On demand 1h 6m 28s Basic

Cannabis Business Basics for Attorneys

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Cannabis Business Basics for Attorneys

This course will provide attorneys with a basic overview of the current state of cannabis market. In this course, attorneys will familiarize themselves with general cannabis terms and definitions, as well as develop an understanding of the basic principles of cannabis and relevant considerations in the process of applying for a cannabis business license. The course will explore the various types of cannabis products, cannabis license types, and the federal cannabis laws on the horizon.

Transcript

Hello everyone. My name is Toni Forge. I'm a 30 year attorney based in Los Angeles, California. My background really is litigation and litigation management. But in 2016, after legalization here in California, I entered the world of cannabis. And so I'd like to welcome all of you to cannabis basics. So I have my contact information here. A lot of people would like to ask questions, or I typically post what is going on on my IG page in cannabis on a national level. So it's a good way to get information if you're seeking additional information about cannabis. We have a lot of exciting things going on on a federal level. So I encourage all of you to look at my IG page. So I'm going to go back a slide. And let's look at what we're going to learn here today. This course is an overview. Like I said it's the cannabis basics. We're going to look at cannabis from 10,000ft down. Right. And so when I first entered this space I didn't know anything about cannabis. I didn't know what a dab was. I didn't know these terms of art. And I really wish I did. Plus, we know that cannabis is legal in a number of states, and a lot of people just want this basic information of how do I go into a dispensary and order something, what should I be looking for? And this course will give you that information as well. So we're going to give you an overview of cannabis. I'm going to give you the general cannabis terms and definitions. We're going to see what's happening on a federal level. We're going to talk about the 2018 farm bill. We're going to talk about hemp. A lot of you have heard about Delta eight and Delta nine but don't know what that is. We're going to get into that. We're also going to talk about what is on the horizon in terms of federal legalization. Everybody wants to know if the Biden administration is going to legalize cannabis. You heard it from me here first. I don't think so. I think it's going to be whoever is president in the next four years, and we'll talk about legalization. And for a lot of you, you're interested in helping your clients or taking on clients that want cannabis business licenses. We know legalization is about two things. Number one, giving individuals the right to smoke cannabis, to have cannabis products in their possession, but also the right to have a business. You've heard of the green rush? We're going to talk about the money associated with cannabis and how it is so important to people to get cannabis business licenses. So what are we looking at with cannabis now? We have 40 states that have approved medical cannabis and we've got to alter this. It's 24 states now because Ohio approved last week um, cannabis for recreational use. So is the District of Columbia. We have 40 countries that have legalized cannabis, either fully or partially for adult use. And at the end of this year, we're looking at medicinal and recreational sales reaching approximately 33.6 billion people. That's with a B, and in 2027, it's looking at upwards to 53.5 billion in cannabis sales. This is just going to give you a visual of what legalization looks like. And you can see pretty much all over the country. We're looking at cannabis being the majority of what people have and what people would like to have in their state rather. And so we're looking at medicinal cannabis, recreational and some of those illegals you'll see in this slide have definitely changed. We're looking at Georgia is looking at some medicinal cannabis on the horizon as well. So let's get into cannabis terminology. Marijuana is just a slang term for flowers, leaf stems. The cannabis plants. And I always get this question. Tony, why do you use the word cannabis instead of marijuana? And the industry as a whole uses the word cannabis. We kind of shy away from marijuana because it has a racist past. In the 1930, US politicians used marijuana to paint it as a Mexican vice. Even though people in the US used cannabis, they didn't smoke cannabis. Typically, Mexicans smoked cannabis at that time, and therefore the industry term to be politically correct is to use cannabis. The flower is the hairy, sticky parts of the plant that are harvested. We know you can smoke flower or flower is going to be put in different types of products, and we're going to learn about those methodologies. Cannabinoid or CBD? Cbd is the second most prevalent cannabinoid in the cannabis plant. And what cannabinoids are are just chemical compounds. There's all hundreds of chemical compounds in cannabis. Thc is the number one prevalent compound. That's what gives you that high feeling. Cbd doesn't. Cbd has been associated with making you feel relaxed, having more of a medicinal type of effect for people. The combination of THC and CBD really helps with sleep with some individuals, and it also helps with pain management. We're going to talk a lot about hemp, but hemp simply is. I call it the cousin of cannabis. It is cannabis, but it's cannabis that it has an inherently low THC. Again, that's a compound that gets you high level. It's got to be 3% or less at dry weight. That's very important. We're all attorneys here. So we know about elements. And this is one of the elements. And we'll get to the farm bill and hemp a little later on in this presentation we're going to talk about the other elements that make hemp legal. Cannabinoid profile is really looking at the quantity and the active components. The amounts that are of cannabinoids that are in the plant terpene are the fragrant oil secreted from the glands of flowers. I always tell people that turbans are like the notes in a wine. Correct. And so you might have notes of chocolate or notes of wood, but you can have that same type of thing in cannabis. And if