Welcome back to Higher Law, our weekly briefing on all things cannabis. I'm Cheryl Miller, reporting for Law.com from Sacramento. Happy new year! I hope your holidays were festive.

To kick of 2019, we're looking at issues likely to shape the year ahead for the cannabis industry. Plus, another RICO claim targeting a marijuana grow bit the dust. And we've got a link to a new report on why cannabis practices are increasingly focusing on data privacy.

Thank you, Higher Lawyers, for ringing in the new year with us. As always, I appreciate your story tips, trend alerts and feedback. What would you like to see us cover in 2019? Drop me a line at [email protected] or you can call me at 916-448-2935. Follow me on Twitter at @capitalaccounts.

2019: What We're Watching

Almost one year ago to the day, then-U.S. Attorney General Jeff Sessions rescinded the Cole memo, casting a pall over the state-legal marijuana industry.

Welcome, 2019. How things have changed.

Sessions is out. A new, marijuana-friendlier, Democratic House of Representatives is in, and there seems to be a general mood of optimism among long-time regulated market advocates that an end to federal prohibition is coming sooner rather than later.

Here's a look at some of the issues that will shape legal marijuana's fortunes in the year ahead.

>>> Whither Washington. Michael Correia, director of governmental affairs for the National Cannabis Industry Association, said in a recent webcast that Democrats' control of the House “is really going to speed up the momentum that we've had.”

Among the bills high on the association's priority list is the STATES Act, bipartisan legislation in the U.S. Senate that would provide legalized states some protection from federal interference while encouraging more banking and tax equity for state-compliant marijuana businesses. The bill still faces tough odds in the Republican-controlled Senate, but any vote on the bill “is really an opportunity to see where senators stand” on the issues, Steve Fox, the association's strategic advisor, said during the webcast.

Another issue to watch, Correia said, is protections for banks that serve the marijuana industry, particularly medical marijuana operators. “If one bill were to shake loose and move through, I think banking would be a good one.”

>>> Start spreading the news. Recreational weed could come to New York state in 2019. Gov. Mario Cuomo once called marijuana a gateway drug. Now he's pushing for quick legalization, eyeing a potential $670 million in tax revenues—perhaps for subway upgrades.

>>> More M&A craziness. Harris Bricken attorney Tatiana Logan says in a Canna Law Blog post that 2019 will be “a banner year” for cannabis mergers and acquisitions.

“ The number of licensed cannabis entities existing today is very limited and will be slow to grow and expand in states with legalization,” Logan writes. “In turn, just by virtue of holding a license, your cannabis business holds inherent value to strategic and financial buyers.”

Canadian legalization and keen cannabis interest from the alcohol (more on that below) and tobacco industries are also contributing to all the transactional work.

>>> Hemp. Congress can't agree on marijuana, but members legalized industrial hemp in the farm bill signed into law last month. The federal blessing of the non-psychoactive plant will boost cultivation and markets, particularly for operations deriving CBD from hemp.

Colorado-based Dixie Brands Inc., which manufactures CBD-infused health supplements for humans and CBD food and snacks and food for pets, issued a post-bill-signing statement saying that the legislation means the U.S Drug Enforcement Agency can no longer block interstate sales of hemp products and that banks and credit card companies can do business with producers.

“Downstream benefits of the Farm Bill include expanding access into more mainstream retail by removing additional regulatory barriers for carrying hemp and CBD-rich products,” the company said.

California Judge Shuts Down a RICO Claim

Another attempt to use RICO to shutter a neighborhood pot grow has failed in court. U.S. District Judge Jon Tigar (above) of California's Northern District recently dismissed racketeering claims brought by neighbors of a reportedly stinky marijuana operation in Sonoma County, concluding that they had failed to “adequately allege” the property damages required by the federal RICO statute.

In a Dec. 27 ruling, Tigar noted that the marijuana grow's owner and cultivator, Carlos Zambrano and Green Earth Coffee LLC, reached a settlement with Sonoma County to stop all unpermitted operations at the site outside Petaluma by Nov. 15.

“While Plaintiffs have alleged a diminution in present market value of their homes, because the nuisance has been abated and the cause of the depreciation has been removed, Plaintiffs have not sufficiently pleaded an injury to property,” Tigar wrote. The Sonoma County agreement also requires the property owner, Flying Rooster LLC, to record a covenant “permanently prohibiting” commercial cannabis operations at the site.

A federal judge in Oregon this summer dismissed RICO claims brought by grow-site neighbors, saying the plaintiffs had failed to show they had suffered financial harm. A similar racketeering claim against a southern Colorado grow was tossed out by a federal judge in October.

Tigar did let stand the Sonoma County neighbors' claim for compensable injury under California's unfair competition law.

You Said It

“It's time the fed govt takes action by either removing cannabis from its official list of banned narcotics or approving safe harbor legislation that protects banks serving #cannabis biz from prosecution.”

—California Treasurer John Chiang tweeted that the federal government needs to take the lead on marijuana banking after his office released a report concluding that a state-run bank for cannabis businesses is not feasible.

In the Weeds…

>> As cannabis companies grew in size and reach in 2018, so did their legal staff. My colleague Caroline Spiezio took a look at some of the cannabis industry's in-house hires last year. [Corporate Counsel]

>> Data breaches are bad enough. Breaches that expose patients' medical marijuana information or data about consumers who live in states where cannabis is illegal are even bigger potential threats. Law firms' cannabis practices are increasingly focusing on data privacy as part of their compliance counsel. [Bloomberg Law]

>> Legal pot is getting easier to find in the U.S. So why is quality cannabis for clinical research so difficult to obtain? Blame anti-marijuana politics and, ironically, a focus on ending prohibition. Oh, and that sanctioned product from the University of Mississippi? “It's brown, muddy garbage,” says one researcher. [Politico]

>> Oregon lawmakers are looking at exporting pot to other marijuana-legal states. The proposal is being pushed by the Craft Cannabis Alliance, and it faces plenty of obstacles. What state, and maybe more importantly, what state's growers would be willing to accept imports? And would interstate sales, even between marijuana-legal states, be one step too far for federal authorities? [Salem Statesman Journal]

>> Ohio regulators have authorized a $2.1 million loan to state agencies facing medical marijuana lawsuits. The companies are being sued by companies that were denied medical marijuana growers' licenses. The initial $1 million budgeted by the state for legal costs wasn't enough. [AP]

The Calendar: What's Next

Jan. 11 - The Colorado Winter Hemp Summit will be held in Ft. Collins. Attorneys from the Hoban Law Group and Vicente Sederberg are scheduled to join other speakers to discuss the hemp industry and the impact of the new federal farm bill.

Jan. 17-18 - The National Business Institute hosts “Marijuana Business Law in California” in San Francisco. Scheduled speakers include 10 regional attorneys.