All posts tagged: cannabis

THE $1M HEIST OF CANNABIS PRODUCT IN PORTLAND HIGHLIGHTS SECURITY PROBLEMS IN THE INDUSTRY

By Shuki Greer, Esq.

The security camera footage has been watched thousands of times. Breaking in through a skylight in the ceiling, dropping a ladder down, and methodologically getting away with dozens of bags of finished product. The video clearly shows that this was a professional job carried out by serious criminals. The estimated value stolen was over $1M, meaning an estimated tax revenue loss for Oregon of about $230,000. The culprits remain at large, and they may never be found.

masked criminal

This isn’t the only incident either. A quick internet search highlights several other high-profile incidents, with varying degrees of professionalism, danger, and dollars lost. While each of these incidents have differences, they all share something in common. The legal industry is known for having large amounts of cash on hand, surplus product lying around, with varying amounts of security in place. The industry is susceptible to these kind of targeted robberies, a fact which is unlikely to change in the near future.

Why is this the case? The answer starts with the fact that cannabis remains illegal at the federal level. The government classifies cannabis as a Schedule 1 drug, meaning it is considered to have no medical benefit and a high potential for abuse. Because that is the case, financial institutions have been hesitant to open accounts and do business with MRBs (Marijuana Related Businesses), because they fear financial penalties, asset forfeiture, as well as civil and criminal repercussions.

Beyond the fact that the government considers MRBs to be illegal drug trafficking operations, several related details make banks hesitant. Bankruptcy courts are (almost) completely closed to MRBs. That means that if a company goes under, the bank has no recourse to get its money back. Section 280E of the tax code means that MRBs pay exorbitantly high taxes, making them significantly less profitable, solvent, and viable as account holders. The industry also still carries a stigma that makes some banks concerned about their other clients, who may close accounts upon learning that the banks have been doing business with MRBs.

It’s not all bad news, however. This issue has been talked about for years, and as the number of states with legal cannabis industries grows, banks have become more willing to get involved. The federal government hasn’t been silent either. The well-known Cole Memo, put out by the Obama administration, essentially stated that as long as businesses were operating legally under state law, they were a low priority for enforcement, as federal resources were better spent elsewhere. Subsequently, the FinCEN (Financial Crimes Enforcement Network, a bureau of the Treasury) announced that banks doing business with MRBs should follow the Cole memo’s guidelines to determine whether their customers were operating legally under state law.

When the Trump administration took over, AG Jeff Sessions rescinded the Cole memo, stating that prosecutors already have discretion as to how to use their limited resources, and there was no need to single out MRBs for special treatment. This suggested to some that the DOJ was going to start going after MRBs even if they were operating legally under state law. Thankfully, this didn’t happen, at least not on the large scale that some feared might happen. However, doubt and uncertainly remained for financial institutions, most of whom refused to bank the money from MRBs. Earlier this year, FinCEN announced that they still expected banks doing business with MRBs to be reporting suspicious activity using the Cole memo guidelines. In a backhanded way, this was an announcement that it was ok for financial institutions to do business with MRBs, and many have begun or continued to do so.

As long as cannabis remains illegal at the federal level, there will be fear and risk that comes along with doing business with MRBs. This means that many companies choose to keep large amounts of cash on hand, created the obvious incentives that thieves look for when picking a target. If we don’t want these incidents to continue, we need to redouble our efforts to push legalization so that the financial, security, and investment opportunities catch up to the rate of business growth. Two helpful and relevant bills are currently making their way through Congress, though neither seems likely to become enacted. The MORE Act, a comprehensive overhaul of the cannabis laws recently passed the House Judiciary Committee. However, the bill is yet to be brought to a full House vote, and the Senate is even less likely to bring the bill to the floor. Then there is the SAFE Banking Act, which passed the House 321-109 earlier this year, in a landmark bipartisan victory. But that bill seems to be dead in the House, as Mitch McConnell positions himself as opposed to any movement in the field. As such, the immediate future for the industry does not seem to hold significant change, and these problems will persist. While I certainly do not want to see more of these incidents, we likely have not seen the last one.

masked bank robbers
Benjamin Caplan, MDTHE $1M HEIST OF CANNABIS PRODUCT IN PORTLAND HIGHLIGHTS SECURITY PROBLEMS IN THE INDUSTRY
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Flavonoids Proven to be Safe and Effective Treatment for Chronic Venous Disease

Recommendations for the medical management of chronic venous disease- The role of Micronized Purified Flavonoid Fraction (MPFF)

In Summary:

A recent review has affirmed that treating chronic venous disease with Micronized Purified Flavonoid Fraction (MPFF) therapy is safe and effective. After reviewing 250 papers, the authors have found a large body of supportive evidence that the MPFF treatment, known as Diosmiplex, is effective for healing venous ulcers on its own or in combination with compression therapy. Diosmiplex, the only MPFF prescribed in the United States, as of 2017, is derived from orange rinds and favorable among patients due to its high safety rating. 

