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CWCB LA - Investing in Edibles - Kim Geraghty and Lauren Estevez

Posted by Margolin & Lawrence on September 30, 2018

CWCB Los Angeles 9/29/2018 Investing in Cannabis Edibles feat. Kim Geraghty, CEO of Madame Munchie and M&L Attorney Lauren Estevez. Topics covered include: emerging market trends in CA cannabis in 2018; legal and regulatory hurdles for operators like marketing & testing; how CA compares to more mature markets like the Canadian cannabis market and Colorado. Full panel video available soon on CWCB site.

DEA Reschedules CBD to Schedule 5

Posted by Margolin & Lawrence on September 28, 2018

By Raza Lawrence and Allison Margolin

On September 28, 2018, the DEA issued a rule announcing that drugs including CBD with THC content below 0.1%  will be taken off of Schedule 1 of the controlled substances schedules, and moved to Schedule 5, which allows CBD products to be sold through traditional pharmacies with a doctor’s prescription, so long as the particular product is first approved by the FDA.  The order also disallows any importing or exporting of CBD products without a permit. 

It is important to note that the ruling is narrow in that it only applies to CBD products with less than 0.1% THC.  However, products with higher THC content could continue to be sold under state law and without federal FDA or DOJ regulation under the Rohrabacher–Farr amendment.  Ironically, the new federal policy is to tolerate sales of CBD products with high levels of THC, but to restrict sales of CBD products with low levels of THC by requiring FDA approval, a huge task in itself. Some sources indicate that it can cost more than $1 billion to bring one FDA-approved product to the market, including approximately $50-840 million to bring treatments through the stages of Basic Research/Drug Development and Pre-Clinical/Translational Research, and approximately $50-970 million to complete the Clinical Trials (Phases 1, 2, and 3).

The new ruling is bad news for anyone hoping to sell CBD with no or low levels of THC and without FDA approval.  Already, in July 2018, the California Department of Public Health ruled that hemp-derived CBD would not be allowed in food or drinks for humans or pets in California. 

CBD products could potentially be sold as edible cannabis products under California state law if the producers obtain commercial cannabis manufacturing licenses from the state and local government, and the products are distributed and sold through outlets with state and local commercial cannabis licenses.  Even if everyone involved complied with California state cannabis laws, they would still be subject to enforcement, punishment and being shut down by the FDA, unless they contain over 0.1% THC, in which case they could be sold under state law with no federal interference.

The Rohrabacher–Farr Amendment would not protect any low- or no-THC CBD distributors, even those who strictly complied with state law, from enforcement actions from the FDA, as Rohrabacher–Farr only restricts the DOJ from interfering with state regulation of medical marijuana.  The FDA is part of the Department of Health and Human Services, not the DOJ, and thus retains the ability to regulate CBD – its regulations trump any state laws relating to CBD under the supremacy clause of the US Constitution. 

It is possible that today’s DEA ruling could later lead to reclassification of all cannabis from a Schedule 1 to Schedule 5 substance, which would mean that all cannabis could fall under the jurisdiction of the FDA and could only be sold through pharmacies with doctor’s prescriptions and must be produced by companies with FDA approval (i.e., large drug companies). 

Since 2009, the FDA has had the authority to regulate tobacco products, which are now controlled by only a few large corporations, as are many other drugs regulated by the FDA.  The same could happen to cannabis.  Individuals and organizations in the cannabis community should lobby the government to prevent this monopolization by ensuring that cannabis is descheduled as a controlled substance.

Earlier this year, the FDA's parent agency stated that CBD has little potential for abuse – hopefully the government's future approach to CBD will follow this lead and remove CBD's schedule 1 classification.

Attorney Lauren Estevez on CNBC today discussing cannabis stocks

Posted by Margolin & Lawrence on September 21, 2018

Check out our very own Lauren Estevez on CNBC discussing Canadian Cannabis stocks. 

What Should I Know for My Cannabis Business?

Posted by Margolin & Lawrence on September 18, 2018

The logistics of running a legal cannabis operation involve many questions that may seem surprising or daunting to both current and aspiring business owners. As a California cannabis law firm, here are a few of the issues that we’ve seen cannabis businesses need answers for. If you’ve found yourself asking any of these questions about your own operation, our lawyers may be able to help.

How much can I expect to spend?

