apparently already considering their options, anticipating marijuana legalization at the federal level at some point. Uber recently acquired Drizly, an alcohol delivery service whose sister company, Lantern, manages cannabis delivery. Lantern, now an independent subsidiary, was the first cannabis delivery service in Colorado.

But one definite upside to the founding of new cannabis delivery services is the potential for smaller firms to gain hold due to reduced financial barriers – something that could allow more minorities to enter the market.

Cannabis Delivery Logistics

Many dispensaries are smaller businesses, mom-and-pop-type operations. They may not have the capabilities internally to facilitate logistics.

As noted by logistics magazine FreightWaves.com, the biggest barrier thus far to cannabis delivery logistics is the block on banking. Rules making traditional banking platforms inaccessible, as well as a patchwork of laws from state-to-state, prevent economies of scale and require all sales and delivery remain local. For the time being, cannabis companies remain mostly cash-based enterprises.

Federal legalization could allow companies to branch into the online marketplace and connect with third-party logistics partners that could assist with supply chain management and last-mile delivery of orders.

3PL operators might have the ability off the bat to better integrate existing retailers into the delivery market, with real-time tracking ability and experience in managing supply chains.

It’s imperative that when the time comes, any such contract should be drafted and reviewed by an experienced cannabis lawyer.

As far as when federal legalization might happen, it seems increasingly likely. Some are pinning hopes that President Joe Biden will sign an executive order decriminalizing, descheduling or rescheduling marijuana. If he does not, there is still the potential of the SAFE Banking Act, which is still pending.

The bottom line is that as restrictions to cannabis soften and legal obstacles fall, the prime focus will increasingly be on distribution.

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:

Uber and the delivery war could be headed to cannabis dispensaries, May 30, 2021, By Cameron Costa, CNBC

As our Los Angeles marijuana business lawyers can explain, the measure was tucked quietly into an appropriations bill late last year that was passed to keep the government running.

Not a single mention of “marijuana” or “hemp” is contained in the Preventing Online Sales of E-Cigarettes to Children Act, but investors and entrepreneurs in both sectors are concerned – and rightly so. They will be expected to comply with it.

To the extent any industry is involved in selling vape products, it will apply to them. That includes manufacturers and retailers.

The legislation formally took effect late last month, but the Postal Service has 120 days to create rules to implement and enforce the law. Note that both UPS and FedEx have also agreed to abide by the U.S. Postal Service’s rules. They won’t be shipping vape products either. UPS’s adherence to the rule went into effect April 5th, and applies to shipments to, from or within the U.S.

How Cannabis Companies Can Become Compliant

It’s not clear how frequently vape products are being shipped in the mail. What we do know is that consumers in the U.S. ordered some $44 million worth of CBD vape cartridges online last year. That gives us some idea of how often mail carriers are being utilized to fulfill these orders.

Sellers of these products under the new regulations will be expected to ship through private companies. This mandates someone sign for the package upon delivery. They’ll also need to register with the U.S. attorney general. Additionally, they will need to onboard some type of system for age verification.

The good news is that many CBD vape sellers do age verification already – both for in-person and online sales. However, there are those for whom this is going to be a bigger beast to take on.

That said, it doesn’t seem as if the government is taking aim at the cannabis industry, at least with this measure. The intention is to throw a wrench in vaping of nicotine (specifically to minors), not cannabis or CBD products.

Los Angeles Cannabis Lawyers Can Offer Guidance

The other bit of good news is there is still some time to prepare. The USPS still needs to organize its resources and the new rules won’t be issued for a few months yet. It’s possible the cannabis industry will be lobbying the USPS for exceptions in the interim, but if you’re in the cannabis or CBD vaping market, now is the time to consult with an experienced Los Angeles marijuana lawyer to ensure you’re fully compliant, or well on your way to it.

The new provision also updates the Jenkins Act, a prior law pertaining to taxation of smokeless tobacco and cigarettes. However, the way it’s worded (“electronic nicotine delivery system” … “or any other substance to the user inhaling from the device”) is what ropes cannabis and CBD companies in. Part of the challenge initially may be just figuring out which companies are subject to the new law. What we don’t want to see is a small business all the sudden required to obtain approval from dozens of different tax authorities, local governments and native tribes. Depending on your company’s business model, you may need to be prepared to considerably increase shipping prices.