you ever go to a dispensary, sometimes there are terpene profiles. And so you can ask your bartender exactly what is the certain profile in flower or in a particular manufactured product. Strain we know is that there are different varieties of cannabis plants. The two most prevalent or popular strains are sativa and indica. Sativa is high in THC, and it's been known and told to enhance your creativity. It's more of a stimulant. Thc indica let me back up. Indica has that mix of THC and CBD that I was referring to earlier, and that's again gives you the effect of relaxation and pain. Reducing a concentrate is when cannabis flowers are refined down and it's creating a hash or some type of hash oil. But keep in mind that concentrates are typically higher, a little higher in THC because remember, you're crushing them down and they have higher potency seed to sale. You're going to hear about seed to sale throughout cannabis. And pretty much it's the whole process of taking an individual seed from its cultivation, from the time you're growing it all the way to the finished product. Seed to sale is important because you're going to hear about metrics and state uses. Metrics and metrics is a cannabis compliance tracking system that tags the seed all the way to the finished cannabis product. And a lot of states use this in order for taxation purposes, but they want to make sure that this is the regulated legal cannabis. And so it's tagged much like you would, let's say, an organic fruit or something of that nature. Extraction is when we're taking those compounds, we're taking those cannabis cannabinoids out, and we're going to use that in order to create a finished good or a finished product. There are typically two methodologies for extraction, and that can be either alcohol extraction or butane hash extraction. Why do I make the difference? Because it's important when you're looking at licensing. So you may have a client that wants to manufacture something but can only do butane hash. So you have to look to see if the municipality or the state allows for that to happen. Typically, jurisdictions are very particular about the extraction methods that they allow with cannabis. Some states say it can only be alcohol. Some states say you can have both, but it's very important to talk to your client, see exactly what they want to do and what particular manufacturing. We're going to talk about this when we get to that license type, what type of manufacturing license they should have for their particular extraction process. Trim is when a grower goes in a cultivator and they're trimming the leaves, and it's just focusing on the buds. We are in trim season now. Trim season usually occurs from September to November. Vertical integration is a very important concept. This is when the cannabis business owner wants to control every part of the supply chain, and sometimes there's one license type that allows them to do this, and that's the Microbusiness license. And it could be three of the four different license types. So a cannabis operator may want or may have a cultivation license, a manufacturer's license. And a retail license. So vertical integration is what in the marketplace is where everybody believes you'll be successful. If you have control over the supply side. People connect that with a lot of success in in the cannabis world. Delta eight. Delta nine. These are chemicals that are in cannabis and in hemp. We know that delta nine is federally illegal and it's federally illegal because it is cannabis and cannabis is federally illegal, but it can be legal depending on the state. So if you are in, for example, the state of Colorado or California, then it will be okay, because cannabis is legal in that state. We have a lot of argument regarding Delta eight, and the thought was, well, Delta eight is legal because it's hemp. And under the 20 2018 farm bill, hemp is legal. However, we just heard this year from the DEA that basically stated, I don't care if it's Delta eight or Delta nine, it's not hemp, it is cannabis. Therefore it's a schedule one controlled drug under the Controlled Substance Act, which we know is illegal. People ask, well, why is it because hemp is legal if it's from an industrial hemp seed, that it is not scheduled? According to the 2018 farm bill. However, what the DEA, DEA is saying is we have manipulation here, right? We have manipulation of the cannabinoids. And so it's being done artificially. It's not a a natural occurring instance where you have 3% or less of THC in hemp. And so we know that this is happening. We have had DEA in certain states go after people at Delta nine conventions, believe it or not. So what are the typical uses? We we saw the visual. It was medicinal use of cannabis. What does that mean. Recreational or adult use? Medicinal. You have to have some kind of medical recommendation. And so you're basically saying look doctor or medical provider, I have a debilitating disease. Or I have remember the joke was I got glaucoma or there's something some kind of medical condition in which I need cannabis. You are going to get a prescription for a certain amount of cannabis. This is important because most states have limitations on how much cannabis can be purchased for adult use. So we have maybe you can only get six ounces, but your prescription is for eight. You can get the eight ounces in a medical state, in a medical, or if they have both, because you have this prescription from a medical provider, or if you are doing adult use or recreational cannabis, if the state allows for that, all you need is a government ID and to be over 21 years of age. So let's talk about ingestion methods and some other terms of art. Dosage is the individual amount of cannabinoids within a product. So think of it as a nutritional guide in a supplement. Right. It may be something to the effect of 30% vitamin C. What you're going to see in cannabis is that same type of thing, but in milligrams. So it will be five milligrams of CBD or five milligrams of THC or ten milligrams of both. It's important to for you to look at the serving size that's going to be on the packaging of your finished product, so definitely look for that. Vaping is where cannabis flower or concentrate is heated in a vaporizing device and inhaled. Dabbing is when you're taking a small amount of that cannabis