CBD and Hemp Legal and Regulatory Roundup – January 2022 | Kelley Drye & Warren LLP

Welcome to our weekly roundup of CBD and hemp-related legal and regulatory news:

A complaint filed by GenCanna trustee Oxford Restructuring Advisors says the Hemp Industries Association (HIA) received a wire transfer of $50,000 from the bankrupt CBD manufacturer in 2019, at a time when it was insolvent. The trustee alleges it sent two demand letters to the HIA seeking a return of the money transfer, both of which were unanswered. Law 360 (sub. req.)

State bill AB-1656 could provide the cannabis industry with another mechanism to create value. “This is an opportunity for California to make it easier for its people to access a non-intoxicating alternative product they want, and for farmers to establish themselves in a fast-growing industry,” said Assembly Member Cecilia Aguiar-Curry (D-Winters). Meanwhile, Omar Figueroa, a director at both the National Cannabis Industry Association and the Cannabis Travel Association International, questioned the testing hemp will be subject to, noting cannabis testing is already imperfect. He expects in the future somebody with clean cannabis may end up contaminating it before it gets to market by mixing it with a hemp-derived product that didn’t face the same scrutiny. LA Weekly

The cap is part of a hemp ordinance under board review, to keep the amount of area limited to what is currently used. In addition to capping the acreage, the ordinance would ban cannabis from hemp fields and allow the county Agricultural Commissioner’s office and Sheriff’s Department to conduct unannounced inspections and take samples at harvest time. Hemp growers would be required to own the land where they plant the crop, and apply annually for a county business license and register with the state. Further, hemp farmers would pay a yearly bond of $2,800 per acre to the county to cover the cost of destroying their crop, should they break the rules for legal harvests. edhat Santa Barbara

Blue Water Hemp owner Taylor Marks revealed his company experienced an increase in calls from people interested in the CBD products and the connection to COVID-19 virus-blocking abilities following the Oregon State University-led study. “We are seeing consumers be a lot more interested in our CBD products, whether it is a gummy or an oral tincture or even a CBD salve,” Marks said. Researchers discovered a pair of cannabinoid acids bind to the SARS-CoV-2 spike protein, blocking a critical step in the process that the virus uses to infect people. WAAY 31 ABC

A Calif. appellate court sided with the Ventura County government in its fight against a medical cannabis business’s petition to recover the costs of property damaged or destroyed in four raids, including a crop of marijuana plants purportedly worth $75 million. The court ruled that dispensary Shangri La Care Center filed its latest petition after the three-year statute of limitations expired. Law 360 (sub. req.)

In three recent cases, the federal legality of cannabis played a role, regardless of whether or not marijuana is legal in the state:

  1. U.S. District Judge Steven D. Grimberg pressed attorneys on whether the business licenses at issue in the Ga. lawsuit could be decoupled from the illegality of the product. “How can I, as a federal judge, grant any relief with regard to a license that would authorize your clients to grow and or distribute contraband?” he asked an attorney for Georgia Atlas, Jerome Lee. The attorney responded that the issue wasn’t whether his client was awarded a license to sell, but rather the application process itself was fundamentally unfair;
  2. U.S. Magistrate Judge Michael E. Hegarty relied on the illegality defense, whereby courts can’t grant judicial relief on claims involving violations of federal law. He dismissed with prejudice a large portion of the claims against numerous cannabis companies and their principal in a suit brought by investors who alleged the principal employed a “shell game” to siphon assets from the business; and
  3. A cannabis security company, Helix, argued its staff wasn’t entitled to overtime pay under the Fair Labor Standards Act because the work for the marijuana industry was illegal.

    Law 360 (sub. req.)

In a case of misappropriation of federal funds by three medical marijuana business associates from Maine, the DOJ argued the court should adopt a “strict compliance” standard when drawing the line on when federal prosecutors can prosecute marijuana charges in a state that legalized it. For all but “small technical noncompliance,” federal law enforcement should be able to press charges, it said. The court didn’t adopt the government’s argument, but also didn’t side with the defendants’ arguments that the federal government should, under most circumstances, ignore matters pertaining to state marijuana laws. “Instead, we adopt an approach that falls between the parties’ positions,” the court said. “In charting this middle course, we need not fully define its precise boundaries.” Law 360 (sub. req.)

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