Welcome back to Higher Law, our weekly briefing on all things cannabis. I'm Cheryl Miller, reporting for Law.com from Sacramento, where we don't need four constitutional law experts to tell us that things have been hopping in the marijuana industry.

This week we're looking at: • The FDA's latest warnings about CBD • Federal regulators' hemp banking blessing • A marijuana-banking champion's retirement plans • New Big Law lobbying disclosures • Two cannabis law veterans' move to Vicente Sederberg, and Fisher & Phillips hires an ex-cannabis general counsel

Thanks as always for reading. Hope your Thanksgiving was festive. Drop me a line with your news and feedback at [email protected]. Or call me at 916.448.2935. Follow me on Twitter @capitalaccounts.

The FDA Frowns on CBD

A few days before Thanksgiving, the U.S. Food and Drug Administration issued a consumer update reminding everyone that it does not sanction adding CBD to turkey—or any other food product—and that, oh yeah, the non-intoxicating compound may cause liver damage.

Happy holidays!

The agency also sent warning letters to 15 companies selling CBD products "in ways that violate the Federal Food, Drug, and Cosmetic Act." What prompted this regulatory flurry of CBD scrutiny?

"We remain concerned that some people wrongly think that the myriad of CBD products on the market, many of which are illegal, have been evaluated by the FDA and determined to be safe, or that trying CBD 'can't hurt,'" FDA Principal Deputy Commissioner Amy Abernethy (at left) said in a prepared statement.

The CBD warning letters aren't new, but 15 is a big number of missives for the agency to issue at the same time on this topic.

"These actions and statements by FDA cut against industry-wide hopes that FDA might soon realign its enforcement policy in light of market realities," Duane Morris attorneys wrote in a Dec. 2 client alert.

The FDA held a public comment session earlier this year on products containing cannabis or cannabis-derived compounds. The agency received almost 4,500 written comments, too. Congress is pushing the FDA to issue rules for CBD products, which are popping up on store shelves everywhere. But there's no sign that regulations are on the horizon.

"The FDA's approach to Hemp-CBD has been one of regulatory inaction and even obfuscation," Harris Bricken attorney Daniel Shortt wrote on Canna Law Blog. "Rather than providing guidance to or issuing regulations concerning manufacturers of Hemp-CBD products, the FDA has focused on telling consumers and Hemp-CBD businesses that most Hemp-CBD products are not legal and not safe … The FDA's current approach to Hemp-CBD does not seem tenable for much longer."

Regulators OK Banking Hemp Money

While federal regulators may frown upon companies putting hemp-based CBD in food and supplements, they do seem to like the idea of putting hemp-related revenues in banks.

This week four federal agencies issued a statement advising banks doing business with hemp-related companies that they don't have to fill out suspicious activity reports, or SARs, "solely because they are engaged in the growth or cultivation of hemp in accordance with applicable laws and regulations."

Claudia Springer, chair of Reed Smith's cannabis law team, called the guidance "a step in the right direction"

Even with legalization of hemp in the 2018 Farm Bill, "banks have nonetheless been reluctant to offer banking services to hemp producers and sellers, not being certain regarding whether suspicious activity reports were still required to be filed when dealing with hemp enterprises," Springer wrote on her firm's website.

"Now that that question has been answered by several federal banking agencies, banking services and products for hemp-related enterprises should be easier to find and should reduce the risks for banks," Springer said.

Maybe. Rob Nichols, president of the American Bankers Association, sounded noncommittal in a New York Times interview.

"We appreciate the steps regulators have taken today to clarify regulatory expectations for banks, and we look forward to working with them as they develop additional guidance," Nichols said.

Banking Supporter Announces Retirement

Congressman Denny Heck, one of the chief proponents of marijuana banking legislation in the U.S. House of Representatives, announced Wednesday he will retire at the end of his term.

The Washington state Democrat wrote in a Medium post that he has grown tired of being apart from his family and discouraged by the "degrading" of civic discourse.

Heck, first elected to his western Washington district in 2012, co-authored the Secure And Fair Enforcement Banking Act, which was overwhelmingly approved by the House in September.

Who Got the Work

• Akin Gump Strauss Hauer & Feld has signed on to lobby for Florida-based supplement producer Garden of Life LLC on federal issues related to hemp-based CBD, according to a lobbying registration filing. Akin Gump partner Hunter Bates, co-leader of the firm's public law and policy practice, and senior policy advisor Lauren O'Brien will particularly focus on potential U.S. Food and Drug Administration regulations affecting hemp-containing food and dietary supplements, the document says.

• Two other big U.S. law firms have jumped into the cannabis advocacy space with contracts to represent a Delaware pharmaceutical manufacturer. Alston & Bird and Jones Walker were retained by Noramco Inc. to lobby on federal regulation of cannabidiol, or CBD, according to recent federal disclosures. The lobbying registration appears to be the first federal cannabis-related advocacy work for the two firms.

• Fisher & Phillips LLP said the firm has hired Brett Wendt as a partner in the Denver office. Wendt arrives from General Cannabis Corp., where he served as general counsel. The firm said in its announcement: "Brett frequently lectures on a wide range of employment laws and workplace concerns, including the rapidly evolving area of medical and legal marijuana."

• Frontera Law Group founders Luke Stanton and Jeffrey Welsh have joined Vicente Sederberg as partners in the Los Angeles office, my colleague Patrick Smith reports. "Luke and Jeffrey built Frontera from the ground up into a premier cannabis law practice and leader in the California cannabis business community," Vicente Sederberg founding partner Josh Kappel said in a statement. "Their diversity of experience and deep understanding of the state's legal and regulatory landscapes will play a critical role in VS's continued growth in California and beyond."

