Breaking Down the Recent Cannabis Rescheduling Recommendation

For more than fifty years, the federal government has maintained that cannabis is a Schedule I drug, meaning that it has a high potential for abuse and no accepted medical value. That changed last week (somewhat) when the Department of Health and Human Services (HHS) recommended to the Drug Enforcement Administration (DEA) that cannabis be placed in Schedule III, meaning that it has moderate to low abuse potential, a currently accepted medical use, and a low potential for psychological dependence. 

Why now?

In October 2022, the Biden Administration announced that it would ask the Secretary of HHS and the Attorney General to initiate the administrative process to review expeditiously how marijuana is scheduled under federal law. As the Brookings Institute outlined years ago, the Executive process for rescheduling is much more complex than the Legislative path. 

It’s no secret that the presidential election is barely more than a year away, and the President seems to be looking to make good on his campaign promise to reform the nation’s marijuana laws.

What does this mean?

First off, it’s critical to note that HHS’ recommendation to DEA is just that: a recommendation. It is non-binding. The DEA may come to the same conclusion that HHS did, but is not required to. 

If cannabis is moved to Schedule III of the Controlled Substances Act, one positive outcome would be that 280E would no longer apply to plant-touching businesses, removing an incredibly punitive and debilitating provision in the tax code.

According to NCIA’s board chair emeritus, Khurshid Khoja, Esq., “…it’s important to remember that rescheduling would not apply the federal Food Drug and Cosmetic Act (FDCA) to marijuana for the first time—it applies right now, and like the federal Controlled Substances Act (CSA), would continue to apply after rescheduling. But absent any statutory authority permitting FDA to do otherwise, the FDCA would continue to apply after descheduling too, just as it does to hemp products.” 

Others claim that the shift to Schedule III would have minimal impact on businesses and individuals. Here at NCIA, we’re cautiously optimistic but recognize that moving cannabis to schedule III could have some limited benefit but does nothing to align federal law with the 38 U.S. states which have already effectively regulated cannabis for medical or adult use.

What now?

Now that HHS has made their recommendation, the DEA will begin its scheduling review process. 

Many are divided about what a move to Schedule III would actually look like. Yes, there would be the elimination of 280E, but what about enforcement priorities? Interstate commerce? Criminal penalties? There are so many unknowns. 

NCIA has previously produced a common sense, workable roadmap for that federal comprehensive reform and provided detailed feedback on legislative efforts. It is time for Congress to follow the will of the American people. Don’t get me wrong, there’s no doubt that this recommendation is a step in the right direction and is long overdue. But we can’t lose sight of the ultimate goal: removing cannabis from the Controlled Substances Act entirely.

Have questions?

Join NCIA on September 14 at 1 pm ET for an engaging webinar where we will unpack all your questions! Register today and don’t miss your chance to hear more about what this means for the cannabis industry and your business.

Summer Recess & Cannabis Progress: Cannabis News from the Capitol and Expectations for the August Break

by Michelle Rutter Friberg, NCIA’s Director of Government Relations

After NCIA’s 11th Annual Cannabis Industry Lobby Days concluded in May, cannabis news from Washington, D.C. has been relatively slow. Curious about what’s next before August recess begins? Keep reading to see what may happen ahead of the break and for a recap on where we’re at now.

SAFE Banking

Last month, just before NCIA’s Lobby Days, the Senate Banking, Housing, and Urban Affairs Committee held a hearing titled “Examining Cannabis Banking Challenges of Small Businesses and Workers”. Witnesses included the bill’s lead sponsors, Senators Jeff Merkley (D-OR) and Steve Daines (R-MT), as well as Ademola Oyefes (International Vice President and Director of Legislative and Political Action Department, United Food and Commercial Workers International Union [UFCW]), Michelle Sullivan (Chief Risk & Compliance Officer, Dama Financial), Dr. Kevin Sabet (President/CEO, Smart Approaches to Marijuana [Project SAM]); and Cat Packer (Vice Chair, Cannabis Regulators of Color Coalition). 

My takeaways from the hearing: no new talking points from Project SAM, surprised by DAMA’s comments (they’ve since walked their testimony [which many saw as opposition to the bill] back), and most importantly of all: the real need for SAFE so that we can stop talking about access to financial services and start talking about legalizing and regulation cannabis in a smart and equitable way. 

As for what’s next? Banking Committee Chairman Sen. Sherrod Brown (D-OH) recently shared that SAFE Banking would be scheduled for a markup after a few other bills received theirs. The good news? That process has begun. The bad news? Still no formal news on when SAFE’s markup will be. I’m expecting it to be after the Fourth of July break but before members leave D.C. for their annual, month-long August recess.

Appropriations 

For years, advocates have looked to the appropriations process as a way in which to enact cannabis reform at the federal level. 

In 2014, a provision that protected medical cannabis patients, programs, and businesses from federal interference (known as the “Rohrabacher-Farr” amendment) was included in the federal budget and became law. Since then, the provision has been included in appropriations bills and remains the law of the land. 

NCIA has (and continues to) lobby on behalf of expanding this provision to include adult-use businesses and to also use the appropriations process to enact other reforms like allowing Washington, D.C. to commercialize adult-use cannabis sales. 

House GOP negotiators heightened the stakes earlier this week when they announced they would mark up their FY2024 spending plans to levels lower than the budget caps set as part of a deal struck between President Biden and Speaker Kevin McCarthy (R-CA). This will undoubtedly make the already contentious budget-process even more volatile.

Maryland

On July 1, adult-use cannabis sales will begin in Maryland. Cannabis became legal for those over 21 in Virginia in 2021, while D.C. legalized cannabis for adults via Initiative 71 in 2014 (but have been unable to begin sales due to congressional interference). Legal sales in the District’s neighboring states means that members of Congress will surely be more exposed to the benefits of regulation.

So, while it’s been relatively quiet in D.C. in June, stay tuned in July for a possible first-ever Senate markup of SAFE Banking! As always, NCIA will continue to advocate on behalf of your business and keep you updated on the latest. 

Member Blog: Future Of FDIC Easing for Cannabis Banking After Biden Decriminalizes Marijuana

by Joshua Gilstrap, e2b teknologies

Over the years, the simple possession or use of cannabis has seen many lives upended by arrests and criminal convictions. Unfairly, racial disparities have determined that black and brown individuals suffer most of these convictions, arrests, and prosecutions, even though white individuals use and possess cannabis at similar rates. The resulting criminal records lead to individuals being denied fundamental rights to employment, housing, and education opportunities.

However, on October 6, 2022, President Biden made an announcement that could change the cannabis and criminal clemency conversation. The president asserted he would:

  • grant pardons to individuals with prior low-level federal cannabis possession offenses
  • change federal cannabis laws by reviewing the cannabis Schedule I rule.

The federal government’s classification of cannabis as a Schedule I substance puts it in the same category as more lethal drugs like heroin and LSD while drugs like fentanyl are not considered less severe than marijuana since it falls under Schedule II.

As more states legalize the sale and use of cannabis, the classification of Schedule I no longer makes sense. Additionally, more direct research on the proper utilization of marijuana can develop suitable restrictive and preventative measures to protect against harmful outcomes of cannabis use.

The Biden initiative is crucial because it can begin to remove the burden of employment, education, and housing limitations often experienced by individuals with simple cannabis possession convictions. Besides, if marijuana is rescheduled to Schedule II, or as many advocates champion for a complete descheduling, it could mean the end of cannabis prohibition altogether.

Widespread Support for this Initiative

Nearly 70% of Americans support the President’s pardon proclamation. Publicly, two in three Americans support Biden’s plan for cannabis reforms, and three in four support the removal of cannabis from Schedule I of the Controlled Substances Act.

Bipartisan support for this move is also high, with 74% of Independents, 84% of Democrats, and 58% of Republicans backing the proposal. At the state level, 68% of respondents support governors that want to issue pardons for people with low-level cannabis possession convictions.

Why This is Important

The expeditious review process requested by President Biden has the potential to open the cannabis industry to further changes, like the easing of banking restrictions for cannabis businesses. For instance, the call for action by governors is already inspiring many to rethink state and local relief for marijuana users. Kentucky, Colorado, and Kansas are three states already actively considering enacting the Biden pardons and drafting new reform bills for marijuana cases. 

The Colorado governor is pushing Congress to pass a bipartisan banking bill on marijuana.

“The lack of safe banking and financial services for the cannabis industry in the State of Colorado has become a dire public safety issue for highly regulated cannabis businesses operating in compliance with state law,” Gov. Jared Polis’ office wrote to House and Senate leaders.

“Further, the lack of safe banking exacerbates the uneven playing field faced by small and minority-owned cannabis businesses, despite their serving the same communities and being subject to the same increased state regulation as other cannabis businesses in the State,” the letter said.

It’s true – over the years, the cannabis industry has dealt with a lack of financial and banking services because of the strict regulations and criminalization associated with marijuana. Consequently, this has resulted in severe public safety issues, even for cannabis businesses that operate within the compliance mandates of the state law.

Additionally, operators are disadvantaged because they lack funding or banking systems that support cannabis business processes. But following Biden’s pardon, many hope that Congress’ marijuana reform will pass the Secure and Fair Enforcement (SAFE) Banking Act for the industry.

If passed, the protection against armed robbery will increase. Also, the SAFE Banking Act will support the minority, veterans, and women who own small cannabis businesses. This, in turn, is expected to improve public safety amid the growing use of cannabis and cannabis products while simultaneously creating jobs within states.

Ushering in the Era of Cannabis Banking and FDIC

Even though the SAFE Banking Act has been in the House of Congress seven times, federally insured banking services and modern digital banking solutions like electronic payment processing are still inaccessible to the cannabis industry.

The Act lags in the senate under Democratic and Republican control. However, the senate is said to be preparing to enact the reform for the SAFE Banking Act as part of the Biden marijuana proposals. And why not? There is significant support for the SAFE Banking Act.

For instance, National Association of State Treasures members have voiced their support for the SAFE Banking Act. Public policy also demands the immediate relief the ACT will provide cannabis businesses. Therefore, the expectation that leaders in the government will push for banking reforms for cannabis businesses is prevalent.

The SAFE Banking Act is an Advocate for the War on Drugs

Many believe that the baking legislation would advocate for the war on drugs because it would offer protection against the risk of robbery and violence. By denying cash-based cannabis businesses access to the traditional financial system, the state and local governments provide an invitation threat that has seen many victims working in cannabis businesses lose their lives or livelihoods.

On the other hand, the right to payment solutions, like credit cards, protects against armed robbery. Nonetheless, for the banking legislation to work, it requires the support of criminal reforms. This is where initiatives like predicant Biden’s pardon and marijuana schedule reform come in.

The SAFE Banking Act will solve the injustice associated with financial inequality, thus, providing public safety that protects customers, employees, and businesses in the cannabis industry. And with reduced invitations for armed robberies working in tandem with the use of mandated cannabis products, the war on drugs will ensue.

Cannabis Businesses Contribute Equally to the Economy

As such, it is only fair to provide them with the same rights and protections that other businesses, whether big or small, enjoy. Therefore, starting with the push to decriminalize and legalize marijuana, not just at the federal level but at the state level, is a solid place to start.

Following this pardon with an advocacy of the SAFE Banking Act will additionally provide cannabis businesses with the capability to carry out operations securely and optimally. But attention must be paid to the details pertinent to these reforms to ensure thousands of convicts get a better chance at life and cannabis businesses get opportunities to continue contributing to the economy. 

FAQs

What does President Biden’s pardon for marijuana possession entail?

President Biden’s cannabis reform initiatives are set to accomplish three things:

  1. Pardon convicts with low-level marijuana possession offenses, thus, allowing them to get housing, education, and employment without prejudice
  2. Reduce the marijuana Schedule level on the Controlled Substances Act from Schedule I to Schedule II, which lessens the seriousness of marijuana possession
  3. Inspire governors to offer the same pardons at the state and local levels where most marijuana convictions are carried out

Is there support for President Biden’s announcement?

Yes. There is ample support from the public and bipartisan control for Biden’s pardon and advocacy for the marijuana schedule change in the Controlled Substances Act.

What would the pardon mean for cannabis banking?

The de-scheduling of the marijuana Controlled Substances Act would remove the many legal hurdles and fears of the financial institutions that keep them from supporting cannabis businesses. This would reduce the discriminatory risks associated with banking or financing cannabis businesses. 


Joshua Gilstrap is the Marketing Manager for e2b teknologies, in addition to his marketing responsibilities Joshua leads business development for e2b teknologies emerging Canna Suite product line. A business graduate with a focus in marketing from Miami University in Oxford, Ohio, he joined the e2b team in the Fall of 2019. Josh brought with him a wide array of business and practical experience in planning and execution. Since coming aboard he has led multiple projects including website hosting and theme standardization company wide, marketing automation streamlining the efficiency of the customer journey, and sales automation where he is changing the conversation from promotion to education, from pitching to catching, and from push to pull in order to keep up with the shifting tides of a digital transformation.

The Pathway to Greater Equity in New York’s New Adult Use Cannabis Market

by Mike Lomuto, NCIA’s DEI Manager

Over the past few months, the NCIA has been hard at work in social equity and the emerging New York market. NCIA’s Diversity Equity and Inclusion Committee has organized an ongoing roundtable discussion with various ally organizations including NYC NORML, Minorities for Medical Marijuana (M4MM), Minority Cannabis Business Association (MCBA), The People’s Ecosystem, the JUSTUS Foundation, Black and Brown Economic Power in Cannabis (BBEPIC), and the Social Equity Co-Chairs of the New York City/Hudson Valley Cannabis Industry Association (NYCCIA/HVCIA), and Unified Legacy Operators Council (UNLOC), and social equity cannabis business owners from existing markets.

These discussions have centered around the proposed New York regulations, policies, and concerns. We all share a common goal to provide sensible and workable solutions to the state famous for “stop and frisk” in alignment with the goals of New York, to create a diverse, inclusive, and socially equitable cannabis industry. 

