New Mexico Governor Grisham signed the Cannabis Regulation Act, legalizing adult-use cannabis on Monday, April 12, 2021.  The law legalizes possession of up to two ounces of cannabis by those 21 and over, and requires the newly-created Cannabis Control Division to release regulations by January 1, 2022, with the goal of having legal sales in New Mexico by April 2022.  Further, the law allows individuals to cultivate up to six mature and six immature plants, with a maximum of 12 mature plants per household.  The odor of cannabis is no longer grounds for a police officer to perform a search.  The legislation does not place a limit on the number of licenses that may be issued and prevents municipalities from banning the sale of cannabis.  There will be a 12% excise tax in addition to New Mexico’s sales tax, which will increase one percent each year from 2025 to 2030, maxing out at 18%.  Medicinal cannabis is exempt from the excise tax.

On the same day, Gov. Grisham also signed Senate Bill 2 into law, which will automatically expunge records of prior arrests and convictions for now-legal cannabis-related offenses, forbid the consideration of such cannabis-related records in determining employment eligibility for state positions, and release those currently incarcerated for now-legal activities within 30 days.

On April 7, 2021, Virginia legalized adult-use cannabis, allowing adults 21 and over to possess up to an ounce of cannabis beginning July 1, 2021.  Individuals will also be permitted to cultivate plants for personal use beginning on July 1, 2021.  Previously, the State Senate and House of Delegates reached a compromise between their two bills (S.B. 1406 and H.B. 2312, respectively) on Saturday, February 27, 2021.  This compromise originally would not allow for legal sales or possession until January 1, 2024.  Governor Northam initially did not sign the bill, and sent the bill back to the Virginia legislature requesting that they change the date on which possession and cultivation would be legalized to July 1, 2021.  The legislature adopted Governor Northam’s amendment, paving the way for legalization.  Sales will not begin until January 1, 2024.  The law provides for:

  • Possession by adults 21 and over of up to one ounce of cannabis beginning July 1, 2021;
  • The cultivation of up to four plants per household, of which at most two plants can be mature beginning July 1, 2021;
  • The expungement and sealing of certain cannabis-related convictions, and adjustment of sentences for other cannabis-related convictions;
  • The implementation of a 21% retail tax, as well as empowering localities to levy an additional 3% tax. Of the 21% excise tax, 40% will be dedicated to pre-school for at-risk children, 30% will be dedicated to an equity reinvestment fund, 25% will be dedicated to addiction prevention and treatment services; and 5% will be dedicated to public health;
  • The establishment the Virginia Cannabis Control Authority in order to regulate sales, cultivation, and manufacture of cannabis products;
  • Localities may opt-out of allowing retail establishments by referendum before December 31, 2022.

However, quite a lot of work has been left undone.  Decisions as to how the retail marketplace will operate have not-yet been made, nor have decisions regarding criminal penalties for underage possession and unlicensed cultivation and sale been finalized.  Additional action will need to be taken by the legislature to allow for licenses to be issued in time for retail sales to begin January 1, 2024.  The law received no votes from Republican legislators, and ultimately required Lt. Gov. Fairfax to cast a tie-breaking vote in the Senate, leading some to fear that if Democrats lose seats in this year’s elections Virginia will be unable to pass the needed legislation next year.  We will continue to monitor Virginia’s legalization process.

On Saturday, March 27, 2021, a bill was introduced which reflected a compromise between the New York State Legislature and Governor Cuomo.  The bill, an amended form of the Marijuana Regulation and Taxation Act (also known as the MRTA), contains the following provisions:

