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FOR IMMEDIATE RELEASE
February 1, 2018

Portland, OR and Sacramento, CA – February 1, 2018 – Emerge Law Group (“Emerge”), Oregon’s first full-service, boutique law firm specializing in the legal cannabis industry has merged with industry pioneer Greenbridge Corporate Counsel (“Greenbridge”), California’s premier cannabis-focused business law firm. For the immediate future, Emerge and Greenbridge will maintain their existing brands in the markets they serve (including Hawaii and Washington), but will otherwise operate as one law firm for the benefit of their current and future clients.

“We could not be more excited about joining forces with one of the most dynamic law firms in the cannabis field, and a powerhouse in California’s industry” said Marco Materazzi, Emerge’s managing shareholder. “The combination of our in-depth experience with Oregon’s two-year-old-plus adult-use cannabis industry and Greenbridge’s expertise and reputation in California’s medical and adult-use cannabis industry will create a wealth of knowledge, skill and experience to serve our clients as they navigate an ever-changing legal landscape and look to expand in other legal markets in the US and abroad.”

Emerge was founded on July 1, 2014 by a group of attorneys with backgrounds in the cannabis industry, as well as years of experience at prestigious business law firms. They had the idea to start a boutique firm that could bring experience in various legal sectors to an industry desperately in need of legal services – the cannabis industry. Over three years later, Emerge has grown into full-service law firm with specialties including business formation and transactions, intellectual property, litigation, employment, land use, real estate and tax. With many of its clients in the Northwest looking to expand into what promises to be the largest legal cannabis market in the world, Emerge is thrilled to be partnering with a nationally well-reputed and trusted boutique firm like Greenbridge with deep roots in the cannabis industry and drug policy reform community.

“Emerge has earned its reputation as the leading cannabis business law firm in Oregon, and one of the very best in the US for service and competence. Given our growing clientele in both California and the Pacific Northwest, it made perfect sense to combine our teams and leverage our talents together,” commented Khurshid Khoja, principal and founder of Greenbridge and stalwart cannabis industry advocate. Khoja has worked to found and/or lead multiple regional, state and national cannabis trade associations, and has had a pronounced impact on the crafting of California cannabis law, policy and regulations, especially as they relate to investor participation.

Greenbridge is a minority-owned and managed law firm founded by Khoja in 2012 to provide premium legal services to businesses and investors in the cannabis industry in California, Washington and Hawaii on regulatory, start‐up, corporate, intellectual property, finance, and other commercial and transactional matters.

Greenbridge attorneys have richly diverse backgrounds with decades of experience in advising clients on state and federal banking, corporate, finance and securities laws in highly-regulated industries, mergers and acquisitions, antitrust and unfair competition law, intellectual property, commercial contracts, and licensing and regulatory compliance. “This is a force multiplier for both firms. With such talented and service-oriented attorneys up and down the west coast, this merger gives us the unique opportunity to provide top-shelf legal services to the entire western US.”

Find Emerge and Greenbridge on social media:

Emerge
Facebook: https://www.facebook.com/emergelawgroup/
Twitter: @emergelawgroup
Instagram: @emergelawgroup
LinkedIn: https://www.linkedin.com/company/emerge-law-group/

Greenbridge
Facebook: https://www.facebook.com/GreenbridgeCorporateCounsel/
Twitter: @greenbridgelaw
LinkedIn: https://www.linkedin.com/company/2638575/

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Bankers are primarily risk managers, so to understand what happens to canna-banking after Attorney General Jeff Sessions rescinded all Obama-era Department of Justice cannabis memos under which all legal-cannabis states operated (the “Obama Memos”), is to asses risk profile under new federal policy.

On February 14, 2014, the Department of Justice (“DOJ”) and the Department of the Treasury Financial Crimes Enforcement Network (“FinCEN”) issued two companion memos for the stated purpose of “encouraging banking for the cannabis industry.” They came on the heels of the widely-known “Cole Memo”, which set out eight enforcement priorities to guide DOJ attorneys in prosecuting cannabis-related crimes in the wake of Colorado and Washington passing recreational cannabis legislation. The DOJ issued a memo providing Guidance Regarding Marijuana Related Financial Crimes, also penned by James Cole (”DOJ Guidance”), and FinCEN issued FIN-2014-G001 BSA Expectations Regarding Marijuana-Related Businesses (“BSA Guidance”).

The DOJ Guidance, which AG Sessions rescinded along with the other Obama Memos, provided that the DOJ should use its prosecutorial discretion regarding banks and financial crimes related to violations of the Controlled Substance Act, if the banks ensured their customers adhered to the guidelines set forth in the Cole Memo directed to the cannabis industry at large. The DOJ Guidance also identified specific financial crimes a banking institution that did not comply with the DOJ Guidance would be committing. These include: violations of the Bank Secrecy Act (BSA), money laundering statutes, and unlicensed money transmitter statutes.

With the rescission of the Obama Memos on January 4, 2018, presumably banks are now subject to prosecution under all three of the above statutes. Let’s look at how prosecutions under these statutes may be impacted by Sessions’ actions:

Bank Secrecy Act (“BSA”):

Recall that FinCEN issued the BSA Guidance, not the DOJ. Therefore, the BSA Guidance was not impacted. As of this post, FinCEN has not revoked its guidelines and has not commented on plans to change the status of its guidelines.