What emerged from our roundtable discussions over the last few months are robust proposals regarding key regulatory changes and solutions to the New York regulators as they deliberate their proposed rules that will affect the industry. If our proposed comments were to be adopted, we are confident New York will see more equitable pathways for folks who potentially would be left behind otherwise. In particular, we strongly recommend their definitions of justice be broadened and we included proposals to that effect. We also encourage the regulators to create more pathways and solutions for legacy operators still in the shadows to be able to enter the legitimacy of the industry. Further, we proposed sensible changes to align New York to more national standards in labeling, advertising, packaging, licensing, and operations.

Our coalition roundtable based our recommendations on combined decades of experience on the frontlines and in the communities that will be impacted by these regulations. Our proposals are workable solutions the state of New York can incorporate in order to solidify equity in the industry as they come online. 

As a roundtable coalition that is New York focused but with national reach, we’re proud to be able to work alongside our allies to create a think tank that will affect future markets beyond the big apple as they struggle with the concept of good and effective social equity programs. For far too long, the road has been paved with good intentions that fall short of the destination needed for true social equity. Our New York Social Equity Roundtable has brought together people from various sectors and organizations who fundamentally understand that and who are passionate about bridging the disparity all too prevalent in the cannabis industry.

Proposed NY Office of Cannabis Management Rules Review – submitted May 31, 2022

Packaging & Labeling Recommendations – submitted August 15, 2022

Advisory Board Recommendations to NY OCM – submitted September 2022

Committee Blog: Four Tips for Cannabis Businesses to Maintain Cannabis Friendly Financial Services

by Kameron Richards and Steven Schain
Members of NCIA’s Banking & Financial Services Committee

Obtaining legitimate, cannabis-friendly financial services is among the cannabis industry’s biggest hurdles. Obtaining financial services is challenging for dispensaries, marijuana grows, and testing labs but it could also be an obstacle for non-plant touching businesses or individuals engaged in the cannabis industry. Without cannabis-friendly financial services, individuals and businesses related to the cannabis industry are deprived of simple financial solutions, like checking accounts, resulting in large amounts of cash being held at company facilities or the operator’s residence, posing significant risks.

Because only a small amount of insured banks and credit unions offer cannabis businesses financial services, finding cannabis-friendly financial services offered by FDIC or NCUA/CUNA institutions is challenging, and following a certain approach may fortify the longevity of a relationship with a financial institution.

Know Your Company Information and Banking Needs 

Thorough onboarding initiates the account opening process for cannabis companies seeking financial services. Cannabis-friendly financial institutions exercise enhanced due diligence at account opening for compliance purposes, which will be further discussed in this article. 

Financial institutions may require information on state licensing, corporate structure, and governance documents. Institutions generally collect information regarding the company’s underlying products and whether those products or services violate The Controlled Substances Act (“CSA”). Information collected during the onboarding process often determines the institution’s fee, risk-based categorization, and willingness to provide financial services to a particular cannabis company. 

During the onboarding process, cannabis companies should determine if the financial institution provides all services necessary for its specific operation. The services offered by cannabis-friendly financial institutions may vary based on its risk tolerance.

Know Compliance Requirements and Cannabis-Specific Programs 

Financial institutions serving the cannabis industry must comply with The Bank Secrecy Act’s (“BSA”) requirements set forth in the Treasury Department’s Financial Crimes Enforcement Network’s (“FinCEN”) BSA Expectations Regarding Marijuana Banking (FIN-2014-G001) (“FinCEN Guidance”). To mitigate the possibility of money laundering, institutions assemble extensive risk-based BSA programs centered around assessing the risk of each cannabis account and detecting and reporting “Red Flags” set forth by FinCEN Guidance. 

To understand the constraints under which financial institutions are forced to operate, cannabis companies should familiarize themselves with relevant cannabis industry regulatory guidance and, if possible, structure its operations to ease its financial institution’s compliance efforts. Further, cannabis companies should understand any contractual terms and operation of any specific cannabis programs required by its financial institution (e.g., participation in cannabis-specific programs to support loan approvals, liquidity management or the coordination of cash courier services).

Know the Risk-Based Approach

FinCEN Guidance requires institutions to perform enhanced due diligence on cannabis companies, because the risk category of each cannabis account is determined during the onboarding process, institutions are required to obtain corporate and state licensing documentation and detect any negative news on the potential account signers and the business.

Because there is no mandated risk-based structure for institutions to follow, it is critical that cannabis companies know its institution’s specific risk-based structure. Further, if a cannabis company is utilizing more than one institution, it should understand that each institution’s risk-based categorization may have specific factors or considerations. Some institutions use a tiering structure (which can vary by institution) or make this determination based on the direct or indirect relationship that the account’s source of funds has with cannabis prohibited by the CSA. An institution’s risk-based categorization could determine an account holder’s compliance obligations or eligibility for financial services such as lending, treasury services, payment processing, and 401(k)/retirement solutions.

Know What Could Cause Account Termination

After completing the onboarding process and placing cannabis accounts in the requisite risk profile (which may vary among institutions), institutions are obligated to conduct ongoing enhanced due diligence on cannabis accounts in accordance with the risk each account poses. 

This enhanced due diligence encompasses staying abreast of corporate changes, confirming that all licenses are up to date and conducting periodic negative news checks that indicate FinCEN Guidance “Red Flags.” It can also include a litany of happenings that cannabis account holders may not be aware of. While cannabis account signers may be compliant, without any negative news on them or their business, their institution could also close an account due to adverse information from tax and state licensing authorities or wrongdoing by employees or vendors. Cannabis account holders should also be aware of transactions prohibited by its institution’s policies and procedures like commingling funds between non-plant touching and plant touching accounts or transferring funds to and from vague accounts at unaware institutions unwilling to serve the cannabis industry. 

Cannabis account holders with multiple relationships should be aware that each institution’s closure protocol may vary in response to adverse information or conducting transactions prohibited by internal policies and procedures (account termination terms are often contained in the depository agreement between the institution and cannabis account holder). 

Conclusion 

Beyond assisting a business’ core functioning, maintaining relationships with legitimate financial institutions leads to strategic advantages for a cannabis company and its owners and operators, like financing or payment processing.  

Further, because FinCEN requires institutions to monitor and report cannabis account transactions and file a Suspicious Activity Report (SAR) when a cannabis account is opened or closed or if “Red Flags” are detected; cannabis companies can protect their accounts and businesses by knowing applicable laws and regulations and their institution’s cannabis-specific programs’ policies and procedures. 

Behind Closed Doors: NCIA at CANNRA’s June Conference

The discussion about the future of cannabis legalization is ongoing, to say the least. Recently, Cannabis Regulators Association (CANNRA) held a two-day conference in early June to gather Marijuana government regulators, trade associations, and businesses. The Cannabis Regulators Association (CANNRA) is a national nonpartisan organization of government cannabis regulators that provides policymakers and regulatory agencies with the resources to make informed decisions when considering whether and how to legalize and regulate cannabis.

Representatives from NCIA participated in the conference – NCIA Board Members Khurshid Khoja (Chair Emeritus) and Michael Cooper (Board Secretary), and we caught up with them in this blog interview to better understand the goals and outcomes of the event.


From a bird’s eye view, what was the overall goal of this conference? 

MC:  The conference was an opportunity for regulators from around the nation to hear directly from stakeholders on the current and future challenges that face these markets and different models of regulation to tackle them.  

KK: I’ll add that our own goals, as the current Policy Co-chairs for NCIA, were to better understand the priorities of state and local cannabis regulators across the country, and anticipate future developments in cannabis policy early on, so we could take that back to the NCIA membership and the staff – especially Michelle Rutter Friberg, Mike Correia, and Maddy Grant from our amazing government relations team.

Let’s talk about who was invited to participate in these panel discussions. From cannabis industry associations to those who regulate cannabis, who else was there?

KK: Michael and I each spoke on a panel. The other speakers included reps from federal trade associations, lobbyists, vendors, and ancillary companies who were helping to underwrite the event (along with NCIA). Given that CANNRA is a non-profit that doesn’t receive any funding from their member jurisdictions, and has a single paid full-time staff member, I thought they were still able to obtain a fairly diverse and interesting set of speakers at the end of the day – including NCIA Board and Committee alums Ean Seeb, Steve DeAngelo, Amber Senter and David Vaillencourt (representing the Colorado Governor’s Office, LPP, Supernova Women and ASTM, respectively), as well as folks from Code for America, Americans for Safe Access, and the Minority Cannabis Business Association, U.S. Pharmacopeia, NIDA, the CDC, and the Alcohol and Tobacco Tax and Trade Bureau, representatives of the pharmaceutical, hemp, tobacco and logistics industries, and public health officials.

Were there any organizations or sectors of the industry that were not in attendance, whether they weren’t invited or just didn’t participate, and why is it important to note the gaps of who was not represented?

MC:  No licensed businesses were invited. Instead, organizations that represent industry members were invited. As a result, we felt it was crucial to inform these discussions with the perspective of the multitude of small and medium-sized businesses otherwise known as Main Street Cannabis that have built this industry and continue to serve as its engine.    

KK: Sadly, we did not have an opportunity to hear from members of the Coalition of Cannabis Regulators of Color. I can’t speak to why that was, but it was unfortunate for us nonetheless. And while we had some public health officials there, I know that CANNRA Executive Director Dr. Schauer would have preferred to see more of them in attendance.

Across the spectrum of policy and regulations and legislative goals, what topics were covered in the panel discussions across the two-day conference?

KK: We covered a ton, given the time we had, including the federal political and policy landscape; interstate commerce; the impact of taxes on the success of the regulated market; social equity and social justice; preventing youth access; regulation of novel, intoxicating and hemp-based cannabinoids; the prospects for uniform state regulations; technological solutions to improve compliance and regulatory oversight; and delivery models.

What information or perspectives did NCIA bring to the panel discussions that were unique from other participants? What does NCIA represent that is different from the other voices at the event?

MC:  There really are a wide variety of perspectives on how best to regulate this industry. We felt it was essential that NCIA give a voice to Main Street Cannabis, the small businesses that so many adult-use consumers and medical patients rely upon. We emphasized, for example, that these are often businesses that cannot simply operate in the red indefinitely, but provide essential diversity (in the background and life experience of operators as well as in product selection and choice). NCIA wants to make sure that the future of cannabis isn’t simply the McDonalds and Burger Kings of cannabis. There are times when consumers want that, but there are also times when they want something unique and different. And it’s crucial that policy not destroy the small and medium-sized, frequently social equity-owned, businesses that provide those choices.

What else was interesting to you about this gathering of minds? Were you surprised by anything, or was there anything you heard that you disagreed with?

MC: There are a ton of different perspectives and approaches to cannabis, and that’s no surprise to anyone who has followed these issues closely because the tensions are very clear in the policy debates that are ongoing. 

As the voice for the industry, we sought to urge an approach grounded in reality. Americans want these products. That’s clear from the ballot box and public polling. The question should be about how to encourage Americans to purchase regulated, tested versions of these products. 

KK: There was definitely stuff we didn’t agree with – some of it from folks that we otherwise largely agree with. For example, our good friend Steve Hawkins of the USCC shocked a few of us in the audience when he seemed to indicate some receptivity to re-scheduling cannabis on an interim basis, rather than moving to de-scheduling immediately. I think that while rescheduling may benefit scientific research and pharmaceutical development, it could ring the death knell for Main Street Cannabis businesses. NCIA has consistently advocated for de-scheduling rather than re-scheduling.

After two days of panels, did anything new come through these discussions, or were any accomplishments achieved?

KK: I think there’s a growing recognition that addressing social equity solely through preferential licensing and business ownership for the few isn’t enough and that the licensing agencies and regulators that execute social equity policies have a very limited (and often underfunded) arsenal to comprehensively redress the harm caused by federal, state and local governments prosecuting the war on drugs. In my remarks, I said it was time for us to start discussing additional forms of targeted reparation and had a number of regulators approach me afterward to continue the discussion. Candidly, I expected my remarks to fall on deaf ears. They didn’t. That was very encouraging.

MC: There was definite progress. At the end of the day, these cannabis regulators are working hard to try to get this right. But in such a new area, and with so many competing perspectives and voices, their job isn’t easy. We were heartened to see the level of engagement from regulators on these points, including follow-ups to get more information on some of the pain points we identified for small and equity businesses in the industry. 

It was definitely rewarding to provide NCIA and our members’ perspectives in a forum like this, and we’re looking forward to continuing to further strengthen NCIA’s relationship with CANNRA and regulators around the country.  

Member Blog: FDA Cites Multiple Violations for Selling CBD as Supplement, Food, Cosmetic, or Animal Food Ingredient

by Gisela Leon, MS, MBA, Independent Consultant, EAS Consulting Group

The FDA’s position on the use of CBD in dietary supplements and foods is steadfast. In 2021, five warning letters about CBD-containing dietary supplements and foods went out – three based on website reviews and two based on facility inspections. All cited violations relate to pain relief claims. The products are therefore unapproved new drugs. Two warning letters emphasize the FDA’s position that CBD does not meet the definition of a dietary supplement, from which it is excluded due to the authorization for investigation as a new drug. 

In November 2019, the FDA published 15 warning letters in a “catch-all” effort regarding cannabidiol products. The products range from articles sold as dietary supplements, conventional foods, cosmetics, and animal food. The FDA sent out the 15 warning letters to companies in a number of states, including California, Texas, Oklahoma, Colorado, Oregon, New York, Florida, North Carolina, Arizona, and Kentucky based on the content of websites and social media sites. This was not the first time the FDA had sent warning letters regarding cannabidiol [CBD]. The first seven CBD warning letters were issued in March 2019, so attentive manufacturers could have been aware of t the FDA’s position and that enforcement actions might be taken.

In the 2019 warning letters, the FDA states that CBD in products sold as dietary supplements does not meet the definition of dietary ingredients in the Federal Food, Drug, and Cosmetic Act (321(ff)(B)(i)(ii)). This provision clarifies that a dietary ingredient cannot be a substance that has been approved as an active ingredient in a drug. The FDA has confirmed that CBD is an active ingredient in the approved drug Epidiolex. 

