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Big cannabis prohibition lawsuit dismissed

Plus, Starbucks v. Starbuds

Tuesday, July 2, 2024

Good morning. 

We hope our friends in the Great White North spent a happy Canada Day yesterday! 

Note: we’ll be off Thursday and Friday for July 4th festivities here in the US.

Let’s get to it.

-JB & CB 

This newsletter is 1050-words or about a seven-minute read.

💡What’s the big deal?

District court dismissed lawsuit over federal prohibition

What happened: A federal court dismissed a lawsuit from major cannabis companies seeking to block the government from enforcing prohibition, specifically against their in-state activities.

The US District Court for the District of Massachusetts’s Western Division cited Supreme Court precedent, which grants the federal government authority to regulate controlled substances within state borders.

That’s despite what the court said are persuasive arguments for reexamining the status of cannabis as a Schedule I controlled substance, the most restrictive regime. 

The plaintiffs, including Verano Holdings Corp. and other Massachusetts-based cannabis businesses argued that prohibition has “no rational basis” due to state-level legalization efforts.

What they’re saying: “At this time, marijuana continues to be listed on Schedule I and, therefore, almost all activities that involve growing, processing, and possessing marijuana continue to be federal crimes,” Judge Mark G. Mastroianni said. “This is true even though thirty-eight states have adopted programs that legalize marijuana within a strict, state regulatory framework.”

Back up: Last year, several cannabis companies hired the prestigious law firm Boies Schiller Flexner to challenge the federal government’s prohibition of marijuana, arguing it should not apply to state-legal cannabis businesses and intrastate commerce. 

The case, which echoed the 2005 Supreme Court decision in Gonzales v. Raich, focused on issues of interstate versus intrastate commerce, the impact of rescheduling cannabis to Schedule III, and the alleged financial harm to cannabis companies. 

The DOJ argued for dismissal, stating they have no intent to prosecute these businesses.

The plaintiffs say the situation on the ground is different today — 38 states have legalized cannabis for adult use, and now, President Joe Biden is pushing for reform. 

Why it matters: Despite dismissal, the court ruled the plaintiffs have standing to bring the lawsuit. 

It explains that the plaintiffs have demonstrated that their economic injuries are directly connected to the Controlled Substances Act (CSA) and that their financial injuries are a result of the federal prohibition, satisfying the requirement for standing under Article III to challenge the CSA's application to intrastate marijuana activities.

Broadly, this ruling highlights the ongoing tension between federal and state laws regarding cannabis regulation and the legal challenges faced by the industry despite state-level legalization.

What’s next: The plaintiffs may continue to advocate for rescheduling or complete removal from the Controlled Substances Act or they can seek higher court review. 

Meanwhile, the Justice Department is initiating a rulemaking process to reschedule cannabis from Schedule I to Schedule III.


🗣️ Quote of the day

“Well, first off, I know that it’s the gateway drug — my brother just died. He just passed away,” Sen. Rick Scott told Ask a Pol. “I didn’t support the legalization of marijuana because I think it’s gonna — it’s a pathway to destructive drugs, which is what it did to my brother.”

Sen. Rick Scott of Florida partially blamed cannabis for the death of his brother in an interview with Ask a Pol. Listen to the full episode

Quick hits

StarBUCKS vs. StarBUDS 🥊
Starbucks is suing Starbuds, a mobile cannabis business, for trademark infringement, claiming that Starbuds is copying its iconic siren logo. The coffee giant alleges that Starbuds’ logo and name are deliberately designed to confuse consumers and capitalize on Starbucks’ brand recognition. Read more

Illegal ▶️ Legal 
Housing Works, New York’s first legal adult-use dispensary, launched an “illegal cannabis buyback” program to encourage consumers to transition from illicit to legal cannabis markets. From July 1-September 1, members of illicit shops will receive free membership at Housing Works Cannabis Co., including significant purchase discounts. Read more

No Confidence in California ☹️
California cannabis brands, retailers, and testing labs are working to restore consumer trust following a pesticide scandal that revealed the presence of contaminants in regulated products. The Department of Cannabis Control faces criticism for insufficient oversight and the scandal has led to product recalls and increased scrutiny on testing labs. Read more.

North Dakota Doesn’t Want 🌿
A new poll shows 57% of North Dakota voters oppose a legalization initiative, with 43% in favor. The New Economic Frontier campaign is close to meeting its signature goal for the November ballot, but gaining voter support remains challenging. The initiative would allow adults to possess, buy, and grow cannabis. Read more

A Nebraska Buzzer Beater? 🚨
Nebraskans for Medical Marijuana (NMM) needs to gather about 12,000 more signatures in the next two days to qualify two medical cannabis legalization initiatives for the November ballot. They need a total of 87,000 valid signatures per measure by Wednesday. Read more

Cresco Workers Say No To Union 
Cresco Labs’ Joliet, Illinois workers voted to decertify their union with the United Food & Commercial Workers, marking the second instance of Cresco employees rejecting union representation this year and reflecting a broader trend of decreasing enthusiasm for unionization in the cannabis industry. Read more.

📈 Deals, launches, partnerships

BFG has acquired VG Supply, enhancing its presence and customer relationships in the Midwest. VG's Munster, Ind. distribution center will remain operational, continuing to serve customers

Maryland collected nearly $14.7 million in recreational cannabis taxes in Q1 2024, a slight increase of less than 1% from Q4 2023.

📊 Chart of the day

Fifty-four percent of recreational cannabis dispensaries in New York are “social and economic equity,” owned, per the state’s Office of Cannabis Management.

Thirty-nine percent are women-owned, and 39% are minority owned:

📰 What we’re reading

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