4 Things to Know About Cannabis/CBD Risk Management

SEATTLE — If convenience-store retailers want to sell cannabis products, they need to know the risks they’re facing.

Ian Stewart, chair of national cannabis and hemp law practice at Wilson Elser, Los Angeles, spoke at CSP’s Risk Management Forum in Seattle to inform retailers about the state of regulation for cannabis products and how to manage any risks they face in the category.

Click through to read four tips from Stewart …

There are 37 states with medical marijuana programs, and 18 states and Washington, D.C. have enacted measures to permit adult-use cannabis, Stewart said. Every state now permits hemp cultivation under the 2018 Farm Bill.

But what are the differences among cannabis and its counterparts?

Cannabis is a general term, Stewart said. There are important distinctions among cannabis, marijuana, THC, CBD and hemp:

• Cannabis: A general term to describe any variety of the plant.
• Marijuana: The psychoactive and intoxicating cannabis that contains tetrahydrocannabinol (THC).
• THC: The primary psychoactive and intoxicating cannabinoid in cannabis.
• CBD: The abbreviation for cannabidiol, the primary medicinal cannabinoid in cannabis. It is not intoxicating.
• Hemp: A variety of cannabis sativa used for industrial purposes, such as rope and sails, and as a source for CBD extracts. It is defined under federal legislation as containing no more than 0.3% THC.

There are several laws that regulate marijuana, including the Controlled Substances Act (CSA) and Bank Secrecy Act, Stewart said.

Under the CSA, marijuana is classified as a Schedule I drug, which means it has no accepted medical use and a high potential for abuse, Stewart said. It’s now widely recognized that marijuana doesn’t belong into that category, but formal declassification would require action by the U.S. Drug Enforcement Administration (DEA) or Congress, he said.

The Bank Secrecy Act requires financial institutions to assist with enforcement of anti-money laundering laws by identifying suspicious transactions. And the act is policed by the U.S. Department of the Treasury, that has obligations including filing suspicious activity reports if they come across money that they believe is illegally derived, which would include from marijuana, he said.

There are still ways for retailers to sell the product, however.  

The 2013 Cole Memo was a policy of prosecutorial discretion in states that have decriminalized or legalized marijuana.

It essentially said, “we the justice department have better things to do with our time than to go after every little state-legal marijuana operation…except if there are some red flags,” Stewart said, which could include targeting children, crossing state lines and working with cartels.

The Treasury Department then issued a companion memo based on the Cole Memo that allowed banks, insurance companies and financial institutions the ability to work with the marijuana industry, although not granting them a safe harbor, Stewart said. Financial institutions looking to work with marijuana companies could file a suspicious activity report and go through a process of due diligence to find out what kind of products the companies they work with are selling, who the owners, etc., Stewart said.  

The Cole Memo was rescinded, though, in 2018 under previous U.S. Attorney General Jeff Sessions. Not much changed, however.

“There were no increases in prosecutions, nothing really changed,” Stewart said, adding most prosecutors used their discretion and stuck with what the Cole Memo said.

Current U.S. Attorney General Merrick Garland has said he supports the idea of the Cole Memo, Stewart added.

Different rules regulate the hemp and CBD industries.

Under the 2018 Farm Bill, hemp and hemp-derived products were removed from the CSA, as long as they contained no more than 0.3% THC.

Now all 50 states allow the cultivation of hemp, Stewart said.

It is important to confirm that the source of hemp and CBD came from a grower or manufacturer with proper licenses under a state-sanctioned hemp program, he said, and that proper product tests were performed to verify the THC concentration is less than 0.3%.

And while the FDA has taken the position that any cannabinoid in ingestible forms are not approved by the agency, they have not issued a final rule on this issue, Stewart said.

The agency has mainly sent warnings to ingestible CBD companies that are making health claims—so that’s what retailers should keep an eye out for when deciding which CBD products to sell.