The rescheduling hearing is getting a bit messy 👀

RESCHEDULING
ALJ hearing on rescheduling gets a bit messy

Driving the news: The upcoming December 2 Administrative Law Judge hearing, the first step in the process President Joe Biden initiated to reclassify cannabis from the most restrictive Schedule I to the least restrictive Schedule III, is already getting chaotic.

In normal times, these are usually little-watched, mostly bureaucratic affairs. But because it’s cannabis — and, if it goes through, potentially the biggest shift in the federal government’s drug policy in half-a-century — it’s a bit more dramatic.

It’s also become something of a proxy battle for the future of cannabis policy in the US as the pro- side and anti- side line up to fight in the courtroom. 

Zoom in: No actual testimony will be heard in the preliminary December 2 hearing. That will come next year. 

But the core of the matter is establishing who does, and doesn’t have standing to debate rescheduling in the courtroom.

The initial list of witnesses was culled down after the judge, John Mulrooney II, ruled that many didn’t explain why they had to be there, or how they could or couldn’t be adversely affected by the policy change.

That question of standing spurred a bunch of lawsuits and back-and-forth motions, some arguing technical process details, and others trying to kick the Drug Enforcement Administration out of its own hearing.

Don’t worry, we’re here to help you make sense of it. 

So who does have standing, actually? The judge ruled that mainly parties adversely affected by the rule have standing, or the ability to get inside the courtroom and debate the issue. He released the list of 25 earlier this week. 

The hearing, per the judge, is specifically designed to air out grievances against moving cannabis to Schedule III — not hear arguments in favor of it. 

Among the groups that do have standing is Smart Approaches to Marijuana (SAM), one of the largest anti-cannabis nonprofit organizations in the US and a frequent industry bogeyman. In my view, their online conduct and frequent cherry picked press materials make them a non-credible participant in a serious hearing. 

But that’s only my view. Others, including attorney Shane Pennington on behalf of cannabis firm Village Farms, alleged in a motion this week that SAM’s founder, Kevin Sabet, had improper ex parte (meaning, without all parties present) contact with the DEA about the rescheduling rule, reports Marijuana Moment. And as part of that, Pennington’s motion sought to kick the DEA out of the hearing and replace them with Department of Justice officials. 

Their evidence? A tweet Sabet sent, where he said sources inside the DEA told him that Anne Milgram, the administrator, did not sign off on the rule change. 

Judge Mulroney later said that SAM does indeed have standing — but only because rescheduling cannabis could affect the organization’s finances as a “marijuana-skeptical” organization, reports MJBiz Daily. So it will have to argue that narrowly, as opposed to general opposition to relaxing cannabis laws. 

And on Thursday, Mulrooney said that the DEA has one week to respond to the allegations that it had improper contact with SAM. 

“[T]he allegations regarding alleged improper ex parte communications are serious,” Mulrooney said in a filing on Thursday. But still, Mulrooney threw cold water on the push to remove the DEA from the hearing — by saying the argument could “be vulnerable to a characterization of being unserious,” — though he didn’t dismiss the motion outright. 

On the other hand: Only one pro-cannabis group, the National Cannabis Industry Association (NCIA), ended up on the final witness list. Others, including cannabis firms and veterans groups, were kicked out — though the judge said nine groups will be able to participate in the hearing, but have not specifically demonstrated standing, reports MJBizDaily.

What they’re saying: “At least based on general legal principles, this decision baffles the mind,” Jesse Alderman, a cannabis law expert and attorney at Foley Hoag told MJBiz. 

He said Mulrooney, the judge, “has taken a one-sided view here, that is, only interest groups that will be harmed by adoption of the rule can demonstrate an injury (are) legally required to receive standing.” 

And more: Last week, Panacea Plant Sciences CEO David Heldreth filed a lawsuit requesting to stop the rescheduling process over concerns that the federal government was violating several laws. And this week, he filed a motion with the DEA to delay the hearing until President-elect Donald Trump takes office. 

-JB

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“Think about that: $9,000,000 taken from hardworking individuals, many of them social equity applicants, with no opportunity to correct minor errors or provide additional information. This is not just bad policy — it’s a blatant betrayal of the very principles of fairness and equity that the program was supposed to represent,” Michael Mayes, the CEO of Quantum 9, a cannabis consulting firm, wrote on LinkedIn, after Minnesota denied two-thirds of social equity license applicants this week.

Read more from The Minnesota Star-Tribune.

FDA approves landmark study on cannabis and PTSD for veterans 🌿

In a monumental first, the FDA has cleared the way for a study that would allow participating veterans to smoke cannabis in the second phase of a clinical trial run by the Multidisciplinary Association for Psychedelic Studies, or MAPS. The FDA previously said that allowing humans to smoke cannabis — still considered a Schedule I drug by the federal government — would be too risky. It’s a reversal of the FDA’s 2021 decision. The study is funded by a $12.9 million grant from Michigan’s cannabis regulatory agency and will source from commercially available cannabis products in Canada. Read more from The New York Times. 

Lawmakers ask Biden to grant clemency to federal prisoners 🤝

A group of 25 lawmakers, including Reps. Ayanna Pressley and Earl Blumenauer, signed a joint letter addressed to President Joe Biden asking him to use his clemency powers to free federal prisoners on cannabis and other charges, before he leaves office in January. Biden previously pardoned federal cannabis prisoners. You can read the full letter. 

Cannabis ERP platform Distru raises $6 million 📈

Distru, an enterprise resource platform for the cannabis industry, closed a $6 million Series A investment today, the company told us. The round was led by Poseidon Asset Management, and Distru was previously backed by Felicis. The company says it operates in 25 states and processes over $2 billion in gross merchandise value annually.  

It’s a sign that venture dollars are finally starting to come back to the cannabis tech space after months of few deals. The news release will hit the wires later this morning. 

What they’re saying: “We closed this strategic funding round to pull in Poseidon  with their deep understanding of the cannabis tech sector to support in navigating the next decade of our growth as the most trusted ERP platform in the industry,” Distru CEO Blaine Hatab said. 

Green Leaf announces cannabis industry 401K plan 💰

Green Leaf Business Solutions, a cannabis industry HR and payroll provider, launched GreenPath 401K, a retirement plan geared toward cannabis industry professionals. First Citizens Bank will serve as custodian for the plan, and Green Check will provide account onboarding services. Many cannabis companies haven’t been able to offer employees 401K plans due to federal restrictions. 

Mango partners with Leafwell 🥭

Virtual cannabis clinic Leafwell announced a partnership with Mango Cannabis Co, to allow patients in New York, Oklahoma, New Mexico, and Michigan easier access to cannabis medicine. 

And more:

• Wynk, a low dose cannabis-infused seltzer brand, is launching in Georgia. 

• Dialed In, a Colorado edibles company, is launching a line of rosin gummies in Ohio. 

Our friends at MJ REIT are hosting a webinar that will give viewers an in-depth look at the commercial cannabis real estate market at 2 PM today. You can register to watch.

Yesterday, the outgoing Chief Equity Officer for the New York Office of Cannabis Management Damian Fagon joined Jay and Jeremy for Cultivated Live.

You can catch the full episode on our YouTube channel: