Regulatory Update – March 2022
Federal Matters
Hemp
On February 8, 2022, Congresswoman Chellie Pingree (D-Maine) introduced the Hemp Advancement Act of 2022 to Congress in an effort to improve the 2018 Farm Bill’s hemp provisions and provide greater clarity and flexibility to hemp growers and processors. According to Congresswoman Pingree, the Hemp Advancement Act of 2022 was submitted in order to eliminate unworkable testing requirements, set reasonable THC thresholds for producers and processors while protecting consumers, and end the discriminatory policy that bans people with drug convictions from growing legal hemp. Specifically, the Act would:
- Raise the allowable THC threshold to 1% (currently set at 0.3% THC threshold) for hemp and in-process hemp extract to make rules more workable for growers and processors while ensuring that final hemp products sold to consumers aren’t intoxicating.
- Remove the requirement that hemp testing occur in DEA-registered laboratories, which is a particular challenge in Maine where there currently aren’t any of these facilities.
- End the 10-year ban on people with drug-related felony convictions receiving a hemp license, which disproportionately excludes communities of color from participating in this emerging market.
The bill is supported by a number of organizations affiliated with the hemp industry including, U.S. Hemp Roundtable, which assisted Rep. Pingree in drafting the bill and making sure that the hemp industry’s concerns were taken into consideration.
Overall, the Hemp industry in the U.S. is valued at $824 million as of 2021 in a recent survey conducted by the United States Department of Agriculture for its latest National Hemp Report.
Cannabis Banking
On Thursday, February 3, 2022, the U.S. House of Representatives approved attaching the SAFE Banking Act to the America COMPETES Act of 2022, a bill proposed by Representative Eddie Bernice Johnson (D-Texas) that would address scientific research and economic competitiveness in manufacturing, engineering and technology. Addressed at a Rules Committee hearing, Representative Ed Perlmutter (D-Oregon) who is spearheading the advancement of the SAFE Banking Act, said that he is planning to offer the SAFE Banking Act as an amendment to “every single bill I possibly can until it’s passed.”
State Matters
California (Medical and Adult Use)
New data is out that suggests that the lack of access to equitable cannabis banking and financing for cannabis businesses in California has kept the illicit market in the state booming. Recreational marijuana was legalized in 2016 and thus far the market has blossomed into an industry worth an estimated $16 billion. Researchers found that California counties that legalized marijuana had increased economic output, with banks and credit unions reporting an increase in assets held by $750 million and an increase in loan activity by $500 million from 2015 to 2020. However, because banks are not able to disclose which loans are for cannabis operations, the study concluded that specific counties with cannabis operations were financially doing better thus allowing financial institutions located in the same area to perform better, lend more money to businesses and earn more interest.
Narrowing the research into the supply chain, the study found that for each new manufacturing or retail license, bank assets and lending capacity multiplied but cannabis cultivation licenses had little to no impact on banks holdings. This suggests that financial gains from cannabis banking can come from other areas of the supply chain. Overall, of the California financial institutions that were contacted by researchers, most were not actively banking cannabis businesses. The reasons given for their lack of service to the industry include hard to follow federal guidelines that pose a risk to financing cannabis and costs associated with taking on the risk and being in compliance with all state guidelines. Of the cannabis businesses that were contacted, growers reported paying fees from $200 to $3,000 a month to maintain a bank account which these businesses believed were cost prohibitive.
Delaware (Medical)
House Bill 305 also known as the Delaware Marijuana Control Act has passed the Delaware House Appropriations Committee and is now scheduled to be heard by the Delaware House of Representatives. Sponsored by Representative Edward Osienski (D), the Delaware Marijuana Control Act would legalize adult use marijuana in the state for persons 21 and older. Consumers would be allowed to purchase up to 1 ounce of marijuana and 5 grams of concentrate a day, an appointed Commissioner affiliated with the Division of Alcohol and Tobacco would oversee all marijuana business licensing, 30 retail licenses – 15 of these reserved for social equity applicants and 60 cultivation licenses. There would be no home cultivation or marijuana delivery licenses.