  • Legalization of possession of up to three ounces of cannabis by adults 21-years-old or older, and automatic expungement of all criminal convictions that would no longer be criminal.
  • Legalization of home cultivation of up to three mature plants and three immature plants per adult over 21, with a limit of six mature plants and six immature plants per household.
  • The establishment of the Cannabis Control Board, consisting of three members appointed by the Governor, one by the temporary president of the Senate, and one by the speaker of the Assembly. The Governor’s appointments shall need the consent of the Senate, with one of the Governor’s appointments serving as chairperson.  Each member of the board will serve a three-year term, and must be geographically and demographically representative of the state and communities historically affected by the war on drugs.
  • The Cannabis Control Board will have the ability to issue, or refuse to issue, registrations, licenses, and permits for cannabis businesses. This includes the ability to limit the number of registrations, licenses, and permits available within the state or any political subdivision.  The Board is to prioritize social and economic equity applicants with a goal of 50% of all registrations, licenses, or permits rewarded to such applicants.
  • The Cannabis Control Board will have the authority to revoke, cancel, or suspend for cause any registration, license, or permit.
  • The Cannabis Control Board shall set the standards for cultivation and processing of medical cannabis, adult-use cannabis, cannabis products, cannabinoid hemp, and hemp extract. This includes setting limits as to potency and the type of products which may be manufactured and/or processed.
  • The Office of Cannabis Management is to be established within the Division of Alcoholic Beverage Control, with the purpose of keeping records of registrations, licenses, or permits issued, perform inspections of cannabis-related businesses, and prescribe forms for all licenses and permits.
  • The creation of the role of Chief Equity Officer, who shall establish public education programming in communities historically impacted by cannabis policing and assist those in said communities in seeking licenses for cannabis-related businesses.
  • The establishment of the Cannabis Advisory Board, who will be empowered to approve grants from the Community Reinvestment Fund.
  • The expansion of the current medical cannabis program, including additional licenses, expanded patient access, and additional products.
  • The creation of an adult-use market, with cultivators and processors being prevented from owning retail stores.
  • Licensing for cultivation, processing, retail, delivery, on-site consumption, and cannabis research.
  • The creation of a 9% state excise tax and 4% percent local excise tax on retail sales of cannabis. Of the local excise tax, 75% would go to the municipalities while 25% would go to the counties.
  • The creation of a THC tax of 0.5 cents per milligram for flower, 0.8 cents per milligram for concentrate, and 3 cents per milligram for edibles.
  • 40% of tax revenue is to be dedicated to education, 40% to the Community Grants Reinvestment Fund, and 20% to the Drug Treatment and Public Education Fund, with 40% of all funds dedicated to those disproportionally affected by cannabis policing.
  • Municipalities may opt-out of allowing retail stores or on-site consumption locations, but cannot outlaw adult-use.
  • New York will fund studies to help determine when someone is driving under the influence of cannabis, and will implement additional regulations based on those studies.
  • Neither the scent of cannabis nor presence of cannabis shall constitute reasonable suspicion to be used to search an adult 21-years-old or older.

While it is anticipated that this bill will be passed with minimal changes, the foregoing provisions are subject to change by the New York State Legislature.  While the bill is expected to proceed on an expedited schedule, it will not move forward as a portion of the New York State budget process.  We will continue to monitor this bill as it moves through the legislative process.

Senator Bob Menendez introduced the Clarifying Law Around Insurance of Marijuana Act (the “CLAIM Act”) on Thursday, March 18, 2021.  The bill is co-sponsored by Senators Jeff Merkley and Rand Paul, and will be introduced in the U.S. House of Representatives by Rep. Nydia Velázquez.

The CLAIM Act would forbid federal agencies from discouraging insurers from providing insurance to a legal cannabis-related business or political subdivision regulating a legal cannabis-related business.  Federal agencies would also be prevented from taking actions against such insurers or taking any action that would incentivize an insurer to not engage in business with a cannabis-related business.  The bill also provides that insurers and their officers, directors, and employees will not be held liable pursuant to any federal law or regulation.  The bill directs the Comptroller General of the United States to carry out a study on the barriers to entry to the cannabis industry faced by minority- and women-owned businesses.

We will continue to monitor the CLAIM Act as it moves through Congress.

A bipartisan coalition of representatives reintroduced The Secure and Fair Enforcement Banking Act (“SAFE Banking Act”) on Thursday, March 18, 2021.  The SAFE Banking Act was previously passed by the House of Representatives in 2019, and twice in 2020, but never received a vote in the Senate.

The SAFE Banking Act would remove federal restrictions currently preventing banks from servicing cannabis-related businesses operating under state law.  The bill would prevent federal regulators from terminating or limiting a bank’s access to deposit insurance for servicing the cannabis industry, taking adverse action against a bank for servicing the cannabis industry, discouraging a bank from servicing the cannabis industry, or taking adverse action on a loan made to a business within the cannabis industry.  The bill also protects banks from criminal, civil, or administrative forfeiture of any legal interest they may have in a cannabis-related business as part of a loan or financial service.

We will continue to monitor the SAFE Banking Act as it moves through Congress.

The Republican-controlled North Dakota House of Representatives passed an adult-use cannabis bill on Tuesday, February 23, 2021 in a 56-38 vote.  The bill legalizes possession of up to one ounce for people 21 and older.  The bill limits the number of cultivators within the state to seven, and the number of dispensaries to 18.  During debate, multiple state legislators stressed that failure to legalize adult-use cannabis on their terms could lead to broader legalization under a ballot initiative, as occurred in South Dakota last year.

The North Dakota House also passed a separate bill establishing a 15 percent gross receipts tax on cannabis products, three percent of which would go to the municipality in which the sale occurs.  We will continue to monitor this bill as it moves through the legislative process.