The BSA Guidance states that if a bank follows the due diligence and reporting requirements identified in its guidelines (“BSA Program”), it will meet its BSA obligations. In other words, if a bank is compliant with the BSA Guidance, Sessions’ rescission is irrelevant.

Laundering of Monetary Instruments, 18 U.S.C. §1956:

The DOJ Guidance also warned against money laundering under 18 U.S.C. §1956. The DOJ’s invocation of this statute had a fatal flaw. Under the statute, money laundering is a financial transaction that involves proceeds of an unlawful activity with the knowledge that the transaction is designed to conceal the nature of the transaction. If a bank has a strong BSA Program in place, there is no design to conceal. The bank will obtain information regarding the nature, location, source, ownership, and control of the transaction, and as opposed to concealing this information they regularly report it all to law enforcement . Again, revocation of the Obama-era memos is irrelevant.

Prohibition of Unlicensed Money Transmitting Businesses, 18 U.S.C. §1960:

An unlicensed money transmitting service is a business that transfers money via wire, check, draft, or other means to move funds without the appropriate license. Typically, banks are licensed, so this should never be an issue. However, the definition of an Unlicensed Money Transmitter also includes any business that transmits money derived from a known criminal offense . In this case a good BSA Program will work against a bank; the bank will know the funds are derived from a Marijuana-Related Business (“MRB ”). Now the question becomes, “Does the revocation of the Obama Memos increase the risk of prosecution for unlicensed money transmissions?

Sessions’ Rescission Memo

In the January 4, 2018 rescission memo, AG Sessions stated that the Obama Memos are unnecessary due to the existence of well-established prosecutorial guidelines set forth in chapter 9-27.000 of the U.S. Attorney’s Manual (the “Manual”), initially published in 1980. He also reiterated that local U.S. Attorneys set the prosecutorial agenda. However, I don’t believe that their agendas will be inconsistent with the wider federal agenda. The federal agenda is to stop marijuana from being manufactured, distributed or dispensed, i.e. enforcement of the Controlled Substance Act.

I’ve attached the relevant section of the Manual:

In determining whether prosecution should be declined because no substantial federal interest would be served by prosecution, the attorney for the government should weigh all relevant considerations, including:

-Federal law enforcement priorities, including any federal law enforcement initiatives or operations aimed at accomplishing those priorities;
-The nature and seriousness of the offense;
The deterrent effect of prosecution;
The person’s culpability in connection with the offense;
The person’s history with respect to criminal activity;
The person’s willingness to cooperate in the investigation or prosecution of others;
The interests of any victims; and
The probable sentence or other consequences if the person is convicted.

Thanks to the BSA Guidance, banks can provide a substantial benefit to law enforcement. Through the due diligence process and ongoing account monitoring, banks obtain large amounts of information on its MRB customers. Then on a quarterly basis, they report that information to law enforcement through SAR reports. If law enforcement wants additional information on any of the reports filed they can call the bank and request additional information, which the bank is required to provide. Banks also prioritize the information into high, medium, and low priorities, so that law enforcement can look into the highest priorities first.

While law enforcement could independently obtain much of the information provided by banks, it would likely take attorneys, judges, and subpoenas, along with months’ or years’ worth of effort. Also, without banks, MRBs would be solely cash based and reliable transaction data would not exist.

Ultimately, the key to serving MRBs is to have a strong BSA/AML program and to fully understand and comply with the requirements of the BSA Expectations regarding MRB guidance. With that in place, the risk of federal prosecution with or without the Obama Memos remains unchanged and generally low, thanks to the benefits that banking provides.

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Yesterday morning, Attorney General Jeff Sessions issued a memorandum upending existing federal policy regarding enforcement against states with legalized cannabis. Prior federal policy was set forth in several memoranda issued by the Justice Department under the Obama administration, including the widely-known 2013 Memorandum by then-Deputy Attorney General James Cole (“Cole Memo”).

This set of statements gave states and their constituents some assurance that their legalized-cannabis programs would not be targeted for federal prosecution, so long as the programs followed certain guidelines. Now, despite vague language suggesting some prosecutorial restraint, it appears that the federal government has taken a step backwards – where all cannabis activity, because it remains illegal under federal law (which it has been since the Controlled Substances Act of 1970), is vulnerable to federal enforcement as non-state-sanctioned activity – subject to enforcement discretion delegated to individual US Attorneys (“USAs”) and the DOJ’s financial and logistical limitations, which are substantial.

You can read more about the content of the January 4, 2018 Sessions Memo here.

Promisingly, the immediate political backlash against Sessions’ announced policy has been fierce. Elected officials from across the political spectrum widely criticized Sessions’ actions and vowed to protect their states’ legalized cannabis programs. Several USAs issued statements strongly indicating little, if anything, would change in their approaches to cannabis.