concentrate, you're going to put it on a preheated surface and you're going to inhale, inhale the vapors. Again this is a little more potent. A tincture. I call this the ladylike way of ingesting cannabis. There's no smell because it literally is a liquid that comes in a dropper. You put a dropper size underneath your tongue. You keep it there for a couple of seconds and then you ingest it. People like it because unlike edibles, it gives you that feeling more quickly. And we're going to talk about edibles. And that's when you're just orally consuming a gummy or some type of chocolate or finished product. Now the problem with edibles is it has a delayed reaction. So typically people do not feel the effects of edibles until 45 minutes or an hour. Now a problem there is overdosing because people don't wait after 20 minutes, don't feel anything, and then they take another edible, and then they wonder why they're on the kitchen floor an hour later. So it's a very important to wait for the effect of the edible. And then after 45 minutes or an hour, if you don't feel it, I suggested that you take another one. Okay. So let's talk about the federal cannabis policy. We talked about this a little before. Cannabis is federally illegal. It's part of this Controlled Substance Act. And the reason it's federally illegal because schedule one drugs have no accepted medical use, and they have a high potential for abuse. Other schedule one drugs are crack, heroin, ecstasy and cocaine. The Biden administration is taking a similar approach as the Obama administration did. They're saying, look, we have a lot of fish to fry on a federal level. As long as you are in compliance with state law, we do not have the resources to go after you. Now, with the story I told you about the Delta nine and Delta eight convention, it really just depends, because this happened a couple of years back in Las Vegas, and I believe it was under the Trump administration, where we had DEA agents that actually did come in and break up a conference that was selling Delta Delta nine. And so I don't want people to have the impression that they will not come in whatsoever. I mean, they have to make the choice. But we see more often or not, we have or the administration has a lot on their plate. And so going after cannabis is not a priority. So why do people want cannabis to be legalized? Because it has so many implications now that it's federally illegal. Number one banking. There's no cannabis operator in the world that can go to a Wells Fargo or B of A and say, look, I want to open a banking account for my cannabis business. That ain't going to happen. A lot of times these banks feel that it violates federal anti-money laundering laws. I understand it takes a lot of paperwork to document it, and they don't want to do the paperwork. And so you can get banking in cannabis. It typically is some kind of financial platform that is used here in California. We have a lot of small credit unions. There are some specific credit unions that have huge banking arms. And we know that there are some states that have state regulated cannabis banks. However, on a national level, you're not going to get FDIC insured for your cannabis business because you can't even be in there. Number one. It impacts interstate trade. Now, we absolutely know in the real world this is happening what is produced. And Humboldt is getting shipped to Jersey, getting shipped to New York. And it does cross state lines, but it is illegal to do so even if both of the states you're going to are legal. You cannot cross those state lines with cannabis. And so it really what a lot of operators are saying is from a commercial basis, it really is impacting it because we may have states that are flooded with flower. We saw that in Oregon. We're seeing that in California. And so a lot of these cultivators do want to go to other states. And so we're going to talk about some of the bills that are in D.C. now. Hopefully that can pass to alleviate these issues. And we all know that everything is certain. Two things are death and taxes. Same thing with cannabis. Even though it's federally illegal, you still have to pay taxes. Um, it's amazing that taxation, I would say, is the second most prevalent issue affecting cannabis operators. The injection of capital and obtaining capital, in my view, is number one, taxes is number two. A lot of people will say taxes number one, being unable to get capital number two. But the problem is you're paying local taxes. You can take state taxes and you pay federal taxes. And even though you have a legitimate state cannabis business under 280, this section says, look, you can only deduct for cost of goods sold. You cannot deduct for ordinary business expenses. And this has been really burdensome on a lot of operators. I was seeing and reading today that New York is lowering taxes, even though they just did legalization, and they're in the middle of allowing people to get cannabis business license. They see the need to really reduce taxes. And really it's under the 280 issue. Some of the other implications. Fear of being criminally arrest. You still can get arrested. There are people sitting in jails now doing 40 years, 50 years, especially in southern states, for cannabis possession or selling cannabis. Denial of immigration or visas. It can impact immigration status DACA you cannot register federal trademarks. Again we talked about this the limitations on obtaining capital. You cannot go to the SBA, for example, and say, I need a small business loan for my cannabis business. It ain't going to happen. Banking is severely impacted. We talked about that before. And even though you're in an ancillary business to cannabis, there is fear that your bank account can get shut down because you are not directly touching the cannabis plant, but your business is around. The whole notion of cannabis. This happens all the time. So we know this is a real world issue and there's no bankruptcy protection in cannabis. There is a California case that I found that states you can have bankruptcy protection. It may be available to liquidate assets if you're in a non operating cannabis business. And so we know that people who are not familiar with cannabis and the cannabis world do not realize there is such a lag time between the time you can get licensing and time you're up and running