Some of it is going to depend on how strictly the measure is enforced. There are criminal penalties that include prison time, though it’s more likely violations will be met with steep fines and possible shut down. Of course, none of these are problems with which you want to contend.

Any cannabis or CBD company with questions can contact our Los Angeles marijuana lawyers for guidance.

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:

How will new law banning vaporizer shipments impact cannabis businesses? March 21, 2021, By Ivan Moreno, Marijuana Business Daily

As our Los Angeles cannabis lawyers can explain, the goal is to establish a safe, legal means for banks and other financial companies to work with marijuana businesses that are state-legal. As it stands, 47 states plus Washington, D.C. have legalized the substance in some form or another.

Sponsors are optimistic that this is much less of a partisan issue than it was in the past, particularly in light of the tax revenue it produces.

Why Cannabis Banking Remains Burdensome

Banking is recognized as one of the most slippery slopes for cannabis companies. They’re cut off from traditional bank accounts, which is what provides many businesses safety, security and legitimacy. Unlike other companies, cannabis retailers and many ancillary companies have no choice but to haul bundles of cash around. Not only is that impractical, it’s dangerous. COVID-19 presented a whole new layer of danger with this prospect, and many customers didn’t want to deal in cash.

Further complications arise from a lack of a bank account. No bank account makes it much more difficult to secure a loan.

And all of it stems from archaic provisions in federal law. Specifically, U.S. law classifies cannabis as an illegal Schedule I narcotic (the most severe classification, with a high risk of addiction and no recognized medical uses). The banks are regulated by federal law. So even if a marijuana company is 100 percent legitimate in the eyes of the State of California, they can’t find financial institutions willing to risk accusations of money laundering or aiding and abetting a federal crime by going into business with them.

Looking for a Loophole

At this point, there is really just one legal loophole that a few banks (mostly smaller credit unions) have opted for in taking the risk. But as our Los Angles marijuana lawyers can explain, the catch is that it requires the financial institution to file a suspicious activity report for every single transaction. In turn, the business gets slapped with some major fees that typically don’t apply to other companies. Banks insist these fees are needed to offset not only the risk but extra work they’re taking on.

We’ve heard reports of some cannabis companies opening bank accounts by not disclosing the nature of their industry and using a name that would indicate they’re part of a different industry. That’s inadvisable because it’s a matter of time before the bank finds out. The accounts could be shut down and there could be stiff penalties imposed.

California Cannabis Industry Association Backs New Bill

Most cannabis businesses want to do the right thing – on the up-and-up – without decimating their bottom line. The California Cannabis Industry Association has lobbied for the SAFE Banking Act for the last two years, and ardently supports its reintroduction in Congress, according to The North Bay Business Journal. The association’s executive director was quoted as saying it would, “give a huge benefit to the legal businesses.”

Even leaders of some credit unions that have opened their doors to cannabis businesses say they’d welcome the change because it would reduce the risk – and the amount of paperwork they’d have to file. Suspicious activity reports are often onerous, and to file one for each transaction is cumbersome. Whereas it takes a single employee to manage two dozen marijuana businesses, that same employee could easily manage 400 other commercial accounts.

The SAFE Banking Act would extend protections to banks against federal money laundering laws. It would also prohibit U.S. bank regulators from terminating or limiting deposit insurance or taking other adverse action against a bank because it provided financial services to a cannabis company. There would be no penalization or prohibition on providing these services.

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:

Northern California cannabis industry hopes for success of newly reintroduced banking bill, March 22, 2021, By Susan Wood, North Bay Business Journal

Some of the trends our Los Angeles marijuana business lawyers recognize as specific to our state include:

• More cannabis business license opportunities in Los Angeles and throughout the state.
• Ongoing evolution of consumer preferences as well as product maturation.
• Pressure from consumers and businesses on taxes and pricing.
• Newly available legal finance and banking services.

