Asserson Cannabis Group - Monthly News Digest

24 Nov 2021

1. US Republicans move to decriminalize cannabis at the federal level: The States Reform Act was introduced to Congress last week and aims to remove some of the legal barriers facing businesses in the cannabis industry. If passed, it would mean that cannabis would be treated in a similar way to alcohol from a legal perspective. Adult use is legal in 18 US states and medical use is allowed in 37 states and the district of Columbia. However, its use (recreational and medicinal) remains illegal under federal law. This is a major obstacle for investors and businesses alike. The new Bill proposes a 3% tax on cannabis sales and seeks to limit FDA involvement, favouring instead the Treasury’s Alcohol and Tobacco Tax and Trade Bureau as the primary body regulating cannabis-related commercial activity between states. More here.

• OUR VIEW: With nearly 70% of Americans supporting the legalization of cannabis and its extensive use already in the medical industry the introduction of the Bill is no surprise. It is likely to harness bipartisan support, allowing businesses already operating in states where cannabis use is legal, to gain full access to the US banking system and investment ecosystem.

2. FDA rejects over-the-counter CBD without robust real-world data: The FDA ruled that it needs additional CBD research and safety data before it will permit the use of cannabis beyond prescription drugs, such as in food additives or dietary supplements. Epidiolex, a drug used to treat rare types of epilepsy, remains the only CBD-based product approved by the FDA. While businesses have invested heavily in New Dietary Ingredient (NDI) applications and developed toxicity and safety profile studies in the laboratory, the FDA is insisting on long-term safety data so it can consider any long-term risks associated with CBD consumption. More here.

• OUR VIEW: Greater funding rounds focused on financing R&D and clinical trials are expected. We also forecast a heightened likelihood of M&As and appreciation of assets in companies positioned strategically on early and late phase product development, including user delivery methodologies.

3.Kanavape duo have their criminal convictions overturned after 7-year legal battle; case changed the way European markets view CBD: In 2014, French authorities launched legal action against SAS Catlab, the makers of the KanaVape e-cigarette, which used a CBD oil made from hemp In 2018, Antonin Cohen and Sebastien Beguerie, the managers of SAS Catlab, were given suspended prison sentences and a fine by the Marseilles Criminal Court. As a consequence of this case, in 2020, a challenge was brought before the European Court of Justice and the ECJ ruled that (i) CBD is not a narcotic, (ii) EU member states cannot restrict the free movement of CBD products; and (iii) CBD can be derived from the hemp flower. More here.

• OUR VIEW: The ECJ decision is a watershed moment paving the way for CBD products to be utilized in Europe. By way of example, France has recently launched a programme to supply free medical cannabis to patients, Luxembourg has legalized growing and using cannabis, and Switzerland has initiated a 3.5-year pilot scheme to harness real-world data on the effects of recreational use. Germany has recently announced the new coalition’s intention to legalise cannabis use (see below), whilst Malta is debating a reform to decriminalize cannabis in an attempt to improve public health and contain trafficking.

4. Germany’s new coalition pushes plans to legalise recreational cannabis. The new coalition that will replace Angela Merkel’s government in December plans to legalise cannabis. The new government wishes to regulate the sale of cannabis to adults through licensed stores, creating 27,000 jobs in the industry in Germany and boosting a European market that is forecast to reach US$ 3.7 billion in 2025 (up from US$ 410 million this year). Supporters of this move believe it will ensure quality control, prevention of the distribution of contaminated products and the protection of the public. No official timeline has been set for the legislation. More here.

• OUR VIEW: A relaxation in the laws on recreational cannabis is bound to force a rethink for medical cannabis as well, opening the German market to investment and disruption. The legislation is likely to benefit U.S and Canadian companies poised to enter the European cannabis market and will incentivize these businesses to comply with European good manufacturing practice (GMP).

This article was written by: Gabriel Sapir, Trainee, Business Law