Looking specifically at California, which kicked off the country’s largest state-legal cannabis industry on January 1, 2018, Senator Kamala Harris, Lieutenant Governor Gavin Newsom, State Attorney General Xavier Becerra, and Congressional Representatives Barbara Lee, Adam Schiff, Nancy Pelosi, Ted Lieu, Ro Khanna, and Dana Rohrabacher (of the Rohrabacher-Farr/Blumenauer Amendment), all issued scathing statements yesterday, chastising Sessions and vowing to uphold the will of the People of California.

Less reassuring, however, were the responses from three of the four USAs for California. Brian Stretch, the USA for the Northern District of California, will leave his position tomorrow to join a private law firm. Stretch had been the last pre-Trump USA standing in California and has denied that his leaving relates to the Sessions Memo. Sessions will now be able to appoint an interim to Stretch’s abandoned post – for up to 120 days – until President Trump nominates, and the Senate confirms, a permanent replacement.

Following Stretch’s announced resignation, his office stated that it would work with “state, local, and federal law enforcement and allocate resources accordingly,” but did not indicate an uptick in state-legal cannabis prosectutions

The USA’s office for the Eastern District similarly said it would “evaluate violations of [federal] laws in accordance with our district’s federal law enforcement priorities and resources.”

The USA for the Central District, which includes Los Angeles, is under a new interim USA as of today — Nicola Hanna, appointed by Sessions — and has not commented on whether its office would change its policy toward cannabis prosecutions in response to the Sessions Memo.  But Sessions did say that Hanna, “spent more than seven years [as an Assistant USA] taking on drug traffickers and other criminals.”

Of deeper concern, the USA for the Southern District, Adam Braverman (who was also appointed to an interim position by Sessions before being confirmed) issued a statement commending Sessions’ decision for “return[ing] trust and local control to federal prosecutors in each district when it comes to enforcing the Controlled Substances Act.” While the Sessions Memo purports to return to “well-established principles that govern all federal prosecutions” by eliminating “unnecessary” guidance, it also reiterates Sessions’ staunch position that cannabis’s lingering status as a Schedule I drug under the CSA means that “marijuana is a dangerous drug and that marijuana activity is a serious crime.”

And although prosecutorial decisions are ostensibly at the discretion of individual USAs, former USA Brett Tolman, a Republican from Utah, reported that the Justice Department is a top-down-policy, chain-of-command organization, and that the Attorney General has a strong hand in recommending federal prosecutors. As it stands in California, the fact that three of the state’s four federal prosecutors will now be Sessions appointees may be a cause for concern. (The fourth, McGregor Scott of the Eastern District, was a Trump appointee.)

Nevertheless, state regulators for what will likely be the world’s biggest cannabis economy have indicated they will be moving forward with licensing for both medicinal and adult-use cannabis businesses. Lori Ajax, the Chief of the Bureau of Cannabis Control, California’s lead cannabis regulatory agency, issued the following statement yesterday afternoon:

“The administration is conferring with the California Attorney General and other states in response to this action. We expect the federal government to respect the rights of states and the votes of millions of people across America and if they won’t, Congress should act. Regardless, we’ll continue to move forward with the state’s regulatory processes covering both medicinal and adult-use cannabis consistent with the will of California’s voters, while defending our state’s laws to the fullest extent.”

Currently, the Rohrabacher-Blumenauer Amendment prevents the federal government from spending taxpayer dollars on the prosecution of state law-compliant medical cannabis activity. But even this limited protection is due to expire with the rest of the budget on January 19, 2018. Unless Congress acts to protect the cannabis industry, Sessions’ Justice Department will have unfettered discretion to spend its limited resources pursuing an outdated war on cannabis that a majority of Americans do not support.

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The Sessions Memo

The Cole Memo is history.  The Sessions Memo, which was released today, January 4, 2018, is now the policy of the land.

The Sessions Memo contains two main points:

1. Federal prosecutors should follow the “well-established principles” that govern all federal prosecutions, which principles are now set forth in a U.S. Attorney’s Manual (“USAM”).
2. Previous nationwide guidance specific to marijuana (including but not limited to the Cole Memo) is “unnecessary” given the well-established principles, and is rescinded.

In other words, according to Sessions, the Cole Memo was superfluous all along.

So, what are these well-established principles that we all now live under?

Well, USAM 9-27.230 provides that federal prosecutors should weigh all relevant considerations in determining whether charges should be initiated or declined, including:

1. Federal law enforcement priorities, including any federal law enforcement initiatives or operations aimed at accomplishing those priorities;
2. The nature and seriousness of the offense;
3. The deterrent effect of prosecution;
4. The person’s culpability in connection with the offense;
5. The person’s history with respect to criminal activity;
6. The person’s willingness to cooperate in the investigation or prosecution of others;
7. The interests of any victims; and
8. The probable sentence or other consequences if the person is convicted.

OK, that sounds fairly reasonable.

But wait a minute.

Consideration #1 (presumably a significant one, as it comes first) references federal law enforcement priorities. And so, what are the federal government’s law enforcement priorities with respect to marijuana?

Well, before I woke up this morning, they were set forth in the Cole Memo, and included priorities relating to minors, cartels, diversion of marijuana to other states, other illegal drugs and activities, violence, drugged driving, public lands, and federal property.