Although these are mainly positive developments on the horizon, some could lead to a degree of market volatility. Still, all indicators are that California’s legal cannabis market will continue to grow by leaps and bounds. Voters in various parts of the state passed dozens of local initiatives that establish a regulatory and tax framework for new marijuana businesses to become established. That means we’re going to see more marijuana businesses set up shop.

It’s true that the black market and cumbersome state and local taxation continues to weigh on existing businesses and hamper new opportunities, consumers are becoming more discerning between licensed and unlicensed operations. The value of licensing and regulation was especially poignant during the vape crisis, as well as the pandemic. We expect to see a heightened focus on health, safety, quality control, and legitimacy of products. Further, industry analysts expect licensed pot products will begin coming down in price, which would cut directly into the demand of unlicensed operators.

Demand is likely to remain high as well. Cannabis consumption has surged in the months following the COVID-19 pandemic, as people’s anxieties have mounted. While we do hope 2021 is far less stressful for everyone than 2020, it’s unlikely we’ll see a precipitous drop in the number of consumers, particularly with more product options available – some specifically designed to help with anxiety and insomnia.

There may also be increased demand among cannabis connoisseurs, who are anticipated to pay a premium for products designated by the new state appellations program, which launches next month. This is the program that works similar to the wine industry and allows for unique marketing opportunities based on cultivation methods and region.

Smaller Shops Feel the Squeeze

Although the niche market for marijuana continues to thrive, smaller retail shops have been feeling squeezed. Cannabis operations were deemed “essential” in the midst of the pandemic, but those with more capital to start have fared better. Supply chains are becoming increasingly sophisticated, and larger operators are increasingly dominating the market.

Competition appears to be especially fierce among manufacturers, though many cultivators too have expressed difficulty keeping pace with the meandering network of local and state regulations – particularly track-and-trace requirements.

All this may mean that some operations may be edged out of the market, though we may well see some operations shift to jurisdictions that have more favorable regulatory and tax rules.

Local delivery services continue to do well, particularly as concerns about the pandemic have changed the way people shop for marijuana. In one survey, nearly 4 in 10 consumers stated they were at least moderately concerned about going in-person to a marijuana shop.

Economic Reforms

Although it’s unlikely federal legalization will happen in 2021 (despite the recent passage of reform in the House, which probably won’t clear the Senate), we may see some easing of restrictions for financial services to cannabis companies.

This may allow many struggling operations to stay afloat, as they’d have debt financing options, credit and the ability not only to survive to but to innovate and possibly expand.

If you are a cannabis company in need of legal services to help you navigate these challenges, our experienced team 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:

World $350+ Billion Cannabis Cultivation (Hemp, Marijuana) Market Size, Share & Trends Analysis to 2027, Dec. 3, 2020, Yahoo! Finance

Cannabis companies would be wise to turn to Los Angeles marijuana advertising attorneys before launching any sort of marketing campaign, as the navigating the legal waters of such enterprises can be fraught with peril. The reality is, marijuana marketers can’t afford to turn a blind eye to federal law that is on the side of consumers in these cases. After mounting a defense and settling a case, you could easily be looking at six-figures.

One of the primary issues in these cases are reported violations of the Telephone Consumer Protection Act (TCPA), a federal law that prohibits transmitting unsolicited advertisements of any goods, property or services to a person without their express prior permission or invitation. A cannabis advertising lawyer in California can help you review your marketing practices to make sure you aren’t risking vulnerability to such claims.

Even more mainstream industry operations have found themselves ensnared in this type of litigation. For example, a marketing company in Oregon was ordered to pay a $925 million verdict for violating the TCPA last fall. Three years ago, the Dish Network was slammed with a verdict of more than $60 million.

California cannabis companies are already squeezed to the max financially due to strict regulation and heavy taxation. A marketing lawsuit isn’t something you want to risk.

Some marijuana business lawyers refer to the TCPA as an extortion statute. Such claims are perfectly legal, of course, but it can be a means for other attorneys to compel marijuana businesses to pay dearly in settlement negotiations in the hopes of avoiding an even pricier trial and verdict.