with your business, that a lot of people just run out of capital, and sometimes they're just leaving the business as is. If you are going to, for example, in California, start a dispensary, you should have $1 million ready to go. You should. So it's very expensive and sometimes people can't make it happen. But again, there's no bankruptcy protection. I always advise lawyers that typically when you're doing an operating agreement and you're creating an LLC, you know, there's always that term in the operating agreement that says the LLC is terminated if there's a bankruptcy. I also always suggest use terminology that basically says this is a bankruptcy situation without saying bankruptcy. So as long as you say we no longer have any money, we don't have any assets, all of that information. So it sounds like a bankruptcy. You're not going to say bankruptcy. Use that term of art. Okay. Let's talk a lot about him. As I said before, hemp is cannabis. The difference that hemp is 3% or less THC at dry weight. It also has to be tested 30 days before harvest. So how you're getting to that 3%. You got to make sure you're testing that 30 days. There's a relaxation of the requirement that it had to be at a tested at a DEA facility. The DEA has given us a little bit of a reprieve on that, but if it doesn't meet that test, then it has to be destroyed and it can be in compliance. I don't even try to act like I know how it can be back in compliance as a cultivator or such, but remediation is allowed. So we talked earlier about the farm bill. It's expired. And the reason why that is so important, because a lot of states like Texas were using industrial hemp and using the farm bill in order to have hemp based products. The 2018 farm bill basically said, look, if it's hemp, again, the definition 3% or less THC at dry weight, then it is no longer part of the controlled Substance Act. And so there has to be or there is legalization. I always caution attorneys that hemp is still kind of this gray area. Everybody thinks it's just across the board legal. I would state still look at your state authority, the hemp, the farm bill, excuse me, was expired this year. We're looking at 2024 for another date, but it's not broadly legal. You still have to meet certain thresholds from other agencies. So for example, the FDA has authority over hemp and hemp products. And so the government really hasn't come out with these strong statements of no, you can't use it in this instance. No, you can't put it in a cream. No, you can't put it in dog food. But I would caution and always tell my clients and I tell attorneys, look at FDA warning letters. Usually the warning letters with hemp based products are saying hemp products are giving too many claims. They're saying it takes away pain or it's going to alleviate this medical situation. Stay away from that. But again, hemp is an agricultural product. You should look at your state agricultural board or if it's under the cannabis regulator, but really do not assume. Yep, 2018 hemp farm bill. Everything is fine. It's hemp and it's blanket authorization. So what's going on with the feds now? So we know that there is in the works as we sit here today, a federal recommendation to DEA to move cannabis from being a schedule one drug to a schedule three drug. Other drugs that are schedule three are steroids, some certain codeine mixtures. So what is the effect people say of this? Well, the effect that we're looking for is some type of commonality because as we know, legalization depends on the state and the type of usage we talked about if it's adult, recreational or medicinal. And so the thought is if it's no longer a schedule one drug, if it's schedule three, there's going to now be a little more certainty commonality around that. Now I don't know about that okay. We next have the secure and fair enforcement regulation Open Banking Act. This is the Senate banking reform bill. This is going to alleviate everything we talked about before. And we're going to look at the bill a little later on in the presentation. And so you can see exactly what the bill is designed to do. But it really wants to give access to financial services. And like I stated, the number one issue that I feel a lot of operators are having in this space is access to capital. The States Reform Act. This was a bipartisan bill passed in the House. It's to legalize and regulate cannabis on a federal level. And that's what ideally we're looking for is blanket legalization. So let's talk about some of these acts and bills. This is the Cannabis Administration and Opportunity Act. The bill was sponsored by Booker Schumer Widen. And it removes cannabis from the Controlled Substance Act. That would be fabulous. It provides for cannabis research, training, entrepreneurship and prevention. There's not a lot of cannabis research done here in the States, because how are you going to get a federal grant? It's federally illegal. The country that is doing a lot of research is Israel. There has been private research here. Montel Williams, the ex TV show host, has been a proponent of cannabis because he was so successful with it for curing a lot of his physical ailments. So he has, I know, done some research there. But this act would also allow for restorative justice, for opportunity programs, establishing a trust fund off of taxation, to have trade practices, to look at public health with cannabis. So it can really, really revolutionize cannabis on a federal, national level. We talked about this, but the name has been modified. It's the Secure and Fair Enforcement Regulation Banking Act. It prohibits banking institutions from basically basically shutting down your account. They can't come in and say, oh my God, you have a cannabis business. You can't bake here. As long as remember that it's a legitimate cannabis business. You're complying with the state law, you're complying with what you should be doing. Then you should be able to have a bank account under this act. It is not considered an unlawful activity in terms of the proceeds. You're not trafficking drug money in the such. It also gives you the ability to, again, even if you're in an ancillary cannabis business, to have a banking account without fear of it being terminated. The more act is the Marijuana Opportunity Reinvestment and Expungement Act. This passed in the House