What are they now? I don’t know exactly.

For the moment, it seems that Sessions is giving each individual U.S. Attorney the discretion to formulate his or her own federal law enforcement priorities. Rather than a top-down promulgation of priorities set forth by Mr. Cole, this seems to be more of a delegation of authority to each U.S. Attorney (of which there are currently 93).

Billy J. Williams, Oregon’s one-and-only U.S. Attorney, released the following statement today: “As noted by Attorney General Sessions, today’s memo on marijuana enforcement directs all U.S. Attorneys to use the reasoned exercise of discretion when pursuing prosecutions related to marijuana crimes. We will continue working with our federal, state, local and tribal law enforcement partners to pursue shared public safety objectives, with an emphasis on stemming the overproduction of marijuana and the diversion of marijuana out of state, dismantling criminal organizations and thwarting violent crime in our communities.”

Not bad overall. The immediate takeaway seems to be: “Stay compliant with Oregon law.”

Bob Troyer, Colorado’s one-and-only U.S. Attorney, was less vague, and seemed to strongly signal that the Sessions Memo will have no effect on his policies. He stated: “Today the Attorney General rescinded the Cole Memo on marijuana prosecutions, and directed that federal marijuana prosecution decisions be governed by the same principles that have long governed all of our prosecution decisions.  The United States Attorney’s Office in Colorado has already been guided by these principles in marijuana prosecutions — focusing in particular on identifying and prosecuting those who create the greatest safety threats to our communities around the state.  We will, consistent with the Attorney General’s latest guidance, continue to take this approach in all of our work with our law enforcement partners throughout Colorado.”

Various Oregon elected officials, including Governor Kate Brown, Attorney General Ellen Rosenblum, Senator Ron Wyden, Senator Jeff Merkley, and Representative Earl Blumenauer, made their own statements supporting and vowing to protect Oregon’s marijuana industry.

Events will undoubtedly unfold over the coming days, weeks, and months, and we will post further blogs on this subject. We also will post a blog about how this may affect securities law disclosures and business transactions in general. In the meantime, if you have any questions, please contact one of our attorneys.

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California Releases Draft Medicinal and Adult-Use Regulations

On Thursday, November 16, the three (3) California cannabis-licensing agencies released draft emergency regulations implementing the Medicinal and Adult-Use Cannabis Regulation and Safety Act (MAUCRSA). The agencies – the Bureau of Cannabis Control (within the Department of Consumer Affairs), the Department of Food and Agriculture, and the Department of Public Health – are legally obligated to begin issuing state licenses to cannabis businesses starting January 1, 2018. They issued these proposed regulations pursuant to an expedited, emergency rulemaking procedure in order to meet that statutory deadline.

The full text of the proposed regulations spans nearly 300 pages and details the agencies’ proposed plans to implement state licensure and regulation of the industry. Here are a few of the highlights.

Additional License Types

In the proposed regulations, the Bureau of Cannabis Control (BCC), which regulates retailers, microbusinesses, distributors, and testing labs, added four (4) license types to the list established by MAUCRSA: Type 9 (delivery-only retailer); Type 13 (transport-only distributor), essentially reviving the Transporter license from the now-defunct Medical Cannabis Regulation and Safety Act (MCRSA); Type 14 (cannabis-event organizer); and temporary event licenses.

The Department of Food and Agriculture (DFA), which regulates cultivation and the statewide track-and-trace program, added a processor license for trimming, drying, curing, grading, storing, packaging, and labeling cannabis. A licensed processor that does not also hold a cultivation license may not commercially cultivate cannabis.

The Department of Public Health (DPH), which regulates manufacturing, added two (2) license types: Type N (infusion – non-extraction manufacturer, such as for topicals and edibles) and Type P (packaging and labeling). The resulting total of four (4) DPH licenses are hierarchical – a Type 7 (volatile manufacturer) licensee may conduct all manufacturing activities; a Type 6 (nonvolatile manufacturer) may conduct all but volatile manufacturing; a Type N may infuse, package, and label; and a Type P may only package and label cannabis products.[i] DPH also announced a fifth license type in development: Type S (shared manufacturing facility), for manufacturers to share facility space.[ii]

No acreage cap for cultivation sites

Under MAUCRSA, licenses for unlimited-size cultivators (Type 5) are theoretically prohibited until 2023, and those for medium-size cultivators (Type 3)[iii] are to be limited in number. In its proposed regulations, DFA limits each licensee to a single Type 3 license but does not cap the size of cultivation sites.[iv] The result is that a single licensee may apply for multiple “small” cultivation licenses (Type 2) and combine them to create one large cultivation site that exceeds an acre.[v]

Transition Period

From January 1 to July 1, 2018, licensees may conduct business with any other licensee, regardless of their license designation as adult-use (A-license) or medicinal (M-license).[vi] After July 1, licensees may only do businesses with other licensees with the same A- or M- designation, although each licensee may hold both types of licenses.

During the transition period, retailers may also sell items in inventory that do not meet new requirements, subject to some additional labeling and packaging requirements for certain products.