All the consumer needs to establish is that they did not give their consent to be contacted. Worse, even if you did have their consent, you could still be compelled to pay to defend yourself in the matter – a cost that may run you more than the initial demand. The onus is on the defendant in these cases to prove that it had the required consent to send the text advertising. By the time the case reaches that point, you may have already paid more than that on legal fees.

As reported by MJBizDaily.com, some of the TCPA lawsuits filed in recent years include:

• A federal lawsuit in California filed last summer against marijuana retailers in California, Washington and Colorado.
• A federal lawsuit in Southern California against a Utah-based company in January. It was dismissed without prejudice this summer and can be refiled.
• An April lawsuit filed in the Central District of California this spring, also dismissed without prejudice (meaning it can be refiled).
• A lawsuit filed in May in the Eastern District of California against a company that sells marijuana cultivation materials.

Several of these and other cases are ongoing.

Consult an Ad Planning Attorney

There are many ways that cannabis companies can protect themselves from litigation while also effectively advertising.

First and foremost, your company should ensure you aren’t sending any SMS messages without first obtaining the mandated written consent. The TCPA bans all text solicitations unless you have gotten express, written opt-in from that particular consumer. This is the most important aspect if you want to protect yourself from liability.

If you’re working with a third-party marketing company, you need to make sure they are complying with the statute as well. Several of these cases involved a single marijuana marketing company that was working on behalf of numerous retailers – who are now potentially on the hook for the marketing firm’s unlawful practices. An L.A. marijuana marketing attorney can review your contract with your marketing firm to ensure they are abiding best practices and that you are legally protected.

Understand too that just because you’ve obtained your customer’s contact information doesn’t automatically mean you have consent to solicit them via phone calls or texts. Be straightforward with customers before sending ad or deal texts. Be wary too of opt-in lists that are sold by potentially unscrupulous third parties.

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:

Text-message ads from marijuana companies spur spam-related lawsuits, Oct. 9, 2020, By John Schroyer, Marijuana Business Daily

The most significant changes in this latest series are to marijuana advertising and banking laws.

Governor Approves Marijuana Business Regulation Changes

As our Los Angeles marijuana business lawyers know, finding legal banking services is still a challenge for many cannabis companies. AB 1525 will have the effect of removing the state-level penalties against banks that provide services to operations that profit from marijuana sales.

Another measure, SB 67, establishes a program for marijuana labeling that is similar to how California labels wines, by indicating where the plant is grown and how it might influence the character of the product. This is called and appellation program. The provisions prohibit cultivators and processors from using the name of a designated region or city in marketing the product unless all the cannabis from the region is grown there. Several counties already have such protections in place.

The main benefit of this for outdoor growers is the recognition of something called terrior. As most cannabis cultivators understand, this refers to a combination of unique environmental environments such as sun and soil that can alter the quality and properties of a marijuana product. Indoor growers will have the opportunity to claim representation of a certain region or hometown.

Yet another measure, AB 1872, pauses state cultivation and excise taxes on marijuana for all of next year, something proponents hope will give cannabis companies the stability of financing they need to pull through next year. It should be noted that as a state, California’s marijuana taxes are the highest in the country.

As to the other marijuana law changes, most are minor enough as to likely be unnoted by Los Angeles marijuana business owners and their clientele. For instance, one of the other laws allows a bit more TLC in certain edible cannabis products, while another gives state-licensed marijuana testing laboratories the ability to provide services to law enforcement agencies.

There were, however, several proposed marijuana laws that cleared the legislature but not the governor’s desk.

Pot Proposals the Governor Vetoed

One of those, AB 1470, would have given pot processors the ability to send prepackaged pot products to testing labs for analysis, something some industry insiders advocated to reduce costs. Newsome, however, said the proposal isn’t aligned with existing regulations, which require the products submitted for testing to be sent in their completed, packaged form – something he said is imperative to prevent products that may be unsafe or uncontaminated from entering the retail market. He added that while the proposal might have cut down on packaging waste, allowing products to be tested in their less-than-final-form would only help some smaller operators but could have an outsized impact on consumers as a whole.

