On July 14, 2021 Senators Chuck Schumer, Cory Booker and Ron Wyden released draft legislation which proposes reforms to US marijuana policy. The Cannabis Administration and Opportunity Act seeks to decriminalize marijuana on a federal level, expunge the records of certain convictions and to fund programs to aid those adversely impacted by the “War on Drugs.” Decriminalizing marijuana would result in it being removed from Schedule 1 of the Controlled Substances list and place cannabis prohibition in the hands of the states. Cannabis regulation on a federal level would be removed from the DEA and transferred to ATF, FDA and TTB. There is a proposed minimum age of 21 for retail sales.
The biggest impact would be on banking and by extension insurance. Presumably, federally insured banks would be able to accept deposits from cannabis related companies as those companies would be operating legally if so allowed under state law. More insurance carriers may be willing to enter into the market to provide coverage for grow operations, transportation, crops and retail sales.
There were multiple bills introduced in the House of Representatives which stalled or were not brought to the Senate floor. As proposed, this bill will have to be discussed for revisions, considered in committee and debated on the floor. Recently the US Supreme Court refused to hear a tax case wherein a cannabis company was seeking to deduct the costs of advertising and other expenses. Presently operators in the cannabis industry are not permitted to take such deductions. Justice Clarence Thomas issued a statement that it was time to address the marijuana question and suggested the federal government’s approach to marijuana may no longer be necessary.
There are currently 19 states with legal adult use and 37 states which allow for medical use. President Biden is thought to be supportive of decriminalization.
On December 4, 2020 the House of Representatives approved legislation removing cannabis from Schedule 1 of the Controlled Substances Act. The passage of the MORE Act does not legalize cannabis use as the bill still faces a vote in the Senate. It is not expected that the Senate will take up a vote in 2020.
Moving Forward! The first week of December may bring an historic vote in the United States House of Representatives. The Marijuana Opportunity Reinvestment and Expungement Act or MORE Act is set to be brought to the floor. The bill was introduced in July of 2019 and passed the House Judiciary Committee in November of 2019 but stalled.
The MORE Act would remove cannabis from the list of Schedule 1 federally controlled substances and leave cannabis policy to the states. It would impose a 5% sales tax on cannabis products with proceeds placed into a trust fund to be used for educational training and substance abuse programs for those communities impacted by the war on drugs. The Small Business Administration would be permitted to release funds to cannabis-related businesses. Additionally, all marijuana convictions would be expunged, and sentencing hearings would be held for those incarcerated for marijuana related offenses.
While the bill has bipartisan support, and may pass the House, approval in the Senate is an unknown. Stay tuned!
New Jersey along with Arizona, Montana and South Dakota by public referendum joined a growing number of states to legalize the adult use of cannabis. New Jersey could create a 1-billion-dollar recreational market for adults over 21 years old. The first step in this process requires the state to create a Cannabis Regulatory Commission which will be the rule making body for regulations, governance, and licensing. The referendum established a 6.65% sales tax on recreational sales and up to an additional 2% municipal tax for sales from local dispensaries. As of November 4 2020, cannabis is not yet legal in New Jersey and it is unlikely legal sales will not be authorized until late 2021 or early 2022.
New Jersey legalized the sale of cannabis for medical purposes in 2010 after which many local municipalities began enacting zoning ordinances prohibiting the sale of cannabis. Large cannabis growers are already established in New Jersey and they are expected to expand operations anticipating a demand for recreational use. Dispensaries will be looking to move into retail spaces which may be recently vacated due to present circumstances. Delivery platforms such as internet preorder or door to door service such as DoorDash could be permitted. There will be a need for transportation services from growth and extraction sites to dispensaries or points of sale.
What this means for the insurance industry in an expanding new market is yet unknown. Cannabis remains a Schedule 1 controlled substance under the Controlled Substance Act of 1970, it remains federally illegal impacting banking and tax issues for the grower and retailer. Additionally, IRS Code 280E prevents businesses from claiming standard deductions by companies that traffic in illegal drugs and Federal RICO laws may result in seizure of all gains resulting from the production and sale of cannabis.
Civil liabilities for cannabis related activities may include labor related issues regarding cannabis and the workplace, employer drug testing of staff and social host liability for the homeowner. There may be landlord tenant concerns such as an individual using an “illegal substance” on the premises if a rental is federally subsidized. Testing for those driving under the influence is still a grey area in the science.
The environmental impact of production of cannabis is evolving. The growing facilities are highly specialized involving extensive water purification and odor all of which have potential worker health and safety repercussions in addition to a myriad of other issues such as advertising liability, customer fraud for product purity, mold in a product – the list is too long for this space.
Stop by this space for updates regarding developments in this trend as the legalization of recreational use of cannabis evolves in the venues we serve.
We are pleased to announce that Margolis Edelstein Partner and Toxic Tort Department Head, Dawn Dezii, Esquire, will be speaking at the upcoming CLM Product Liability Conference. The conference will take place on July 16 – July 17, 2015 in Irvine, California. Dawn will be presenting on “Effective use of National Coordinating Counsel in Product Cases”. For more information on the presentation, feel free to contact Dawn directly at firstname.lastname@example.org
Margolis Edelstein Partner Jeanine D. Clark, Esquire also serves as a co-chair for the conference. You may also contact Jeanine with any questions at email@example.com
We are pleased to announce that Margolis Edelstein Partner and Toxic Tort Department head Dawn Dezii, Esquire will be presenting at ACI’s 19th Advanced Forum on Asbestos Claims & Litigation, June 23-24 in Chicago. Dawn will be presenting on “Use of Asbestos by the United States Military.” For additional information please feel free to contact Dawn at firstname.lastname@example.org or view the brochure at http://www.americanconference.com/2015/745/asbestos-claims–litigation
Early registration discounts may be available by emailing email@example.com and mentioning you are being referred by Dawn Dezii.
New Jersey Partner, Dawn Dezii addressed the attendees at the American Conference Institute 12th annual National Forum on Asbestos Claims & litigation held at the Union League in Philadelphia. Dawn presented on the topic of Forum Non Conveniens: Best Defense Strategy Practice When Seeking a Different Forum.