Dr. Caplan and the #MDTake:

Flavonoids are one of the categories of natural compounds produced in nature, including within the innate production system of the cannabis plant. Several patients have reported using strong cannabis topical agents to help venous insufficiency and disease, including conditions such as varicose veins, phlebitis, and post-surgical venous incompetence.

varicose veins picture

Process of leukocyte trapping to tissue degradation
contributing factors to  skin pathology and edema
Genetic and environmental risk factors for CVD
US and European Guideline Recommendations that include flavonoids  and MPFF
Cellular Molecular pathology of venous hypertension
CVI Symptom Assessment
WBC adhesion  with venous hypertension
Recommendations for the use of MPFF in the management of chronic venous disease

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Benjamin Caplan, MDFlavonoids Proven to be Safe and Effective Treatment for Chronic Venous Disease
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Should Oncologists Recommend Cannabis?

Oncologists Should Recommend Cannabis-Based Medicine for Palliative Care

Oncologists are encouraged to recommend cannabis: cannabis-based medicine for palliative care and more

In Summary:

Earlier this June, a review was published that encourages oncologists to recommend cannabis products to their patients as a safe and effective method of palliative care. The opinion piece highlights how cannabis is a useful treatment for a variety of illnesses (nausea, vomiting, sleep, mood, anxiety), and encourages practitioners to prescribe cannabis for their patients so that they can appreciate the safety and effectiveness of the product.  

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Benjamin Caplan, MDShould Oncologists Recommend Cannabis?
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A Synthetic Flavonoid Derivative May Treat Triple-Negative Breast Cancer

Regulators and mechanisms of anoikis in triple-negative breast cancer (TNBC)- a review

In Summary:

Researchers are always exploring new methods to treat highly aggressive forms of breast cancer. As the scientific culture opens up to cannabis as a natural pharmaceutical factory, eyes have been drawn to the individual chemical components born inside cannabis, namely cannabinoids, terpenoids, and flavonoid compounds. Recently, a group stumbled upon a promising synthetic flavonoid derivative. This derivative, named GL-V9, has been found to have an inhibitory effect on the growth of triple-negative breast cancer (TNBC) tumors and has shown other anti-metastatic properties. The growth-stopping and anti-spreading effects would address two of the central aspects of TNBC that have thus far made it difficult to treat. The growing understanding of flavonoids and their potential therapeutic benefits seem all but sure to enshrine its place among future research regarding cancer treatments. 

Dr. Caplan and the #MDTake:

In scientific and medical circles, it’s not uncommon to hear the phrase, “everything causes cancer.” It’s often repeated contemptuously, a tongue-in-cheek expression that calls attention to unknowns associated with the spawning and growth of cancers but also bends to the hurricane force of nature’s impact on living organisms. As living biology, cancers are born and thrive while provided sustenance by particular inputs and supports. Because of this fact, there are also innumerable opportunities to stifle or prevent the birth of tumors and many avenues to interrupt its growth or end the life of cancer cells.

The human cultural history has taught all cultures that sleep, exercise, fruits, vegetables, fiber, and water are all required ingredients for sustained, healthy growth. What is it about fruits and veggies that is healthy? They have fiber that is healthy for the human digestive tract, but they also have natural components, terpenes and flavonoids, which support wellness, healing, and the normal cycling (features of both living and dying) of our cells. Cancer represents the inappropriate over-replication of cells. In a sense, the body’s natural ability to end the cells which are not responding to normal signals is lost. If we know that the cannabis factory happens to produce many of the same compounds that are found elsewhere in vegetation and fruits, is it so surprising that we would see cancer-fighting effects?

