REGULATORY UPDATE – 4/5/19

It’s been a busy few weeks in the cannabis industry with significant developments coming from Washington D.C. A pair of high-powered bills are churning their way through the halls of Congress that could vastly improve things for the cannabis industry.

Here’s a look at some of the recent developments in the nation’s capital and what they could mean for the cannabis industry. While the outcome of each remains unclear, progress is ongoing, and the implications could be significant.

The reintroduction of the STATES ACT

The Strengthening the Tenth Amendment Through Entrusting States (STATES) Act was reintroduced in the House and Senate on April 4. If passed, the STATES Act would protect state-compliant cannabis businesses from federal enforcement of the ongoing prohibition of cannabis.

Essentially, the STATES Act would revise the Controlled Substances Act to exempt from federal action “any person acting in compliance with State law relating to the manufacture, production, possession, distribution, dispensation, administration or delivery” of marijuana. It would place in law the hands-off policy set out in the now-rescinded Department of Justice Cole Memorandum and would be a significant half-step toward the ending of federal cannabis prohibition.

House Rules Committee Chairman Rep. Jim McGovern (D-MA) said he expects a vote on the measure in “weeks.” The House version currently boasts 45 cosponsors, while the Senate version is supported by 10. The bill now lies with the Judiciary Committee in each chamber of Congress and awaits markup and a vote.

The SAFE Banking Bill moves forward

As the STATES Act resurfaces, the Secure and Fair Enforcement (SAFE) Banking Act has been approved by the House Financial Services Committee by a vote of 45 to 15. The legislation includes provisions that would protect financial institutions that work with state-compliant legal cannabis businesses from incurring penalties from banking regulators.

The cannabis industry has struggled immensely with banking issues. Many federally chartered financial institutions (state-chartered institutions and credit unions have embraced the sector) are hesitant to work with cannabis businesses because of the risks posed by the federal government’s prohibition on marijuana. The SAFE Banking died in committee in the 115th Congress, so its survival beyond the Financial Services Committee breaks new ground.

The SAFE Banking Act seems popular in the House with 157 co-sponsors, more than a third of the full chamber. However, the bill’s success is not yet guaranteed. The SAFE Banking Act remains up for consideration by the House Judiciary Committee before it can be considered on the floor.

FDA continues work on CBD regulatory guidelines

The FDA has signaled more about its intentions regarding hemp-derived CBD regulations in a press release issued on April 2. Departing FDA Commissioner Scott Gottlieb announced the formation of a working group to “explore potential pathways for dietary supplements and/or conventional foods containing CBD to be lawfully marketed.” Gottlieb also announced the FDA would host a public hearing on May 31 to obtain input regarding the agency’s regulatory strategy.

The agency also moved to underline its previous claim that it would not tolerate marketing CBD products as providing a therapeutic benefit without prior FDA approval. Gottlieb announced the FDA issued three warning letters to companies for “egregious and unfounded claims” of health benefits related to CBD products. The FDA maintains that marketing unapproved CBD products as therapeutic or as medicine is a violation of the federal Food, Drug, and Cosmetic Act.

While the FDA’s statements and actions have sent a signal about its general disposition toward CBD, a clear regulatory framework remains unarticulated. The importance of an unambiguous regulatory framework for hemp-derived CBD products cannot be overstated. For CBD producers and marketers, clear regulations would make clear exactly what is and what is not permitted.

Many developments in flux for the cannabis industry

While these developments represent progress toward a more coherent, regulated cannabis industry, they are far from decided. Lobbying efforts will continue to support the STATES Act and SAFE Banking Act, and of course, friends of the cannabis industry are encouraged to contact their legislators. The passage of each bill would go a long way to affording the cannabis industry desperately needed protections enjoyed by every other industry in the country. And despite that fact that many retail establishments are selling CBD infused food products and wellness remedies, a clear regulatory framework is sorely needed to allow the industry to grow in a legally compliant manner. Every day without a clear set of rules creates more uncertainty, so news that the FDA is making progress toward the development of new regulations is encouraging.

The cannabis industry remains one of the fastest growing in the country, and that is with the weight of prohibition on its back. The sooner artificially created obstacles are removed by legislation and clear regulation lights the way, the sooner the cannabis industry can drive even more economic growth and prosperity.

This is how I Fink about it. How about you?