Welcome back to Higher Law, our weekly briefing on all things cannabis. I'm Cheryl Miller, reporting for Law.com from Sacramento, where the governor says he wants to pull National Guard troops from the southern border to fight illicit marijuana grows in the state. Well, that and because he thinks the president's border emergency declaration is “political theater.”

This week, WilmerHale dips its toes into the marijuana banking conundrum. Also, the fate of a million-dollar hemp shipment stuck in Idaho moves to the Ninth Circuit. Scroll down to see Who Got the Work.

Thanks as always for reading. Please keep the feedback, story ideas and tips coming. Drop me a line at [email protected] or you can call me at 916-448-2935. Follow me on Twitter at @capitalaccounts.

 

WilmerHale Talks Pot … Banking 

As Congress grapples with how, or even whether, to ensure marijuana-related businesses have access to banking, eight attorneys from Wilmer Cutler Pickering Hale and Dorr weighed in on the issue with a client alert that was reprinted this week in New York University School of Law's Compliance & Enforcement blog.

The authors, including Denver partner John Walsh, the U.S. attorney in Colorado from 2010 to 2016, note the ongoing risks for banks and credit unions that choose to serve cannabis businesses, including potential violations of drug and money laundering laws.

“Financial institutions should be aware of and develop policies and procedures to mitigate these risks,” the Wilmer advisory says. “Because different jurisdictions take different approaches to criminalizing activities involving [marijuana-related businesses], financial institutions should centralize risk-management decision making around marijuana-related issues with a knowledgeable group of legal, compliance and risk management personnel.”

The piece talks about hemp's inclusion in the 2018 Farm Bill, the confusion surrounding CBD and how Canadian and European laws play into the mix. There's probably nothing groundbreaking in the report for folks who have been struggling with cannabis banking issues for years. But it is interesting to see a firm with the heft of WilmerHale offering guidance on a marijuana-related topic.

It's not the first time. A November client alert from London-based WilmerHale counsel David Rundle discussed proceeds from legal Canadian cannabis operations in light of the United Kingdom's money laundering laws. WilmerHale doesn't have a marijuana practice, but its attorneys know plenty about banking, securities and regulatory compliance. And their clients are surely aware of the current and future potential of licensed cannabis markets.

“The myriad—and conflicting—state, federal and international laws governing the burgeoning marijuana industry have created a complicated legal landscape for financial institutions,” the alert says.

Joining Walsh as authors on the guidance are partners Sharon Cohen Levin, Paul Architzel, Franca Harris Gutierrez and Matthew Martens; counsel Michelle Nicole Diamond; and associates Emma Bennett and Zachary Goldman. Architzel is chair of the firm's futures and derivatives group, and Cohen is an authority on anti-money laundering. Gutierrez is vice-chair of WilmerHale's financial institutions practice group.

>> Rob Nichols, president of the American Bankers Association, wrote an op-ed in The Hill this week, calling on Congress to “reconcile that divide” between states and the federal government on marijuana legalization “so financial institutions have the certainty they need to serve businesses that are legal in their states.” You can read more here. 

 

A Fight Over Hemp Held Hostage

The fate of a truck-trailer full of what it's owners say is industrial hemp is now before the U.S. Ninth Circuit Court of Appeals.

Chief U.S. Magistrate Judge Ronald Bush of the U.S. District Court in Idaho this week refused Big Sky Scientific's request for an order forcing the Idaho State Police to release the 6,700 pounds of cargo that officers seized outside of Boise on Jan. 24. State police said the Colorado-bound shipment was marijuana.

In a 28-page ruling, Bush wrote that while the 2018 Farm Bill made hemp a legal agricultural commodity, Big Sky Scientific's shipment “could not have been grown under either a federal or state plan implemented under the 2018 Farm Bill because neither the federal government nor the state of Oregon (where the hemp is alleged to have been grown, harvested, and shipped from) has yet enacted such a plan.”

Bush continued: “Unless produced in compliance with such a plan, the cargo at issue in this case—whatever name is given to it—is not 'hemp' as defined in the 2018 Farm Bill, which is entitled to interstate commerce protections for purposes of transportation across state lines. Therefore, the Court concludes that Plaintiff is not likely to prevail upon the merits of its case and, under applicable law, the Court cannot issue a preliminary injunction to grant the relief Plaintiff seeks at this time.”