CO2 and Ethanol are Nonvolatile

DPH’s proposed rules define carbon dioxide and ethanol as nonvolatile solvents for the purposes of manufacturing licensure, despite the definition of volatile solvent (which remains unchanged) as “any solvent that is or produces a flammable gas or vapor that, when present in the air in sufficient quantities, will create explosive or ignitable mixtures.”

Once these proposed emergency regulations are filed with the Office of Administrative Law (OAL), there will be a 5-calendar-day public comment period and OAL will have 10 calendar days to approve or disapprove the regulations. The promulgating agencies (BCC, DPH, and DFA) are not required to respond to public comment in the emergency rulemaking process, but they may do so within 8 calendar days of submitting the regulations to OAL.

Since these emergency rules are being promulgated on an expedited timeline,[vii] we can expect the licensing authorities to follow this emergency rulemaking with a standard rulemaking process (likely in early 2018) to clean up, modify, or add to the emergency regulations.

[i] The difference between a DPH Type P manufacturer and a DFA processor is the type of product being packaged and labeled.

[ii] This would seem to contravene MAUCRSA’s definition of “premises,” which expressly prohibits a single premises from being occupied by multiple licensees.

[iii] “Medium” cultivators can cultivate up to an acre outdoors or up to 22,000 indoors or with mixed light.

[iv] This omission has already met with significant opposition and may change.

[v] Type 1 “specialty cottage” licensees are prohibited by definition in MAUCRSA from cultivating more than 5,000 square feet on one premises or on contiguous plots.

[vi] This does not change the prohibition on business transactions between licensees and unlicensed entities, including collectives currently exempt from the state-licensure requirement, starting January 1, 2018.

[vii] MAUCRSA was just passed in late June and amended in early September of 2017, and the licensing authorities are under mandate to begin licensure on January 1, 2018.

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On June 29, 2017, Governor Brown signed a bill impacting Oregon’s hemp industry into law.  SB 1015, which goes into effect the first week of October 2017, amends Oregon’s industrial hemp statute and significantly increases the industry’s access to the commercial market.

Industrial Hemp

In 2009, the Legislature gave the Oregon Department of Agriculture (ODA) the authority to license industrial hemp growers and handlers.  Since ODA issued the first hemp licenses in 2015, hundreds of growers and handlers have entered this new potentially lucrative market. Industrial hemp is a cannabis plant that contains less than 0.3 percent tetrahyrdrocannabinol (THC).  Traditionally used to create fiber, fuel, and fabric, contemporary research reveals that hemp also contains cannabidiol (CBD), a non-psychoactive cannabinoid compound linked to several medical benefits (e.g. Charlotte’s Web, anti-inflammatory, epilepsy treatment, etc.).

Oregon Revised Statutes (ORS) 571.305, makes industrial hemp production, possession, and commercial activities legal in the state of Oregon.  Current state law categorizes industrial hemp as an “agricultural product” subject to regulation by ODA.  A “grower” produces and cultivates industrial hemp, while a “handler” receives industrial hemp for processing into commodities or products. All growers and handlers must have an ODA-issued industrial hemp license.

Formerly, Chapter 571 did not provide a way for licensed industrial hemp growers and handlers to transfer their hemp products to OLCC processors.  SB 1015, now specifically allows these transfers.

The bill’s major provisions include:

Industrial Hemp Concentrates and Extracts Defined

SB 1015’s definitions of “industrial hemp concentrate” and “industrial hemp extract” mirror those of cannabis concentrates and extracts found in the rules governing medical and recreational cannabis (OAR 845-025-1015).

Delivery of Industrial Hemp Products to OLCC Processors

SB 1015 allows an ODA-licensed industrial hemp grower to deliver industrial hemp to an OLCC-licensed processor.  Also, the measure allows a state-registered industrial hemp handler to deliver industrial hemp concentrates and extracts to an OLCC-licensed processor.  The following restrictions apply:

  • Industrial hemp growers, handlers, and marijuana processors seeking to engage in processing industrial hemp into CBD concentrates and extracts must be registered with OLCC for that express purpose.
  • Growers and handlers must provide recipient cannabis processors with all results of any required tests conducted on the industrial hemp and the processor must retain those test results.
  • Growers, handlers, and cannabis processors must track industrial hemp products using the same CTS tracking system (i.e. Metrc) currently in place for all cannabis businesses in the state.
  • Deliveries must be conducted in a manner that satisfies the delivery requirements currently in place for all cannabis businesses in the state.

Processing of Industrial Hemp Products

Upon receiving industrial hemp products, a cannabis processor may process the hemp into industrial hemp concentrates and extracts (like CBD oil).  The processor may also use the industrial hemp products to supplement their own marijuana products, but only if that product meets existing processing requirements.  This would allow processors to infuse purely hemp-derived CBD into their extracts and concentrates, opening new opportunities for innovation and product development.

Retail Sale of Industrial Hemp Products by Individuals

Any person may make retail sales of industrial hemp products and commodities if the processing method used complies with Oregon law.  This levels the playing field for in-state industrial hemp manufacturers and businesses competing with out-of-state importers.

