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Protecting & Building Your Cannabis Brand

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On March 9, 2019, James Creedon joined Richard Cheng of DLA Piper to discuss the many legal issues to consider when starting or growing a business in the cannabis industry. This presentation, hosted by the Texas Cannabis Business Alliance, was attended by a wide variety of entrepreneurs at the Communion Neighborhood Cooperative and was divided into three sections:

The first section was an overview of the current legal status of cannabis laws and regulations on the federal and state level, and included discussion of legislation pending in the U.S. Congress and the Texas legislature. The second section used an example business to walk through the immediate challenges faced by cannabis industry companies in Texas, addressing topics such as the legal status of CBD, industrial hemp farming, and the Texas Compassionate Use program. The final section identified the importance of good business practices and the use of resources such as the TCBA to connect with other industry members and start informed on changes in the law.

For more information about this presentation, please contact us by email at contact@creedonpllc.com or by phone at 972-850-6864.

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Protecting & Building Your Cannabis Brand

  1. 1. JAMES CREEDON — CREEDON PLLC RICHARD CHENG — DLA PIPER
  2. 2. RICHARD CHENG RICHARD.CHENG@DLAPIPER.COM BACKGROUND AND EXPERIENCE ROLE AND FOCUS IN THE INDUSTRY HOW WE CAN HELP YOU PROTECT & BUILD JAMES CREEDON JHCREEDON@CREEDONPLLC.COM
  3. 3. “CANNABIS IS THE NEXT GOLD RUSH” “The largest group of [legal] cannabis buyers will be in North America, going from $9.2 billion in 2017 to $47.3 billion a decade later.” Thomas Pellechia, Forbes.com (March 1, 2018)
  4. 4. ANNUAL GROWTH PREDICTIONS ARE OVER 20% Image and data from Arcview Market Research in Executive Summary: The State of Legal Marijuana Markets (5th edition) REVISED PREDICTIONS INCREASE Current estimates of 2016 to 2017 growth rate average from 25% to 33%, with revised estimates of 2017 spending at $9.7 billion LEGALIZATION MATTERS As more states move to approve cannabis products, spending shifts into this sector and increases overall market revenue
  5. 5. GALLUP POLL: U.S. SUPPORT FOR LEGAL MARIJUANA Gallup Poll results as reported by Arcview Market Research in Executive Summary: The State of Legal Marijuana Markets (5th edition) SUPPORT DOUBLES SINCE 2000 Pew Research Center Polls from 2000 to 2018 show adult support nearly doubling from 31% to 61%. (Last cited Pew Research Center Poll conducted Oct. 25-30, 2017) MILLENNIAL SUPPORT HIGHER For those born 1981-97, support crested 70%. Gen X (1965-80) support is at 66%, and Boomers (1946-64) reached 56%. (Pew Research Center Poll, Oct. 2017)
  6. 6. LEGALIZATION ACROSS THE UNITED STATES Image and state status reporting provided by the National Cannabis Industry Association, with data reported and compiled by CannaRegs, Ltd., Arcview Market Research, and BDS Analytics ADULT USE BROAD MEDICAL LIMITED MEDICAL PROHIBITED
  7. 7. WHAT DOES CANNABIS MEAN? Understanding the basic terminology at the beginning will help to frame out our discussion
  8. 8. MARIJUANA / MARIHUANA Generally differentiated from other forms of Cannabis by its higher THC content (greater than 0.3%) CANNABIDIOL (CBD) Non-intoxicant found in Cannabis (generally not under DEA/CSA enforcement as of May 22, 2018) THC = TETRAHYDROCANNABINOL Intoxicant in Cannabis regulated by the Controlled Substances Act and Drug Enforcement Administration HEMP Generally differentiated from other forms of Cannabis by its low THC content (0.3% or less by 2014/2018 Farm Bill) CANNABIS TERMS
  9. 9. PAY ATTENTION TO LEGAL CHANGES Federal, state, and local law all vary, with a number of changes on the horizon. LEGAL UPDATE 1
  10. 10. FEDERAL LEGAL REGIME TODAY These laws change day- by-day, so always be certain to get the most recent updates MARIJUANA IS ILLEGAL FEDERALLY The Controlled Substances Act still applies, and AG Sessions rescinded the 2013 Cole Memo in January 2018 to lift soft restrictions on enforcement march 9 2019 THC IS ILLEGAL FEDERALLY The 2014 Farm Bill set the industrial hemp permissible level of THC at 0.3%, and content above that is prohibited overall — the 2018 bill does not change this CBD GENERALLY NOT PROHIBITED BY THE DEA/CSA On May 22, 2018, DEA clarified that products outside of CSA marijuana definition (i.e. seed oil and mature stalk extract) are not prohibited FDA EXERTS REGULATORY CONTROL OVER CBD FDA considers CBD to be a drug under substantial clinical investigation which was not marketed prior as a dietary supplement or conventional food