in 2022. We're awaiting further action. The main thing I love about this act is it would give the Small Business Association an opportunity to give cannabis entrepreneurs loans and services for their businesses. It's going to have a trust fund to support various programs and communities that were impacted by the war on drugs. We're going to talk a little bit about this. When we're getting into what social equity means. It prohibits the denial of federal benefits. It gives those protections under immigration. It expunges convinced convictions, and it conducts federal sentencing review hearings. We know Biden today is saying, look, judges for cannabis. We don't want you to give these extraordinarily harsh penalties and sentences, but we want to go back and look at some of those old sentences to see if they were just extraordinarily harsh for either possession or selling small amounts, amounts of cannabis. And even though the act is uses marijuana, it's going to replace statutory references from marijuana to cannabis. So we know that states have the authority to rule on cannabis if they want to make cannabis legal in their states. We're seeing this more and more again. Last month or last week we saw it with Ohio. And the reason being is cannabis taxation. We saw the numbers at the beginning of this presentation can bring a lot of money to municipalities, to states, and that's what they're looking for. And how it's doing that is by giving operators a cannabis business license. So let's look at some of the cannabis business license types. There's cultivation manufacturing or sometimes it's called processing distribution, retail testing. And microbusiness cultivation is just that a cultivation a cultivator is growing cannabis. They're trimming it. They're preparing the soil. They're doing irrigation fertilization. They're drying, curing. They're doing everything in order to create flour. So that flour can be used either to smoke or to create a finished product. In manufacturing, we talked about this earlier. A manufacturer is either extracting the turbines and cannabinoids or they can inject it. They can infuse a product with turbines and cannabinoids. But you have to look at your particular state because depending on the state, this processing or manufacturing license can do a lot of things. So you can create products so you can inject or infuse foods and beverages. You can have vape cartridges, lotions, balms, dabs, shatter wax. And you can also package cannabis products and you can label it. So it depends on what your client wants to do. What I suggest is attorneys really talk to their clients, see what they want, if they want to infuse cannabis products, if they want to create a chocolate, for example, what can you do with the license and what type of license specifically do I need? Distribution. Same thing is manufacturing can do a lot of different things depending on the jurisdiction. There are some distribution licenses where you can transport flour or you can transport cannabis products. You can also store cannabis products. Distributors. Can distributors, excuse me can also test cannabis products. They take a batch and they look at that and they get it all ready to go to a testing facility. So when I'm talking about testing, what I'm talking about is they're just getting a batch, a sample in order to take that to a testing facility. And they can look to see if a cannabis product is within the realms it's supposed to be. So typically states can say, all right, this finished product can only have 100mg in the whole package. The distributor, depending on the license that they have, can look at that type of thing. In California, we get our products from distributors. So no longer can a cultivator sale to a retailer in California. All products have to be from a distributor. So I always say it's like a Walmart. You're going to a central place to get your cannabis products. Retail is where we know you can, as a consumer, obtain cannabis products from a retailer or flower. It can be done two ways, either storefront or non storefront. Storefront is what we're used to seeing a dispensary. Non storefront is typically delivery where consumer cannot go to the storefront. Even mean to the place. Because there typically is a cannabis building. You're not keeping product in your car right. So there typically is a retail site. But consumers cannot go to that retail site for non storefront. They can only put in their order through some type of platform. It's stored there. And then like Uber Eats they go out. They have the cannabis with them and then they go to your location. Testing is just that there are testing facilities that want to make sure cannabis products do not have mold pesticides. Remember, this is going into the stream of commerce. And so the state wants to make sure that this is a clean product. And in some jurisdictions, if you have a testing license, you cannot have another type of license. Microbusiness. Again, we talked about vertical integration. This is where the operator wants to do have total control over the supply chain, and they want to have a couple of cannabis licenses because they want to do different activities with that license. So they might want to be a cultivator, a distributor, do retail. And it's typically for those operators that want a niche type of product. It's a small batch. It's a low batch. They're not looking to produce all this, this product. They want something that is small. So I always say it's like having a craft beer business. Other license types that are available. We see this in Illinois consumption lounges. The biggest one is in Nevada. We have temporary event licenses where you want to have a concert, but you want to have some type of cannabis there or a cannabis event organizers. We see these all over the country as well. So I get this question a lot, you know, what do I need to do to apply for a cannabis license and what kind of information is there regarding cannabis licenses? So first of all, you need to, number one, make sure that it's legal in your state to have adult use or recreational or medicinal use. And so you have to either have that local authority or state authority. There are some jurisdictions you need both here in California, you need a local license from a municipality as well as a state license. Before you can operate. You