Products containing CBD and sold as conventional food often worry the FDA even more, because they are often advertised for toddlers and infants. FDA clarified that CBD does not have an authorization as a food additive. Food additives need to be pre-approved by the FDA and there is no such regulation for CBD. CBD also is not a GRAS substance. This is based on the FDA’s review of publicly available data, which shows that CBD is potentially harmful and may cause liver injuries and interact with other drugs. Furthermore, studies in animals have shown that it might impair sexual behavior in males.

Similarly, the FDA states in relevant warning letters that CBD is an unapproved new animal drug because of the disease claims. The products are also adulterated animal foods because there is no animal food additive regulation that authorizes the use of CBD and there is no basis to conclude that CBD is GRAS for use in animal foods.

Besides the illegal status of CBD as a dietary ingredient, the warning letters regard the products as unapproved new drugs, because they claim that CBD cures, mitigates, treats, or even prevents diseases. Most warning letters are very long because the manufacturers cite numerous diseases for which CBD might be helpful. CBD is often depicted as a “cure-all.” Some of the popular disease claims involve pain relief, anti-inflammatory, diabetes, acne, anxiety, depression, and cancer. For example, one warning letter cites 45 diseases. Simultaneous to being unapproved new drugs, all products are regarded as misbranded drugs. 

Most 2019 warning letters were signed by three FDA compliance directors from Center for Drug Evaluation and Research, Center for Veterinary Medicine, and Center for Food Safety and Applied Nutrition. In some of the earlier warning letters, the FDA also involved FTC – Federal Trade Commission – because of unsubstantiated claims. Both agencies are concerned that some of the efficacy claims may not be substantiated by competent and reliable scientific evidence.

There are clearly more than 27 companies in the market selling CBD. My thought is that the FDA has picked some of the worst offenders with respect to claims to establish impressive examples. Throughout the years in articles and press notifications, the FDA has always stated the regulatory position that CBD does not meet the definition of a dietary ingredient. This position has been challenged by industry and is a controversial topic. Some plaintiffs’ lawyers have initiated class-action lawsuits on the basis that clients were harmed by buying an illegal product and paying too much for it. It appears that the FDA is currently only enforcing against CBD products with disease claims. So far, the FDA has not written warning letters solely because a dietary supplement uses CBD. All of the mentioned warning letters could have been written to any dietary supplement making obvious disease claims.

So, what can be learned from the FDA’s actions? The first and most important step for manufacturers would be to “clear” all web pages, social media pages, and third-party referrals of disease statements. A second approach should be to not use CBD as a food ingredient or as an animal food ingredient. As a regulatory strategy, this may buy some time until the controversy about the legality of use in dietary supplements is clarified. For dietary supplements – in a conservative regulatory approach – a next step could be not using CBD as a dietary ingredient, because it is an approved drug. 

A possible alternative legal ingredient is a full spectrum hemp extract which contains all hemp components – not just isolated CBD. Hemp-derived ingredients are eligible for use as dietary ingredients by virtue of being “botanicals.” However, hemp-derived substances must submit a New Dietary Ingredient notification 75 days prior to first marketing the hemp supplement. A less conservative regulatory approach for dietary supplements could be to wait and see what the FDA decides under the pressure from industry and consumers. Hopefully soon, the FDA will clarify the legality of use in dietary supplements.


Gisela Leon brings in over 33 years of experience in international labeling. She is well-experienced in USA labeling requirements of food, dietary supplements and cosmetics, in European food laws and multi-language labeling. As a regulatory consultant, she focuses on a concise review process, having reviewed hundreds of labels for U.S. compliance and helped international products to come into compliance with U.S. regulations. Her international labeling background allows her to point out differences or similarities with other countries.

After receiving her Master’s degree in Food Technology Engineering, Ms. Leon received her DGQ Audit-Specialist Certification from the German Institute for Quality, and her Master’s in Business Administration from George Mason University. For over 20 years she worked at Schöller Lebensmittel GmbH & Co KG as Director of Quality Management and Labeling Compliance. Ms. Leon speaks English, German, and French.

EAS Consulting Group, as part of the Certified Group of companies, merged with Food Safety Net Services, (FSNS), to become the global leader in testing and regulatory solutions for the FDA and USDA regulated industries. 

EAS’ network of 200 independent advisors and consultants enables us to provide comprehensive consulting, training and auditing services, ensuring proactive regulatory and quality compliance for food, dietary supplements, pharmaceuticals, medical devices, cosmetics, tobacco, hemp and CBD.

The merger of FSNS (FSNS.com) with the Certified Laboratories group of companies, (certified-laboratories.com), has created a leading, national testing  and regulatory consulting  platform. EAS can assist with your regulatory and quality requirements and challenges, while offering access to a robust scope of testing services to meet your organization’s sophisticated needs. 

From regulatory strategy, auditing, training, FDA inspection preparation, 483 & Warning letter remediation, quality system implementation, labeling compliance, preparation of technical submissions such as GRAS, Food Additive Petitions, DMFs, NDIs, 510(k)s and more; to FSMA compliance, expert witness services and due diligence assessments, EAS offers the expert knowledge and experience your company requires to ensure compliance through accurate and timely assistance. With our vast expertise in FDA’s and USDA’s policies and enforcement, EAS is the proven choice for assistance with product testing and other regulatory and quality consulting solutions. easconsultinggroup.com 

 

Committee Blog: Protecting Innovations in Cannabis Technology

The Role of Patents in the Industry, Now and in the Future

Paul Coble is an intellectual property attorney and Chair of NCIA’s Cannabis Manufacturing Committee; Scott Seeley is an intellectual property attorney with Eastgate IP and is Organizer of the Cannabis Manufacturing Committee

Competition in the cannabis industry has always been fierce. To date, most competition has focused on securing licenses and sales territory. But, as markets saturate and the green pastures are all claimed, the battlefronts must shift. Cannabis companies now look to collect non-geographic assets, such as market share, profitability advantages, and a durable brand presence.

Intellectual property law provides mechanisms to capture and monetize these intangible assets. Assets that give a company a competitive advantage can build value into a business beyond its balance sheet. Well-crafted IP portfolios not only deter freerider copying, but are also valuable assets that can be sold, licensed, or provide incentive for investment or acquisition by larger entities. Businesses with a strong IP strategy are able to maintain their edge over their competitors by protecting their investments in technology and marketing to discourage competitors from utilizing their newfound developments or improperly capitalizing on their brand recognition.  

Ignoring cannabis IP not only leaves this value on the table, but exposes the business to unnecessary risk. As in all other industries, cannabis companies must recognize that competitors have IP portfolios that may need to be avoided or licensed. Modern competition requires solidifying your own rights as well as understanding the rights of others.  

Intellectual property is often broadly broken out into four major categories.  Each category is tailored to protect different forms of intangible assets:

  1. Patents (Technological Developments)
  2. Trademarks (Brand Recognition, Consumer Goodwill)
  3. Copyright (Original Authorships and Expressions)
  4. Trade Secret (Information Providing Competitive Advantage)

This blog post overviews patents, and how patents can be used by cannabis businesses to protect their technological advancements. This is the first of a 3-part series about cannabis IP. The series will culminate with a Q&A-based webinar on April 19 at 1:00 PM ET. Advance questions can be sent to paul@thalo.io.

What are Patents?

Patents protect technological advancements and can be used to exclude others from making, using, importing, or selling a claimed technological innovation. 

Patents are often used by businesses to build walls around technologies they develop to temporarily prevent competitors from using the same advantages. Companies also use patents to build portfolios of technology that can be sold or licensed like any other asset, or used to bolster their valuation for acquisition or investment opportunities. 

But patents are not just used to block competition, they can also be a tremendous source of information about technological developments in the field. While patent discovery tools are admittedly lacking at the moment (GooglePatents is a good place to start), the details in a patent can often short-circuit months or years of work. Of course, depending on the patent claims, you may need to license the patent in order to use that information.  But that type of information-for-licensing-rights exchange, with the right mentality on both sides, is the foundation of an efficient industry.

Here are just a few examples of the cannabis technology that may be patent eligible:

  • Cannabis Strains
  • Formulations for Extracts, Topicals, Tinctures, Vape Liquid, Edibles
  • Vaporizer Design
  • Cartridge Design
  • Extraction Methods
  • Manufacturing and Processing Methods

There are three types of patents that can be used to protect cannabis technology: Utility, Design, and Plant. These types of protection are not mutually exclusive and sometimes can be combined to form a more comprehensive protection strategy. 

Utility Patents

Utility patents are the most popular type of patent, offering the broadest and strongest form of protection. Utility patents last 20 years from the date of filing and are good for protecting nearly any new technological innovation including formulations for extracts, topicals, tinctures, or edibles, new vaporizer designs, new improvements to processing or manufacturing methods, and similar developments. Utility patents can also be used to protect new cannabis genetics, at least theoretically. As discussed below, however, there are several practical barriers to patenting cannabis genetics.

A significant benefit of utility patents is that they can protect the actual function of an innovation, rather than just the outwardly recognizable features or the specific implementation. This aspect of protection sets utility patents apart from other forms of protection like design patents and copyright, which are limited non-functional aspects.

Design Patents

Design patents protect an item’s unique ornamental appearance. Design patent protection is sometimes easier to obtain than utility patents because design patents only protect the look of an item, not how it works. So design patents do not protect against someone selling a functionally identical device with a different outward appearance. This narrower protection also lasts only 15 years instead of 20.

Nevertheless, design patents can be a strong tool to protect products that have a novel and distinct design aesthetic. They can cover the visual appearance of vaporizer batteries or cartridges, retail packaging, even unique dispensary displays. In some cases, design patents can be effectively combined with trademark and trade dress protections to create a highly defensible brand style.  

Patenting Cannabis Strains

The most common questions about cannabis patents usually relate to patenting strain genetics. Newly developed strains can be protected by both utility and plant patents, with varying rights and requirements. Cannabis strains may also, theoretically, receive pseudo-patent protection under the Plant Variety Protection Act of 1970 (“PVPA”). As noted below, however, current practical realities make PVPA protection unattainable for most cannabis strains.

Both plant and utility patents can protect cannabis strains, but they do so very differently. Utility patents cover newly invented compositions of matter and, therefore, can be used to prevent copying a novel genetic sequence. These patents literally cover specific sequences of DNA base pairs. A key requirement of utility patents is that the applicant must enable others to make and use the same invention once out of patent. While it may be possible to meet the enablement requirement with a transgenic breeding or CRISPR gene editing, the more common method of enabling plant gene patents is with a biological deposit of seeds or other propagation material with a public organization. So long as cannabis remains federally illegal, it can be difficult or impossible to make the deposit within the U.S. Some applicants have had success making the seed deposit at foreign centers, but the growth of cannabis genetic patents has been slowed by these requirements. When cannabis is eventually descheduled, the practical barriers to genetic patents will fall and that may trigger a rush by more companies to seek patents for their proprietary cannabis strains.

Plant Patents

Another form of patents, plant patents, can protect new plant varietals that have been reproduced asexually. Although cannabis plants are relatively easy to reproduce asexually via cloning or cutting, one disadvantage of this form of protection is that plant patents only cover genetically identical copies, reproduced asexually from the claimed plant. That means to infringe a plant patent, one must physically clone the patented plant–a narrow base for an infringement claim.

Plant Variety Protection Act

The last vehicle that can protect a new cannabis strain is the Plant Variety Protection Act that was designed specifically to protect sexually reproducing plants, such as cannabis.

The PVPA, however, comes along with a strict requirement that at least 3,000 seeds of the claimed plant species be deposited with the U.S. Department of Agriculture in Fort Collins, CO. The USDA will not accept any deposits for plants that are classified as controlled substances, including cannabis. Meaning that, for the time being, PVPA protection is unavailable for cannabis plants that do not qualify as hemp (less than 0.3% d9-THC). 

The Process – How to Get a Patent

All patents start as applications which must be examined and approved by the U.S. Patent & Trademark Office (“USPTO”) to become granted patents. The application process, from start to finish, can last 1-5 years and cost anywhere between a few thousand to tens of thousands of dollars.  

The examination involves a review of the patent application, as well as related literature published before your application was filed (also called “prior art”). An examiner with technical expertise in the application’s field will search for prior art and determine whether the application meets all statutory requirements. Most notable of those requirements are that the invention must cover eligible subject matter and be sufficiently inventive to warrant a patent.

The prosecution process typically involves letters back-and-forth between the inventor and the Patent Office. It is often thought of as a negotiation — nearly all patent applications receive at least one rejection. The applicant is given an opportunity to change what the patent covers or explain why the rejection was wrong. Only if and when the Examiner is satisfied that all statutory requirements are met will the application be allowed to issue as a patent.  

How will Patents Shape the Cannabis Industry?

Like it or not, patents are rapidly becoming a major force in the cannabis industry. The cannabis industry is in a unique position to determine the role intellectual property will play, but one thing is certain: cannabis IP cannot be ignored. Some companies, like Canopy Growth, Nextleaf, and various pharmaceutical companies, are aggressively developing patent portfolios and high-stakes patent litigation is already underway. Additionally, holding companies known as “non-practicing entities” have been formed to purchase valuable patents covering key aspects of cannabis cultivation, manufacturing, and consumption.  

But these forces do not have to dominate the industry. Patents were originally designed to promote scientific advancement, not inhibit it. When the IP rights of others are respected and technology is licensed widely at reasonable rates, intellectual property can cut years and millions of dollars from research budgets. Some industries have found success with patent cooperatives and similar pooled-patent arrangements. The future may see some combination of patent licensing with blockchain technology, NFTs, or decentralized autonomous organizations (DAOs).

We will continue the discussion as to what an enlightened approach to intellectual property could look like in the cannabis industry in our webinar scheduled for April 19 at 1:00 PM Eastern. Please send any advance questions to paul@thalo.io.