  11. 11. TEXAS LEGAL REGIME TODAY These laws change day- by-day, so always be certain to get the most recent updates MARIJUANA IS ILLEGAL IN TEXAS Although there is an on-the-ground trend towards decriminalization, marijuana arrests can and do still result in significant penalties march 9 2019 THC IS ILLEGAL IN TEXAS THC continues to be illegal in Texas, regardless of the method by which it is obtained — this includes mislabeled products CBD IS ILLEGAL IN TEXAS The Texas Controlled Substances Act still prohibits CBD unless specifically approved under the terms of the Compassionate Use Act HEMP IS ILLEGAL IN TEXAS Texas continues to prohibit hemp, has not submitted a USDA hemp plan, and does not permit hemp extracts
  12. 12. MEDICAL CANNABIS 16 bills with some focusing on establishing greater oversight REDUCING PENALTIES 13 bills filed focusing mostly on personal use quantities HEMP 6 bills with focus on occupational licenses and oversight OTHER BILLS 10 bills ranging from zoning to drug testing of state employees FDA IS TAKING STEPS TO UPDATE CBD POLICY • New food/drink CBD regulatory changes planned but FDA Commissioner Scott Gottlieb resignation makes status unclear USDA HOLDING HEMP LISTENING SESSION MARCH 13 • Must register by March 11 at http://creedon.link/hemplisten BRIEF REVIEW ON TEXAS CHANGES TWO LEGISLATIVE PUSHES • Secure and Fair Enforcement (SAFE) Banking Act • Strengthening the Tenth Amendment Through Entrusting States (STATES) Act CONSTITUTIONAL AMENDMENTS 6 joint resolutions primarily on legalization or dedication of tax proceeds BRIEF REVIEW ON FEDERAL CHANGES
  13. 13. CANNABIS BUSINESS OPERATIONS MODEL BUSINESS 2
  14. 14. BUSINESS: KUSHIECAKES KUSHIECAKES is a bakery selling a four-layer brownie cake in Dallas, which contains CBD Oil purchased from Colorado. The owners have also begun selling hemp oil extract on the shelves, and once a week run a holistic health session in which one of the owners provides CBD dosing guidance for patients.
  15. 15. USE YOUR ATTORNEY AND CPA Legal issues can be general to the business or specific to the cannabis industry HAVE A GOOD OWNERSHIP AGREEMENT Make clear how everything will work in advance DEVELOP GOOD INTERNAL PRACTICES Cannabis businesses face complex issues which require careful operations BUILD THE BRAND INTELLIGENTLY Position yourself for the future legal status of this industry — not just the present FORM AN ENTITY LLC’s are most common in Texas and provide the most flexibility OVERALL BUSINESS PRACTICE
  16. 16. TAX ISSUES ARE SIGNIFICANT Be aware that the financial issues in this industry are complex and constantly changing RISKS TO FUTURE LEGAL OPERATIONS Future licensing may require no history of violations REMEMBER THAT NON-CANNABIS LAWS APPLY Providing medical advice is a serious risk COMPLY VOLUNTARILY WITH FUTURE REGULATIONS Set the standard now to increase opportunities later LEGAL VS. UNCLEAR BUSINESSES You can service the industry or be at the core — each carries different risks MAJOR CANNABIS ISSUES
  17. 17. FINAL ADVICE ON CANNABIS BUSINESSES • GROW INTELLIGENTLY • USE YOUR RESOURCES • CONNECT WITH OTHERS • EVALUATE RISK AND MAKE SMART CHOICES
  18. 18. CANNABIS RESOURCES WHERE TO LOOK National Cannabis Bar Association https://www.canbar.org Daily Update: Word on the Tree Newsletter https://wordonthetree.com Marijuana Moment https://www.marijuanamoment.net National Cannabis Industry Association https://thecannabisindustry.org DEA/CSA Updates https://www.deadiversion.usdoj.gov/schedules/marijuana/index.html FDA Updates https://www.fda.gov/NewsEvents/PublicHealthFocus/ucm421168.htm
  19. 19. VISIT CREEDON PLLC WWW.CREEDONPLLC.COM 2595 Dallas Parkway, Suite 420 Frisco, Texas 75034 972.850.6864 jhcreedon@creedonpllc.com VISIT DLA PIPER WWW.DLAPIPER.COM 1900 N. Pearl Street, Suite 2220 Dallas, Texas 75201 214.743.4582 richard.cheng@dlapiper.com

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