usually are going to find real estate that is in a green zone, and that is the use is in that zone are for cannabis. And so it's important to work with that city planning department in order to figure that out. Usually they have a map. You have to find real estate within the map and you go from there. A lot of times licenses want you to have financials and a business plan. How are you going to make this business successful? The state or the city has a vested interest in the success of a cannabis operator. Remember, this is just like owning a Chili's. The only thing is the widget is cannabis instead of chili. So you know this. They want to make sure that you are successful. So they want to see a business plan. They want to know where that money is coming from. Again, unfortunately, in the space, we have a lot of people that are putting illegal gains money right into cannabis. The city or the state wants to see, okay, are you using your 401 K money or were you getting this money from. There's a premise diagram. Like in any other business, what is the footprint of this business going to look like? We talked about financial plan and inventory plan. How are you going to move product? What type of inventory software are you using? Security plans are extremely important. So we're not only looking at cameras, we're looking at pixels and cameras. We're looking at having locks, we're looking at faults. We're looking at all different types of security measures. We see in the news that there have been so many group snatch and grabs, burglaries, robberies and cannabis. And so it is very important that you have a great security plan. Also, they're standing operating procedures. How are you going to operate this business? So who is going to be the manager when you wake up in the morning and you open the front door, what is the process going to look like? Where is your inventory going to be kept? A lot of cannabis businesses are not in plain sight. So you're not having this open window in the front and you can see flower. Usually it's not that way at all. So they want to know what are the operating procedures a waste management plan if you are trimming, if you are creating a product, where is this waste going to go? Or do you have an Hvac because people do not want and communities don't want the smell of cannabis all around a neighborhood plan, people ask a lot, what is this? And the city or municipality wants to know, okay, if there's complaints, who can the neighborhood councils go to? Are they going to go to a manager? Do you have a number available for them? You know, are you going to do classes to the neighborhood so they can understand about the business? Some neighborhood plans, if they're in a senior facility or near a senior facility, will have classes about using safely CBD for pain management and the such. So all of those and then depending on the type of license type you're having, depends on what type of plan you would have. So if you're just going for delivery license, what that delivery plan looks like, cultivation plan, distribution plan. The other thing that is very important is cities always want to make sure, especially in storefront retail, that it looks pretty, that your your retail facility is going to fit into the design aesthetic of the city. So I did a application in Pasadena which has a very much mission Spanish feel. It's a very quaint town here in Southern California, and so design was extremely important. They wanted to make sure nothing kind of stuck out, that this was a cannabis retail facility. You're not going to have to have a billboard blaring that says cannabis. They don't want that kind of attraction. They wanted something that was extremely subtle and that looked very elevated. And I can say generally when you go to a dispensary, they are a regulated dispensary. Let me put that caveat there. They have a very elevated look. So what about Tony getting this cannabis business license? What should I do as an attorney if I have a client and I'm trying to help them? Number one, follow the application directions to the letter. I work with municipalities with cannabis licensing. And I can tell you the first thing we're going to throw out, if it told you to do a six page document and you have 12, well, you're out the door. So you have to follow it specifically what the application is telling you to do. Build a multidisciplinary team. Your client may be a legacy operator, but again, this is a business. The only thing is different is the widget is cannabis. And so you need people with cannabis experience. But you have got to have people on your team with business experience. So I tell my clients that are looking for licenses, yes, they always tell me about all these people in cannabis, but I'm always saying, okay, who on your team has ever run a business who has entrepreneurship experience? Also get a strong executive team. You have to have a person that knows about marketing. You have to have a CFO, a budget, the person that knows about the numbers, a CEO, a person who knows how to oversee everything, also vet your consultants. Cannabis, unfortunately, is a type of business where you always see people that say, I'm a consultant, I have business knowledge and they don't have any of that, so you have to vet them to see. Do they in fact have that develop a budget for an application? I'm going to tell you, sometimes applications, just getting these individual plans can run you around 50,000, right. Because you may have a security expert that charges five. 5000. 