In the Weeds: Billboard Battles, NY Bans but DEA Allows Some Delta-8, Montana Outlaws Dispensary CBD Sales

November 16, 2021
Newsworthy Highlights

Oregon Landowners Cautioned About Leasing Property for Illegal Cannabis Cultivation. Landowners in Jackson County, Oregon, were advised to do their due diligence when leasing their property for cannabis cultivation. In a letter sent with property tax bills, the Jackson County Sheriff’s Office warned of fines and criminal charges property owners could face by renting property to individuals growing marijuana without the proper permits and licenses. Additionally, the letter stated that landowners could be held liable for failure to register a farm labor camp, structures built on the property without a permit, and labor violations for renters that construct greenhouses on the property to grow illegal marijuana. Jackson County encourages landowners to verify land leasers’ permits for growing hemp or marijuana. Additional information for landowners can be found on Jackson County’s website.

DEA Letter Suggests Possible Legality of Delta-8 THC. States, distributers and users of cannabis products have been uncertain about the legal status of delta-8-tetrahydrocannabinol, an isomer of delta-9 THC, the main psychoactive ingredient in marijuana. Seeking to clear up regulatory questions surrounding delta-8, in August 2021, the Alabama Board of Pharmacy requested an explanation from the U.S. Department of Justice Drug Enforcement Administration (DEA) of the control status of delta-8 under the Controlled Substances Act (CSA). On Sept. 15, the DEA issued an advisory letter noting that cannabinoids extracted from tetrahydrocannabinols in hemp with a delta-9 THC concentration of not more than 0.3 percent on a dry weight basis are not controlled under the CSA. However, the letter noted that cannabinoids, including delta-8, synthetically produced from non-cannabis materials are controlled under the CSA as a “tetrahydrocannabinol.” DEA guidance letters provide nonbinding advice, and the full implications of this letter remain unclear. The DEA has not specified, for example, whether delta-8 produced from hemp-derived cannabinoids, like CBD, would be considered synthetically produced. However, for delta-8 that is extracted from hemp and that contains less than 0.3 percent delta-9 THC, this letter suggests legality on the federal level.

Nevada Cannabis Compliance Board Suspends Kindibles’ Production License. On Nov. 5, 2021, the Nevada Cannabis Compliance Board (CCB), in a unanimous vote, suspended Kindibles LLC’s cannabis production license for failure to comply with Nevada Cannabis Compliance Regulations. During an inspection in October 2021, CCB agents found major deficiencies in the company’s production logs and inaccurate inventory counts. As a result, CCB issued the suspension due to public health and safety concerns and warned consumers in its Public Health and Safety Bulletin 2021-2 to be cautious about consuming Kindibles’ cannabis products. To lift the suspension, Kindibles must submit a plan of correction to CCB within 10 business days.

Grassroots Federal/State Legislative Highlights

Montana’s Adult-Use Cannabis Law Prohibits Dispensary Sales of CBD Products. Montana’s House Bill 701 was signed into effect on May 18, 2021, implementing the state’s adult-use cannabis program. Much to the surprise of industry participants, the bill provides that “a licensee may not cultivate hemp or engage in hemp manufacturing at a licensed premise.” Accordingly, cultivator/manufacturer licensees may not grow or manufacture products derived from hemp, including cannabidiols/CBD products. Additionally, the bill provides that “[a]n adult-use dispensary or medical marijuana dispensary may not sell or otherwise transfer hemp or alcohol from a licensed premises.” Under this prohibition, adult-use and medical-use dispensary licensees may not sell CBD products in their facilities. Licensed cannabis dispensaries must remove all CBD stock by Jan. 1, 2022. Other non-licensed retailers in the state, including gas stations and convenience stores, will still be able to sell CBD products.

