Business
Opinion: What Main Street operators need to know about rescheduling or descheduling marijuana
Last fall, President Joe Biden called on the leaders of the U.S. departments of Justice and Health and Human Services to “review expeditiously” how marijuana is scheduled.
The move opened the door to renewed speculation about how descheduling – or rescheduling – marijuana would affect regulated cannabis markets operating across the country.
Those of us in the industry were obviously pleased with Biden’s request.
But the president’s move also emphasized the need for policy reform that will benefit smaller, independent cannabis businesses – not just multistate operators and other large, deep-pocketed companies.
Main Street cannabis and rescheduling
Descheduling is the key to responsible federal marijuana reform.
By descheduling marijuana and placing it under the purview of the Alcohol and Tobacco Tax and Trade Bureau (TTB), cannabis could be regulated similarly to alcohol.
Unlike tasking the U.S. Food and Drug Administration with oversight, cannabis would be a logical – and better – fit for the TTB because it’s already equipped to deal with regulating consumer packaged goods.
Rescheduling cannabis from Schedule 1 to Schedule 2 would be the worst-case scenario for Main Street cannabis businesses.
Moving the plant to Schedule 2 – “drugs with a high potential for abuse which may lead to severe psychological or physical dependence” – would subject all cannabis-based products to FDA scrutiny and approval.
States with regulated adult-use markets have shown that they can operate far beyond that restrictive model.
Rescheduling would be regressive and have dire consequences for existing operators in those markets.
Moving marijuana to Schedule 3, on the other hand, would have the advantage of removing cannabis from the draconian and poorly applied Section 280E of the Internal Revenue Code.
There could still be a mountain of FDA regulations to address, but cannabis operators would no longer be forbidden from deducting ordinary business expenses from gross income associated with the “trafficking” of Schedule 1 or 2 substances, as defined by the Controlled Substances Act.
Rescheduling is far from ideal, given that it would fail to align federal law with modern state cannabis laws.
There would be some benefit to moving marijuana to Schedule 3 or higher, however, as long as that move is accompanied by a clear mandate to the FDA and U.S. Drug Enforcement Administration that federal law must not apply to state-licensed cannabis businesses.
That mandate could come from guidance from the executive branch or from Congress in the form of budgetary restrictions such as those that are currently in place to protect medical cannabis.
One scenario that has been mentioned in industry circles – but not yet in congressional legislation – is the creation of a sixth schedule that would allow legal cannabis at the state level to continue as is.
The problem with this idea is that marijuana would technically remain a controlled substance and, therefore, under the jurisdiction of the DEA, whose charter is to enforce prohibition while ostensibly protecting public health.
The need to deschedule cannabis
Although President Biden requested a review of the scheduling of marijuana, he has not indicated any support past that request.
The only way to harmonize state and federal law and ensure a future for the small businesses that make up the Main Street cannabis industry is to remove marijuana from the Controlled Substances Act and begin the process of regulating the product under federal law.
The push for federal legalization now has the credibility of successful state legalization, and it’s important to ensure that members of Congress understand the need to keep taxes within reason at the federal level so the industry can compete against the illicit market.
If lawmakers are educated on the debilitating effects of overtaxation in markets such as California, they might be more inclined to keep the federal government from adding another layer of unreasonable costs.
More than ever, Main Street cannabis operators need to push to remove marijuana from the federal Controlled Substances Act rather than rescheduling the drug.
Federal legalization is coming in some form, and Main Street cannabis needs to get involved and educate Congress as much as possible about how regulated cannabis markets operate well, where they can improve and why improper rescheduling, heavy taxation or other federal overreach would be devastating to small businesses across the country.
Aaron Smith is co-founder and chief executive officer of the Denver- and Washington DC-based National Cannabis Industry Association.
Source: https://mjbizdaily.com/marijuana-operators-should-be-wary-of-rescheduling/
New Mexico regulators fined a cannabis operator nearly $300,000 and revoked its license after the company allegedly created fake reports in the state’s traceability software.
The New Mexico Cannabis Control Division (CCD) accused marijuana manufacturer and retailer Golden Roots of 11 violations, according to Albuquerque Business First.
Golden Roots operates the The Cannabis Revolution Dispensary.
The majority of the violations are related to the Albuquerque company’s improper use of BioTrack, which has been New Mexico’s track-and-trace vendor since 2015.
The CCD alleges Golden Roots reported marijuana production only two months after it had received its vertically integrated license, according to Albuquerque Business First.
Because cannabis takes longer than two months to be cultivated, the CCD was suspicious of the report.
After inspecting the company’s premises, the CCD alleged Golden Roots reported cultivation, transportation and sales in BioTrack but wasn’t able to provide officers who inspected the site evidence that the operator was cultivating cannabis.
In April, the CCD revoked Golden Roots’ license and issued a $10,000 fine, according to the news outlet.