 

 

SAFE Banking, Hemp, and SCOTUS Update

Photo By CannabisCamera.com

by Michelle Rutter Friberg, NCIA’s Deputy Director of Government Relations

Since I last provided an update from Washington, D.C., not much has changed in terms of cannabis reform. That being said, there are still a few short developments that we’ve been keeping an eye on that we want to bring to your attention! Keep reading to learn the latest:

SAFE Banking

SAFE Banking passed the House for the sixth time in February as part of the America COMPETES Act. More recently, a stakeholder meeting was held with lead champion Congressman Perlmutter that NCIA was proud to have participated in. 

During this stakeholder meeting, Rep. Perlmutter reviewed where the bill is at, the hurdles it must clear in order to pass, and reiterated his commitment to passing the bill before this session is over. Congressman Perlmutter also talked extensively about a recent hearing that the House Financial Services Subcommittee on Consumer Protection and Financial Institutions held titled “Small Businesses, Big Impact: Ensuring Small and Minority-Owned Businesses Share in the Economic Recovery.” Chaired by Rep. Perlmutter himself, the subcommittee heard testimony from the Minority Cannabis Business Association’s (MCBA) Executive Director, Amber Litteljohn, on the economic barriers federal policy has created within the burgeoning cannabis market.

Hemp

A few weeks ago, the United States Department of Agriculture’s (USDA) National Agricultural Statistics Service (NASS) released the results of the 2021 Hemp Acreage and Production Survey in its National Hemp Report. This is a massive, first-ever survey of its kind to be done at the national level, and is set to provide a “benchmark” analysis of the economic impact of the burgeoning newly legal market.

The survey collected data for hemp grown in the open and hemp under protection. Planted area for industrial hemp grown in the open for all utilizations in the United States totaled 54,152 acres. Area harvested for all utilizations totaled 33,480 acres. The value of U.S. hemp production in the open totaled $712 million. The value of production for hemp that was grown under protection in the United States totaled $112 million. Area under protection totaled 15.6 million square feet.

SCOTUS

The Supreme Court has officially asked the highest lawyer in the land, the solicitor general, to weigh in on cannabis.

Justices were asked whether or not employees seeking workers’ compensation for medical cannabis after being hurt on the job should receive the assistance, but before they do, they want the broader government to comment. They have requested that the solicitor general submit a brief on the topic. For more details, check out this great piece our friends at Marijuana Moment published.

While this week’s update was another “hodge-podge”, NCIA’s government relations team continues to work hard at passing reform this Congress. We continue to meet with offices to elevate the need for SAFE Banking – primarily for small and minority-owned businesses, discuss the decimation that 280E is wreaking, and highlight opportunities for restorative justice. Interested in becoming more involved with lobbying and our government relations efforts? Contact Stefan at stefan@thecannabisindustry.org to talk about becoming an Evergreen Member today! 

U.S. Cannabis Business Conditions Survey Report Reveals Critical Concerns for the Cannabis Industry in 2022

by Beau Whitney, NCIA’s Chief Economist

As the largest national trade association of the cannabis industry, NCIA works to advocate for and advance the interests of hundreds of member businesses. The recent publication of the Whitney Economics U.S. Cannabis Business Conditions Survey Report offers a granular look at how respondents are feeling, and what they are worried about. 

Survey description

There were a total of 396 respondents to the Whitney Economics U.S. Cannabis Business Conditions Survey. Respondents were either licensed cannabis businesses or ancillary businesses to the cannabis industry, and were from 20 states across the country. According to the report, the objective of the survey was to “establish a baseline of data, and identify the successes and the challenges that operators in the industry are facing.” 

The survey examined policy, regulatory issues, industry successes, and overall industry sentiment using questions around demographics, questions intended to definitively answer a specific question, and questions with the opportunity to offer multiple responses or comments. We are pleased that NCIA members participated in the survey. Because this survey is intended to be conducted on a quarterly basis moving forward, we expect that a growing number of the NCIA membership will want to participate.

Key Takeaways From the Survey

  • Only 42% of respondents are turning a profit. Further, in terms of profitability, female respondents and non-white respondents are faring much worse than white, male respondents. 
    • While 58% of businesses overall are not making a profit (either breaking even or losing money), 62.5% of female-run businesses are not turning a profit and 67.8% of BIPOC businesses are not turning a profit. 
  • Lack of banking, market volatility, and state & federal taxation are the key issues facing cannabis operators. 
    • 72% of respondents stated that access to banking and other financial services was the top issue facing them.
    • Smaller operators are struggling by being pulled in two different directions. On one side is the competition from the illicit market that competes for the same customers as the smaller operators and the other side is the ever presence of big businesses looking to consolidate the market.
    • Taxation is an issue that impacts all businesses regardless of size. Cannabis operators run the risk of being taxed out of business. State policymakers are focused on state issues without considering the impact of federal policy and federal policymakers are not considering the state policy. This lack of a unified tax policy is creating strain on business operators. 
  • The concerns of the industry are weighing heavier on the minds of operators than are the successes, and this is impacting industry sentiment.
    • Business owners are quite proud of their accomplishments over the past year, from increasing opportunities for women and minorities, to doing more for their workers and educating an ever-increasing clientele.
    • Despite this success though, cannabis operators’ concerns far outweigh their feeling of success and this is impacting the overall sentiment.
    • The word cloud on the successes tells a compelling story.

We are very excited that we have now established a baseline of new data that reflects operator sentiment and business conditions. This can help support the narratives with data when having policy discussions at the state and federal levels and to help shape strategy for operators in this space.

“We are delighted on how this initial survey turned out and look forward to surveying the cannabis landscape regularly in the future. We really appreciate the support we received from leading national cannabis organizations such as NCIA.” – Beau Whitney

2022: A New Year In Cannabis – What To Watch 

Photo By CannabisCamera.com

by Michelle Rutter Friberg, Deputy Director of Government Relations

With the start of 2022 also comes the final year of the 117th Congress. Last year was marked with some small victories, although meaningful cannabis reform has yet to be enacted on the federal level this session. While it’s a midterm election year, I have no doubt that we’ll see some significant movement over the coming months. Keep reading to see my answers to some of your FAQ’s for the new Congress:

What’s going on with the SAFE Banking Act?

You’ll remember that during the 116th Congress, the SAFE Banking Act became the first cannabis-related bill to be passed by a chamber of Congress. It also became the first piece of cannabis legislation to pass the 117th Congress in April of 2021 by a vote of 321-101. Since last spring, the bill has languished in the Senate due to disagreement over enacting comprehensive versus incremental reform.

This year, expect pressure on the passage of SAFE to increase. While efforts to enact comprehensive reform continues, the votes are simply not there as of now. If you’re interested in learning more about this conundrum, take a look at this piece that the Brookings Institute recently posted.

NCIA is continuing to build support for the SAFE Banking Act in the Senate, but some big news was announced this week that will certainly impact the legislation in the future: longtime champion and lead sponsor, Rep. Ed Perlmutter (D-CO), just announced that he will not be running for re-election next session.

What’s next for comprehensive cannabis reform? Is legalization on the horizon?

There are numerous bills that have received much attention in terms of descheduling cannabis – among them the MORE Act (H.R. 3617), the States Reform Act (H.R. 5977), and the discussion draft (not formally introduced) of the Cannabis Administration and Opportunity Act (CAOA). 

Back in the 116th Congress, the Marijuana Opportunity, Reinvestment, and Expungement (MORE) Act became the first piece of comprehensive legislation to pass the House of Representatives by a vote of 228-164. More recently, the MORE Act passed out of the House Judiciary Committee in September 2021 by a vote of 26-15. While this is certainly news to be celebrated, the bill has been referred to another eight committees of jurisdiction and faces a more conservative chamber overall than last session for full passage.

The States Reform Act is a newer piece of legislation that was introduced in the House by freshman Congresswoman Nancy Mace (R-SC). The bill deschedules cannabis, regulates it through ATF/TTB for cannabis products and FDA for medical use, and institutes a 3% federal excise tax on products to fund law enforcement, small business, and veterans mental health initiatives. Many have lauded the pro-business elements of the bill, however, additional provisions must be added to address equity and restorative justice. It’s unlikely that the bill will move this Congress for partisan reasons – particularly during an election year. 

As for the Senate-led CAOA – there are too many unknown elements to make any real predictions! Senate Majority Leader Schumer (D-NY), Finance Committee Chairman Wyden (D-OR), and Sen. Cory Booker (D-NJ) outlined their plans for the CAOA in February 2021, unveiled the text in July 2021, with comments due by September 1 (make sure you check out NCIA’s response!). Due to the sheer magnitude of input received, the never-ending pandemic, and other legislative priorities, official language still has not yet been introduced. NCIA continues to work with the sponsoring offices on the CAOA and anticipates introduction in the spring. 

What’s going to happen at the committee level?

If you’re following cannabis policy at the federal level, definitely keep your eyes on what’s happening in various congressional committees. Given that there were few cannabis-related hearings and markups in 2021, I’m hopeful that there will be more this year. I’ll specifically be keeping my eye on both chambers’ appropriations, financial services, tax, and judiciary committees. 

Midterm elections will be here before we know it, but NCIA is continuing to keep the pressure on our elected officials to reform our outdated cannabis laws. Want to learn more about what’s possible? Make sure your company is an active member of NCIA and register for our next webinar, check out our podcast, and hop on over to NCIA Connect to chat with us and learn more about what we’re working on in D.C.!

 

NDAA Blues, But HOPE On The Horizon

by Morgan Fox, NCIA’s Director of Media Relations

The last week or so has been an interesting one in Congress when it comes to cannabis policy reform, and carried with it the usual mix of positive and unfortunate developments.

First, in yet another installment in the long and ongoing saga that is the SAFE Banking Act’s path toward becoming law, a minor setback. Champion and lead sponsor Rep. Ed Permutter had been working for weeks to get SAFE Banking language included in the NDAA, or National Defense Authorization Act. This spending package is typically focused on security and military matters, and is considered “must-pass” legislation by both chambers. Now, you may be asking what allowing banks to more easily work with legal cannabis businesses has to do with national security, and the answer – oddly enough – is a lot. Beyond the obvious public safety benefits of no longer forcing most cannabis businesses to operate entirely in cash and making them targets for crime, allowing access to banking would dramatically increase financial transparency in the industry. This would give law enforcement additional tools to help prevent the admittedly rare occurrences of criminals extorting legal businesses or using them to launder money, which is certainly a security concern. Perhaps even more relevant, being able to use the financial services that are available to other legal industries would help remove significant barriers to entry into the legal market and allow small cannabis businesses to be more competitive with unregulated operators, some of whom have ties to international drug trafficking organizations that present an ongoing threat to global security.

Unfortunately, Rep. Perlmutter decided not to add the banking language to the NDAA at the urging of Speaker Pelosi in order to ensure the spending package would pass without issue. Despite this compromise, however, Rep. Perlmutter has vowed to attempt to add it to every available legislative vehicle going forward. Given the fact that the Senate is currently stalling on the SAFE Banking Act as a standalone bill, this may be the most viable strategy of getting cannabis banking reform through both chambers before the end of the current Congress.

Speaking of other vehicles for reform, the ongoing appropriations process continues to hold hope for passing a number of cannabis-related items in the near future. Lawmakers recently approved a continuing resolution to fund the government through February and avoid a shutdown. This means that there will be no changes to the previous budget until then, but it does give us more garner support for the provisions that we want to make sure are part of that spending package. That includes preventing the Department of Justice from targeting state-legal adult-use cannabis businesses and programs, SAFE Banking, improving access for veterans, expanding research, and more.

In better news, Reps. David Joyce (R-OH) and Alexandria Ocasio-Cortez (D-NY) partnered up to introduce a bill that would provide federal support for state-level expungement efforts. The Harnessing Opportunities by Pursuing Expungement (HOPE) Act would allocate $20million for a grant program to help reimburse states for the costs associated with expunging non-violent cannabis convictions. This is incredibly important because most of the federal expungement conversation has focused around federal convictions, yet the vast majority of arrests and convictions occur under state laws. Most states lack the resources and infrastructure to effectively address this issue at a large enough scale and in a manner that is affordable to the victims of prohibition who are just trying to clear their records of convictions for behavior that is now legal for a majority of Americans. It is wonderful to see bipartisan support for this important legislation, and we look forward to working with lawmakers to push it through as soon as possible.

That’s all for now, but stay tuned for further updates from Capitol Hill. And don’t forget to register for NCIA’s Cannabis Business Summit in San Francisco next week!

 

The PACT Act Final Rule Has Been Released Prohibiting the Mailing of Cannabis/Hemp Vaporization Products. Is Your Business Ready?

By Rachel Kurtz-McAlaine, NCIA’s Deputy Director of Public Policy 

After months of delay, the United States Postal Service (USPS) has released its FINAL rule enforcing the Prevent All Cigarette Trafficking (PACT) Act, effective October 21, 2021, and unfortunately, they are indeed applying it to cannabis/hemp vaporization products. The PACT Act has now made it extremely difficult for anything related to vaporization to be mailed, either business to business (B2B) or business to consumer (B2C). Your business could be affected even if you are not mailing out products. Although this is a massive burden on the cannabis/hemp vape industry, there are ways to deal with it. NCIA remains vigilant in making sure the federal government understands this unnecessary hardship to the industry, and making sure our members are fully educated on this issue.

What is the PACT Act?

The Prevent All Cigarette Trafficking (PACT) Act went into effect June 29, 2010, applying strict regulations to the mailing and taxation of cigarettes and smokeless tobacco products, effectively banning the mailing of cigarettes unless authorized by an exception. With the rise of e-cigarettes, especially their popularity among youth, Congress decided that vaporization products should be included in those provisions. On December 27, 2020, Congress modified the definition of “cigarettes” to include Electronic Nicotine Delivery Systems (ENDS), broadly defining ENDS to include nearly all vaporization products, regardless if they contain nicotine or are used for nicotine. Specifically:

“(1) any electronic device that, through an aerosolized solution, delivers nicotine, flavor, or any other substance to the user inhaling from the device; and (2) any component, liquid, part, or accessory of an ENDS, regardless of whether sold separately from the device.”