That said, the governor indicated there is likely to be some changes to pot testing next year when lawmakers consider a pending plan to streamline the state’s regulatory and licensing agencies.

Similarly, while the governor vetoed a measure to dissolve the state’s Bureau of Cannabis Control, the entity that oversees the state-legal pot industry. In a statement, Newsome said the proposal was premature, considering that there are plans in the works for broader reform. Specifically, the governor wants to consolidate the state’s three marijuana regulation entities into just one department. The goal will be to reduce business time and costs incurred by red tape and unnecessary packaging, while still enforcing state pot product standards.

Ongoing Push for Federal Changes to Cannabis Law

Meanwhile, Congressional Democrats have continued to push for a cannabis law overhaul at the federal level. One of those measure from representatives in the House is a coronavirus relief bill that would incorporate protections for marijuana banking. In the past, such measures have been axed by Republicans in the Senate.

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:

California Governor Approves Changes To Marijuana Banking And Labeling Laws, Sept. 30, 2020, By Ben Adlin, Marijuana Moment

According to L.A. Cannabis News, a petition filed within the U.S. District Court for the Southern District of California shows the federal Drug Enforcement Administration (DEA) in January issued a subpoena to the California Bureau of Cannabis Control for records pertaining to cannabis companies and owners. Regulators refused to turn the records over, citing the federal government’s failure to specify the relevancy of their request. Furthermore, the agency said they risked violation of privacy laws by turning over the records.

What is not clear to our Los Angeles marijuana business attorneys is what type of federal investigation is occurring such that would require records pertaining to legal cannabis operations. Overall, the current administration has taken a hands-off approach with respect to state-legal marijuana laws, even after they had rescinded the Obama administration memorandum directing federal prosecutors to generally avoid meddling in state-legal marijuana markets. The president has said he supports the right of state governments to set their own cannabis laws, regardless of federal-level prohibition.

But here, the DEA argues in U.S. v. California Bureau of Cannabis Control, just broadly that it has the authority to obtain these records solely based on violations of the U.S. Controlled Substances Act. This, the DEA says, is both material and relevant to legitimate inquiry by federal law enforcement agents.

In its response to the federal authorities’ petition, the state attorney general noted that courts have previously held that to enforce such an order, the DEA has to provide evidence showing that what they are asking for is both reasonable and relevant. In this case, however, the DEA has not done that, the AG’s office said. What they have asked for are the unredacted cannabis business license applications, licenses and shipping manifests. These pertained specifically to three specific commercial cannabis operations and individuals from early 2018 to early 2020. The identity of those businesses and people are not apparent in the recent petition. There are indicators in the petition that indicate the feds are looking into a distribution network, rather than cultivators, manufacturers, retailers or test labs. But that’s not 100 percent guaranteed.

This legal sparring comes just a few weeks after a whistleblower within the DOJ made allegations that U.S. Attorney General William Barr personally directed investigations into nearly a dozen cannabis company mergers due to the personal hostility that top prosecutors hold for the industry. Yet another official within the agency explained in a letter to Congress that these actions were only taken so that cannabis consumers would have more affordable access to marijuana products – which doesn’t make a lot of sense considering hands-off or even aggressive approach the federal government has taken historically.

If you are operating a marijuana business in Los Angeles, Orange County or elsewhere in California, it is important to have an experienced cannabis attorney on retainer who can help you navigate the legalities, regulations, banking, licensing and other issues that may unexpectedly arise.

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:

Justice Department Demands Marijuana Documents From California Officials In Federal Court Filing, July 20, 2020, By Kyle Jaeger, Marijuana Moment

The initial approval of these significant changes to Los Angeles’ marijuana business licensing and social equity program marks the end of months-long delays that halted permitting and had resulted in significant frustration among stakeholders.

The changes aren’t final until council approves them one more time and the mayor signs off, but it’s a significant step. A separate motion was adopted to allow 100 of those who won social equity licenses in the lottery last year to be placed on an immediate track for approval.