Please keep in mind that the federal government’s position is constantly evolving in addition to our state regulatory structure.  If you have any questions regarding SB 1015 or any other hemp-related issue, please don’t hesitate to contact one of our compliance attorneys and keep an eye out for more of our blog updates on our website!

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Just days before the end of the 2017 session, the Oregon legislature passed a major cannabis-related bill.  Surviving a relatively close Senate vote last Thursday, HB 2198 now awaits the Governor’s signature.

Please see the bill’s key provisions below:

Oregon Cannabis Commission

The Oregon Cannabis Commission (OCC) within the Oregon Health Authority (OHA), will consist of a Public Health Officer and eight other commissioners appointed by the Governor.  The OCC will provide guidance and oversight on a broad range of issues impacting the medical marijuana industry, including recommending a governance framework for the future of the Oregon Medical Marijuana Program (OMMP).  Additionally, the Commission will develop a long-term strategic plan to maintain the medical marijuana program’s viability as more medical growers move into the recreational system.

Limited Transfer of Medical Marijuana into OLCC System

A medical marijuana grow site with more than twelve plants may transfer up to twenty pounds of marijuana a year to licensed recreational marijuana processors and wholesalers.  However, the medical grower must have registered their grow site with OHA prior to the date the Governor signs the bill into law.  These transfers must be tracked in OLCC’s tracking system.  The OLCC will also assess whether the amount of marijuana transferred from medical grow sites to wholesalers and processors per year can be increased without adversely affecting the market.

If the OLCC determines that the supply of marijuana exceeds consumer demand, it may issue a temporary order to limit the sale of marijuana items into the recreational system. These temporary orders may only be issued if the OLCC determines that the saturation of the market will not self-correct.

Mature Plant Limits

The mature plant limits previously in place under SB 1057 have been slightly increased. Now, the maximum amount of mature plants allowed at a property not registered as a marijuana grow site (such as private residences where patients are growing their own marijuana) is twelve plants.  These are limited to up to six plants per patient.

Also, if there is only one patient and at least one more person above the age of twenty-one living at the address, the mature plant limit for the entire household is ten plants.  That cap is based on a patient’s six plant limit under the OMMP program, in addition to up to four plants permitted for a non-patient adult living at the household. This provision clarifies questions related to “stacking” both medical and personal-use recreational marijuana plants at the same residence.

Immature Plant Limits

The new bill also replaced SB 1057’s immature plant restrictions for medical grow sites.  A medical grow site may now have an unlimited number of immature plants under twenty-four inches.  Two immature plants taller than twenty-four inches will be allowed for every mature marijuana plant on the grow site.  For example, if a grow site has twelve mature plants, up to twenty-four (24) immature plants over twenty-four (24) inches would be permitted.

Caregiver Privileges

Designated primary caregivers are now clearly allowed to help patients with all things related to medical-use, including the production and processing of marijuana into concentrates or products (but not extracts).  This clarifies the legal relationship between cardholders and their designated primary caregivers and will hopefully allow for patients less familiar with production and processing to fully benefit from their caregiver’s skills and knowledge.

Security System Exemption

OHA and OLCC may not require a medical marijuana grow site to use a security system, video surveillance, alarms, and sensors or physical barriers. This should ease concerns that medical patients and their caregivers might be forced to bear the high cost of installing the types of security systems required of recreational licensees.  However, anyone growing marijuana plants at home must still keep all plants out of the public’s view.

OHA Grow Site Registration

For the purposes of verifying the address of a marijuana grow site, OHA shall accept tax lot numbers, assessor’s maps, or exact locations using latitude/longitude coordinates, GPS, or township coordinates.  This gives patients and caregivers more options with respect to the documents they can provide to satisfy grow site verification requirements and will hopefully simplify the process of grow site registration.

Distance to Schools

If the OLCC determines there is a physical or geographic barrier preventing children from traveling to a marijuana retail location, a marijuana retailer premises may be located within 500-1000 feet of a school.  Until now, local governments decided whether to grant exceptions to the distance requirement.  HB 2198 delegates that authority to the OLCC exclusively.

Because this bill contains an emergency clause, it will take effect on the date the governor signs it. Absent a veto, this will likely be early next week.  If you have any questions about the changes included in this bill or any other compliance-related issues, please contact one of our compliance attorneys.

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The Oregon Legislative Assembly adjourned on Friday, July 7, 2017.   As the dust from this session settles, the State of Oregon will begin implementing several substantial changes to its marijuana regulations.  SB 1057, SB 56, HB 2198 and SB 1015 are the main bills passed during the legislative session.  We will be posting a three-part series this week summarizing the bills.

SB 1057, is the most comprehensive measure the legislature enacted related to cannabis.  Among other things, this measure expands the Oregon Liquor Control Commission’s (“OLCC”) authority to regulate parts of the Oregon Medical Marijuana Program (“OMMP”), creates marijuana promotional events, and revamps the existing “bump-up” canopy option for recreational producers who elect to serve medical patients.