Detroit Allows Therapeutic Use of Naturally Occurring Psychedelics. Detroit recently passed Proposal E: “Entheogenic Plants,” which will allow to the “fullest extent permitted” the personal and “therapeutic use” of “magic mushrooms” by adults. Entheogenic plants include a class of naturally occurring psychedelics like mescaline, ayahuasca, psilocybin and dimethyltryptamine or DMT. Detroit joins the District of Columbia, Denver, Oakland, Grand Rapids and Ann Arbor in reevaluating the use of police resources and the harm presented by entheogenic plants and fungi like psilocybin. Importantly, the law does not wholesale legalize psychedelics, but decriminalizes them for personal use and directs police activity elsewhere. Commercial sale is still prohibited, and use appears to be limited to “therapeutic” and not “recreational,” although enforcement will be a near-zero priority for Detroit police moving forward. In September, Michigan state Sen. Jeff Irwin (D-Ann Arbor) also introduced legislation in Lansing that would allow possession and cultivation of some psychedelics. Senate Bill 0631 was referred to the Michigan Senate Committee on Judiciary and Public Safety, where it is pending. Michigan could be building a foundation for the eventual medical sale of psychedelics. Michigan and federal law prohibit the possession and use of entheogenic plants, including psychedelic substances, and the Detroit proposal does not change that fact.

New York Adopts Cannabinoid Hemp Regulations, Excludes Delta-8 Products. After several rounds of public comments, on Nov. 3, 2021, the N.Y. Office of Cannabis Management (OCM) adopted a resolution to file notice of adoption of the Cannabinoid Hemp Regulations. Key updates to the regulations include good manufacturing practices for food and dietary supplements. The regulations cite specific product laboratory testing and labeling requirements. Laboratory testing must include testing for heavy metals, microbials, pesticides, mycotoxins and residual solvents. Nutrition supplement labels must address total cannabinoids per product servings, stating the amount of CBD and THC as applicable, and must include a mechanism to report an adverse event and information on the country where hemp is sourced. The regulations take effect immediately; however, the packaging, labeling and laboratory testing requirements have a delayed effective date of April 2022. Finally, the regulations explicitly exclude delta-8 products. OCM indicated that these products will be further discussed as part of the New York adult-use program.

Cannabis Billboard Dispute Arises in Connecticut and Massachusetts. In addition to sharing a mutual border, Massachusetts and Connecticut also share advertising for Massachusetts cannabis companies on billboards along Connecticut highways. According to Massachusetts news reports, the proliferation of these billboards recently prompted Connecticut Attorney General William Tong to send notice to the cannabis companies requesting removal of the billboard ads. Connecticut’s recently passed adult-use cannabis law is unique because it includes extensive sociable responsibility and equitable standards as part of its regulations. In addition, one of the regulations prohibits cannabis advertising unless 90 percent of the target marketing audience is 21 years of age or older. According to the articles, the Connecticut Attorney General’s Office views the Massachusetts cannabis billboards as overbroad and in violation of the statute. Besides citing Connecticut law, the Attorney General’s Office also alleges that the billboards violate federal law by encouraging customers to cross state lines with cannabis products. Although the attorney general described his letter to the cannabis companies as a “request,” it is possible Connecticut may seek further measures to enforce the advertising rules. It’s uncertain whether the cannabis companies will remove their billboard advertising in Connecticut at this time.

Investments and Transactions Highlights

Curaleaf Acquires Tryke Companies. On Nov. 8, 2021, Curaleaf Holdings Inc., a leading international provider of consumer products in cannabis, announced a definitive agreement to acquire Tryke Companies (dba as Reef Dispensaries) — a privately held, vertically integrated, multistate cannabis operator for cash and stock — for approximately $286 million. The transaction is expected to close in the second half of 2022, subject to required approvals and conditions. Tryke was founded in Arizona in 2014 and helped pioneer Nevada’s legal cannabis market from its inception in 2015. Tryke is the exclusive cultivator and processor for Wiz Khalifa’s Khalifa Kush brand in all of the markets where Tryke operates.

springbig Intends to List on Nasdaq Through Merger With Tuatara Capital Acquisition Corp. On Nov. 9, 2021, Tuatara Capital Acquisition Corporation, a publicly traded special purpose acquisition company, announced that it entered into a definitive agreement for a business combination that would result in springbig becoming a publicly listed company. In the cannabis industry, springbig is a provider of marketing solutions, consumer mobile app experiences, and omnichannel loyalty programs. Upon closing, the combined company is expected to remain listed on the Nasdaq. The transaction is expected to close in the first quarter of fiscal year 2022.

“In the Weeds” is McGuireWoods’ biweekly ounce of highlights in the budding cannabis, hemp and CBD industries. For more information, see our newsletter archive, our Edible Bites podcast series (available on Apple and Spotify), or visit our Cannabis, Hemp & CBD practice.