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Cannabis Lawyer: Regulation Gives Public Confidence in Industry

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by Josh Long -

Editor’s Note: Cannabis attorney Bob Hoban will be speaking on Thursday, Sept. 28, during a panel at SupplySide West in Las Vegas. The panel, “The State of CBD in Dietary Supplements," will explore business opportunities in the CBD market, regulatory challenges, and recommendations for bringing new products to market.

More than 20 years ago, California voters approved the use of medical marijuana. How far has the cannabis industry come since then?

“We’ve come very, very far," proclaimed Bob Hoban, a cannabis lawyer in Denver during a podcast interview that will go live July 17 on Natural Products INSIDER. “The key word, or words, would be … regulation and government participation."

Twenty nine states, the District of Columbia (DC), and U.S. territories Guam and Puerto Rico have adopted comprehensive medical marijuana and cannabis programs, while eight states and DC have legalized marijuana for adult recreational use, according to the National Conference of State Legislatures (NCSL), a bipartisan organization in Denver and DC.

California paved the way for other states to adopt cannabis laws. However, Hoban said The Golden State “has operated on this patchwork of a caregiver system with nonprofits and local government approval, but not a top-down regulated structure.

“And it’s really regulation that does a number of things," said Hoban, managing partner of Hoban Law Group, a cannabis business law firm. “It gives the public confidence that … it’s something that is closely guarded and strictly controlled. It makes policymakers more comfortable with the idea that this system can work and does work."

Cannabis’ regulated system also is generating tax revenues for governments, helping to fund such things as construction of schools and drug prevention. In the state of Colorado, marijuana revenues in 2016 totaled US$1.3 billion, generating nearly $200 million in tax revenues, MarketWatch reported.  

“With regulation, which is embraced by the industry, and the tax revenue that comes from regulation, we have something that’s here to stay and that the public should have confidence in," Hoban said, “because it prevents black market activity, it prevents diversion into that system, [and] it prevents this from getting into the hands of children far more so than it ever did when we had a black-market model."

Hoban described a “seed-to-sale" or “track-and-trace system" in Colorado and other states like Oregon and Washington. Each seed or clone entering the soil in a licensed marijuana cultivation facility is assigned a specific identifying number, he explained, and the “plant is tracked from the time it’s put into that soil to the time it’s harvested and put into a finished product…."

“There’s confidence that from the very beginning to the very end, every single gram—down to the milligram frankly, even accounting for water loss when these plants dry out after they’re harvested—is all tracked," Hoban said. “That prevents diversion outside of the regulated market, meaning no marijuana cultivated in a commercial system can be sold in the black market."

The cannabis lawyer also described evolving regulations to protect consumers, such as labels to disclose what’s in a cannabis product, and a growing list of pesticides and other substances that have been banned in the cultivation process.

The current regulated system is an effective and flexible one that can be amended as issues arise, Hoban maintained. But the cannabis laws in the United States vary widely from state to state. For instance, 16 states limit the legal sale of cannabis to the use of low THC—the psychoactive substance in marijuana—and high CBD (cannabidiol) products for medical reasons, according to the NCSL.

“Many of those states don’t allow THC because they don’t want there to be potential abuse of that psychoactive or psychotropic substance," Hoban said. Such CBD-only states, he observed, are perhaps more skeptical about the medical benefits of cannabis or fearful of THC’s impact if it is readily available to consumers.

Despite Petitions, Marijuana Remains Schedule I Controlled Substance

The federal government’s position on marijuana—or cannabis in general—stands in stark contrast to the recreational marijuana laws passed in more than a handful of states.

Marijuana remains a Schedule I controlled substance. As the Drug Enforcement Administration (DEA) explains on its website, Schedule I controlled substances have “have no currently accepted medical use in the United States, a lack of accepted safety for use under medical supervision, and a high potential for abuse."

Last year, DEA rejected petitions seeking to reclassify marijuana in Schedule II of the Controlled Substances Act (CSA). Bryan Krumm, a psychiatric nurse practitioner in Albuquerque, New Mexico who submitted one of the petitions, told ABC News in a 2016 story that he intended to appeal DEA’s decision.

Advocates of marijuana scoff at the notion that cannabis has no acceptable medical use and a high potential for abuse.

In a letter denying the petitions, DEA acknowledged the potential benefits of cannabis.

“If, for instance, CBD proves to be safe and effective for the treatment of a specific medical condition, such as childhood epilepsy (some trials have shown promise), that would be a wonderful and welcome development," DEA Acting Administrator Chuck Rosenberg wrote. “But we insist that CBD research—or any research—be sound, scientific, and rigorous before a product can be authorized for medical use. That is specifically—and properly—the province of the FDA."

Commenting on DEA’s rejection of the petitions, Hoban said, “The federal government is unwilling to recognize as a matter of law or policy that somehow, someway, cannabis actually is not an adverse thing to society, but actually can help people with specific conditions."

He described a “quagmire" in which “policy and politics is completely contrary to science and medicine."

Despite DEA’s position on cannabis, Congress has taken actions to protect segments of the industry. For example, a federal budget amendment—known as the Rohrabacher–Farr amendment—bars the U.S. Justice Department from using funds to intervene with states’ implementation of medical marijuana laws.

Hoban said the amendment was extended through September 2017, and he anticipates it will be renewed.

The amendment “doesn’t affect recreational or adult use marijuana businesses, yet we’ve seen no activity by the federal government despite the saber-rattling that comes from our Attorney General [Jeff] Sessions on that particular topic," he said.

Under the Obama administration, the Justice Department directed U.S. attorneys to focus on certain priorities in enforcing the CSA, such as targeting the sale of marijuana to minors. However, a Justice Department official, James Cole, noted in a 2011 memorandum that compliance with state law is not a defense to enforcement of the CSA.

Although DEA hasn’t moved to shut down recreational dispensaries operating in compliance with state law, the states are gearing up to defend themselves should the Trump administration under Sessions decide to crack down on cannabis.

“Nevada as a state has said … effectively, ‘Bring it on federal government. I dare you to shut this down,’" Hoban said.

Other states like Colorado, Oregon and Washington have been more moderate in their approach, he noted, requesting that the federal government advise them beforehand if they plan to change their policies regarding recreational marijuana.

“There is a message from these states … that are regulated very well that says, ‘Federal government …don’t … come down this road against us,’ but we just haven’t seen it happen yet, despite the fact that it could happen if they [federal authorities] really wanted to."

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