Breast cancer & flavonoids: current research and treatments
Graphical Abstract: anolkis resistance; breast cancer-related chemsitry

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Benjamin Caplan, MDA Synthetic Flavonoid Derivative May Treat Triple-Negative Breast Cancer
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Participants in Cannabis for Chronic Pain Study Describe Life-Changing Results

Restored Self: A Phenomenological Study of Pain Relief by Cannabis

In Summary:

In an Israeli qualitative study investigating the impact of cannabis use on chronic pain patients, all but one of the nineteen study participants experienced pain relief after cannabis use. Participants explained how cannabis allowed them to not just discontinue medications treating their pain, but also medications treating secondary outcomes of their pain, such as poor sleep and anxiety. Patients described feeling “a sigh of relief,” being “reborn” or being saved by cannabis use after years of debilitating pain and medication side effects.

Dr. Caplan and the #MDTake:

The pathway through which cannabis works to combat pain is different from the usual pathways doctors have used for the last 90 years. Prior to the 1930s, cannabis was used routinely, just about everywhere, but political and social agendas kidnapped the medicine and hid it away from most of the mainstream and from routine medical education.

Patients often describe typical pain relievers as adjusting the impact of the pain. Reducing or quieting the pain, softening discomfort, allowing the sufferer to perform previously typical tasks without debilitation or dysfunction. Cannabis, on the other hand, is sometimes described as “taking the sufferer away from the pain,” rather than the other way around. The effects that cannabis can have on the reduction of inflammation, attention, memory, and relaxation, provide a new type of opportunity for relief.

Still, other patients describe the effects of cannabis through a lens of mental focus. Whereas in daily use we typically open a standard set of drawers, some have said, the use of cannabis allows the consumer to open up a different set of draws, and through this adjusted lens, to see discomfort from a different perspective.

For those suffering with chronic pain, years upon years of discomfort, suffering that, when paired with modern medicines, has only met frustration and further discomfort, cannabis is frequently seen as a welcome “sigh of relief.”

different types of  pain
Discussion  from text of research  doc
Sample of text discussing lack of adverse  side effects of cannabis

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Benjamin Caplan, MDParticipants in Cannabis for Chronic Pain Study Describe Life-Changing Results
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USDA RELEASES DRAFT RULES FOR HEMP FARMING AND PRODUCTION, SETS 60- DAY WINDOW FOR PUBLIC COMMENT

By Shuki Greer, Esq.

Starting with the 2014 Farm Bill, and continuing with the 2018 Farm Bill, we have seen a dramatic shift in the landscape governing hemp. Prior to 5 years ago, hemp production was entirely illegal, as the Federal government handled industrial hemp the same as it handled high-THC marijuana. It was an established Schedule 1 controlled substance, entirely illegal to grow, harvest, or possess.

As awareness has grown, and the true benefits of the hemp plant have become more widely understood, the federal government has passed legislation to decriminalize hemp. However, although it is no longer considered a controlled substance, the questions about the process and regulatory requirements abound. This is because all plants grown in the United States are highly regulated by the United States Department of Agriculture, or the USDA, which has a complex framework of licensing, reporting, and general requirements for every specific product grown in the country.

Last week, the USDA published the draft of its regulations for the hemp industry. Since the 2018 farm bill, we have been living in the “wild west” for hemp. As promised, the USDA released its rules in time for farmers to get legal and licensed for the 2020 season. However, this long-awaited release has been met with mixed results.

Many lawmakers and industry leaders are happy that the federal government has finally put out regulations for hemp. First, they see this as a dramatic shift from the era of prohibition, alone a cause for celebration. Others see the certainty that we are going to have regulations put in place means that the industry will start to grow and develop at a much faster pace.  It is certainly true that the future is extremely bright for hemp. But other farmers and individuals have expressed concerns with some of the regulation’s details.

The “0.3% THC” limit, which delineates the difference between legal “hemp” and illegal “marijuana”, may be too stringent for some growers. They report that a mature hemp plant will have a THC content that will vary from day to day, including some spikes over the 0.3% limit. The new regulations require strict testing to be done prior to harvest, and if the resulting THC content is too high, the entire crop must be destroyed. This may cause farmers to harvest before true maturity, leading to a decrease in the potency or effectiveness of the CBD derived from such a harvest.

The regulations also allow the states to develop their own plans and submit them for approval. Some are concerned that some states may try to infringe on the interstate commerce occurring there, which could cause all kinds of problems and complications for the industry. Still others are worried that the method for disposing of “hot crops” requires just a little too much DEA involvement, which could also cause disruption or have a chilling effect on growth.