Please see a summary of the key provisions below:

Tracking Requirements for OMMP Patients

The new law requires certain OMMP registrants to track the production, transfer, and processing of medical marijuana with OLCC’s existing tracking system.  Registered grow sites with more than twelve plants, processing sites, and dispensaries (“Registrants”) must use the tracking system. To cover extra costs incurred by the tracking system, the Oregon Health Authority (“OHA”) will impose an additional fee on Registrants.  OHA must deposit the money collected from the fees into the Marijuana Control and Regulation Fund.

Registrants will have the option to choose to remain OHA Registrants subject to tracking or to convert to OLCC (recreational) licensees.  Each Registrant must notify OHA whether they are electing to apply for OLCC licensure or remain under the medical system by December 1, 2017.  If the Registrant elects to apply for OLCC licensure, they must do so on or before January 1, 2018, or it will not be able to renew its OHA registration.

If the Registrant elects to remain within the medical system, the law requires them to submit to the OLCC tracking system on or before July 1, 2018.  Failure to comply with the tracking requirements by this deadline will bar OHA registration renewal.

Immature Plant Limits

SB 1057 provides that medical cardholders and designated primary caregivers may jointly possess up to twelve immature plants and up to six mature plants at a residence.  The law also allows for two immature plants for every one mature plant allowed at a designated marijuana grow site.  If a designated medical grow site is located within the city limits of an area zoned for residential use, the law allows growing up to twelve mature plants and twenty-four immature plants.  However, HB 2198, currently awaiting the Governor’s signature alters these limits.

*Note: Under subsequently passed SB 56, if a designated medical grower submitted an OLCC producer application on or before June 24, 2017, they will not be subjected to the immature plant limits established under SB 1057.

Exclusively Medical Licenses

In response to indications that potential changes in federal marijuana policy are less likely to affect medical marijuana programs, SB 1057 allows the OLCC to designate licensees as “exclusively medical licensees.”  Licensees may register with the OLCC as exclusively medical licensees if certain conditions are met, such as attesting to transfer products only between other licensees with “medical purpose” registrations.

Bump-Up Canopies

This provision modifies the OLCC’s current bump-up canopy program (which allows OLCC-licensed producers to enter into agreements with patients to provide them medical marijuana from separately designated medical canopy space).  Under the new provision, OLCC-licensed marijuana producers may apply to designate up to an additional 10 percent of the total size of their medical and recreational canopy square footage to produce marijuana for medical patients. Marijuana producers who elect this option must provide seventy-five percent of the marijuana produced from the additional canopy space to OHA-registered patients for free.  Also, the OLCC will no longer require patient/producer agreements. As an incentive to add medical canopy, the OLCC will allow producers to sell the remaining twenty-five percent to other licensees.  As the recreational system continues to attract medical growers, this option is designed to ensure that medical patients continue to receive medication free of charge.

Marijuana Promotional Events

Under certain conditions, SB 1057 allows OLCC licensees to exhibit marijuana items at trade shows (such as the Oregon State Fair and similar events).  Although live immature plants were already displayed at the 2016 Oregon State Fair, this provision allows participating licensees to exhibit all types of marijuana items.

The OLCC has already adopted a temporary rule implementing this provision.  The rule, effective until at least December 27, 2017, dictates the specific conditions under which organizers may conduct these events.  These conditions include the following:

  • The designation of an “event organizer,” who is responsible for ensuring that all licensee participants adhere to OLCC’s rules and restrictions regarding the event.
  • Promotional event applications must be submitted by event organizers in writing at least twenty-eight days before the event date.
  • All the marijuana items transported and displayed must be tracked in OLCC’s cannabis tracking system (“CTS”) and immediately returned to the licensed premises following the event.
  • Each marijuana item is required to have the item’s associated Universal Identification (“UID”) tag affixed to the item or its package.
  • Participants and organizers must prevent minors from accessing the marijuana items during these events.
  • Events may not be held at a licensed premises or in a city/county that has prohibited recreational marijuana businesses.

*Note: Industrial hemp products may not be displayed at these events.

Increased Authority for OLCC Regulatory Specialists

In addition to OLCC personnel’s existing right to conduct inspections and investigations, the law grants OLCC regulatory specialists additional powers to make seizures and aid in the criminal prosecution of licensees. This broader authority is intended to prevent marijuana diversion into the black market. The OLCC may also proceed with investigations or disciplinary actions against licensees regardless of whether their licenses have lapsed, been revoked, or suspended.  Applicants who withdraw their application or renewals may also be subjected to these disciplinary actions.

There are limitations to OLCC’s authority, however. OLCC may not inspect/investigate medical cardholders, primary caregivers, or the residences and locations where cardholders and their caregivers produce marijuana.  The law prohibits OLCC regulatory specialists from acting in the capacity of a federal official, carrying a gun, and from conducting inspections of unlicensed primary residences.  These provisions bring the state regulatory program further in line with the Cole Memo’s federal enforcement priorities.

Financial Disclosure

OLCC may now require persons with a “financial interest” in a licensed recreational marijuana business to submit sworn statements to the OLCC that show the person’s name and address, as well as the nature and extent of their financial interest.  OLCC has already released application forms that require persons with a financial interest to disclose their home addresses. We previously discussed the nuances of this requirement and how it affects applicants and licensees in our April 4, 2017 blog post found here.