• Santa Rosa, California-based Union Cannabis Group has hired Eli Korer as its first chief legal officer, my colleague Dan Clark reports. Korer most recently worked as corporate and business law attorney at Barnes & Thornburg in Chicago. "The cannabis industry is edging toward its next great growth phase—the moment that will define the successful companies by their ability to consistently produce effective, high-quality and safe products, and develop and close outstanding commercial transactions that create true value," Korer said.

• Christopher Ferguson has been named the new head of the Florida Department of Health's Office of Medical Marijuana Use, Florida Politics reported. Ferguson was the chief of the investigative services unit at the health department's Division of Medical Quality Assurance. He replaces Courtney Coppola, who was promoted to the health department's chief of staff earlier this year.

• Acreage Holdings has hired Kristin Jordan as its head of real estate, Bloomberg reports. Jordan was previously senior counsel at Greenspoon Marder. Jordan joined Greenspoon Marder in January after serving as of counsel at Newman Ferrara in New York for nearly four years.

• Attorneys with Sommers Schwartz and Kreis Enderle have filed a proposed class action against cannabis companies Loud Buddha and Pura Cali Management Corp. for alleged violations of the Fair Labor Standards Act. The name plaintiffs allege in the lawsuit filed in California's Northern District that they were denied overtime pay, rest breaks and reimbursement expenses for marijuana harvesting work they did in Lake County. Attorneys for the two companies have not yet filed a response.

In the Weeds…

>> Cannabis companies struggle to obtain insurance. "Major insurance providers, including Berkshire Hathaway and Aon, have begun to offer coverage to American companies in the legal marijuana industry, which had long been off-limits due to regulatory or reputational reasons.However, investors and executives say many insurers remain cautious in their approach, resulting in higher prices. They argue that more widely available coverage is badly needed." [Financial Times]

>> Harborside Inc. is ready to appeal an adverse tax ruling to the Ninth Circuit. The cannabis company announced that it's filed its formal notice to challenge the ruling in Patients Mutual Assistance Collective Corp. v. Commissioner. In 2018 the tax court sided with the IRS in finding that the dispensary could not take deductions that are available to other non-marijuana companies. The tax court recently pegged Harborside's liability at $11 million. Greenspoon Marder partner James Mann, who is preparing Harborside's Ninth Circuit arguments, told Higher Law this summer that the case will not center on 280E but rather 2015 guidance from the IRS that severely curtails the costs of goods sold that cannabis resellers can calculate for tax purposes.

>> Why so many failed and restructured cannabis M&A deals? General counsel in the industry point to rapid changes in the marketplace, lengthy regulatory approval times and a limited investor pool. "When you're putting the numbers together you're trying to hit a moving target," John Moynan, general counsel of Toronto-based -based cannabis company SLANG Worldwide, said. "When you're contemplating these transactions the numbers may be dramatically different on the date of the signing." [Corporate Counsel]

>> Marijuana businesses may be cash-dependent but they're still cybersecurity risks. Most point-of-sale systems in the industry "automatically report to the state's compliance tracking system, which might include the individual's name, birth date and contact information based on the scanning of a driver's license or state-issued ID card," said Kathryn Rattigan, a data privacy and cybersecurity associate at Robinson & Cole. Many startups haven't invested in cybersecurity measures and some are afraid of reporting trouble at their state-legal marijuana operations to federal authorities, said Harris Bricken data security attorney Griffen Thorne. [Legaltech News]

>> New York lawyers can ethically advise clients on medical marijuana. The New York State Bar Association reaffirmed that position in an opinion released by the Committee on Professional Ethics last month. The committee originally offered that guidance in 2014 but revisited the question after the U.S. Department of Justice rescinded the Cole Memo in 2018. The memo's rescission "does not meaningfully change federal law enforcement policy," the commission wrote. "If anything, the adoption, continued approval, and implementation of the Rohrabacher Amendment reinforces our earlier conclusion." [Bloomberg]

>> Michigan ushers in legal recreational marijuana sales. More than 2,200 people spent more roughly $221,000 on marijuana flower, infused edibles and concentrates on Dec. 1, the first day of legal recreational sales in Michigan. Four state-licensed retailers served the crowds, which at times snaked down blocks with would-be buyers. The state started issuing recreational sales licenses on Nov. 1, almost one year after Michigan voters approved the new regulated market. More outlets are expected to open in the coming weeks. [Detroit Free Press]

Your Calendar: Things Happening

Dec. 7 - The Minority Cannabis Business Association hosts the Tri-State Cannabis Equity Summit in New York City. Scheduled speakers include Moyeno Gonzalez partner Jessica Gonzalez, Vicente Sederberg counsel Jennifer Cabrera, and Hiller associate Fatima Afia.

Dec. 10 - The International Cannabis Bar Association presents The Cannabis Law Sessions at MJBizCon Las Vegas. Panels of attorneys will talk about tax planning, cross-border transactions and IPOs, and business sales in the cannabis industry.

Dec. 11 - The California Cannabis Advisory Committee meets in Sacramento. Among the items on the agenda is possible action on the final draft of the committee's annual report.

Dec. 11-13 - MJBizCon takes place in Las Vegas. Speakers include Saul Ewing Arnstein & Lehr partner Adam Fayne; Greenlane general counsel Douglas Fischer; and Frantz Ward attorney Tom Haren.