It is clear that these regulations are a good step in the right direction. It’s also clear that this is just the beginning, and there is still plenty of room for improvement. The USDA announced a 60-day window for submitting public comments, and then they will consider any suggestions, and then publish a final rule in the future. I encourage you to read the regulations or a summary of them. I encourage you to think about how you would be affected by these rules, and what suggestions you may have. Speak to an expert about how you can do your part to improve the landscape of the industry for the future.

Submit public comments here:

https://www.regulations.gov/document?D=AMS_FRDOC_0001-1919

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Benjamin Caplan, MDUSDA RELEASES DRAFT RULES FOR HEMP FARMING AND PRODUCTION, SETS 60- DAY WINDOW FOR PUBLIC COMMENT
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Cannabinoids Further Demonstrate Therapeutic Potential in Interactions with Adrenaline and Serotonin Systems

Regulation of noradrenergic and serotonergic systems by cannabinoids: relevance to cannabinoid-induced effects

In Summary:

Among many system-wide interactive effects, the noradrenergic and serotonergic hormone/signaling systems are responsible for pain, mood, arousal, wakefulness, learning, anxiety, and feelings of reward. A recent review dives deeper into the interactions between cannabinoids and these two systems: cannabinoids play roles in exciting, inhibiting, and regulating the nerve activity and feedback of both the noradrenergic and serotonergic systems. This data further underscores the therapeutic potential of cannabis for conditions such as depression, chronic pain, and insomnia, all of which are mediated, at least in part, by these systems. Further research may uncover more specific therapies targeted toward the noradrenergic and serotonergic systems and their interactions with cannabinoids.

Dr. Caplan and the #MDTake:

It would be shocking to imagine that, in addition to the usual fruits and vegetables on display at supermarkets, all of a sudden, there was a new category of healthy food. Similarly, the recognition that cannabinoids play a central role in animal physiology is embarrassingly recent. Surveying a sea of illnesses that have become increasingly common, over the last hundred years, before which cannabis was a common household product, also begs the question about a relationship between the circumstances. Might some of the common maladies of modern medicine be attributable to a cannabinoid deficiency syndrome?

A Schematic overview for regulation of NA/LC and 5-HT/DRN cells by the CB1 receptor
Neurochemical Evidence for cannabinoid-induced effects
Electrophysiological evidence for acute effects of cannabinoids on neuronal activity
Neurochemical evidence for cannabinoid-induced effects in the locus coeruleus
Functional evidence fo cannabinoid-induced effects
Electrophysiological evidence for acute effects of cannabinoids

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Benjamin Caplan, MDCannabinoids Further Demonstrate Therapeutic Potential in Interactions with Adrenaline and Serotonin Systems
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US Tax Court denies deduction request under §280E, but leaves the door open for future challenges

By Shuki Greer, Esq.

Last week, the Tax Court continued the line of cases denying tax deductions under Internal Revenue Code §280E. That section says that any business which is “trafficking in controlled substances” cannot receive many of the traditional deductions that a business may take. Otherwise put, this means that a company must pay taxes on all of its incoming revenue before it subtracts most of its expenses.

This law can be a severe punishment for a cannabis company that may be operating entirely legally under state law. Unfortunately, the federal government still considers them to be “drug-dealers” and holds this punitive tax measure over their heads.

The case before the tax court involved a dispensary that filed taxes and took deductions for its business expenses. The IRS sent them a bill of $1.26 million, plus another 250K in fines. The company filed suit, asking the court to declare that it did not have to pay those bills.

A divided court rejected the company’s three arguments. In addition to the majority opinion, there were two concurring opinions and two dissenting opinions. Of particular interest is the Gustafson dissent, which opens up a new avenue for declaring §280E to be a Constitutional violation. Essentially, Gustafson argues, that the 16th Amendment allows Congress to tax income. Income is defined as “gain”, or net profits, minus costs, to get those profits. So for Congress to then disallow normal business expenses, it means that they are taxing more than actual income, which violates the 16th Amendment.

This argument was only agreed to by one other Judge on the tax court, which ultimately ruled against the dispensary. However, in the future, as the public opinion shifts, the policies behind these prohibitive rules may fall away, and we may not be far away from a court coming to the opposite conclusion. Legal Cannabis companies are working tirelessly to follow the law, and they should be rewarded for doing so. Continuing the regime of these prohibitive financial policies constitutes a “subsidy for the black market.” The way to solve this problem is to shift the financial incentives in favor of operating under a legal framework, and avoiding this severe tax problem is the best way forward.

tax codes picture with calculator and tax document

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Benjamin Caplan, MDUS Tax Court denies deduction request under §280E, but leaves the door open for future challenges
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