When the USPS issued their notice of proposed rulemaking, they received more than 15,700 comments, with many expressing frustration with the broad interpretation of ENDS, so the USPS delayed issuing FINAL rules while it considered the practical application to the unique cannabis and hemp industries. NCIA was proud to submit comments with a broad coalition and to issue an action alert to get our members to express their concerns. 

In the meantime, the USPS issued a guidance document (“April 2021 Guidance”) (86 FR 20287) to help prepare businesses for the final rule and what documentation will be needed to apply for an exception. The exceptions include:

  • Intra-Alaska and Intra-Hawaii Mailings: Intrastate shipments within Alaska or Hawaii;
  • Business/Regulatory Purposes: Shipments between verified and authorized tobacco-industry businesses for business purposes, or between such businesses and federal or state agencies for regulatory purposes;
  • Certain Individuals: Lightweight, non-commercial shipments by adult individuals, limited to 10 shipments per 30-day period;
  • Consumer Testing: Limited shipments of cigarettes sent by verified and authorized manufacturers to adult smokers for consumer testing purposes; and
  • Public Health: Limited shipments of cigarettes by federal agencies for public health purposes under similar rules applied to manufacturers conducting consumer testing.

18 U.S.C. 1716E(b)(2)-(6). These exceptions are the ONLY way to mail these products moving forward. Unfortunately, the USPS was not accepting applications for exceptions until the final rule was published, but now that it has been published, it is time to apply for an exception.

FedEx and UPS have already banned delivering these products, so they are out as an alternative.

How can it affect me?

If you manufacture, sell, or buy vapor products, you will be affected. Manufacturers and distributors who use the mail to get their products to stores for resale (B2B) will have to apply for an exception through the USPS Pricing and Classification Service Center. If you are a business receiving these products, you will have to work with the business that mails it to you to be included in their exception as a recipient. If you are a retailer who delivers vaporization products to consumers via the mail, such as online retailers (B2C), you will also need to apply for an exception. If you buy the end products as a consumer, expect an increase in price because of the extra costs placed on the suppliers.

What should I do?

If your business has ANYTHING to do with the manufacture, delivery by mail, or retail of cannabis/hemp vaporization products, including liquids, batteries, empty cartridges, etc., you should get familiar with this final rule that is in effect as of October 21, 2021. The USPS spends the time addressing potential issues or suggestions from the comments it received, so any questions of why they did something are probably answered there.

You will also want to read the guidance document the USPS issued in the Spring that details if you qualify for an exception and how to apply for it. This will require cooperation between the mailer and the recipient, so make sure you are working with your supplier/retailer to get all the necessary information.

What is NCIA doing?

NCIA remains committed to making sure our members understand all of the legal ramifications and how to continue operations despite this rule. We continue to work with our coalition partners to better understand the effects and best practices, and will share with you as much information as possible to ease the transition via blog posts and webinars.

I will be participating in a webinar on November 9, 2021, that will be diving deeper into the PACT Act, how your business can operate with it, and how, if any, the tax considerations of the PACT act apply to cannabis/hemp businesses: PACT Act Leaves Vaping & CBD Industries in a Fog: The Latest Tax and Legal Considerations.

As always, feel free to contact me Rachel@TheCannabisIndustry.org with any questions or concerns.

 

Member Blog: Protecting Your Cannabis Business from Ransomware

by Eric Schlissel, CEO/CTO of Cure8

Ransomware is everywhere in the news lately. It caused the shutdown of the largest refined oil pipeline in the U.S.; disrupted the operations of the world’s largest meat processing company; and continues to disrupt operations at hospitals around the world, even as the pandemic has surged and waned and surged again. 

The question many cannabis businesses are asking themselves these days is – could I be a target, too? 

The answer is yes, since ransomware gangs target businesses of all sizes and in all industries, including cannabis. At the same time, there are a couple of reasons why many cannabis businesses are less likely to be targeted, which we’ll get into.

What Is Ransomware?

By definition, ransomware is a type of malware that encrypts your files so that they’re inaccessible and demands a ransom in the form of cryptocurrency in exchange for a decryption key to restore your data.

Ransomware is designed not only to encrypt the files on the device it infects, but also the files on anything that the device has access to, including other computers, servers, company file shares, and backups. You can run into a situation where literally all your company’s important files are encrypted before you even realize what’s happening.

Why Windows Is Key

Most forms of malware, including ransomware, are designed to target Windows devices only, mainly since it’s the most popular operating system (OS) in the world and the one that most businesses use.

Fortunately for cannabis companies, most of their actual operations don’t rely on Windows. Most cannabis point of sale (POS), enterprise resource planning (ERP), and cultivation software and industrial systems are non-Windows or cloud-based, though there are a few exceptions to this including BioTrack.

A lot of their most critical data – including track-and-trace and inventory and transaction records – are on these non-Windows platforms, and so are relatively safe from being encrypted by ransomware.

Still, a lot of them still use Windows PCs and servers in their back offices and headquarters. 

So while a ransomware infection might not be a complete disaster for most cannabis businesses – resulting in days and weeks-long outages and recoveries for the entire company – you still have to worry about critical administrative and other non-operations data being encrypted, as well as whatever damage hackers might do with access to your back office and HQ networks, including stealing intellectual property and banking info. 

Protecting Yourself from Ransomware

Firewalls

Network-level firewalls, the IT equivalent of a dispensary security guard checking IDs at the door, can protect you from ransomware by blocking traffic from unknown, suspicious, or blacklisted domains (keeping hackers from both entering your network and transferring data in and out); preventing users from accessing malware-laden sites like adult, gambling, and piracy sites; filtering out malware and spam; and alerting you to suspected intrusions.

Employee Training

The most common source of ransomware? Employees doing things they shouldn’t, like opening attachments in emails from people they don’t know, getting tricked into entering their passwords into phishing websites, visiting websites they shouldn’t be accessing at work, or setting passwords that are easy to guess. Make sure to train them on how to use IT securely when at work.

Secure Your Windows Machines

Including by protecting all Windows machines with strong passwords; setting up encryption (the good kind that prevents hackers from accessing your data); never giving users admin-level Windows access; requiring that users get permission before installing applications; giving users access to only the applications, files, and servers they need access to; applying security updates as soon they’re released; and installing antivirus or enabling Windows Defender.

Backups

Backing up your data won’t prevent a ransomware infection, but it will allow you to recover your data without having to pay the ransom. Just make sure your backups are isolated enough from the rest of your system that 1) your backups aren’t encrypted; 2) you don’t overwrite your backups with the encrypted versions of your files; 3) you don’t back up the ransomware itself.

Ransomware Isn’t Just a Threat, It’s a Wake-Up Call

We don’t know all the details about the Colonial Pipeline hack, but recall that it reportedly wasn’t actually ransomware that brought down the pipeline itself. Instead, ransomware affected some other areas of the company, and Colonial shut down the pipeline to be safe and determine the full extent of the hack.

So just because your most important applications and data are relatively secure from ransomware doesn’t mean you’re not susceptible to hacking in general.

Even if hackers break into your systems and can’t encrypt your files to hold them for ransom, they can still:

  • Steal credentials
  • Lock you out of your accounts
  • Steal sensitive data including intellectual property, banking info, customer data, embarrassing emails, etc. and leak this data on the internet
  • Use their access or stolen information to trick employees into wiring them money

So don’t view ransomware just as a threat in itself that may or may not affect your business. Cyber attacks existed before ransomware and will still exist after it, if they’re ever brought under control. 

View it as an opportunity, now that IT security is as on the top of everyone’s mind as it’s ever been, to take a serious look at your IT security and make the needed investments to protect yourself against both current and future threats.


Eric Schlissel is the CEO/CTO of Cure8, one of the world’s leading cannabis IT services providers. His company helps dispensaries, distributors, manufacturers, and cultivators throughout the U.S. and Canada to plan, install, secure, manage, and scale their IT.

He has been a featured panelist at many cannabis industry events, including those put on by the NCIA and CCIA. He’s also a respected IT thought leader outside of the cannabis industry, being quoted in publications such as Wired, the Los Angeles Times, InfoWorld, and Information Week. Outside of work, Eric can be found gardening with his two small children, trying to perfect the feat of growing a thriving basil plant and ripened tomatoes at the same time. He is currently developing in the fine art of bourbon tasting, enjoys travel, and is a foodie-wannabe.

FDA Punts on Regulating CBD Again

by Morgan Fox, NCIA’s Director of Media Relations

Last week, the hemp and CBD industries took another blow from the Food and Drug Administration when the agency refused to grant a request from prominent CBD producer Charlotte’s Web to regulate the substance as a dietary supplement. This is the latest in a series of delays and setbacks on the part of the FDA when it comes to regulating hemp-derived cannabinoids and products since they became technically legal at the federal level under the 2018 Farm Bill.

Bloomberg reports: “The company’s bid to sell its full-spectrum hemp extract with CBD as a dietary supplement won’t be considered because of the FDA’s own prior decision to treat CBD as a drug, according to a letter posted on the agency’s website Wednesday. This shouldn’t disrupt the business of Charlotte’s Web or prevent other companies from continuing to sell such products, which already exist in a gray area without the agency’s oversight. The decision shows the agency’s ongoing hesitancy to regulate cannabidiol, the non-psychoactive ingredient in cannabis plants better known as CBD… The FDA’s objection rested in part on its prior approval of Epidiolex, a CBD drug to reduce seizures, which the agency said precludes it from authorizing CBD for dietary purposes. Even if the drug hadn’t been approved, though, the FDA said in the letter to Charlotte’s Web dated July 23 that it “has concerns about the adequacy of safety evidence” that the company submitted.”

You can read the full FDA letter here.

This position is likely to create serious problems for the CBD industry. Without allowing CBD products to be regulated as dietary supplements or food additives, the FDA will be forcing producers to get federal approval for their products under the Investigational New Drug program. This process can often take years and cost applicants millions of dollars.

This casts even more doubt on what the future of the CBD market will look like as producers continue to operate in an uncertain landscape. The legality of CBD combined with the lack of federal regulations has created a lot of opportunities for responsible producers to bring products to market without dealing with the often overly strict state cannabis programs, but it has also opened the door to irresponsible operators who have been accused of actions from making misleading or unsubstantiated health claims to selling mislabeled or adulterated products.

Furthermore, the lack of federal regulations has discouraged many larger retailers from selling CBD or hemp-derived products altogether, drastically limiting the market options for producers. Some industry insiders have theorized that lack of access to those retailers has directly led to some producers desperately searching for ways to unload their excess CBD, including processing it into unregulated Delta 8 THC and flooding the markets in both legal and prohibition states, creating concerns among regulators, lawmakers, licensed cannabis operators, and consumers.

This troubling news follows on the heels of another memo issued by the Farm Credit that suggests that financial institutions that provide financing to hemp businesses should only do so if the company is operating under the auspices of a USDA-approved state hemp program.

“While many states and federally recognized tribes have since submitted those plans, 20 states are still operating under an earlier provision: a hemp pilot program created by the 2014 Farm Bill. That program, which is still valid and would be further extended under pending legislation that has passed the House and is pending in the Senate, requires less federal oversight than the new USDA-approved programs,” Marijuana Moment reports.

Some in the industry are concerned that the memo will lead to lenders dropping their hemp clients operating under the pilot programs, but others have suggested that it will not have a significant impact on the lenders who are already working with hemp businesses given the amount of reporting that they must already complete for the federal government and the lack of federal prosecutions for doing so historically.

It seems pretty clear by this point that the FDA will not move forward with regulating CBD in a timely and reasonable manner without outside pressure. You can add your voice to the chorus calling for sensible CBD regulations by visiting RegulateCBDNow and urging Congress to take action.

Member Blog: Does Your Cannabis Brand Need Social Media? Yes, But Not For the Reasons You Think

By Aaron Rosenbluth, Hybrid Marketing Co

Every cannabis brand needs social media. But, the reasons to be on social media, and how you should approach your accounts might surprise you.

Social media is a powerful tool for all businesses today. Even in the cannabis industry, where most paid advertising opportunities – including paid social – are off the table. 

It’s an effective way to communicate with customers directly. Social media lets your cannabis brand or dispensary start meaningful conversations – it’s a place to develop and nurture a community. But should you look at social media as a primary business driver? Probably not; hear me out. 

Five years ago, when I started managing social media accounts for cannabis brands, organic engagement wasn’t easy, but it was easier than it is today. Marketers (like me) remember the era of chronological Instagram feeds and simplified Facebook algorithms fondly. Five years ago, getting organic attention from your followers was more straightforward. It was also easier to build an audience quickly. 

Strict regulations are a constant battle for cannabis businesses marketing on social media. We’re violating every platform’s terms of service and community guidelines just by being there. Every cannabis brand wants social dominance. I’m here to deliver unfortunate news; social media dominance is off the table for most of you. 

Today, you can only expect to reach about 3% of your audience on most social media platforms. And that’s if your content is excellent. But even with amazing content, algorithms are your enemy, and hashtags only get you so far. 

It can feel like an impossible challenge. We’re tasked with bolstering brands but walk a tightrope of rules to keep posts and accounts from getting the boot. 

Do cannabis brands still need to be on social media? Yes. Here’s why. 

You can access a limitless direct-to-consumer digital platform if you can manage to grow and maintain a social media following. But, of course, it’ll take time to build an engaged community (for many of you, it’ll take years of hard and consistent work), and you need to be realistic – don’t put all of your cannabis marketing eggs in the social media basket; there are other ways (email and programmatic advertising for example). 

Still, social media is a business necessity today, just like printer cartridges or desk chairs. You must be there – even if the task is seemingly impossible. 

What makes excellent social media content? 

Every marketing “expert” on the internet will tell you the key to social media success is excellent content. And that’s true. But, what makes for awesome content is relatively subjective – it’s not for you or me to decide. So, who gets to decide what makes terrific content? Your customers, that’s who. 

How do you determine if your customers think your content is excellent? They’ll reward you with engagement. And engagement is virtually the only thing almighty social media algorithms care about. 