Labeling Duties Transferred to OLCC

On January 1, 2018, OLCC will assume responsibility for adopting and enforcing labeling requirements formerly under OHA’s purview.  Until OLCC creates new rules, the labeling and packaging requirements remain as is under OAR 845-025-7000 to 845-025-7060 and OAR 333-007-0010 to 333-007-0100.

OHA Database

SB 1057 requires OHA to establish, maintain, and operate an electronic database for storing certain patient and marijuana grow site registry information to increase efficiency between agencies responsible for administering the OMMP. While OLCC and the Department of Revenue will be allowed to access the database, the stored information is confidential and may not be publicly disclosed.  The law does not require OHA to store information related to patients’ debilitating conditions.  Patients’ and Registrants’ contact information will also be confidential unless the information is related to a designated grow site’s location.

We are carefully monitoring developments as the OLCC implements these changes.  In the meantime, remember to always stay tuned to our Facebook and blog updates!

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Today, Oregon Governor Kate Brown signed SB 56 into law. This law is effective immediately and contains several anticipated fixes to the current cannabis regulatory scheme.

On May 30, 2017, SB 1057 was signed into law by the Governor and became effective immediately.  SB 1057 made significant changes to the Oregon Medical Marijuana Program (OMMP), including limiting the number of plants to six mature plants and twelve or fewer immature plants per patient.  Previous plant limits were six mature plants per patient and an unlimited number of immature plants. The timing of SB 1057 created a significant timing issue for medical growers, particularly outdoor growers, currently operating under the OMMP and in the process of applying for recreational production licenses with the Oregon Liquor Control Commission (OLCC). Among other things, SB 56 provides relief from the newly implemented immature plant limits under SB 1057 for medical growers who have applied for their OLCC producer license.  Specifically the bill expressly states that the new plant limits do not apply, except as provided by OLCC rule, to a premises for which an OLCC application has been made on or before the effective date of SB 56, June 23, 2017.

We previously summarized this and some of the other key changes made by SB 56 in our post from June 21, 2017.

If you have any questions regarding SB 56 or any other compliance issue, don’t hesitate to contact one of our compliance attorneys and remember to stay tuned to our blog updates for more up-to-date information on changes to Oregon cannabis laws!

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Today, the Oregon legislature passed Senate Bill (SB) 56, which contains several of the anticipated “fixes” to the cannabis regulatory scheme currently in place.

SB 56, carried by Representative Fahey (D – District 14 – West Eugene and Junction City), includes the “Dash 39” amendments adopted by the Joint Committee on Marijuana Regulation which provides, among other things, relief from the newly implemented immature plant limits for those who submit a producer license application to the OLCC on or before the effective date.

Although SB 56 currently awaits the governor’s signature to take effect, here are some of the key changes you can expect to occur:

Immature marijuana plant limits. The bill exempts OMMP growers who submit their OLCC producer applications on or before the measure’s effective date from OMMP immature plant limits. Current law sets OMMP immature plant limits at twelve (12) plants. This is an important fix for growers intending to transfer their medical plants into the OLCC program.

Immediate suspension of license for suspected diversion. OLCC may restrict, suspend, or refuse to renew a license if the OLCC has probable cause to conclude the licensee has sold, stored, or transferred marijuana in a manner not permitted by its license.

Processing by small producers. OLCC-licensed Micro Tier I and Micro Tier II recreational marijuana producers may process marijuana into cannabinoid concentrates using two specified methods: (1) a mechanical process (i.e., keif sieves, silk screens, etc.) and (2) an extraction process using water as the solvent (i.e., ice water hash, bubble bags, etc.).

Transfer of product between retail locations. SB 56 allows a licensed marijuana retailer to transfer product from one retail location to another if the destination retail location is “owned by the same or substantially the same persons.” Although “substantially the same” is not defined in the bill, we expect the OLCC will provide further guidance on the matter.  Note: these transfers are subject to OLCC rules governing transportation of marijuana items.

Verification of lawful activity hotline. Until now, it was difficult for government officials to determine whether a farm was a registered marijuana grow site or OLCC licensed producer premises. This provision requires that the OLCC and OHA create a telephone hotline to inform inquiring city, county, and Water Resources Department representatives, or a district water-master, as to whether a farm is a registered medical grow site, an OLCC licensed producer premises, or a site for which a registration or license has been applied for.

Exclusively medical licensees. Previous legislation enacted this session (SB 1057) created an “exclusively medical” license designation for OLCC applicants. Under SB 56, city and county governments that currently allow or prohibit OHA processing sites or dispensaries may unilaterally prohibit or allow exclusively medical licensees. This would empower local municipalities to refine the cannabis regulatory structure within their limited jurisdictions as their constituents prefer.

Restricted licenses. At its discretion, the OLCC may issue a restricted license to an applicant if the OLCC makes a finding that the applicant meets the denial criteria found in OAR 845-025-1115 (2). This fix allows an applicants to obtain restricted licenses when they otherwise may have been simply denied.

Remember to always stay tuned to our blog updates for more information on changes to Oregon cannabis laws!

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