The vote, however, doesn’t completely make it up to those affected by the extensive delays. Many note they’ve been paying hefty rents on marijuana business properties they have yet to be able to open.

While the city has technically been working on the social equity program for about three years, but as of yet, no retail permits have been issued to any applicants to the program, a fact many have said point to a leadership failure.

Some also wonder whether the proposed changes will have any real impact anytime soon. Concern has been expressed that the changes may even boost the city’s already-massive black-market sales because many of the city’s non-social legacy cannabis businesses that have yet to win a permit for retail are going to be forced out.

Our concern as Los Angeles cannabis lawyers is that while many of these changes appear to be a good thing and look fairly comprehensive on paper, they’d have been much more helpful a year ago. Some businesses are still floundering. At the very least, temporary licenses need to be granted with swiftness.

The new rules on social equity pare down the ZIP codes that are eligible for relief through the city program. Initially, a number of affluent, white neighborhoods had been included in the ZIP codes that were to be considered for the program.

Now, officials with the Department of Cannabis Regulation say they’re going to be looking at police statistics to help better identify those minority and low income communities hardest hit by the failed War on Drugs and the disparate enforcement of cannabis criminalization (something the social equity licensing program is intended to mitigate). Furthermore, applicants for the next round of licensing must have:

1. Lived in one of those hard-hit areas for at least 10 years OR be low-income;
2. Have a previous cannabis-related conviction or arrest.

Dispensaries can open in neighborhoods that have reached their limits, so long as they have favorable written input from the local neighborhood council and others in the region. This provision is intended to address criticism that city council wields too much power in approving marijuana businesses, allowing certain operators a political advantage over others. Under the old rules, council’s failure to respond right away to an operator’s request to open a new cannabis dispensary in an area that’s already “full” would mean automatic approval. Now, the request is automatically denied if council doesn’t move on the request within three months or so.

Concern remains among Los Angeles cannabis lawyers that these new rules might still leave the door open for possible corruption or improper criteria (such as racial prejudice) used to deny or approve licenses. Some argued in a letter to council that a fairer, more transparent process would include public hearings. There are calls for opening as many new cannabis businesses as possible right now, both for the sake of applicants as well as the legal marijuana industry in general.

The social equity program in Los Angeles is intended to lower barriers to entry to the legal cannabis industry by extending numerous programs to help with employment opportunities and business ownership.

Anyone who wants to explore ownership or operation of a legal cannabis business should consult with an experienced Los Angeles marijuana business lawyer who can help guide you through priority application processing and first-to-market advantages. This is essential in a city that has a strict cutoff on the number of legal licenses issued. Applicants to the SEP program might also qualify for a deferral of fees. Job placement opportunities are also available for those who are interested in employment rather than owning their own cannabis business.

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:

Los Angeles City Council Votes for Sweeping Cannabis Reforms, July 1, 2020, By Nushin Rashidin, Cannabis Wire

More Blog Entries:

California Cannabis is Legal, But Lawyers Urge Caution Near Borders, July 8, 2020, Los Angeles Marijuana Business Lawyer Blog

Of course, lack of harmony between the state and federal positions on marijuana is nothing new. But it’s important for marijuana businesses in cities close to international borders to use extra caution, and consult with a California cannabis lawyer for insight on how best to protect their investment, operation and employees from legal headaches. As The Los Angeles Times reported recently, those in Imperial and San Diego counties especially need to beware due to the closeness of the U.S.-Mexico border. The U.S. Boarder Patrol has the authority to establish checkpoints that stretch as far north as 100 miles past the international line.

In one reason case, a small van transporting about $15,000 of marijuana wholesale – locally grown, certified and state-legal – from Imperial County to a state-licensed dispensary about three hours north. However, it was stopped at a Border Patrol checkpoint on the highway – 20 miles from the actual U.S.-Mexico boarder. The distributor reports federal agents seized the entire load.

It’s incidents like this that have prompted some marijuana dispensaries, delivery operators and others to avoid these areas – especially Imperial County. That’s been problematic for several operators in that region.