Maybe your customers love ridiculous memes; perhaps they prefer higher-brow lifestyle content. If you run a dispensary, your customers might love seeing their favorite budtenders highlighted on your feeds. If you’re a cultivator, your customers probably think drool-worthy strain content is excellent (be careful, Instagram is advanced enough to find flower images, and that violates TOS and community guidelines). 

Here are a few social media post types you should consider:

  • Expert Budtender Recommendations 
  • Cultivation Behind-the-Scenes
  • Aspirational Lifestyle Imagery and Content
  • Humorous Memes for Cannabis Enthusiasts
  • General Cannabis Education
  • Product Education
  • Consumption Tips and Guidelines

You need to deeply understand your customers (that’s why we’re persona development sticklers) and craft a content strategy explicitly designed for engagement. Of course, I’m vastly oversimplifying this process – it takes time and a lot of testing to determine what will work best for your cannabis brand. But the results are often worth the work. Let your customers tell you what they want. 

Even with excellent content, you need to be realistic. 

I’m going to break some hard news to you – even with genuinely excellent content, you can still really only expect to reach around 3% (as I mentioned earlier) of your total audience. So whoever told you that organic engagement on social media is easy lied to you. 

Most people think there’s one overarching algorithm controlling what we see on our social media feeds. But, in the case of Instagram, for example, several algorithms work together, making tiny decisions in real-time to determine the posts you see. 

Adam Mosseri (head of Instagram) talks about how their algorithms work in a recent blog

“One of the main misconceptions we want to clear up is the existence of “The Algorithm.” Instagram doesn’t have one algorithm that oversees what people do and don’t see on the app. We use a variety of algorithms, classifiers, and processes, each with its own purpose. We want to make the most of your time, and we believe that using technology to personalize your experience is the best way to do that.

When we first launched in 2010, Instagram was a single stream of photos in chronological order. But as more people joined and more was shared, it became impossible for most people to see everything, let alone all the posts they cared about. By 2016, people were missing 70% of all their posts in Feed, including almost half of posts from their close connections. So we developed and introduced a Feed that ranked posts based on what you care about most. 

Each part of the app — Feed, Explore, Reels — uses its own algorithm tailored to how people use it. People tend to look for their closest friends in Stories, but they want to discover something entirely new in Explore. We rank things differently in different parts of the app, based on how people use them.” 

Instagram wants to personalize content for users, so it’s constantly making small decisions to reach its goal. Your job (and ours, as marketers) is to understand our customers deeply enough to create unique personalized experiences (I prefer to use the word experience over content in this scenario). Still, the algorithms pose a challenge which is why you need to understand that it’s going to take a lot of time, a lot of trial and error, and more content than you think you can possibly create in a lifetime to build and manage a loyal – and engaged – community. 

It’s not impossible, but it’s not easy – many of you will fail. But still, you must be there because your customers expect you to show up for them in the places they hang out digitally. Of course, it doesn’t hurt to have the support of an experienced social media marketing team.


Aaron is Hybrid Marketing Co‘s Content Director, and he loves to write blogs. He’s written so many blogs that he’s lost count. And beyond his skills as a copywriter and storyteller, he’s an obsessive reader and researcher. Aaron writes on subjects ranging from cannabis to collaboration, social equity to HR software, interior design to cybersecurity. His words attract, engage, educate, and convert. Btw, Aaron hates the phrase “content is king” (even though content is king – and queen).

Hybrid Marketing Co is a Denver-based branding and marketing agency that specializes in building custom strategies that supercharge growth and drive revenue. Working with brands and businesses across the U.S. and Canada, Hybrid’s partners run the full-spectrum of the cannabis world including dispensaries, manufacturers, cultivators, and ancillary businesses. Visit hybridmarketingco.com to learn more about the Hybrid approach. 

 

Supreme Court of Cannabis?

Photo By CannabisCamera.com

By Michelle Rutter Friberg, NCIA’s Deputy Director of Government Relations

While it’s become commonplace to hear cannabis come up in the halls of Congress, and increasingly so in the White House, there’s one branch of government that has been quieter on the topic: the Supreme Court (SCOTUS). However, this week, conservative Justice Clarence Thomas changed that when the court actually declined to weigh in on a 280E case. 

Towards the end of 2020, a Colorado medical cannabis dispensary decided to ask the U.S. Supreme Court to review a lower-court decision that allowed the IRS to obtain business records in order to apply the 280E provision of the tax code. (Fun fact: NCIA member Jim Thorburn, of the Thorburn Law Group, was actually the counsel on record for this appeal!) According to the filings, the IRS overstepped its authority and also violated the company’s Fourth Amendment privacy rights. Some of the questions the company took to the highest court in the land:

  • Does the Fourth Amendment protect taxpayers from having confidential information released to the IRS and federal law enforcement authorities?
  • Does the application of Section 280E to state-legal marijuana businesses violate the federal constitution? 

Again, while SCOTUS declined to consider this appeal, Justice Thomas took issue with the underlying state/federal discrepancy in the country’s cannabis laws and issued a searing statement. He specifically discussed a 2005 ruling by SCOTUS in a case called Gonzales v. Raich. In this ruling, the court narrowly determined that the federal government could enforce prohibition against cannabis cultivation that took place wholly within California based on its authority to regulate interstate commerce. Check out a few excerpts from Justice Thomas’ statement below: 

  • “Whatever the merits of Raich when it was decided, federal policies of the past 16 years have greatly undermined its reasoning. Once comprehensive, the Federal Government’s current approach is a half-in, half-out regime that simultaneously tolerates and forbids local use of marijuana. This contradictory and unstable state of affairs strains basic principles of federalism and conceals traps for the unwary.” 
  • “Given all these developments, one can certainly understand why an ordinary person might think that the Federal Government has retreated from its once-absolute ban on marijuana. See, e.g., Halper, Congress Quietly Ends Federal Government’s Ban on Medical Marijuana, L. A. Times, Dec. 16, 2014. One can also perhaps understand why business owners in Colorado, like petitioners, may think that their intrastate marijuana operations will be treated like any other enterprise that is legal under state law.” 
  • “As things currently stand, the Internal Revenue Service is investigating whether petitioners deducted business expenses in violation of §280E, and petitioners are trying to prevent disclosure of relevant records held by the State. In other words, petitioners have found that the Government’s willingness to often look the other way on marijuana is more episodic than coherent.” 
  • “This disjuncture between the Government’s recent laissez-faire policies on marijuana and the actual operation of specific laws is not limited to the tax context. Many marijuana-related businesses operate entirely in cash because federal law prohibits certain financial institutions from knowingly accepting deposits from or providing other bank services to businesses that violate federal law. Black & Galeazzi, Cannabis Banking: Proceed With Caution, American Bar Assn., Feb. 6, 2020. Cash-based operations are understandably enticing to burglars and robbers. But, if marijuana-related businesses, in recognition of this, hire armed guards for protection, the owners and the guards might run afoul of a federal law that imposes harsh penalties for using a firearm in furtherance of a ‘drug trafficking crime.’” 
  • “Suffice it to say, the Federal Government’s current approach to marijuana bears little resemblance to the watertight nationwide prohibition that a closely divided Court found necessary to justify the Government’s blanket prohibition in Raich. If the Government is now content to allow States to act “as laboratories” “‘and try novel social and economic experiments,’” Raich, 545 U.S., at 42 (O’Connor, J., dissenting), then it might no longer have authority to intrude on “[t]he States’ core police powers . . . to define criminal law and to protect the health, safety, and welfare of their citizens.””

Just to be clear, these statements don’t change the law of the land, nor do they indicate formal policy developments. They do, however, show that the constantly shifting public perception of cannabis is affecting the way we as a society think about marijuana, which will, at some point, translate into policy. It’s no small feat that one of the most conservative justices on the Supreme Court has weighed in so substantially on this topic. Continue the momentum and join the movement with NCIA!

 

 

Video: NCIA Today – May 14, 2021

NCIA Deputy Director of Communications Bethany Moore checks in with what’s going on across the country with the National Cannabis Industry Association’s membership, board, allies, and staff. Join us every Friday here on Facebook for NCIA Today Live.

NCIA Statement on Derek Chauvin Conviction

by  NCIA Staff and members of NCIA’s Diversity, Equity, and Inclusion Committee

As the nation continues to struggle with the ongoing deaths of people of color at the hands of law enforcement, including recently those of 20-year-old Daunte Wright and 13-year-old Adam Toledo, we are relieved to see that George Floyd – whose killing by police officer Derek Chauvin last year sparked a global reckoning on institutional racism and the urgent need for criminal justice reform – will receive some form of justice with his murderer being held accountable in a court of law.

The fact that the Chauvin defense largely hinged on the presence of drugs in George Floyd’s system at the time of his murder should come as no surprise. Since its inception, prohibition and the accompanying dehumanization of people who use drugs have been used to justify unfairly robbing people of color of life, liberty, and property, with devastating generational effects. This bloody cycle must end.

While many of these deaths are not directly related to cannabis, they take place in the house of horrors that prohibition helped build, and it is our duty to dismantle the walls nearest us through substantive policy reform. Despite yesterday’s guilty verdict in the Chauvin trial, examples of justice like this are still far too rare and do little to ease the pain of those most affected. We acknowledge that there is still much work to do to right the wrongs of the past and ensure they do not continue into the future.

NCIA reaffirms its commitment to helping repair the racially and economically disparate harms caused by prohibition by removing criminal penalties for cannabis-related behavior and promoting a diverse and inclusive cannabis industry. We stand in solidarity with all those fighting against police violence and systemic racism.

Member Blog: Creating a Diverse, Inclusive, and Sustainable Cannabis Industry

By Rebecca Lee Katz, President, Pakaloh LLC

This year, a national outcry against police violence and the impact of COVID-19 on Black and brown communities initiated a reckoning with the legacies of oppression and injustice in the U.S. Along with recognizing our institutionalized and internalized racism, we have started to come to terms with our economic inequality now that the income gap is worse than it has been in 50 years and three families alone control more wealth than 50% of Americans.

As with the rest of the country, the cannabis industry is lived differently based on the intersectionalities of race, class, gender, orientation, (dis)ability, and veteran status. For example, already wealthy, white, male individuals have amassed fortunes in cannabis with roughly 74% of U.S. cannabis businesses owned by men and 81% by whites, according to a 2017 Marijuana Business Daily survey.

After most states designated cannabis “essential” during COVID-19, private individuals, family funds, and pension funds plowed $2.6 billion into corporate cannabis, and multi-state operators posted record sales in the hundreds of millions. Earlier in September, the second cannabis exchange-traded fund (ETF) was announced which involves an investment portfolio of multi-state operators, REITs, and CBD companies. In contrast, Black and brown communities face mass incarceration for that same plant whereby African Americans are four times more likely nationally to be arrested for cannabis offenses than whites, while in states such as Kentucky and Montana, almost 10 times more likely, cited by a 2020 ACLU report.

These economic barriers to entry entrench the lack of representation in cannabis. For most entrepreneurs, the main obstacle to starting a cannabis business is the lack of access to traditional banking. It takes at least $300,000 to open a cannabis retail store, and up to millions of dollars for other cannabis enterprises, according to the 2019 Marijuana Business Factbook. Without traditional banking, most professionals finance their businesses through family wealth or personal contacts – 84% of U.S. cannabis companies are self-funded by founders, and 22% capture additional funding through a Family and Friends Round, cited by that same report. In this system, minority entrepreneurs are at a disadvantage. U.S. median household net worth ranges from $171,000 for white families to $17,600 for African Americans, $20,700 for Latinx, and $64,800 for “Other,” based on a 2016 Federal Reserve Board survey. 

In addition to funding challenges, cannabis entrepreneurs must navigate onerous state and local regulations to obtain and maintain licensing. Some states have launched Social Equity Programs to help communities historically targeted by the criminalization of cannabis to now participate in the profits of legalization. However, even Illinois’s Social Equity Program, which is considered the gold standard, awarded only 21 out of its total 75 retail social equity licenses, leaving unclaimed 54 licenses that could have transformed the applicants’ economic circumstances. The 21 finalists were taken from a total pool of 1,667 applicants, which equates to only 1.3%. Low success rates stifle market entry and ensure that corporate, multi-state operators continue to saturate the cannabis space.

Beyond media proclamations, we must actualize an inclusive cannabis industry that reflects and celebrates the rich diversity of our community and provides equal opportunities to all professionals throughout the growth cycles of the market. We must operationalize sustainable businesses that produce unionized jobs and foster generational wealth. To do so, we must not only promote our own professional aspirations, but we must champion our friends’ and colleagues’ pathways into and up the cannabis industry.

While federal legalization remains the ultimate goal, local policies that would articulate a diverse, inclusive, sustainable cannabis industry must include explicitly legalized access to banking and finance, an overhaul of law enforcement and the criminal justice system, and social equity programs that encourage market activity. Until then, we must collectivize our professional resources and knowledge to build a true business community that empowers each of us to achieve our cannabis ambitions. 


Rebecca Lee Katz is an attorney at an international law firm and President of Pakaloh LLC, the free business resource for an inclusive cannabis, CBD, and hemp industry. Pakaloh offers three types of membership which are all free, and members may select as many as they choose.  Membership is available to 1) “Individuals”, including new and established entrepreneurs and professionals, 2) “Providers of Products”, or plant-touching businesses, and 3) “Providers of Services”, including ancillary services.

A WOC-owned company, Pakaloh provides its members with a comprehensive suite of services, starting with free information and discounts at financial institutions like banks, lenders, and payment processors that work in cannabis. Pakaloh also features free Business Tutorials that cover a range of cannabis topics from accounting to agriculture. These are informative, introductory online videos submitted by members that allow them to reach an audience of potential clients who may need to hire their services. Additionally, members may post and search for job opportunities.

Partner companies also offer discounts for members to use on individual and bulk orders. Members network on the site by accessing directories and sending messages directly to each other. Lastly, Pakaloh curates information on professional and activist organizations and events. Pakaloh is pledged to every community, and comes from pakalolo, an embrace of generations of the founder’s family in Hawai’i. Pakaloh holds true that no matter your roots, each of us aspires toward something greater than ourselves, be it our family, our nation, our cannabis movement.   