At present, the capital requirements to start a cannabis business are very high; on top of the normal costs of starting a business, like buying real estate and hiring employees, the industry is very tightly regulated, and it’s not possible to get an outside loan. That means your business has to be privately fundraised, so it’s important to figure out exactly how much money you have and how much you’re willing to spend.

The application fees alone for cannabis licensing are often several thousand dollars, and many jurisdictions require both proof of funding and a detailed business plan before they consider a cannabis licensing application complete. A cannabis lawyer can help you find this information in order to start your licensed operation.

Is my property in an eligible location for cannabis business?

Zoning requirements vary widely based on your jurisdiction and which type of cannabis activity you’re interested in, so it’s not always easy to tell whether a given property or address is eligible for a particular activity. In addition to restrictions on which zones a given activity can be located in (for instance, cannabis cultivation might be banned in commercial zones but allowed in industrial ones), many municipalities have setback restrictions that prevent cannabis businesses from being located within a certain distance of schools, parks, residential areas, or other cannabis businesses.

Interpreting the local zoning regulations to determine for what activities your business is eligible is another service that cannabis lawyers can provide.

What information do I need to apply for a cannabis business license?

Applying for a cannabis business license isn’t just a matter of filling out an application form – most state and local licensing authorities will require a large amount of information about the business and its owners, including a complete operating plan describing how your establishment will meet all legal requirements for cannabis business activity.

On top of this information, you’ll also need to have business documents such as a seller’s permit, federal employer ID number, and certificate of good tax standing in order. On top of that, most applications will require you to provide accurate financial information, insurance documentation, and enough personal documentation for each member of your business to pass a full background check.

Finding these documents and preparing them for your final application is just one service that cannabis lawyers can provide for your business.

Should I get a license for medical-use or adult-use cannabis?

At the present moment, many states and municipalities have separate regulatory regimes for medical-use and adult-use cannabis, often with very different legal requirements. For your cannabis business to succeed, you’ll need to decide which license (or combination of licenses) is best for your business, then master the licensing and compliance processes for the type of cannabis business you choose. A cannabis lawyer can help guide you through this process, from choosing the right activity to applying for a license to remaining in compliance with the law once your business is operational.

What cannabis activity should I apply for?

In addition to medical-use and adult-use, cannabis business licenses are broken down into different activities, such as cultivation, manufacturing, and retail. Additionally, many of these categories are split into subcategories such as indoor and outdoor cultivation or storefront and non-storefront retail. As with medical and adult-use cannabis, these different types of cannabis activities often have very different requirements.

Some jurisdictions also offer boutique categories with special requirements such as Microbusiness, impose restrictions on how many licenses can be granted, or limit which types of licenses a single business can hold simultaneously. For your cannabis business to succeed, you’ll need to optimize which activities to apply for – another task that a cannabis lawyer can help with.

How can I ensure that my business is licensed as quickly as possible?

Given that legal cannabis licensing is a complex, highly regulated bureaucracy currently receiving a large number of applications, it can be difficult for a cannabis business owner to predict how long it will take their business license application to be approved, or to optimize their application in order to be licensed and operational as soon as possible.

Some areas offer a fast track to licensing under their Social Equity Program, in order to ensure that business owners who are disadvantaged or disproportionately affected by the War on Drugs have a quicker path to licensed operation than other applicants. Our cannabis lawyers can help you find out whether you qualify for one of these programs.

Whether or not you qualify for a Social Equity Program, the best way to ensure that you’re licensed as soon as possible is to choose the right license for your business and make sure that the information in your application is complete and correct.

What license should I apply for if I plan to expand my operation?

Especially for new cannabis businesses, the size of a cannabis business at the time of initial licensing might not be the same as the size of the business you hope to run in two or three year’s time. However, cannabis license application fees often vary based on the size of the operation in question, and applications often require businesses to provide details that depend on the size of their operation, including what types of equipment they plan to use, their planned hours of operation, and how many employees they’ll hire (including their labor practices and management structure).

Our cannabis lawyers can help you figure out how to reflect your long-term growth plans in your licensing application, including the multi-year pro forma budgeting and income documents that many municipalities require.

Will I need to apply for additional licenses or permits?