On Wednesday, Stoel Rives partner Elijah Watkins, filed a notice of appeal to the U.S. Court of Appeals for the Ninth Circuit.

“It sets up a really interesting question for the Ninth Circuit,” Watkins told me. “We think we've got a commerce clause case that's on all fours and the [district] court doesn't really address that directly.”

Watkins said three Big Sky Scientific-sanctioned lab reports show the THC level in the transported crop is under 0.3 percent, making it non-psychoactive hemp. Bush in a footnote to the ruling noted that tests ordered by both parties show the crop meets the definition of hemp. But attorneys for the Idaho State Police contend that the cargo is contraband because products and plants containing any amount of THC are marijuana under state law.

Watkins said the cargo's potential CBD value is worth more than $1 million. Big Sky Scientific has asked the Ninth Circuit for an expedited briefing schedule.  

Who Got the Work

• Sandeep Singh, a former litigator for the U.S. Internal Revenue Service's Office of Chief Counsel, has joined Rogoway Law Groupto help expand the San Francisco cannabis firm's taxation practice. Singh was previously a tax attorney with Moskowitz LLP.
• Nicole Elliott, director of San Francisco's Office of Cannabis since 2017, was named senior advisor on cannabis issues in California Gov. Gavin Newsom's Office of Business and Economic Development. Elliott served as director of the Office of Legislative and Government Affairs for the late Mayor Lee from 2014 to 2017.

 

In the Weeds…

>> Weed in the workplace: ”With New York seemingly poised to enact legislation legalizing recreational marijuana, New York employers will face a host of new compliance issues,” DLA Piper partner Evan Parness and of counsel Garrett Kennedy write. Drug-testing, drug policies, reasonable accommodations—there's a lot on the table. “Employers would be well-served to begin surveying their policies, procedures and training that will need to be adapted to comply with any such new law.” [New York Law Journal]

>> Meanwhile, add Maryland to the list of states pondering recreational use laws. Lawmakers have created a work group to study the issue. The group will make recommendations by the end of this year. The issue could go to voters in a 2020 referendum. [The Baltimore Sun]

>> And it looks like there's a marijuana deal in New Jersey. Maybe. Gov. Phil Murphy appears to have reached a deal in principle with legislative leaders over recreational-use taxes and regulation. How solid that deal is seems to depend on who's doing the talking. A tax of $42 an ounce is reportedly on the table as is a five-member regulatory commission. [NJ.com]

>> Is CBD a cure-all or quackery? With marijuana still prohibited at the federal level, there hasn't been much research on the potential benefits of cannabidiol. But that hasn't stopped its marketing for all manner of aches and pains. And sales are booming. Regulators are taking notice, aided by provisions in the recent farm bill that gave the U.S. Food and Drug Administration some oversight over hemp-derived CBD. [Bloomberg]

>> Los Angeles should be California's largest legal cannabis market. But delays in a complex permitting process have left hundreds of applicants waiting for a license even though recreational sales became legal in the state more than a year ago. That's left would-be retailers paying rent on empty storefronts, unsure when they'll be able to stock shelves and welcome customers. [Los Angeles Times]

>> The Florida legal fight over medical marijuana dispensary caps will continue. Attorneys for the Florida Department of Health filed notice that they'll appeal a Feb. 1 ruling by Leon County Circuit Judge Karen Gievers that struck down a state-imposed limit on the number of dispensaries operating in the state. Gievers, siding with retailer Trulieve, said the caps violate the 2016 constitutional amendment legalizing medical cannabis. [Daily Business Review]

 

The Calendar: Mark It

Feb. 23 - The Kansas Hemp Symposium takes place at the Kansas State Fairgrounds in Hutchinson. Scheduled speakers include Peter Andreone, counsel to Hoban Law Group and founder of Andreone Law.

Feb. 26 - CannaGather New Jersey hosts “Education is the Key: Major in Cannabis.” at the New Jersey State Museum in Trenton. Scheduled speakers are Bridget Hill-Zayat, an attorney with Hoban Law Group and Chloe Villano, president of Clover Leaf University.

Feb. 26 - Kahner Global presents the 2nd annual Cannabis Private Investment Forum in Ft. Lauderdale, Florida. The slate of speakers include John Vardaman, general counsel at Hypur, and Greenspoon Marder partner Sander Zagzebski.