For example, one of the few state-certified testing labs in Southern California revealed it no longer makes testing trips to cannabis farms and dispensaries in Imperial County. The risk is just too great. In turn, that makes it tough for legal operators to do business there, but some say they’ve been left with little choice. As the lab’s CEO put it: “They’ve trapped a corner of the state.”

At any given time, there could be up to nine checkpoints within 65 miles north of the U.S.-California border. Primarily, these exist along I-5 North, I-8 West and I-15 North, with some on more rural stretches.

As far as federal agents are concerned, setting up these checkpoints allows for an additional measure to halt illegal immigration of people coming in through Mexico who may have slipped passed the border without detection.

It is true that the region is a hot spot for drug trafficking across the border. The checkpoints are viewed as the final defense before those substances reach larger distribution hubs in other areas. Big drug busts involving cocaine, heroine, methamphetamine and fentanyl are reported with some regularity. But there is still a question of how much authority federal agents have when it comes to accosting citizens of the U.S., particularly those who routinely cross the border for school, work or errands. Nonetheless, courts have ruled time and again in the government’s favor. The lines have gotten blurrier though since California legalized marijuana for recreational use four years ago (though sales didn’t ramp up until two years ago). The U.S. government’s position is that marijuana (containing more than 0.3 percent THC concentration) is still illegal, classified as a Schedule I narcotic.

Therefore, it remains subject to federal forfeiture if a load happens to cross a U.S. border checkpoint – even one dozens of miles from the U.S. border. But that doesn’t mean it’s always seized. There are reports of substantial volumes of state-legal cannabis products being quietly ushered through these checkpoints. But there is no clear distinction between what’s legal and what isn’t. The state itself has a host of stringent rules for any company legally transporting marijuana. The product needs to be locked and secured, not visible from outside, protected by a security system and clearly packaged and labeled.

Distributors need to ensure their transport operators are licensed, permitted and have all their documentation and shipping manifests easily accessible when they approach one of these checkpoints. But then, it’s up to the discretion of federal agents. Some cannabis companies say their drivers aren’t hassled much when they pass through the checkpoints, which sometimes aren’t even open. But because much is left up to the agents, it’s still possible that a load with every T crossed and I dotted can be seized.

That means state-legal marijuana businesses are ultimately taking a gamble at every checkpoint they approach. Consult with an experienced Los Angeles marijuana business lawyer for information about the best ways to protect your company and your people and to be prepared in the event you are ensnared in a legal issue. 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: Border Patrol checkpoints are a risky reality for California cannabis companies, July 4, 2020, The Los Angeles Times

The U.S. Postal Service is a federal entity, so federal law applies (even if you’re using another carrier, such as FedEx, DHL or UPS). Whether you ship marijuana intrastate or interstate, you risk being charged with marijuana trafficking, for which there are minimum mandatory federal prison sentences depending on how much product has been moved.

Industrial hemp and its derivatives are the exception under the 2018 U.S. Farm Bill, but even that has proven problematic (just ask long haul truckers).

Shipping products is likely one area of the legal market that marijuana advocates will want to explore in the upcoming years, as it could broaden their potential market reach exponentially. However, it’s probable nothing will change until marijuana is no longer considered an illegal substance under federal law. It’s currently listed as a Schedule I narcotic, among the most dangerous and with no accepted medical purpose. (The designation is of course preposterous, but for now, it remains.)

Those wishing to transport marijuana from Point A to Point B need to discuss their legal options with an experienced Los Angeles marijuana lawyer who can offer advice on how to remain within the parameters of the law. Those arrested on drug trafficking charges for shipping marijuana should also seek the assistance of a marijuana defense lawyer who will be prepared to help you fight the charges.