For many businesses, the cannabis license itself is only one of a number of licenses you’ll need for a fully licensed operation. To begin with, new cannabis businesses will need to apply for their tax registrations and seller’s permits. Additionally, depending on your activity, you may need to apply for Conditional Use Permit or Land Use Permit from your local planning department before you can apply for a cannabis business license.

For some activities, like outdoor cultivation, this may require further permits, such as for diversion of water, tree removal, or environmental review. On the other hand, businesses located in cities may be required to apply for enrollment in local Social Equity or community benefits programs. Our cannabis lawyers can help you find out what additional permits you need and help you apply for them.

California Cannabis License Fee Calculator

Posted by Margolin & Lawrence on September 6, 2018

The state regulators have released the annual fees for cannabis licensees - manufacturing fees are determined by the CDPH, cultivation by CalCannabis, and testing, microbusiness, retail and delivery fees are set by the BCC. We have compiled all of these fees into a calculator you can use to estimate your costs for the state annual license into one place. 

 

 

https://margolinlawrence.com/california-state-licensing-fee-calculator/

 

Provisional Licensing in California

Posted by Margolin & Lawrence on September 5, 2018

Originally, Senate Bill (SB) 1459 was written to allow the county agricultural commissioners (CACs) to include cannabis among reports about the condition, acreage, production, and value of the county’s agricultural products as submitted to the Secretary of Food and Agriculture. The bill was first introduced in the California State Senate on February 16th, 2018, by Senator Cannella (coauthored by Senators Galgiani and McGuire, Assembly Members Caballero and Wood). The impetus for suggesting that CACs report cannabis as an agricultural product was based on the National Agricultural Statistics Services assessment that “providing crop statistics is basically a way to stabilize the agricultural marketplace." Such action would ultimately facilitate the integration of cannabis cultivation into the marketplace, and moreover encourage unlicensed growers to legitimize their businesses. After passing the Assembly Appropriations Committee 13-4 on August 8th, SB 1459 then received a majority vote upon a third reading on the Senate floor.

Approval of Cannabis Epilepsy Medicine is Sign of Growing Acceptance

Posted by Margolin & Lawrence on August 17, 2018

This editorial, by Allison Margolin and Raza Lawrence, also appears in the July 25th, 2018 edition of The Daily Journal.

On June 25, the Food and Drug Administration announced that it was approving Epidiolex, a cannabidiol (CBD) oral solution for the treatment of seizures associated with two rare and severe forms of epilepsy. This is the first drug approved by the FDA comprised of an active ingredient derived from marijuana.

The approval is a sign of the growing acceptance of CBD, and cannabis generally, to treat various medical ailments. THC, not CBD, is the primary psychoactive (intoxicating) component of marijuana. But CBD is believed to have its own distinct health benefits for conditions ranging from anxiety to cancer, and has recently exploded in  popularity. CBD-based products seem to be everywhere, including Walmart, although the 9th U.S. Circuit Court of Appeals ruled this year that CBD is properly banned as a controlled substance under federal law, and the FDA warned in its recent press release that it will continue to crack down on “illegal marketing of CBD-containing products with serious, unproven medical claims.”

California’s health department also recently made clear that state law forbids adding CBD products (whether from cannabis or industrial hemp) to any food. Regardless, the FDA’s ruling could open up CBD and cannabis generally to broader acceptance in government and society.

The FDA’s approval contradicts the federal classification of cannabis as a Schedule 1 substance, the same as heroin, which is defined as one with a high potential for abuse and no medical value. The FDA specifically found, as part of its approval of Epidiolex, that CBD has medical benefits that have been supported by rigorous scientific research and clinical studies. Litigants could use the FDA approval to challenge marijuana’s Schedule 1 status in court. Or, reading the tea leaves, the government could re-classify or de-classify marijuana on its own. Under the law, Congress, the president, and the heads of the
Drug Enforcement Administration and FDA would each have the power to remove marijuana from Schedule 1.

What happens next if cannabis is removed from Schedule 1? There are different possible paths. Under one scenario, feared by many in the cannabis industry, cannabis would become regulated by the FDA as a Schedule 2 (or 3 or 4 or 5) controlled substance. Complying with FDA regulations can be extremely expensive and time-consuming, which is why drug companies are all large corporations rather than “mom and pop” operations. The estimated cost of bringing a new prescription drug to market is $2.6 billion.

