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Virginia’s adult-use cannabis market stalled indefinitely

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Virginia’s recreational marijuana industry is on indefinite hold.

Less than two years after the state became the first in the South to legalize adult-use marijuana for adults 21 and older, the projected start date for legal sales of Jan. 1, 2024, has been effectively scrapped.

It’s unclear when – or if – recreational MJ sales will begin.

The issue: The legalization bill that the then-Democratic-controlled General Assembly sent to former Gov. Ralph Northam two years ago was a half-measure. Northam signed the bill into law in April 2021,

The new law allowed Virginians to possess cannabis and cultivate up to four plants. It also called for recreational sales to begin no later than Jan. 1, 2024.

But the law also required the General Assembly to later reenact a number of provisions of the 2021 legislation, including those that detail a regulatory and market structure such as licensing.

Prospects for passage of those measures dimmed after a November 2021 state election: Republicans regained control of the governor’s office plus the House of Delegates, the Legislature’s lower chamber.

And with what observers say is encouragement from GOP Gov. Glenn Youngkin, the legislation needed to set up an adult-use market was on track at the weekend to fail during the General Assembly’s short, odd-year legislative session – following a similar failure in 2022.

On Jan. 31, a Republican-controlled subcommittee in the House of Delegates killed a pair of Republican-sponsored cannabis regulatory bills, which would have set up a licensing scheme in time for sales to begin sometime in 2024.

A similar bill proposed in the Democratic-controlled Senate by state Sen. Adam Ebbin, a Democrat, died in the same committee earlier this month.

Multiple sources cited pressure from Youngkin to defeat any adult-use cannabis bill as a major factor in the defeats.

At the same time, Republicans pushed a proposal to slash nearly 70% from the budget of the state’s marijuana regulatory agency, the Cannabis Control Authority.

‘No path’ forward

Virginia’s part-time General Assembly meets in regular session for only 30 days in odd-numbered years, meaning there’s no time left in the state’s legislative calendar to introduce an alternative. 

Lawmakers were scheduled to adjourn on Saturday, Feb. 25.

Greg Habeeb, a former state Republican lawmaker who now lobbies for the Virginia Cannabis Association – an industry trade group – said last week that he held little hope for a 2024 sales launch, noting the General Assembly was scheduled to adjourn Saturday.

“I see no path,” Habeeb said in an interview with MJBizDaily.

With adult-use cannabis regulation dead for the year, the major multistate operators that hold some of Virginia’s existing medical cannabis licenses – as well as possible new market entrants – are stuck in a holding pattern.

“Given the current legal and regulatory ambiguity, Columbia Care does not anticipate adult-use sales beginning on Jan. 1, 2024,” Ngiste Abebe, Columbia Care’s vice president of public policy, told MJBizDaily.

The New York-based multistate operator is one of four companies with medical marijuana business licenses in Virginia, where it currently operates eight dispensaries.

Crisis in a vacuum

In the absence of legal adult-use retail, illicit-market alternatives have appeared across the state, including illegal storefronts and pop-ups.

Add that to the proliferation of untested products containing hemp-derived delta-8 THC, and what’s left is a status quo that Republicans and Democrats in Virginia alike have called a “public health crisis.”

Legally purchased delta-8 THC gummies are what led to the death of a 4-year-old boy last year, according to local prosecutors trying the boy’s mother on murder charges.

“We are in a public health crisis,” Republican Delegate Keith Hodges, sponsor of the failed bill that would have directed the Virginia Cannabis Control Authority to craft adult-use cannabis regulations, said during the Jan. 31 sub-committee hearing in Richmond.

Hodges did not respond to a request for comment from MJBizDaily but he said during the hearing that the current situation in Virginia is a paradox that is “propping up organized crime.”

“You can legally possess marijuana in the Commonwealth of Virginia, but you can’t legally purchase it,” he said. “If we do nothing, we have a problem on our hands. We need to protect the citizens of Virginia from the illicit market.”

A few minutes later, the subcommittee voted to kill Hodges’ bill.

Where the buck stopped

Lobbyists and industry observers said that lawmakers, like those overseeing the Republican-controlled subcommittee where regulatory bills died over the past few weeks, received clear direction from Youngkin, a possible contender for the 2024 Republican presidential nomination, not to advance any adult-use cannabis legislation in Virginia this year.

“Whether explicitly or implicitly, the words or signal was: This was not where the governor wanted the Assembly spending its time,” Habeeb said. “The governor wants nothing to do with it.”

Instead, Youngkin is pushing for a bill to tightly regulate hemp-derived cannabinoids.

As of Friday, the day before adjournment, both houses of the General Assembly were hammering out a compromise bill.

But whatever form hemp regulations take, they are unlikely to address the burgeoning illicit market, critics say, including the rampant “pop-up” markets selling cannabis.

“It’s pretty simple,” said Trent Woloveck, chief strategy director at Florida-based multistate operator Jushi Holdings, which operates five dispensaries in Virginia. “The governor, with his no vote, has voted yes to license cartels and organized crime in the Commonwealth of Virginia.”

The governor’s office did not directly respond to that allegation.

In an e-mail, Youngkin spokesperson Macaulay Porter directed MJBizDaily to a Jan. 25 comment the governor gave to reporters.

“Let me be clear, the bill that I am tracking and looking for is a bill that deals with hemp and delta-8 and the regulations and consumer safety around those products,” Youngkin said.

“Right now, we have products that are being mislabeled, mis-sold and targeted toward children. That is the bill that I am watching to make sure that comes out, because that’s the bill I want to sign.”

Porter did not respond to further questions.

Now what?

Habeeb, the former Republican lawmaker and current industry lobbyist, said Republicans were effectively asked to solve a problem not of their own making, as it was Northam and a Democratic-controlled General Assembly that legalized cannabis without simultaneously passing ironclad regulations for an adult-use market.

“They (Democrats) just assumed they’d win a majority in the next election and fix the bill the next year,” he said.

“We all now know that did not happen. So now you’re in a situation where Republicans – almost all of whom voted against legalization in the first place, and all of whom voted against Democrats’ idea for setting up an adult-use marketplace with social equity provisions and all of those things – are being told to fix a problem someone else created.”

At the same time, it was Republicans – including Hodges as well as Delegate Michael Webert – who carried the regulatory bills that fellow GOP members tabled and who are voicing the same concerns as cannabis advocates and industry lobbyists.

“Our problems are going to continue until we start regulating and taxing the market we have now,” Webert said during the Jan. 31 hearing.

Going forward, absent another political shakeup in Richmond, it’s unclear when Virginia’s marketplace can expect to begin.

“The most impactful change to the outlook for the next year is the General Assembly elections this November,” Columbia Care’s Abebe said. “With every delegate and senator seat up for election, voters have a chance to pick pro-cannabis legislators who will finish the job of legalizing cannabis in the commonwealth.”

Gov. Youngkin’s four-year term, meanwhile, doesn’t end until January 2026.

Source: https://mjbizdaily.com/virginias-recreational-marijuana-market-stalled-indefinitely/

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New Mexico cannabis operator fined, loses license for alleged BioTrack fraud

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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:

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/

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Marijuana companies suing US attorney general in federal prohibition challenge

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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.”

Source: https://mjbizdaily.com/marijuana-companies-suing-us-attorney-general-to-overturn-federal-prohibition/

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Alabama to make another attempt Dec. 1 to award medical cannabis licenses

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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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