10,000. I always say do a budget and then double it because it's always going to be more. Application fees in and of themselves can go from 5000 to 20,000 even more. The average typically is between 9 and 15,000. That's non-refundable people. That's just putting in the application. That's not even winning the application. I have seen in really upscale neighborhoods, application fees are being $50,000, and that is just a way of making sure that the people that get in there really have the money. But yes, you always should double your budget for the application. Engage in community outreach. I always tell my clients this people do not typically want cannabis businesses coming to their city because they always think it's going to be a retail establishment. It's going to attract a lot of crime, everything else. So you have to educate people. It's so funny. I come from an extremely conservative family, and my sister went to a dispensary for the first time to get some pain meds for my late mother, and she was just shocked that everybody in line was over the age of 50. Yep, that's typically what it looks like, but people don't understand that. And so if you are helping your client establish this cannabis business, go out, have a kind of welcome party. You know, we're planning, I always call it a soft opening. We're planning in the next six months to have a cannabis business. We'd like to welcome you meet our staff. This is who you can call. All of those things are extremely important, and they're really going to help the success of your business distinguish yourself from the herd. Cities and municipalities want to know. States want to know, okay, what are you doing that's going to be different? Are you going to have a cannabis operation, let's say in retail that reaches out to women? Is it going to be older women? I gave you the example of seniors. Are you going to do education? Are you going to do community parties? Are you going to give to the Little League? They want to know with your cannabis business, how are you going to help the community. And so you have to distinguish yourself from the herd. Also, you have to understand what it takes to get to that finish line of a cannabis license. People just think it's the license. But remember, you're having the building on property in the Green zone, so you're working with planning departments. You might need a development agreement, a conditional use permit. So it's all of those things that run with the land as well that you have to think about. So again, know what it takes. You have to have the fire department maybe come out and look at your property. The police department's going to come out. It's just not I have the license and I'm ready to go. So I always get this question as well. What is the cannabis process even look like to get a license? Well, it can be competitive or non-competitive and I've seen so many variations of competitive. Competitive is usually we have a limited number of licenses. And here's the application. And so you have business operators competing for that license. And different points will be attributed to different parts of the licenses. The ones with the highest points are going to be awarded the licenses. I've also seen lotteries in California and here in Los Angeles we have a lottery. So it was the first hundred that clicked on. Were the people that got the licenses. That's competitive. I've seen it where people, potential business operators go in and they do a presentation to a panel. They talk about their business, all the things we talked about in terms of what you needed, security plans, inventory, all of that. They're doing that to a panel. The panel is going to give them a score, rate them and then they may win the licenses. That doesn't mean you still don't have the zoning issues that we talked about. You still have to make sure that's okay and you're still going to pay that application fee. The application fee just gives you entrance to the ride. That is what you have to pay in order to fill out an application. Non competitive is when a municipality jurisdiction says look everybody's going to get a license. But these are the things that you need to do. You have to follow the ordinance the procedure. Again you're going to still deal with zoning and you're still going to pay your application fees. Other state regulatory agencies to consider, and that may play a part in the application process and depending on what you want to do. So if you have a client that I had a client that wanted to make brownies, well, they couldn't make cannabis brownies the way they wanted to with milk with butter, because the Department of Public Health in that particular state said they couldn't. So we had to change the formula, or my client did, and we had to get a different type of license. And so you need to look at these other agencies depending on what your client wants to do, because a you need to make sure that it is legal, or it may be another agency that may impact your client's business. State taxation agencies, like I said, everybody's got to pay some taxes. Usually it's local, state and federal OSHA. That's extremely important. And we're seeing this in cultivation, especially because there was a case in which one cultivator did not wear a proper respiratory mask and unfortunately passed away. So we now know OSHA is getting involved, labor boards extremely involved in the process. Now here in California, you have to have a labor peace agreement, which basically states, you know, you're not going to interfere if people want to unionize in Colorado. I know they are really big about looking at to make sure your weights and your measures are correct. So you might need to have the Department of Weights and Measures. But it's all of those things that you need to consider. So we hear this phrase social equity. And in fact the marijuana daily, the MJ Biz Daily did a big article today in fact on social equity. And social equity basically says, look, we know that there are certain communities, typically black and brown communities that have been impacted by the war on drugs. We absolutely know that the Nixon administration and the Reagan administration had a concentrated effort to go in those communities where they had high arrest records, people were taken away from their families. There were disproportionate arrests and incarcerations. And these high prison sentences high, meaning the number of years. And so we see all of this racial biasness, because these neighborhoods that were impacted by the war on drugs, drugs, like I said, are typically black and brown neighborhoods. And so what equity in the cannabis space is saying, look, we know that the industry has developed, in essence, on the backs of black and brown folks. You know, you all have been incarcerated. And here now we have created this green rush and this pathway. So the thought is to bring some type of equity to these communities. And how this is happening is that different states or municipalities have social equity programs, and these programs can do a lot of different things. Number one, it can earmark a certain amount of licenses for social equity operators. It can also give