It’s Time to Spark the Vote! Calling On All Retailers to Mobilize Customers for the 2020 Election

by Etienne Fontan, Owner, Berkeley Patients Group, Founding Board Member, NCIA 

Despite having been marginalized and underrepresented in the political process for as long as prohibition has been policy, cannabis consumers are quickly emerging as an incredibly diverse and effective voting bloc in American politics. The impact of the cannabis consumer vote on state and local elections is palpable in these unprecedented times. As a beneficiary of this constituency base, we as an industry need to appreciate not just what elections have done to enable our businesses to exist today, but, critically how by lifting the voices of our patrons we are ensuring our own sustainability tomorrow. In fact, the backbone of the cannabis industry is our consumer base. Without consumers, there would be no local reform and, in most cases, no legal state market.

Today, we have hundreds of licensed retail stores across the country, and our industry is finally in a place where we can mobilize our customers nationally for the 2020 election. As retailers, it is now absolutely essential that we ensure cannabis consumers are effectively engaged, which is why we, at Berkeley Patients Group, are proud to join the Spark the Vote Retail Partnership Program. We are calling on every retailer out there to join us. 

Spark The Vote‘s Retail Partnership Program is a COVID-safe, cannabis consumer voter registration and mobilization drive. The goal is to leverage the growing number of public-facing cannabis retail networks, and allied businesses to promote the effort through in-store and online customer engagement. The campaign is bringing together hundreds of socially responsible operators from across the country that are committed to supporting public participation in the electoral process. This is an excellent opportunity for our industry to stand out as good corporate citizens by lifting the voices of the communities we serve, and by empowering our employees to support positive social change.  

There is no fee to participate as an official retail partner, and his campaign was designed specifically to minimize any staff or operational disruption. The only requirement is to promote get out the vote by displaying a QR code sign (graphic is provided) in a high-traffic, high-visibility location in the store, and highlight content on social media when necessary (language templates are provided). The sign acts as a COVID-safe, contactless voter registration station where a customer can use their phone to scan the code and quickly find out about their registration status, early voting, and other resources on how to participate and promote the democratic process.

In the words of Thomas Jefferson, “We do not have government by the majority. We have government by the majority who participate.”

For more information on Spark the Vote, how your organization can participate in the Retailer Partnership Program, or other partnership opportunities, please contact ben@sparkthevote.org or go to www.sparkthevote.org

 

[Sabrina Fendrick, Chief Public Affairs Officer, Berkeley Patients Group; Spark the Vote Advisory Board Member, contributed to this post.]

Member Blog: Operational Excellence In Cannabis

by Dr. Jon Thompson, Ph.D., CEO of extraktLAB

What is Operational Excellence?

Operational Excellence is basically having a goal that looks far ahead to the future of what ultimate business plans should be while analyzing every aspect of the business itself. This is accomplished by using evidence-based results to achieve a higher level of function than any other company in the same market. Whether issues are found in lean supply chain, revenue control, processes that may be unnecessary or serve a lower function than what is needed, or other areas in which money is getting tied up, Operational Excellence is a management philosophy based on a constant method of refinement. It is taking all of the thinking, ethics, and ideology of Lean Thinking, Six Sigma, and Scientific Management, and putting them into one category to cover a broad range of improvements. In this article, we will delve into how Operational Excellence ties in the cannabis and hemp industry.

Why Is Operational Excellence Important?

A company that is employing Operational Excellence will outperform its competitors in many ways, even if they are using a similar business strategy. How resources are being used will often decide which company is going to perform better. The superior company will have much lower operational risks because it will have done a proper and thorough analysis. It will have a lower operating cost because of constant improvements to enhance the information and material flow. And, it will likely have more revenue because of efforts made in the interest of saving money, which will create a higher value for customers and the business itself. Companies utilizing Operational Excellence develop the right culture for their industry while managing their processes and business in a systematic, analytical fashion.

Applications In The Industry

There are several ways this can be applied to the cannabis industry. We could speak at length about any of these topics, so we will try to stick to the most important points to watch for and ways to operate. This is much more of a state of mind than a list of ways to improve the overall success of a company. And the whole team should have this same method of thinking when operating in their respective departments because this is something that should cover the business as a whole. 

Lean Supply Chain

Controlling how much inventory you have on hand is important, not only fulfill orders but keep operations moving forward while minimizing waste. As an example, farmers often want to be paid for their material immediately. If they want to sell their whole yield, you would then have to store their entire crop in your warehouse. At the end of the day, this costs money and could possibly interfere with production while trying to process the material. A better solution would be to take the entire 500,000 lb processing deal but split it up into ten 50,000 lb shipments, or five 100,000 lb shipments. In this model, the farmer is paid sooner and you do not have an oversupply of product cluttering the warehouse and workspace. 

Value Stream

A value stream map is a visual tool that displays all critical steps in a specific process and easily quantifies the time and volume taken at each stage. Value stream maps show the flow of both materials and information as they progress through the process. Within that value stream is the value-added processes and non-value added processes. For example, all machines need maintenance in one form or another; however, particular circumstances will determine whether or not maintenance on a given machine will be considered value-added, or non-value-added processes. If the maintenance required is a routine scheduled maintenance, then it is considered to be a value-added process. If it breaks down because the scheduled maintenance was subpar, however, that would likely deem the maintenance a non-value process. As a rule, it is beneficial to eliminate all non-value processes in your value stream. 

The Invisible Killer

You can grow yourself out of business easily. In fact, this almost happened to our company. Because we were unable to wait 24 weeks for materials to arrive before we started manufacturing, we were pre-ordering to build up our inventory. As more orders start coming in, it is still necessary to have cash available to continue manufacturing – otherwise, it is not feasible to have a surplus of inventory. Bankers told us that we might have strangled ourselves with inventory. Fortunately for us, that did not happen, and since we have been using Operational Excellence to enhance the business, growth has never been greater. 

As a business owner you should always have an insight into how the operations are running. This takes it a step further by recording and analyzing the information of your cannabis operation and making decisions that are going to have the most benefit for continuous growth. Operational Excellence means you should be using a Business Execution System that efficiently and harmoniously incorporates the following components: Process Excellence, Performance Management, and Strategy Deployment. 


Dr. Jon Thompson, Ph.D., Chief Executive Officer of extraktLAB is a separations scientist, entrepreneur, and inventor. As a scientist, he has a strong technical background and industry experience in analytical instrumentation, in-vitro diagnostics, biotech, mining, and homeland security markets. During his cannabis industry career, Dr. Thompson has earned a strong track record of winning and implementing medical cannabis licenses in well-regulated, medically-modeled states. Dr. Thompson has assisted numerous companies to attain their goals in cannabis and hemp manufacturing, as well as market development, strategic marketing, and worldwide business-to-business alliance formation (including international markets). He received a Bachelor of Science degree in Biochemistry, Master of Science degree in Chemistry and a Doctor of Chemistry degree–all from the University of Minnesota.

The “Helpers” In The Cannabis Industry – Responding to COVID-19

By Bethany Moore, NCIA’s Communications Manager

As the entire world continues to navigate through the devastating COVID-19 pandemic, it can sometimes be difficult to see the silver lining. A beloved public television figure known as Mister Rogers famously told the story of how his mother urged him while watching “scary things in the news,” to “…look for the helpers. You will always find people who are helping.” 

This sentiment rings true for the cannabis industry here in the United States, as cannabis has been declared an “essential business” even during these initial, and most severe, phases of the shutdown. And in recent days and weeks, we are seeing how the cannabis industry itself has stepped up to become “helpers” in various ways, ranging from fundraising efforts to manufacturing hand sanitizer for the community. 

As we get through these difficult times together, one day at a time, let’s take a moment to celebrate the efforts of these NCIA members helping to make our world a better place.

Donations Of Supplies And Dollars

Seattle-area company Canna Brand Solutions, a custom packaging supplier and CCEL Vape hardware distributor, has donated 10,000 KN95 masks to local hospitals Providence Everett and Virginia Mason.

They’ve been fortunate to continue serving their adult-use and medical cannabis manufacturing partners who are deemed essential businesses. Through their strong relationships with manufacturers in China, they were able to procure the masks. 

Canna Brand Solutions’ CEO Daniel Allen shared, “During this challenging time, we can think of no better way to serve our community than support the people working to keep us safe and healthy.” 

Good Chemistry, a Colorado-based dispensary, donated $50,000 and masks. Read more in The Westword

Kind Colorado is participating in the CDC (Cannabis Doing Good) Gives fundraising campaign. 

Cannabis Doing Good (CDG) found nonprofit partners and fellow cannabis collaborators doing incredible work to support the hungry, the unhoused, medical providers caring for our sick, and our frontline workers at dispensaries and restaurants. Together – they created a platform for the cannabis community to contribute. 

Many nonprofits are wary to accept cannabis dollars for a host of reasons. However, through relationship development, trust, and transparency, CDG has found 3 community treasures that are willing to work with them. Addressing hunger, Metro Caring, addressing the unhoused, Urban Peak and – one from our very own industry, Friends In Weed, supporting budtenders and the restaurant industry. 

CDG Gives: Donations as small as $10 and as large as $5000 are accepted. If this is successful – CDG plans to launch a national campaign so that our sector can contribute on a larger scale. Any amount of participation is welcome.

Technology Perks

Leafbuyer, the cannabis technology company, is giving free texting and loyalty to help non-cannabis businesses get back on their feet!

Because marijuana dispensaries have been considered “essential businesses,” some cannabis businesses have not been hit as hard as other small businesses that have had to shut their doors or scale back. Leafbuyer Technologies, Inc., which serves hundreds of dispensaries, is offering up to $750,000 in free texting and loyalty to 500 small businesses in five cities hit hardest by the coronavirus. Learn more

Switching Gears: Hand Sanitizer

The Galley is Producing Hand Sanitizer

In early April, The Galley of Santa Rosa, California, joined a wave of cannabis companies’ efforts to support the urgent need for supplies brought on by the COVID-19 pandemic. Channeling resources at their state-of-the-art manufacturing and production facility, a first run of “Stop & Sanitize” will include 25,000 units for distribution to hospitals, retail shops, grocery, and drug stores. The Galley has been built to FDA and CDPH standards and is capable of meeting high demands in multiple cannabis product categories. Using operational expertise and a cutting edge facility, the company will provide bottles of hand sanitizer to retailers in need.

Annie Holman, CMO of The Galley, shares, “It’s our civic duty to do what we can to save lives. Our “Stop & Sanitize” hand sanitizer is made with great care in a sterilized setting and we want to contribute in some way to help people & our community in this crisis.”

Director of Operations Cheriene Griffith comments on manufacturing practices stating, “We have followed the strict FDA temporary guidelines for this purpose and our plant to ensure the product is safe.”

CGA Packaging of Santa Rosa will provide donations of labels and packaging for the “Stop & Sanitize” product. Wherefour, a local Enterprise Resource Planning (ERP) technology company, will donate services to support expedited production.

Anresco Labs began manufacturing ethanol-based hand cleansing solutions.

In light of this terrible outbreak, Anresco is assisting the community through a sister company, Micro-Tracers, developing a capacity to manufacture ethanol-based hand cleansing solutions.

The company’s intention is to donate as much of this material as possible to those most in need. For each bottle purchased, an equivalent bottle will be donated to a non-profit organization. 

4Front Ventures is making liquid disinfectant for prisoners in conjunction with the Last Prisoner Project.

New Day Cannabis is using extra ethanol supplies to produce hand sanitizer.

Garden Remedies is producing hand sanitizer for health workers.

Pure Greens is also making hand sanitizer for front-line healthcare workers and charity.

 

At a time when we need it most, it’s uplifting and encouraging in these dark times to see the cannabis industry stepping up and giving back to a community in need, and these values are part of what our industry represents: Community. Health. Well-being. Innovation. And generosity. 

As we come together to solve new problems and face new challenges, we’re also grateful for the various educational blogs and other resources with advice and expertise regarding COVID-19 that NCIA members have contributed during this time. 

If you are an NCIA member that has given back to the community in response to the COVID-19 crisis, we want to hear about it! Email me your story at Bethany@TheCannabisIndustry.Org.

 

Meet The Team: Jon Dinh – NCIA’s Membership Manager

Hello! My name is Jon Dinh and I work as the Membership Manager here at NCIA! I started my cannabis journey three years ago when I first tried cannabis legally in my home state of Colorado and completely changed my life for the better!

I grew up in Thornton, Colorado which is a suburban area north of Denver and didn’t have any interest in cannabis growing up. None of my friends participated in the cannabis culture so I didn’t have any influence growing up. Coming from an Asian culture, it was heavily looked down upon. When the laws changed in my state, I decided to try it and visited my first dispensary. I was amazed at the professionalism and knowledge the budtender provided. I ended up with an edible cookie as my first experience and took a bit much for a first time user. It’s crazy to think that moment changed my life and career path.

I was now curious about the war on drugs and drug policy reform and around this time stumbled upon NCIA. I was lucky enough to get hired as the Membership Coordinator and have learned a great deal about cannabis reform and how it affects people’s lives. I’m fortunate enough to try cannabis safely and legally and have no doubts that others will follow the same path for their first time experience. My scenario is much more common now with states legalizing and people having open access to cannabis. I just hope they’re more careful with their first dose than I was!

I’m now part of the mission here at NCIA to get cannabis businesses treated fairly like any other business in America and it has truly opened my mind to the struggles that face cannabis businesses now and what’s to come in the future. I hope to contribute towards the needed change of these laws and for better treatment of cannabis businesses. Cannabis businesses, even though legal, still exist in a world where the laws are not up to date and have caused issues like loss of profits and having to pay higher taxes.

