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Marijuana Businesses Plea For Congress To Provide Banking Access

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Marijuana business owners and those working closely with the growing cannabis economy were on Capitol Hill last week, asking for the same access to financial services as any other business in America.

Their testimony was submitted for a meeting of a subcommittee of the U.S. House Committee on Financial Services, during which lawmakers heard statements on the difficulties of opening and maintaining bank accounts for marijuana-related businesses.

Due to the marijuana’s current status as a Schedule I drug under the Controlled Substances Act, many banks, which are federally insured and regulated, avoid providing services to businesses in or operating adjacent to the cannabis market. Regardless of what state law says, in the eyes of the federal government, funds deposited from cannabis businesses can be considered money laundering and are subject to enforcement action—even if no such actions have yet been carried out against the small but growing number of financial institutions that are willing to work with the marijuana industry.

In nearly 100 separate pieces of written testimony compiled by the National Cannabis Industry Association, marijuana business owners from states including California, Utah, Washington, Tennessee, Michigan and Maryland talked about the hurdles placed in their path by not having a place to store their money.

Leah Heise of 4Front Ventures told lawmakers that not only has the current federal prohibition caused problems for her business, but the she also “had my personal bank account shut down just for being employed by a cannabis company.”

Another statement came from Stephen Madigan, the senior vice president of Kidder Matthews, a real estate firm with offices on the west coast. Madigan has 20 years of experience as a real estate broker in southern California and, over the past two years, has represented landlords, tenants, buyers and sellers in cannabis-related commercial real estate. He described the roughly $50 million in transactions he’s been associated with as “a small piece of the larger Orange County/LA market” and said that the lack of banking is “the single biggest hurdle to growth, second only to the removal of cannabis as a Schedule I drug.”

Madigan said businesses looking for real estate to house their cannabis operations are unable to provide credit or banking history and are treated as high credit risks. As a result, many must provide hundreds of thousands of dollars in security deposits and prepaid rent. Since they are not entitled to the same loans as other peer industries, they are limited to taking loans with interest rates at nine to 15 percent, due in as little as three years. 

“This is one step above predatory lending terms,” he said.

Victoria W. of Materia Medica Laboratories, Inc. described the rude awakening she experienced in moving from food safety testing into cannabis testing.

“I did not expect that we would have such a hard time simply opening a checking account in order to do basic things like paying vendors and receiving payments from customers,” she wrote. “In food testing there is no way we could have told our customers that we strongly prefer cash over check or card, but that’s what many cannabis labs have to do.”

Many of the complaints from other cannabis businesses that submitted testimony centered on feelings of physical insecurity at hauling around large quantities of cash to pay bills, employees or taxes.

“Our drivers deliver product and can collect as much as $80,000 in a day,” wrote Metrik Feurtado, the chief financial officer of Big Pete’s Treats, a brand of THC-infused cookies based in Santa Cruz, California. “We do not have an armored delivery van so our drivers face significant risk from criminals who may find them an easy target. Banking would allow our drivers to deliver product and not touch cash. Safe banking is common sense.”

Other testimony came from law firms that don’t sell marijuana—or “touch the plant,” in industry parlance—but have had their bank accounts closed simply because they represent clients who do.

The statements were part of broader discussion at the hearing about the Secure and Fair Enforcement (SAFE) Banking Act of 2019, a draft bill that Rep. Ed Perlmutter (D-CO) plans to file soon. He and bipartisan group of lawmakers introduced a version of the legislation last year that generated a long list of cosponsors but didn’t receive a vote.

According to the draft’s text, federal regulators would be prohibited from punishing banks for providing services to a cannabis business or from discouraging financial institutions from working with marijuana industry clients.

Advocates are optimistic about the legislation’s chances under the new Democratic House majority, though it’s unclear what its prospects are in the Republican-controlled Senate.