In California, the cannabis industry has operated for years under an informal system of non-profit “collectives,” with only vague legal guidelines and no regulation. This year, the state is transitioning to a new system of state and local licensing and regulations. California cannabis cultivators, manufacturers, distributors, and retailers are already struggling to comply with the new high taxes and complicated regulations imposed by California. If the FDA were to take over the regulation and licensing, the costs of compliance would likely be much higher, and only those with the deepest pockets would have the resources required to produce and sell cannabis. The costs of compliance would inevitably be passed on to consumers, who would face sky-high cannabis prices similar to those of prescription drugs.

Federal control and regulation of cannabis, however, is not inevitable. Many would prefer the approach taken by proposed federal legislation that removes federal penalties and allows each state to sets its own marijuana policy within its borders, similar to how alcohol is now treated. Under this approach, the FDA would not regulate cannabis like a prescription drug, but could still prevent misleading health claims or misrepresentations on labels, and enforce basic quality standards, as it does for dietary supplements.

Unlike synthetic drugs derived for billions of dollars in corporate labs, cannabis is just a plant. It is not toxic or physically addictive. People who use it for medical purposes can safely and effectively determine and adjust their own doses. States could set reasonable restrictions and regulations on commercial
cannabis as they do with alcohol, but would not need to subject it to the intense scrutiny of prescription drugs.

The approval of Epidiolex is promising to the extent it increases awareness and legitimacy of cannabis as medicine. But it also raises the concerning possibility that all cannabis may soon be regulated like prescription drugs, and controlled by large corporations, rather than by the people and small businesses who grew the industry up from the ground.

Applying for a Commercial Cannabis License: State vs. Local

Posted by Margolin & Lawrence on August 13, 2018

Since the Department of Cannabis Regulation opened up Phase II licensing in Los Angeles a couple of weeks ago, questions have been flooding in regarding the differences between state and local licensing. While the requirements set forth in local ordinances usually reflect the laws set forth by state agencies, there are some distinctions in terms of what is required for the purposes of applying for business licensing.

New York State Releases Report on Recreational Cannabis

Posted by Margolin & Lawrence on July 13, 2018

With a recent study, the state of New York signaled receptiveness to the possibility of legalizing cannabis for recreational use. Specifically, the report, commissioned by Governor Cuomo, recommends that adults be allowed to legally consume marijuana. While the study has yet to be finalized by the New York State Department of Health, its announcement indicates that New York is planning to embrace the marijuana industry to the same extent that states like California and Colorado have, switching from a relatively restrictive medical-only marijuana program to a system which legalizes the recreational use of cannabis. Given the size and influence of New York State’s population and economy, this shift would have major implications for the status of cannabis in the nation at large.

Currently, New York State’s regulations only allow marijuana to be legally used for medical purposes. Additionally, only 10 companies are licensed to operate as medical marijuana suppliers, a restriction with the potential to greatly limit patients’ access to marijuana and drive prices up. Further, patients aren’t even allowed to smoke marijuana – as of December 2017, the drug can only be legally taken in the form of cannabis extracts like oils, tinctures, and chewable tablets. According to the New York Times, these restrictions were initially put in place by Cuomo, out of concern that marijuana would become a “gateway” drug leading to use of other illicit substances. Therefore, this study, with its conclusion that marijuana (even when smoked) is not harmful for adult recreational use, indicates a major pivot on the governor’s part when it comes to legalization.

This shift may be due to the upcoming election for the governorship, where Cuomo’s most prominent challenger, Cynthia Nixon, has made marijuana legalization a central campaign issue. Nixon has positioned herself as even more pro-legalization than Cuomo, calling for a fully regulated and taxed recreational marijuana industry in New York as well as a statewide program to expunge past marijuana convictions. Therefore, whichever candidate wins the governorship, it seems likely that New York State will continue to liberalize its cannabis regulations. Together with New York City moving to limit marijuana arrests, this indicates that, while New York may not have a full recreational cannabis industry for some time, the region’s political climate has shifted significantly against the restrictive laws which are currently in place.

Don't Be Intimidated by LA's Social Equity Program - All are welcome to Apply

Posted by Margolin & Lawrence on July 9, 2018

Through the Social Equity Program, Drug War Victims Will Help Build LA’s Green Economy

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This blog is not intended as legal advice and should not be taken as such. The possession, use, and/or sale of marijuana is illegal under federal law.