I got to attend my first Lobby Days event with NCIA to talk about current cannabis issues and it was one of the most powerful experiences channeling my inner citizen lobbyist. I got to see firsthand how Capitol Hill works and what Hill meetings are all about. It’s an important part of how the government works, and it was great to see members of NCIA becoming citizen lobbyists too. This was my first time in D.C. and was blown away by the inner workings of it all. Thanks to NCIA for allowing me to be part of Lobby Days and hope other members of NCIA can join us in the future!

In the meantime, as part of my job duties, I hope to open the doors for others to experience cannabis in their home state and federal legalization in the future. I hope to change the world’s perception of cannabis and to open access to the plant.

 

Committee Blog: Practical Tips for Cannabis Businesses Impacted by Theft and Property Damage

By Stephanie Bozzuto, Jason Horst, Eric Rahn, and Ian Stewart
NCIA’s Risk Management And Insurance Committee

As the country continues to grapple with the murder of George Floyd and its aftermath, we have seen reports that numerous cannabis dispensaries in California, Illinois, Oregon, and elsewhere have been the victims of theft and property damage. A number of shops have been hit multiple times in successive days, with many reports indicating that businesses are being targeted by organized groups not involved in protests.

The owners of these dispensaries, like many of the other business owners around them, are likely asking themselves: Is my insurance going to cover this? The good news is that, for many of them, it is likely that they will have coverage for at least some of the losses that they have suffered. What losses are ultimately reimbursed can depend on a number of factors, including what an impacted business owner does in the immediate aftermath of an incident. Thus, we provide below an outline of the steps that businesses should follow in the unfortunate event that your shop has been damaged:

  • File a police report.
  • Immediately report the loss to the relevant cannabis regulatory authority (check both state and local regulations to ensure full compliance).
  • Get in contact with your insurance provider and file a claim immediately. Once filed, you will receive a claim number and an assigned claims adjuster who you will work with from the very beginning to the end of the claim.
  • Ensure your place of business is well protected (even after the loss). Do your very best to continue to protect what you can after a loss.
  • Document everything. Take photos, save and review your video surveillance. Your insurance company will ask for this when you file a claim
  • Begin taking inventory of everything that has been damaged, destroyed, and stolen. Your insurance company will need this as well.
  • Review your insurance policy again and speak with your insurance professional.
  • Does your insurance policy cover civil unrest, theft, or vandalism coverage? Is it excluded? Is it not listed at all? Many cannabis businesses operate under property insurance policies that will cover losses for property damage and theft that occurs during a public disturbance.
  • Some insurance policies, however, contain “protective safeguard” endorsements creating certain requirements that the cannabis business owner must follow or a claim can be denied. Many of the requirements include a central burglar alarm, cameras, an approved vault or safe room, and other similar risk mitigation measures. Pay special attention to these protective safeguard requirements, and ensure that all are met. This can be particularly important for businesses that have already been the victims of crime. If the safety systems in question have been damaged or are otherwise inoperable as a result, make sure to put your insurer on notice of this fact and, ideally, get them to approve a temporary accommodation relieving your business of the relevant protective safeguard.
  • Policies may also be “sublimited” for certain types of property coverage, meaning that limits for particular types of loss are lower than the overall policy limits. Impacted businesses should look for a page entitled “Property Optional Extension Endorsement.” The types of coverage that might be sublimited include:
    • Employee Dishonesty;
    • Money and Securities;
    • Outdoor Property (Fences, Radio/TV Antennas/Satellite Dishes and Signs Outdoor Property (Trees, Shrubs or Plants);
    • Personal Effects and Property of Others (relevant if a dispensary has not taken title to product): and
    • Valuable Papers and Records (Other Than Electronic Data).

In addition to taking these actions, dispensary owners in cities where civil unrest is ongoing should give consideration to reducing their store hours or even closing entirely until conditions change in order to keep their staff safe. For those concerned about leaving product in their stores and having it stolen, some states, including California, allow for licensed cannabis dispensaries to remove product from a licensed facility in the face of a public disturbance or emergency. Nonetheless, businesses should always consult their state and local regulations and/or consult with an attorney before removing cannabis products from their facilities in any way that would normally be impermissible under applicable laws.

In sum, while cannabis dispensaries unfortunately appear to be attractive targets for opportunistic criminals, there are a number of steps these businesses can and should take right now to help them begin to pick up the pieces.

Webinar Recording: NCIA Committee Insights – Managing Novel Risks During the COVID-19 Crisis

In case you missed it, watch the recording of this webinar from April 27, 2020. NCIA’s Risk Management and Insurance Committee presents a conversation regarding how cannabis operators can mitigate the risks that the coronavirus presents to their customers, their employees, and their businesses. Get actionable advice and expert insights regarding how to manage your risk and avoid potential liability while keeping your essential business open.

Topics addressed include:

Identifying all novel risks presented by COVID-19
Addressing the availability for insurance coverage for COVID-related losses
Creating SOPs around employee and customer safety
Increased delivery exposure and SOPs around fleet management, driver safety/protection
Managing increased cyber security risks through insurance and strong SOPs
What coronavirus teaches us about the import of proactive risk management

Speakers include:

Jason Horst, Principal
Horst Legal Counsel

Stephanie Bozzuto, Co-Founder & President
Marketing Cannabis Connect Insurance Services

Summer Jenkins, CLCS, Senior Product Development Manager
Cannasure Insurance Services

Eric Rahn, Managing Partner
S2S Insurance Specialists

Wes Gilbreath, CFO
Continental Heritage Insurance Company

Eduardo Provencio, General Council
Mary’s Medicinals

NCIA Today: May 2020 Episode – HEROES Act, #CannabisIsEssential, and New Fireside Chats for NCIA Members

Host Bethany Moore, NCIA’s Communications Manager and host of NCIA’s weekly Podcast ‘NCIA’s Cannabis Industry Voice‘ brings you an in-depth look at what is happening across the country in federal cannabis policy reform and with NCIA.


From the top, Bethany discusses the NCIA
#CannabisIsEssential movement, coordinating efforts between our communications, public policy, and government relations teams. We have been hard at work, exploring avenues for the legal cannabis industry to access federal COVID relief benefits, like including SAFE Banking language in the recent HEROES Act.

We check in with NCIA Deputy Director of Public Policy, Rachel Kurtz, to hear some of the recent highlights from our Allied Associations Program. Fortunately, most states have deemed cannabis as essential, and our state associations are working in their areas to make relief options, or commerce opportunities, easier to reach.

Kim Kovacs, President of the Arcview Group, checks in with Bethany to discuss the relaunch of their Women’s Investors Network. The cannabis industry leads on women in C-suite and leadership roles, but that doesn’t mean we can be complacent. ArcView has been offering regular webinars, and other digital programming options, for women energetic about entering the space. The next will be looking at the science behind the plant, join the conversation!

We’ll see you next month for NCIA Today!

 

Veterans And Cannabis: A Discussion With Congressional Champions

by Michelle Rutter Friberg, NCIA’s Deputy Director of Government Relations

Last week, NCIA’s Government Relations team honored the veteran community and Memorial Day through our latest #IndustryEssentials webinar. Our Director of Government Relations, Mike Correia, and I “Zoomed” with congressional cannabis champions Congressman Lou Correa (D-CA) and Congressman Earl Blumenauer (D-OR), as well as the cofounders of the Veterans Cannabis Coalition, Eric Goepel and Bill Ferguson. During the webinar, we talked about how through cannabis, veterans of all generations and with various conditions have experienced improvements in their quality of life and also discussed policy and legislation to address this conundrum. NCIA members can catch the full webinar recording, but in the meantime, check out a few highlights:

Congressman Earl Blumenauer (D-OR):

“In fact, if we were able to have the Veterans Administration (VA) embrace medical cannabis, veterans would get better care because they could deal directly with their primary care physician, who is in the best position to give them appropriate advice. But sadly, the VA is caught with this federal restriction and they have a very narrow interpretation of what they can do, and how they can do it, and they simply do not permit their physicians to work with veterans to discuss and work with — let alone prescribe — medical cannabis.”

Congressman Lou Correa (D-CA):

“These folks came back from the theater of war with a lot of invisible, psychological scars– many of them that never were addressed. Back when I was the Chair of the Veterans Affairs Committee in the state of California, I would go on to have town halls and I remember veterans more and more would ask me, ‘Hey state senator, what’s going on with cannabis? I prefer cannabis to opioids, it makes me feel a lot better, I’m being able to function much better, why can’t I be prescribed cannabis by my VA doctor?’ And that really set me off on a quest to address medical cannabis in reference to veterans. Now in Congress, that’s something that I’m trying to work on front and center, and when I say trying to — I am working on it — I’m trying to score some victories there and get this legislation to the President’s desk for a signature, but again in the context of an election coming up, it’s going to be a challenge. But nonetheless, I think it’s a task all of us must take to heart and work hard towards.”

Veterans Cannabis Coalition Co-Founders:

Bill Ferguson: “I think it’s really cool that both of those politicians you know — and you know, they’re not backbench guys either — they essentially say that, you know, like if we can get the VA bill to pass, that will be like opening the floodgates for the rest of the cannabis legislation, you know like the banking and all that kind of stuff. And I think they’re right because you know once you poke a hole in a dam, you know eventually a dam is going to break.”

Eric Goepel: “The problem is that they’re largely out of step with the population — like the general population and the veteran population. I mean Pew’s been tracking public support for medical cannabis legalization and adult-use legalization and it’s 92% in favor of medical use and 60 plus in favor of legalization. That’s pretty overwhelming when it comes to any political issue. Like these issues out-poll most politicians and popularity and certainly, maybe beyond like universal background checks, I can’t think of too many other major policy issues that have this level of public support that see no conversion into federal legislative change.”

We are all so grateful to the Congressmen and the VCC team for joining us. While Memorial Day has now passed, I’m continuing to feel so appreciative of our fallen service members. While all gave some and some gave all, the vast majority of our veterans are still unable to access safe, regulated cannabis, and since they fought for us, we’ll keep fighting for them. 

Stay tuned for upcoming Fireside Chat webinars with NCIA’s Government Relations team. 

Webinar Recording: Good Manufacturing Practices in the Age of COVID-19

Tune in to this webinar recording from Wednesday, April 15, 2020. As the realizations of the Coronavirus sink in, one thing is certain – cannabis companies need to be leveraging good manufacturing practices, otherwise known as GMPs. GMPs are the practices required in order to conform to the guidelines recommended by the Food and Drug Administration (FDA). The FDA is the public health agency in the United States that controls the authorization and licensing of the manufacture and sale of food and beverages, cosmetics, pharmaceutical products, dietary supplements, and medical devices. While many companies in cannabis are already following these guidelines, some are not.

This panel explores the GMPs themselves, how companies can become compliant, how GMPs can be amplified to make certain that we are preventing the spread of COVID-19, and whether there are extra precautions that should be taken to keep cannabis consumers safe.

Panelists:

Andrew Kline, Director of Public Policy
National Cannabis Industry Association

Haley Brandsgard, Senior Quality and Compliance Manager
Mary’s Brands

Alena Rodriguez, Managing Director
Rm3 Labs

Trevor Morones, Founder
Control Point

Jen Komerda, Quality Assurance Manager
Wana Brands

SAFE Banking Provision of Federal Relief Package Approved in House, Faces Difficult Path in Senate

by Morgan Fox, NCIA’s Director of Media Relations

It’s been a busy week for NCIA in our nation’s capital as we try to make sure the industry can survive the pandemic and continue to develop and thrive once the country begins to focus on recovery.

Earlier this month, NCIA and a coalition of advocacy and industry groups sent a letter to Congress urging them to include the SAFE Banking Act in the next stimulus package. We worked diligently with allies and our champions in the House to this end, reminding lawmakers that this legislation was approved with an overwhelming bipartisan majority in a stand-alone bill last September and that the pandemic was creating even more need for cannabis businesses to be able to access banking services immediately.

Last Tuesday, we got our wish: cannabis banking language identical to that passed in the House last year was included in the latest COVID-19 relief package, known as the HEROES Act. 

Unfortunately, the partisan backlash to the Democrat-backed legislation was almost immediate, with some lawmakers opting to use this necessary and nearly revenue-neutral provision of the legislation as a punching bag and a symbol of overreach in the lower chamber. Republican lawmakers decried things as irrelevant as the number of times the word “cannabis” appeared in the language and claimed that this provision did not belong in a COVID-related bill. Senate Majority Leader Mitch McConnell even complained about a section of the bill that would study diversity in cannabis banking access and cost a practically infinitesimal percentage of this roughly $3 TRILLION stimulus bill.

This misdirected vitriol was thankfully not enough to block cannabis banking reform from moving forward. On Friday, the House approved the HEROES Act with the SAFE Banking language included!

The public health and safety benefits of allowing cannabis banking are undeniable. Our industry employs hundreds of thousands of Americans and has been deemed ‘essential’ in most states. Forcing the majority of them to deal almost entirely in cash puts workers at risk of infection from the cash they are handling. It makes the social distancing that is so important to getting this pandemic under control much more difficult and increases the danger for workers and consumers, particularly immunocompromised patients. The public safety concerns regarding cash being a target for crime will only grow as unemployment rates increase around the country.

The economic benefit to post-COVID recovery is clear as well. Lack of access to banking and other financial services will ensure that the cannabis industry – which has been exemplary in providing continuous healthcare, preserving jobs, and generating much-needed tax revenue during this disaster – recovers at a significantly slower pace than other industries. We deserve fair access to the financial systems utilized by every other legitimate industry.

Make no mistake: this is a big step forward for cannabis policy reform. But now comes the hard part – convincing the Senate to support this legislation. With or without cannabis banking language, all signs point to an uphill battle getting the Senate to consider any additional coronavirus relief spending. But that’s all the more reason to redouble our efforts, and support continues to grow. This week, a bipartisan group of 34 state attorneys general added their voices to the chorus calling for cannabis banking reform.

And with the chances for direct access to federal relief funding looking increasingly slim, it is absolutely vital that we do everything we can to push this legislation forward. 

Please contact your senators today and ask them to support the HEROES Act with the House-approved cannabis banking provisions.

 

CALL CONGRESS NOW

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