Among the recent cases of criminal charges for shipping marijuana:

• A North Carolina man was arrested after he allegedly shipped more than 10 pounds of marijuana from California to a private home in North Carolina. The county sheriff caught wind of the upcoming delivery, made earlier this month via U.S. Postal Service, and set up surveillance outside the home. Once the package was delivered, authorities obtained a search warrant for the property. Once inside, they discovered packages of high grade marijuana, along with a scale, nearly 2,000 grams of vape pen cartridges, drug packaging paraphernalia and an assault rifle. The total value of items seized was estimated to be roughly $60,000. A 40-year-old man was arrested by sheriff’s deputies and charged with trafficking marijuana, felony maintaining a dwelling/vehicle and possession of drug paraphernalia.
• A 29-year-old North Dakota man is facing three felony drug charges after local police in Bismarck allege he received marijuana shipments from California through the mail and wired money back to California for payment. When authorities searched his home in October, they reportedly found more than 220 grams of marijuana and 35 grams of methamphetamine. His trial is slated for May.
• A man in Louisville, Kentucky was arrested earlier this month after picking up a large shipment of marijuana at a local post office box. Authorities arrested the 37-year-old after he followed instructions to pick up his P.O. box packages at the front counter. Authorities pulled him over in a traffic stop and reportedly discovered more than 16 pounds of marijuana. He is facing felony marijuana trafficking charges.

It’s not clear whether any of those on the shipping end will face charges, but it’s imperative all defendants in these situations seek immediate, experienced legal counsel.

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:

May trial set in case of pot shipped through mail, Jan. 13, 2020, By Travis Svihovec, The Bismarck Tribune

Some 400 companies have been ordered to halt all transactions until they ensure their licenses are brought up to “active” status.

The notices were issued by the California Bureau of Cannabis Control on Nov. 1st, directed to delivery services, retailers, microbusinesses and distributors, informing them they will no longer be allowed to lawfully conduct business until they implement the appropriate track-and-trace system credentialing and training mandated by the state.

The state agency oversees more than 2,500 marijuana businesses, each of which hold either an annual or provisional license. Meanwhile, the California Department of Public Health is in charge of handling oversight of more than 930 marijuana manufacturers and the California Department of Food and Agriculture is responsible for managing regulations and oversight of more than 3,800 cannabis farmers.

In all, there are nearly 7,400 licensed cannabis companies in the State of California. (All temporary licenses expired over the summer.)

As our Los Angeles marijuana business attorneys can explain, the problem that led to this mass suspension was failure of these companies to ensure the required track-and-trace steps were appropriately followed. If you are among those companies whose provisional or annual license was suspended for this purpose, we can help.

California’s Track-and-Trace Program

The California Track-and-Trace system is used throughout the state to monitor inventory and movement of legal cannabis and related products as they move throughout the commercial supply chain.

Use of the system is required by all yearly and provisional marijuana business licensees – growers, manufacturers, retailers, distributors, testing labs and microbusinesses.

The system, called Metrc, tracks more than 8.5 million packages and has more than 53,000 industry users enrolled. The system allows users to generate and print tags for plants and products to identify the chain of custody.

The BCC insists users have had plenty of time to implement use of the system. Free workshops were offered by the agency last month for those who still had yet to enroll. Those that failed to do so were issued warnings – and promptly had their licenses suspended the first of this month for failure to comply.

To have the suspension lifted, cannabis companies are instructed to obtain their credentials. This requires an online training session, which takes roughly three hours to complete.

Nearly 2,240 marijuana businesses did complete the credentialing requirement before the deadline. A BCC spokesperson referred to those who had not as “stragglers.”

Farmers under the purview of the CDPH are likely next. More than 100 of them received notices that their permits would be suspended if they failed to complete the track-and-trace participation requirements to be credentialed in the system. Roughly a dozen agricultural cannabis businesses have had their licenses suspended so far for not obtaining credentials, and it’s likely more will follow.

Help for the Black Market?

Some legal marijuana retailers lamented that entirely shutting down legal operations – even temporarily – is to the advantage of black market retailers. This minimizes options to consumers, who may be even more apt than usual to give their business to illegal purveyors.

State officials seem unconvinced.

If your are a Southern California marijuana business having issues obtaining or maintaining your license to do business, our dedicated cannabis law firm 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:

Over 400 California marijuana business licenses suspended, injecting fresh uncertainty into state’s cannabis industry, Nov. 6, 2019, By John Schroyer, Marijuana Business Daily