Key Moments From The First Marijuana Hearing Of The New Congress

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Rapper Who Owns Looted Marijuana Dispensary Says Justice Is More Important Than Business

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One marijuana dispensary owner whose business was caught in the chaos stemming from the reaction to rampant police violence over the weekend says he values life and justice over his stolen cannabis merchandise.

Cookies, a well-known dispensary in Los Angeles, was looted during Saturday’s massive protests sparked by the killing of George Floyd. But the brand’s creator and store’s part-owner, the famous rapper-turned-cannabis-entrepreneur Berner, says he is more concerned about the underlying injustices being highlighted by protestors than the damage to his storefront.

A video on Instagram shows the Cookies location on Melrose being broken into, with people jumping the fence, entering the store and stealing products. Police are seen driving by in the clip, but no one appears to have been arrested.

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It’s going down in the streets tonight

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Berner, whose real name is Gilbert Anthony Milam Jr., released a statement shortly after the incident.

The rapper doesn’t condemn the people who broke into the store. Instead, he argues that human life is more valuable than any building.

“It’s extremely unfortunate what happened to our store tonight on Melrose. But as a human living in the world we’re living in today, I cannot expect anything less until justice is served,” Berner said in the video posted to his 1.3 million Instagram followers. “We can rebuild our store, but you cannot bring someone back to life.”

“With that being said, we stand with what is going right now in the world. A statement needed to be made. All I say is, I pray everyone stays safe and protects their family in a time like this,” the rapper said. “How can I worry about a store when there is so much more going on in the world right now? So much hate, so much anger, so much pain, and a lack of justice. Please take care of your families and stay safe.”

There were six armed security guards at the storefront, Berner said, but he told them not to be violent towards protesters. “I don’t want to see anyone die!! I told everyone to stand down,” he posted. “I’m not allowing anyone to die on my watch… all life matters. And money comes and goes…”

Instagram commenters were quick to suggest that insurance money stemming from the theft would be advantageous to Berner. One commenter, Elijah71p, wrote: “Plus that insurance money won’t hurt.”

But Berner said he wasn’t counting on it, replying: “We sell weed. I’m not sure that insurance will honor our business, I haven’t even thought about it. I was focused on preserving life and instructing the armed guards to stand down and not to shoot.”

Another commenter wrote on the post: “Someone had good insurance, lol other wise I’m sure this would sound different.”

“Nah man, the world is a fucked up place,” replied Berner. “This is from the heart homie.”

Cannabis companies have historically had a hard time accessing coverage for things like lost employee wages, property damage and more due to marijuana’s federal classification as a schedule I substance.

Berner started Cookies as a clothing and cannabis brand in the San Francisco Bay Area in 2016. The company has held itself up as an equity success story, opening the Cookies Haight Street location with CEO Shawn Richard under San Francisco’s first social equity license. While some have raised questions about the involvement of white investors and people with political pull helping to win the dispensary’s approval, Berner has maintained that the company is holding true to authentic cannabis culture—one that represents and speaks up for black, indigenous and people of color.

The Cookies brand, well-known for its bright blue packaging, is on sale in eight medical and adult-use markets across the country, including in Its dispensary storefronts in Los Angeles, Santa Ana, San Francisco and Denver.

Cookies isn’t the only dispensary to have been impacted by looting over the weekend. Photos of a ransacked MedMen location in downtown Los Angeles have surfaced, for example.

The company has not issued a statement at the time of publication.

New Congressional Resolution Condemns Police Brutality And War On Drugs

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Oregon Marijuana Sales Spike During Pandemic, But Officials Expect Market To ‘Mellow’

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Amid one of the sharpest economic downturns in state history, Oregon marijuana sales continue to roll along at a healthier-than-normal pace. State budget officials say that shelter-in-place policies and economic stimulus programs have kept marijuana sales “quite strong” during the pandemic so far.

Since March 1, the sales of adult-use marijuana products are up 60 percent compared to a year ago, the state Office of Economic Analysis said in its latest quarterly budget forecast published last week.

“These increases are not only related to the stockpiling consumers did after the sheltering in place policies were enacted,” the report says, “but have continued through April and early May.”

Oregon marijuana sales during COVID-19

In April alone, consumers bought $89 million worth of legal cannabis products—a record amount—thanks in part to what officials described as a “4/20 bump.” While the boost in sales figures are due in part to rising prices, state budget analysts said that “underlying demand is up as well.”

“The increase in sales for other marijuana products, like concentrates, edibles and the like, are due to significant gains in consumer demand as prices are flat or down,” analysts reasoned.

The June 2020 budget forecast estimates that the current increase in marijuana sales will yield an extra $9 million in state tax revenue during the 2019-2021 budget period. It’s a rare bright spot in the overall budget report, which state analysts described as “the largest downward revision to the quarterly forecast that our office has ever had to make.”

Oregon marijuana demand

But even the marijuana sector’s boost may be time limited.

“Expectations are that some of these increases are due to temporary factors like the one-time household recovery rebates, expanded unemployment insurance benefits, and the shelter in place style policies,” the report says. “As the impact of these programs fade in the months ahead, and bars and restaurants reopen to a larger degree, marijuana sales are expected to mellow.”

Demand for marijuana is also expected to fall in coming years due to a lower overall economic outlook, which is projected to reduce Oregon’s population and cut average incomes. “A relatively smaller population indicates fewer potential customers,” the report notes, “and lower total personal income than previously assumed indicates less consumer demand.”

Oregon population forecast

The projected slowdown in sales isn’t expected to make an impact until the next budget period, beginning in 2021. At that point, the forecast says, sales will begin trending down by 5 percent relative to the current period “due to the lower economic outlook” associated with COVID-19.

The pandemic has also changed how Oregonians are making marijuana purchases, the report found, though perhaps not as much as one might expect. The share of sales completed by delivery services more than doubled in recent months, but it remained relatively small, making up just 1.4 percent of total sales. As the Office of Economic Analysis observed, “Consumers still prefer to shop in store.”

Oregon is one of a handful of states looking to legal cannabis sales to help buoy tax revenues. A report published last month by cannabis regulators in Michigan, where legal sales to adults began this past December, forecasts annual marijuana sales in that state to top $3 billion as the market matures. That would mean another 13,500 jobs and roughly $500 million per year in taxes to state coffers. Factoring in the effects on peripheral businesses, the state found, the “total economic impact is estimated to be $7.85 billion with a total impact on employment of 23,700.”

Although tax revenue from cannabis sales will help pad budgets in many legal states, the Oregon report doesn’t mince words: The pandemic’s hit to the state’s economy will be drastic. Oregon’s current recession is “the deepest on record with data going back to 1939,” according to state analysts, and it hit with virtually no warning. “The path looks more like what happens to economic activity during a labor strike or in the aftermath of a natural disaster.”

Oregon incomes over time

For its part, Oregon’s Office of Economic Analysis predicts a relatively swift recovery. “While this recession is extremely severe, it is expected to be shorter in duration than the Great Recession,” analysts wrote. “The economy should return to health by mid-decade.”

New Mexico Governor Says Legalizing Marijuana Would’ve Funded Programs Cut Due To Coronavirus

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Company Recalls Injectable CBD Products Following FDA Warning Letter

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A Food and Drug Administration (FDA) letter warning a company about its marketing of injectable CBD products has led to a voluntary recall that the federal agency announced on Wednesday.

Biota Biosciences received the letter last month, with FDA directing the firm to cease sales of its line of CBD vials, which it markets as a pain reliever that serves as an alternative to opioids and can help with detoxification.

The agency said the company was violating federal statutes both by engaging in interstate commerce of an unapproved new drug and failing to properly label the products by neglecting to include directions for use.

“Injectable drug products can pose a serious risk of harm to users because they are delivered directly into the bloodstream and bypass many of the body’s natural defenses against toxic ingredients, toxins, or dangerous organisms that can lead to serious and life-threatening conditions such as septicemia or sepsis,” FDA wrote.

 

In a public response published on Friday, the company told consumers that “we would like to convey that the executive and management team at Biota Biosciences take full responsibility for these observations and understand the gravity of the risk to consumers by posting these unapproved claims and intended use on our website.”

Products subject to the recall include formulations of Cannabidiol (CBD) Complex, Curcumin Complex, and Cannabidiol + Curcumin. “All customers who received this product will have the choice to keep any remaining product or receive a full refund for returning unused products,” the firm said.

Since receiving FDA’s warning letter, the company says has pulled all the products, provided the agency with a “root cause and corrective action plan” and launched a voluntary recall of the vials.

According to the original warning letter, the CBD products meet the definition of a drug subject to FDA regulation because “they are intended for use in the diagnosis, cure, mitigation, treatment, or prevention of disease, and/or intended to affect the structure or any function of the body,” the letter continues.

FDA identified several examples of medical claims Biota Biosciences made about their CBD vials in advertising:

“Fighting the opioid epidemic… BIOTA Biosciences produces and distributes effective all-natural alternatives with no side-effects. Join the growing ranks of pain, oncology, psychiatry, naturopathy healthcare professionals utilizing BIOTA Sterile CBD Vials.”

“VISION: OPIOID-FREE FUTURE… Our goal is to supply the world with pharmaceutical grade, all natural products containing cannabidiol and other natural compounds. We believe strongly that pharmaceutical grade hemp oil will drastically reduce the need for opioid-based pain relief and eliminate the global opioid epidemic by providing a safe and natural alternative.”

“Instant relief for patients that are symptomatic of inflammatory auto-immune diseases”

While the products lack directions for use, the company has claimed that they bypass liver absorption and deliver CBD “directly into your bloodstream.”

Further, FDA stressed that even if the labels did contain usage information, they would still be in violation.

“New drugs may not be legally introduced or delivered for introduction into interstate commerce without prior approval from the FDA,” the letter states. “FDA approves a new drug on the basis of scientific data and information demonstrating that the drug is safe and effective.”

The injectable CBD vials “are offered for conditions that are not amenable to self-diagnosis and treatment by individuals who are not medical practitioners; therefore, adequate directions for use cannot be written so that a layperson can use these drugs safely for their intended purposes.”

“The violations cited in this letter are not intended to be an all-inclusive statement of violations that exist in connection with your marketed products. You are responsible for investigating and determining the causes of the violations identified above and for preventing their recurrence or the occurrence of other violations. According to your website, you manufacture many other types of CBD containing products. It is your responsibility to ensure that your firm complies with all requirements of federal law, including FDA regulations.”

FDA gave Biota Biosciences 15 days within the receipt of the letter to notify them about corrective steps they’ve taken. Failure to resolve the issues could have resulted in “legal action without further notice, including, without limitation, seizure and injunction.”

In its public statement, Biota Biosciences said that so far “no adverse or serious adverse events have been reported in relation to these products.” FDA is urging consumers may have such experiences to report them to its MedWatch Adverse Event Reporting program.

This is one of the latest statements FDA has made about CBD companies that are not meeting its standards.

Earlier this week, the agency publicized a voluntary recall of another CBD product from a different company, notifying consumers about potentially high levels of lead in a batch of tinctures.

FDA has said that it is currently targeting companies that make especially outlandish and unsanctioned claims about the therapeutic potential of their cannabis products.

For example, it sent a warning letter to a CBD company owned by a former NFL player after advertisements it displayed suggested its products could treat and prevent a coronavirus infection.

FDA has previously issued warnings to other CBD companies that have made unsubstantiated claims about the therapeutic potential of their products.

Although the agency does not currently approve of CBD as a food item or dietary supplement, it is in the process of developing regulations that may allow for such marketing.

FDA Notifies Public About Recall Of CBD Product That Tested High For Lead

Photo courtesy of Flickr/Marco Verch.

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