The company requested a hearing, which the regulator scheduled for Sept. 1.
At the hearing, the CCD testified that the company’s dried-cannabis weights in BioTrack were suspicious because they didn’t seem to accurately reflect how much weight marijuana loses as it dries.
Company employees also poorly accounted for why they were making adjustments in the system of up to 24 pounds of cannabis, making comments such as “bad” or “mistake” in the software, Albuquerque Business First reported.
Golden Roots was fined $298,972.05 – the amount regulators allege the company made selling products that weren’t properly accounted for in BioTrack.
The CCD has been cracking down on cannabis operators accused of selling products procured from out-of-state or not grown legally:
- Regulators alleged in August that Albuquerque dispensary Sawmill Sweet Leaf sold out-of-state products and didn’t have a license for extraction.
- Paradise Exotics Distro lost its license in July after regulators alleged the company sold products made in California.
Golden Roots was the first alleged rulebreaker in New Mexico to be asked to pay a large fine.
Source: https://mjbizdaily.com/new-mexico-cannabis-operator-fined-loses-license-for-alleged-biotrack-fraud/
Four marijuana companies, including a multistate operator, have filed a lawsuit against U.S. Attorney General Merrick Garland in which they allege the federal MJ prohibition under the Controlled Substances Act is no longer constitutional.
According to the complaint, filed Thursday in U.S. District Court in Massachusetts, retailer Canna Provisions, Treevit delivery service CEO Gyasi Sellers, cultivator Wiseacre Farm and MSO Verano Holdings Corp. are all harmed by “the federal government’s unconstitutional ban on cultivating, manufacturing, distributing, or possessing intrastate marijuana.”
Verano is headquartered in Chicago but has operations in Massachusetts; the other three operators are based in Massachusetts.
The lawsuit seeks a ruling that the “Controlled Substances Act is unconstitutional as applied to the intrastate cultivation, manufacture, possession, and distribution of marijuana pursuant to state law.”
The companies want the case to go before the U.S. Supreme Court.
They hired prominent law firm Boies Schiller Flexner to represent them.
The New York-based firm’s principal is David Boies, whose former clients include Microsoft, former presidential candidate Al Gore and Elizabeth Holmes’ disgraced startup Theranos.
Similar challenges to the federal Controlled Substances Act (CSA) have failed.
One such challenge led to a landmark Supreme Court decision in 2005.
In Gonzalez vs. Raich, the highest court in the United States ruled in a 6-3 decision that the commerce clause of the U.S. Constitution gave Congress the power to outlaw marijuana federally, even though state laws allow the cultivation and sale of cannabis.
In the 18 years since that ruling, 23 states and the District of Columbia have legalized adult-use marijuana and the federal government has allowed a multibillion-dollar cannabis industry to thrive.
Since both Congress and the U.S. Department of Justice, currently headed by Garland, have declined to intervene in state-licensed marijuana markets, the key facts that led to the Supreme Court’s 2005 ruling “no longer apply,” Boies said in a statement Thursday.
“The Supreme Court has since made clear that the federal government lacks the authority to regulate purely intrastate commerce,” Boies said.
“Moreover, the facts on which those precedents are based are no longer true.”
Verano President Darren Weiss said in a statement the company is “prepared to bring this case all the way to the Supreme Court in order to align federal law with how Congress has acted for years.”
While the Biden administration’s push to reschedule marijuana would help solve marijuana operators’ federal tax woes, neither rescheduling nor modest Congressional reforms such as the SAFER Banking Act “solve the fundamental issue,” Weiss added.
“The application of the CSA to lawful state-run cannabis business is an unconstitutional overreach on state sovereignty that has led to decades of harm, failed businesses, lost jobs, and unsafe working conditions.”
Alabama regulators are targeting Dec. 1 to award the first batch of medical cannabis business licenses after the agency’s first two attempts were scrapped because of scoring errors and litigation.
The first licenses will be awarded to individual cultivators, delivery providers, processors, dispensaries and state testing labs, according to the Alabama Medical Cannabis Commission (AMCC).
Then, on Dec. 12, the AMCC will award licenses for vertically integrated operations, a designation set primarily for multistate operators.
Licenses are expected to be handed out 28 days after they have been awarded, so MMJ production could begin in early January, according to the Alabama Daily News.
That means MMJ products could be available for patients around early March, an AMCC spokesperson told the media outlet.
Regulators initially awarded 21 business licenses in June, only to void them after applicants alleged inconsistencies with how the applications were scored.
Then, in August, the state awarded 24 different licenses – 19 went to June recipients – only to reverse themselves again and scratch those licenses after spurned applicants filed lawsuits.
A state judge dismissed a lawsuit filed by Chicago-based MSO Verano Holdings Corp., but another lawsuit is pending.
Source: https://mjbizdaily.com/alabama-plans-to-award-medical-cannabis-licenses-dec-1/
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