Hawaii (Medical)
On Monday, February 14, 2022, the Hawaii Senate Committee approved Senate Bill 2718 that specifically exempts anyone who has reached the age of 65 from the requirement of having a debilitating medical condition to be eligible for the use of medicinal cannabis. The purchase limits would remain the same – 4 ounces every 15 days and no more than 8 ounces every 30 days; however, those 65 and older would bypass the requirement that a diagnosed medical condition is necessary for medical marijuana purchases. Currently, the bill needs to be reviewed by the Senate Judiciary Committee by March 4, 2022.
Relatedly, the state has called for less regulations for its marijuana industry. A report conducted by the Hawaii Cannabis Industry Association, showed that 31% of marijuana patients are getting their cannabis from licensed dispensaries and some 61% of marijuana patients are getting their cannabis from elsewhere. Additionally, growth has plummeted from 110% in 2019, to 685 in 2020, to 12% in 2021. The Hawaii Cannabis Industry Association concluded that in order to address these issues, the industry needs to: increase the allowable number of retail outlets per licensee (2 is the maximum), increase the amount of allowable production per licensee under the seed-to-sale model (no more than 3,000 cannabis plants is the standard set forth by the state with the option to increase to no more than 5,000 cannabis plants per production facility), allow business-to-business relationships among licensees, enabling them to sell to each other in a wholesale market which could cut costs and increase supply levels for struggling businesses.
Maryland (Medical)
The Maryland House of Delegates advanced two legislative proposals that would legalize adult use marijuana in the state. House Bill 1 is a constitutional amendment that would ask Maryland voters if people 21 and older may use and possess marijuana. If the majority of voters approve the amendment in November, then House Bill 837 becomes law which would require the Natalie M. LaPrade Medical Cannabis Commission to legalize the use and possession of cannabis by those 21 and older. Current marijuana laws would stay in effect until 2023. If passed, HB 837 authorizes the Commission to conduct a study on the health benefits and social concerns related to cannabis use, in addition to the state being required to expunge marijuana convictions and allow those currently incarcerated on marijuana charges to apply for their sentences to be reduced.
New Jersey (Medical and Adult Use)
No official date has been set for adult use sales but state officials have reported that sales can start in a matter of weeks. The delay is in ensuring that currently operating medical marijuana dispensaries have enough product to meet the increase in demand from adult use consumers. Applications for adult use marijuana retailers will begin on March 15, 2022.
On February 24th, the New Jersey Cannabis Regulatory Commission passed a waiver allowing medical marijuana providers to sell marijuana concentrate. Currently, medical marijuana patients in the state are allowed to buy flower, oil, topicals, vape pins and lozenges. Concentrates, which are sold in the form of dabs, wax and oils, usually contain much higher amounts of THC. Purchase amounts for medical patients is 3 ounces every 30 days. For recreational users over the age of 21, the purchase amount is 1 ounce daily per single transaction once adult use sales start.
New York (Medical and Adult Use)
New York has made a pathway for currently licensed hemp farmers to apply for a conditional license to grow marijuana for the forthcoming adult-use marijuana market. The Conditional Adult-use Cannabis Cultivator license permits a two year term for farmers to grow marijuana either in indoor or outdoor facilities. It also allows them to manufacture and distribute marijuana flower products without holding an adult-use processor or distributor license until June 1, 2023. Cultivators are limited to one acre of flowering canopy outdoors or 25,000 square feet in a greenhouse and can use up to 20 artificial lights. If split between outdoor and indoor, the total square footage may not exceed 30,000. Hemp farmers eligible to apply must be authorized to grow hemp under the Department of Agriculture and Markets Industrial Hemp Research Pilot Program, be in good standing with the Department of Agriculture and Markets, be authorized to grow CBD hemp for the past 2 – 4 years (2018 – 2021) as opposed to hemp for grain or fiber and hold at least 51% or more ownership in the entity that holds the industrial hemp grower authorization from the Department of Agriculture and Markets.
Puerto Rico (Medical)
On February 2nd, state representative and member of the Popular Democratic Party, Hector Ferrer Santiago, introduced House Bill 1191 (Proyecto 1191) that would legalize adult use marijuana in Puerto Rico. If passed, the proposal would allow those 21 and older to purchase and possess up to 28 grams of marijuana flower, 8 grams of THC in concentrated products and 800 milligrams of THC in edibles. Consumption would be outlawed in public places, including beaches, with a fine of up to $500. A study on adult legalization in Puerto Rico concluded that the commercial impact within the first year of adult sales would amount to $522 million.