them grants to start their businesses. It can give them grants for real estate or it can give technical assistance. I work for the Department of Cannabis Regulations here in Los Angeles as a technical assistant advisor. So you're advising social equity operators about business, about, you know, legal fees, about legal documentation, because typically we are looking for at individuals that do not have an advanced business acumen. And so it is to kind of write some of those wrongs. Unfortunately, this statistic is still the same and really for women as well. Black or brown entrepreneurs are less than 2% of the nation's cannabis business owners, and we still know since 2017. Ain't too much change that the majority. Over 80% of cannabis business owners are white males. And so what we're looking at, equity in the cannabis space is to, again, have more people of color, women. Those individuals impacted by the war on drugs to be able to participate in the green rush through. Opportunities with jobs or through opportunities to have a cannabis business. So what kind of legal disputes are we seeing in the cannabis space? While we're seeing a lot now, especially in the more mature markets, if you're here on the West Coast, you're seeing it a lot of on the in the Midwest, you're seeing the partnership disputes, but we're seeing everything from negligence, right. Negligence with consultants as well as lawyers. And so we're now seeing that as well. Premises liability. We're seeing slip and falls. We're seeing products liability that the some of the products are not being properly tested and or did not have had some type of manufacturing defect. And so it would be product liability cases, business disputes and partnerships. Disputes are number one. We are seeing so many people in the cannabis space said, look, I didn't have all the information. Look, you used me as a straw man or you tried to get my cannabis business away from me. We see so much predatory behavior in the social equity space, so much so that we have a lot of municipalities and jurisdictions having a set of ordinance rules and regulations, just so this won't happen. This is especially in Los Angeles, the Department of Cannabis Regulation here amended. And so we have now social equity rules and regulations that must be followed. And they're really to help alleviate a lot of these business disputes we have in the space. We have HR employment claims. Again, these are businesses. But somehow in the cannabis industry people don't realize these are businesses. So we're having claims like for example, trimmers who were not American citizens. And so some cannabis companies thought they did not have to be paid. And these trimmers did a wage and hour claim and employment claim against them. And so, again, with more mature markets is where you're now seeing a lot of these legal disputes because it's past the application period we're operating. We're, you know, years into operation, and we're seeing things are just not going the way people thought they would go. So what do I want you to take away from this presentation? A couple of things. Number one, determine if cannabis hemp is legal in your state and who's regulating it. Know if you are working with a cannabis cannabis operator or you have a client seeking a cannabis license. What the local the state licenses are, you have to know about taxation. You need to know about 280. All of that is extremely important. You really need to talk to your clients about what they are trying to do. My first conversation is, what would you like to do? And then we're going to see if it's legal, and then we're going to look at other agencies that may be impacted, and then we can come up with a determination if you need a license and whether a licenses are available. Keep in mind that typically jurisdictions have licenses for a period of time. Typically it's a month or it's six weeks. There is there, it's out there. But you're not really going to see a state or municipality say, we're offering cannabis licenses for the next eight months. It ain't happening. So you really need to look to see when the cannabis license is available and what type of cannabis license is available. Not all municipalities say all license types are up for grabs. They may say it's only a retail license or only a testing license, so you need to look at that. Make sure your client has a dynamic team, and please vet all of your consultants. The cannabis business application process is a long process, so give yourself time. You cannot do a competitive application in two days. It ain't going to happen. Typically, it's getting all of those different types of reports and plans that I talked about. So give yourself if you're preparing an application with the client as much time as possible. Also. Again know what it takes to get to the finish line of a cannabis application or a cannabis license. It's a long period of time. I tell my clients, between the time you're going to get the the license and the time you become operational is typically eight months to 12 months. So be sure you have that conversation with your client. And this is the biggest takeaway. Just because people are doing it doesn't make it legal. I see this time and time again and clients will come to me. Well, such and such is putting CBD and THC and dog treats, so I should be able to do it to know that person is taking a chance and you have to look at your risk. Remember, as lawyers we are about risk mitigation. We're counselors, but we have to inform our clients. It's about the risk. And so I always tell my clients, look, this is what you need to do in order to have it legally done. So I hope this has helped you. I hope you got the information you needed. I hope you feel comfortable that you can have a conversation now about cannabis, and know a little bit about what you're talking about. Or you can go into a dispensary and understand what a terpene is or or some of those things. You see those terms of art you see in the dispensary. If you have any questions or comments, please you can reach out to me directly. You can direct message me on IG at four Leaf Consulting. And that's the number four. Thank you so much. It has been a pleasure. Have a great day everyone.

Presenter(s)

TF
Toni Forge
Attorney and Owner
4LeafConsulting

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