By: Alicia Ashcraft, Co-Founder and Managing Partner, Ashcraft & Barr LLP
This is the third year for Ashcraft & Barr to make legal predictions for the marijuana industry in the “Legal Opinions” section of Nevada Business Magazine.
As has become the custom, the firm made three predictions about Nevada’s marijuana industry, and this article re-visits those predictions to see how well our prognostication powers fared.
Last year, we predicted that the 2019 Legislature would create a new agency to regulate marijuana. This prediction came true.
Assembly Bill 533 was passed by the Nevada Legislature and signed into law by Governor Sisolak this year providing for the creation of the Cannabis Compliance Board. The board ramps up in January 2020 and begins fully regulating the industry on July 1, 2020. The board looks like many that regulate other industries in Nevada, and will add a new level of professionalism to marijuana regulation in Nevada.
Prediction Grade: A+
Last year, we foresaw tighter regulatory control of Nevada’s burgeoning CBD industry. “CBD” is shorthand for the chemical compound “cannabidiol.” Cannabidiol is a non-psychoactive chemical found in both marijuana and hemp. Hemp is not a “Schedule I” substance and is not illegal at the federal level. Hemp is regulated by the Department of Agriculture in Nevada. On the other hand, marijuana is a “Schedule I” substance and remains illegal at the federal level because it contains a psychoactive substance called “THC,” or tetrahydrocannabidiol.
In 2018, CBD regulation was in a gray area. Recently the U.S. Congress passed the Farm Bill that significantly clarified regulation at the Federal level. In Nevada, there also has been some better regulations, but CBD remains in a bit of a gray area. Thus, this prediction became halfway true.
Prediction Grade: B
We forecasted federal and state banking reform to ameliorate the cash-based, cannabis economy. There has been no banking reform. While there has been much talk of the need for reform, neither Congress nor the Nevada Legislature has made any strides.
Prediction Grade: D
Because we have not learned our lesson from last year’s forecasts, the following continues the tradition of making legal predictions for 2020.
Proponents attribute many (unproven) health benefits to CBD oil. Given the proliferation of CBD products, we predict that the Federal Food and Drug Administration will take a greater role in regulating CBD products under the Pure Food and Drug Act.
The marijuana industry has grown exponentially in the last five years. The rapid acceleration of the industry has no real comparison. Five years ago, the only legal marijuana grown in Nevada was clandestinely cultivated by chronically-ill patients for use in treating their debilitating diseases. Patient-grown cannabis gave way to local entrepreneurs, and local entrepreneurs gave way to publicly-traded Canadian start-ups.
We predict the market will continue to consolidate with a few, international cannabis behemoths dominating trade in Nevada. National brands will emerge as consumers become more sophisticated. For dispensaries in particular, there will be less Nevada control.
We failed miserably at this prediction last year, so we are a bit reluctant to make it again. But the stakes are high in the cash-based, cannabis industry. Thus, our hope for banking reform in the marijuana industry triumphs over experience.
It is not illegal for those in the cannabis trade to open and maintain bank accounts, but many banks refuse to serve marijuana commerce because the banks must comply with substantial federal and state regulations. Because the marijuana industry will continue to grow, we predict that federal and state banking laws will be reformed to permit cannabis operators to freely open bank accounts.
For five years, legal cannabis has proven to be a remarkably successful experiment. The year 2020 promises to surprise us all.