Welcome back to Higher Law, our weekly briefing on all things cannabis. I'm Cheryl Miller, reporting for Law.com from Sacramento. Has CBD jumped the shark? I just got a pitch mentioning CBD-infused guacamole.

This week we're looking at: California pushback against the DEA's marijuana records subpoena • SEC charges against cannabis investment pitchmen • A settlement between Master P and Privateer Holdings • The latest attempt by the U.S. House to protect state-legal cannabis businesses

Thanks as always for reading. Send your feedback and story ideas (but not guacamole with peas recipes) to me at [email protected]. You can call me, too, at 916.448.2935. Follow me on Twitter @capitalaccounts.

California Tees Up Privacy Clash Over DEA Access to Cannabis License Records

California pushed back in court this week against a federal subpoena seeking state records tied to marijuana licenses and shipping manifests.

In a response filed in the U.S. District Court for the Southern District of California, lawyers with the attorney general's office said the U.S. Drug Enforcement Administration has not offered any required explanation for why its agents want documents about three unnamed marijuana businesses and three related individuals.

"Here, a facial reading of the subpoena reveals only that there is an ongoing investigation authorized under the Controlled Substances Act, nothing more," Senior Assistant Attorney General Harinder Kapur told the court. "This does not satisfy the relevancy requirement."

The case appears to be one of the first clashes between the state and federal agents over access to the thousands of license-related records submitted by legal California marijuana operators.

Representatives from the DEA and California's Bureau of Cannabis Control declined to comment.

"We view this as another attack by the Trump administration on the Constitution," said Katy Young, president of the International Cannabis Bar Association. "It is making things more difficult for the cannabis industry."

The DEA has asked for state cannabis records tied to three unidentified license applicants and three business entities, including shipping manifests. Agents have only said they want the documents for an ongoing investigation.

"This set of subpoenas is, quite simply, an affront to the Tenth Amendment and the Constitution itself," said Christopher Davis, executive director of the cannabis bar association. "Today, the bulk of law enforcement activity is information-gathering and investigation, and the demand that states engaged in these functions to effect federal law enforcement priorities, is impermissible."

>> Vanderbilt University Law School Professor Robert Mikos says the DEA subpoena is "probably unconstitutional." You can read his analysis here.

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SEC Targets $25M Cannabis Investment Offering

The U.S. Securities and Exchange Commission is again targeting what it says was a fraudulent cannabis investment offering.

The commission on Tuesday filed a complaint in Los Angeles federal court alleging that six men and their companies defrauded more than 400 investors of $25 million with promises of huge returns on two marijuana-related businesses.

The complaint alleges that brothers Anthony Todd Johnson and Jeremy Johnson misappropriated more than $2.7 million of investor money and, with fellow Californian Michael Gregory, deceived investors about a "business loan" secured by property to develop a CBD extraction facility "that in fact was used to pay back investors in an unrelated entity." The complaint also alleges that defendants misrepresented their backgrounds, their financial commitment, and a purported relationship with a California university.

The SEC charged all the defendants, except for one business entity, with Securities Act violations and running afoul of registration requirements. The agency is seeking injunctions, disgorgement of "ill-gotten gains" and civil penalties. Attorneys for the defendants have not yet entered appearances.

Tuesday's filing is not the first SEC salvo aimed at cannabis investment offerings. In January, the agency charged two men and three companies with defrauding investors of nearly $5 million that was supposed to fund a Washington state cannabis business.

The SEC issued an investor alert in 2018 warning of investment schemes surrounding purported state-legal cannabis operations.

The SEC's Office of Investor Education and Advocacy "regularly receives complaints about marijuana-related investments, and the SEC continues to bring enforcement actions in this area," the advisory said.

Gilbert J. Bradshaw of Wilson Bradshaw & Cao LLP represents the Johnson brothers.

Who Got the Work

>> A California trial court has dismissed a lawsuit brought by rapper Percy Miller, also known as Master P, against marijuana investment firm Privateer Holdings Inc. after the two sides reached a settlement. Miller accused Privateer of breaching a contract to produce and distribute marijuana products under his brand, according to GeekWire. Walter Jack of Engstrom, Lipscomb & Lack represented Miller. John Goldmark, Nicole Phillis, and Nathan Rouse of Davis Wright Tremaine defended Privateer.

>> Vape pen manufacturer Puff Corp. sued Kandypens Inc July 22. in Delaware federal court for false advertising, unfair and deceptive trade practices,and trade libel, WeedWeek reports. Kandypens made disparaging comments about Puffco on social media and orchestrated a class action targeting Puffco in Arizona, the suit alleges. Puffco is represented by Bryan Cave Leighton Paisner.

>> Butzel Long sued Michigan Governor Gretchen Whitmer and other state officials Tuesday on behalf of Detroit Unity Fund. The plaintiff, which is backing a ballot initiative to legalize recreational marijuana in Detroit, challenges the signature requirements for ballot access in light of the COVID-19 pandemic and hurdles created by the governor's stay at home order. The suit was filed in the U.S. District Court for Michigan's Eastern District. Associate Michael Griffie signed the complaint.

>> Greenberg Traurig filed a trademark infringement lawsuit July 27 in the U.S. District Court for Nevada on behalf of Touch LLC, the operator of OMNIA nightclubs in Las Vegas and Southern California. The complaint pursues claims against All Done Management Group Inc., the owner of a cannabis dispensary that does business as OMNIA Industry. Counsel have not yet appeared for the defendant..

>> iAnthus Capital Holdings, a cannabis company with cultivation, processing and retail businesses, and its co-founders have retained Seth Levine and Chad Albert of Levine Lee LLP to fight a lawsuit filed by its largest shareholder, Hi-Med LLC. The complaint, which pertains to dealings between iAnthus and private equity firm Green Gotham Partners, was filed May 19 in the U.S. District Court for the Southern District by Riker Danzig Scherer Hyland & Perretti.

>> Greenberg Traurig, Stikeman Elliott and Posse Herrera Ruiz served as legal advisors.to Schultze Special Purpose Acquisition Corp., in is acquisition by a new holding company, Clever Leaves Holdings Inc Freshfields Bruckhaus Deringer US, Dentons Canada, and Brigard & Urrutia Abogados SAS served as legal advisors for Clever Leaves, a multinational cannabis operator.

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In the Weeds…

• Mitigating Data Breach Risks Facing Marijuana Businesses. "Marijuana businesses have access to sensitive consumer information, particularly those businesses that retain health and identification records in order to fulfill medical marijuana orders. Perkins Coie attorneys outline some proactive steps to mitigate risks related to data protection for an industry in which legality differs not only from state to state, but also between the states and the federal government." [Bloomberg Law]

• U.S. House Votes to Restrict DOJ Prosecutions of All State-Legal Marijuana Operations. The House passed the measure on a voice vote Friday. The legislation would expand existing provisions blocking taxpayer-funded prosecutions of state-legal medical marijuana entities–in the unlikely event the U.S. Senate approves the measure. "This is the most significant vote on marijuana policy reform that the House of Representatives has taken this year," said NORML political director Justin Strekal. [NORML]

• Regulated Marijuana Has Been a Double-Edged Sword for Missouri's Governor. After voters legalized medical marijuana in 2018 "Mike Parson, moved quickly to certify tens of thousands of patients and begin licensing cannabis businesses. But what seemed at first to be an easy source of voter satisfaction and a new cache of revenue to the state has boomeranged badly: A flood of complaints led to state and federal corruption probes that now threaten Parson's 2020 campaign." [Politico]

• Massachusetts Cannabis Regulator 'Embarrassed' by Industry Inequities."The laws that legalized recreational marijuana in Massachusetts four years ago explicitly mandated that those who disproportionately suffered during the war on drugs would be able to benefit from the industry, but today it is disproportionately run by white business owners." Cannabis Control Commissioner Shaleen Title told Boston Public Radio "at this point, four years later, I'm starting to becom[e] embarrassed, to be honest." [WGBH]

• Delays in Illinois' Licensing Process Continue, With Costly Effects. "The state is almost three months late awarding dispensary licenses, and a month late awarding licenses to grow, process and transport marijuana. Meanwhile, the consulting firm the state hired for about $6.7 million isn't done with the process of scoring applications, an Illinois official said." [Chicago Tribune]

• Poll Shows Strong Support For Legal Marijuana in New Jersey. "The Brach Eichler Cannabis Poll, conducted by DKC Analytics and released Tuesday, found about 68% of 500 New Jersey registered voters said they strongly support or somewhat support legalization via the ballot in the Garden State. Favorability ranked higher among Democrats than Republicans, with Independents falling in the middle." [NJ Advance Media]

On the Calendar

Aug. 3-6 - Marijuana Business Daily International presents the webinar series "Regulations and Opportunities in Key Latin American Markets." Scheduled speakers include Hughes & Hughes associate Lucía Patrón; Camilo de Guzmán Uribe, general counsel and vice president at Natuera; and Maritza Reátegui, a partner at Rodrigo, Elías & Medrano.

Aug. 5 - Harris Bricken hosts a cannabis litigation Q&A webinar. Attorneys Jihee Ahn and Jesse Mondry and moderator Griffen Thorne discuss recent trends in cannabis litigation.