An adult-use cannabis bill was announced February 24, 2021 by State Senators Sharif Street (D-Philadelphia) and Dan Laughlin (R-Erie).  The bill would legalize possession of up to 30 grams for those 21 and over, while limiting at-home cultivation to medicinal use.  Noting New Jersey’s recent legalization, and New York’s intention to legalize adult-use cannabis this year, the Senators stressed the importance of Pennsylvania legalizing now to avoid ceding tax revenue and jobs to their neighbors.  Under the bill, cannabis products would be subject to a 10 percent excise tax, in addition to Pennsylvania’s state tax.

The bi-partisan bill follows Governor Tom Wolf’s call for legalization earlier this year.  We will continue to monitor this bill as it progresses through the legislative process.

Today, New Jersey’s legislature passed Senate Bill No. 3454, also known as the “clean-up bill.”  The clean-up bill sets the penalties for underage possession of cannabis and changes the penalties for underage possession of alcohol to match.  There will be no fines or criminal penalties for the possession of cannabis by minors.  People under the age of 21 and over the age of 18 would be subject to up to a $50 civil fine for possession of cannabis under the legal limit for those 21 and over (six ounces), and up to a $100 civil fine should they possess over that amount.  There are no criminal penalties for possession by those under the age of 21 and over the age of 18.  The clean-up bill also establishes that the scent of cannabis is not probable cause for detainment or search by the police, police must have body-cameras turned on when interacting with suspected violators of New Jersey’s underaged cannabis laws, and forbids detainment for violations of the underaged cannabis laws.

In response to a 2020 ballot initiative amending the New Jersey constitution to permit the possession, sale, and use of cannabis by adults 21 and over, the state legislature passed a decriminalization bill, permitting the possession of up to six ounces of cannabis, and a legalization bill, which established the taxation rate and legal marketplace for the state.  However, New Jersey Governor Phil Murphy worried about the lack of legislation regarding underage cannabis use and would not sign either the decriminalization or legalization bills until the legislature passed the clean-up bill.  All three bills were signed by Gov. Murphy today, February 22, 2021.

Governor Ned Lamont introduced his new proposal for legalization of adult-use cannabis with the unveiling of his 2022-2023 budget.  This coincided with the release of Gov. Lamont’s proposed bill, titled An Act Responsibly and Equitably Regulating Adult-Use Cannabis.  The proposal includes legalization of possession of up to 1.5 ounces of cannabis effective January 1, 2022, and the legalization of sales of cannabis effective in May 2022.  Cannabis would be subject to a tax of $1.25 per gram of flower on a dry weight basis, $0.50 per gram of trim on a dry weight basis, and $0.28 per gram of unprocessed, or “wet” cannabis, in addition to the standard sales tax.  Additionally, there will be a 3% tax reserved for the benefit of municipalities.  The proposal also provides for automatic expungement of convictions for possession prior to October 1, 2015, with later convictions requiring a petition to the court for expungement.

While Democrats control both chambers of the Connecticut General Assembly, it is unclear if they have enough votes to pass this proposal.  House Speaker Matthew Ritter has previously pledged to introduce a ballot measure legalizing adult-use cannabis by constitutional amendment should the General Assembly fail to pass legislation.  We will continue to monitor Connecticut and provide updates as Gov. Lamont’s proposal moves through the legislative process.

Last week, Virginia’s Senate and House of Delegates have both passed legislation legalizing adult-use cannabis (S.B. 1406 and H.B. 2312, respectively), and Governor Ralph Northam has indicated he will sign the final legislation into law.  Common elements in both bills include:

  • Legalize possession of up to one ounce for individuals 21 and older
  • Households may cultivate up to four plants, of which at most two plants can be mature
  • Expunge many cannabis-related convictions
  • Provide for a 21% retail tax, as well as empower localities to levy an additional 3% tax
  • Establish the Virginia Cannabis Control Authority in order to regulate sales, cultivation, and manufacture of cannabis products
  • Appropriate the largest portion of cannabis-related tax revenue to fund preschool for at-risk children.
  • Commence retail sales starting January 1, 2024

However, there are some differences between the Senate and House bills.  The Senate bill legalizes possession effective July 1, 2021, whereas the House bill does not legalize possession until the regulated market is established.  Further, the Senate bill allows for localities to ban retail stores.  In contrast, the House’s bill allows localities to designate where retail locations can be opened but does not allow for localities to outright ban retail establishments.  It is anticipated that these differences will be reconciled, which is necessary before a bill can be delivered to Gov. Northam for his signature.  We will continue to monitor any developments and analyze future developments.