Four key areas to watch as the movement progresses
Despite continued legislative needs around research, securities protection and business regulations, the Dentons team believes that 2020 holds potential for continued growth and innovation that will bring the United States nearer to widespread normalization and legalization of cannabis. Here are the top four areas to watch.
Increased access to research
There is significant pressure to gain more comprehensive research into cannabis’s potential, especially related to its long-term effects, benefits and applications.
For this to happen, the DEA must expand access and funding for approved research-driven cultivators beyond the University of Mississippi (currently the sole approved cultivator of cannabis for U.S. research).
While the DEA has historically stood in the way of cannabis research, it announced last year that it is further facilitating and expanding scientific and medical research for cannabis in the United States. This will include registering additional companies and universities to produce cannabis for researchers in order to increase the variety of cannabis available for research. The DEA’s goal with this increased focus is to not only better understand the effects of cannabis, but also to aid in the development of drug products that could be approved for marketing by the Food and Drug Administration (FDA).
Expanded usage rights
As cannabis continues to be normalized and its benefits better established through research, expect to see expanded rights for employees and patients. Currently, state laws differ dramatically on balancing employers’ and employees’ rights when it comes to the use of cannabis. In the face of increased state legalization, human resources departments will have to familiarize themselves with new laws and ensure they have a clear understanding of their employees’ rights when it comes to cannabis usage.
This also holds true for the health care system, as research better unveils how cannabis holds potential to treat those with medical conditions. Because of this, we anticipate growing protections for cannabis users and believe that most zero-tolerance policies in workplaces will likely only impact safety-sensitive positions.
Continued business challenges
The complications related to inconsistency in state and federal cannabis regulations will continue to pose a challenge for cannabis businesses in 2020. Simultaneously, the state-legal industry faces limited capital for several reasons, including the disappointing financial results of Canadian licensed producers and institutional capital’s reluctance to enter an industry that remains federally illegal.
As companies try to navigate these waters, they will need to find ways to remain compliant and competitive, including against other state-licensed businesses and nontraditional competitors, like black-market sales.
Clarified CBD regulations
A 2018 provision to the Farm Bill removed hemp and its extracts, including CBD, from the Controlled Substances Act. The FDA, however, has claimed that CBD in food, drink or supplements, or in any product with a health claim, is still illegal. While the FDA has targeted its enforcement solely against those making health claims, plaintiff class action lawyers have also filed actions against CBD companies not making health claims. This signals the need for further clarification from the FDA about its enforcement and pathways for CBD products.
The cannabis industry is in its infancy. There is still much room for cannabis legislation to expand and many hurdles still stand in the way. In the next decade, we expect the cannabis market to continue to grow. Additionally, there will be increased education of both the general public and our political leaders as the benefits — and risks — of cannabis become clearer.
While the industry overall will likely remain complex until federal legalization sets a nationwide precedent, business owners should feel confident that much of the legal industry is evolving to help cannabis companies operate in a legal, safe and competitive way.
The next year will yield increased social acceptance that will take the United States one step closer to federal legalization.
Kathryn B. Ashton and Eric P. Berlin are co-chairs of the cannabis group at Dentons, the world’s largest law firm.
Ashton is a partner at Dentons, a leader of the firm’s global health care group and co-chair of its cannabis group. She concentrates her practice in health care transactional matters with an emphasis on finance.
Berlin, also a partner at Dentons, is one of the nation’s leading cannabis law authorities, advocating full-time for clients in, or impacted by, the state-legal cannabis industries and tensions with federal law. He also has more than two decades of courtroom and jury trial experience in high-stakes matters.