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.

On February 1, 2021, Senators Cory Booker (D-NJ), Ron Wyden (D-OR), and Chuck Schumer (D-NY) announced their intention to introduce cannabis reform legislation this year.  In a joint announcement, the Senators pledged to end the federal prohibition on cannabis, as well as “ensure restorative justice, protect public health and implement responsible taxes and regulations.”

While the Senators have not yet released their plan, all three have sponsored cannabis-related legislation in the past.  Each Senator has sponsored legislation to remove cannabis from the list of controlled substances under the Controlled Substances Act, with Sen. Schumer sponsoring the Marijuana Freedom and Opportunity Act in 2018, Sen. Booker sponsoring the Marijuana Justice Act in 2019, and Sen. Wyden sponsoring the Marijuana Revenue and Regulation Act in 2019.  Both the Marijuana Freedom and Opportunity Act and Marijuana Justice Act sought to establish trust funds for the benefit of communities disproportionally impacted by the War on Drugs, and the Marijuana Justice Act also sought to expunge federal convictions for cannabis use and possession.  The Marijuana Revenue and Regulation Act sought to establish a framework for taxing cannabis products produced in the US as well as those imported.

As the new Senate Majority Leader, Sen. Schumer can ensure that any bill proposed receives a vote in the U.S. Senate. We will continue to monitor any developments and analyze any proposed legislation the Senators release.

On July 2, 2019, Governor Phil Murphy signed the Jake Honig Compassionate Use Medical Cannabis Act (the “Act”), which amends the formerly known Compassionate Use of Medical Marijuana Act (“CUMMA”) and expands New Jersey’s medical cannabis program.  Employers should pay particular attention to this new development because the Act includes a non-discrimination provision to protect New Jersey medical cannabis users in the workplace.

As we previously blogged, the New Jersey Appellate Division recently afforded medical cannabis users, who suffer from adverse employment actions due to their lawful medical cannabis use, with the ability to pursue a claim under the Law Against Discrimination (“LAD”), despite the fact that CUMMA previously did not include any explicit employment protections. The Act has now codified various employment protections for medical cannabis users. Specifically, pursuant to the Act, employers cannot take an adverse employment action against an employee “based solely on the employee’s status” as a valid medical cannabis user.

The Act also confirms an employer’s right to maintain a drug testing program, but imposes several requirements upon the employer when dealing with a positive test result for cannabis. Specifically, an employer must provide written notice of the positive test result to the employee or job applicant and notify him/her of the opportunity to “present a legitimate medical explanation for the positive test result.” According to the Act, an employee or job applicant must be given at least three (3) working days after receiving the aforementioned written notice to submit information explaining the positive test result or request a retest of the original sample at the employee’s or job applicant’s expense. To explain a positive test result, the Act explicitly permits an employee or job applicant to submit proof of registration as a valid medical cannabis user with the State and/or a doctor’s authorization to use medical cannabis.

Notwithstanding the above provisions, the Act specifically allows employers to “prohibit, or take adverse employment action for, the possession or use of intoxicating substances during work hours or on the premises of the workplace outside of work hours[.]” Further, the Act states that it should not be construed to require an employer to “be in violation of federal law, that would result in a loss of a licensing-related benefit pursuant to federal law, or that would result in the loss of a federal contract or federal funding.”

Overall, New Jersey employers should review their workplace drug policies and drug testing programs/procedures to ensure compliance with the Act. Except for federal contractors, as noted above, employers should also refrain from making a hiring decision or taking any adverse employment action against an employee based solely upon their valid use of medical cannabis.

This is a reminder to all restaurant and hospitality operators that, commencing on July 1, 2019, the New York City Department of Health will officially ban food and drink products containing Cannabidiol (“CBD”). All products containing CBD must be returned to the supplier or discarded prior to the July 1st enforcement deadline.  Failure to comply may result in fines ranging from $200-$650, dependent upon the quantity seized.

Although efforts to legalize cannabis for adult recreational use failed to win majority support prior to the end of the legislative session, both the New York State Assembly and New York State Senate have approved a significant decriminalization bill.  The bill, which Governor Andrew Cuomo has said he will sign, generally (1) reduces penalties for small-scale cannabis possession and (2) provides for automatic expungement of certain low-level cannabis related criminal records. The bill includes the following key measures:

  • Possession of less than two ounces of cannabis will be classified as a violation. Under existing law, possession of between one and two ounces is classified as a misdemeanor.
  • Public use will be classified as a violation, rather than a misdemeanor as it is classified under existing law.
  • The fine for possession of less than one ounce will be capped at $50. The fine for possession of between one and two ounces will be capped at $200.
  • Imprisonment can no longer be imposed for possession of less than two ounces.
  • At the request of the defendant, the court in which that person was convicted must vacate a judgment of conviction and dismiss the charges relating to certain prior cannabis-related offenses, including convictions for possession of less than 25 grams and for public use.
  • Records of certain prior cannabis-related charges shall be automatically expunged, including convictions for possession of less than 25 grams and for public use.

As noted in our article dated May 23, 2019, New York law currently does not provide a mechanism for expungement of criminal records.  The new bill introduces a definition of “expungement” to the New York Criminal Procedure law, which generally provides that:  (1) any arrest, enforcement activity, prosecution and disposition in any New York State court will be deemed a “nullity” and the individual will be restored to the status occupied prior to the arrest, prosecution and/or disposition; (2) records of the arrest, prosecution and/or disposition shall be marked as “expunged” or destroyed; and (3) no individual shall be required to divulge information pertaining to an expunged proceeding.  Commentators have observed that the bill’s expungement provision will, in practice, mean that relevant convictions will no longer show up on criminal history searches.