Tag Archives: Hoban Law Group

Hoban Law Group Files Lawsuit Against DEA

By Aaron G. Biros
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The Hoban Law Group filed a petition on behalf of three clients against the DEA in the U.S. Court of Appeals for the Ninth District on January 13th, according to a press release. The clients represented by Hoban Law Group in the suit are Hemp Industries Association, RMH Holdings, LLC and Centuria Natural Foods, Inc. The companies are based in California, Colorado and Nevada respectively and are all active in the legal hemp trade. The press release says RMH Holdings “sources its products from industrial hemp lawfully cultivated pursuant to the Agricultural Act of 2014 (also known as the Farm Bill).”

San Francisco's United States Court of Appeals for the Ninth Circuit Photo: Ken Lund, Flickr
San Francisco’s United States Court of Appeals for the Ninth Circuit
Photo: Ken Lund, Flickr

In December, the DEA published a ‘Final Rule’ that classifies cannabis-derived extracts, such as CBD oil, in their own category with a code number to “better track these materials and comply with treaty provisions.” The announcement by the DEA ultimately serves to make any cannabis extract a Schedule 1 narcotic. “Extracts of marihuana will continue to be treated as Schedule I controlled substances,” says the document.

BobHobanAttorney
Bob Hoban, managing partner

Bob Hoban, managing partner of Hoban Law Group says the action is clearly beyond the DEA’s authority. “This Final Rule serves to threaten hundreds, if not thousands, of growing businesses, with massive economic and industry expansion opportunities, all of which conduct lawful business compliant with existing policy as it is understood and in reliance upon the Federal Government,” says Hoban.

The lawsuit states that they want a judicial review of the DEA’s actions “on the grounds that the Final Rule is (1) arbitrary, capricious, an abuse of discretion, or otherwise not in accordance with law, e.g. the CSA, the Farm Bill, and the DEA’s regulations; (2) contrary to constitutional right, power, privilege, or immunity; (3) in excess of statutory jurisdiction, authority, or limitations; and, (4) without observance of procedure required by law.” The suit also claims that the ‘Final Rule’ conflicts with other federal laws like the Data Quality Act, Regulatory Flexibility Act and Congressional Review Act.

According to Garrett Graff, associate attorney at Hoban Law Group, the entire Cannabis genus is not unlawful and the DEA is overstepping its authority. “As the Ninth Circuit found in 2003 and 2004 there are certain parts of the plant like the stalk and seed that are congressionally exempted from the Controlled Substances Act and thus the DEA’s rulemaking authority,” says Graff. “By creating a drug code for ‘marihuana extract’, the DEA is saying that they are a controlled substance, but that goes against a number of existing laws.”

Garrett Graff, associate partner at Hoban Law Group
Garrett Graff, associate partner at Hoban Law Group

The definition of ‘marihuana extract’ under the ‘Final Rule’ also references extracts containing one or more cannabinoids, which goes beyond the realm of cannabis altogether, according to Graff. “The DEA and many other sources have acknowledged and confirmed that cannabinoids can be derived from other varieties of flowers, cacao and other sources, making it virtually impossible to distinguish which cannabinoids would be subject to this drug code,” says Graff. “The DEA’s rule effectively makes the presence of cannabinoids a determinative factor of a controlled substance, which is inconsistent with what Congress has said.”

The petition filed is essentially the initiation or commencing of a lawsuit. Graff says their case is rooted in statute. “We hope to accomplish a striking of the rule, permanent injunction of the rule and for the DEA to engage in the appropriate processes and procedures when making rules in the future,” says Graff. “Alternatively, an amendment to the rule to make the definition of ‘marihuana extract’ consistent with existing law and reflect those portions and varieties of the plant which are in fact lawful could be considered.” It may still be roughly 30 days before the DEA responds with briefing and possibly an oral argument to follow on the various issues surrounding the petition, says Graff. The Ninth Circuit petition, including briefings and hearings, is likely to take at least several months.

PA Cannabis Banking Committee Announces Formation

By Aaron G. Biros
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The Hoban Law Group announced today the formation of a committee to address banking access issues for the Pennsylvania cannabis market. Steve Schain, Esq., nationally recognized consumer finance litigation, banking law and cannabis law expert practicing with national cannabis law firm Hoban Law Group, is the committee’s spokesman and chair.

Steve Schain, Esq. practicing at Hoban law Group and chairperson of the committee.
Steve Schain, Esq. chair and spokesperson of the committee.

Limited access to banking is an ongoing issue plaguing cannabis businesses due to its federally illegal status. According to Steve Schain, cannabis businesses across the country are forced to pay their vendors, utility bills, payroll, taxes and insurance in cash. “At any time, a dispensary or cultivation operation could have up to $200,000 in cash on site- not having a place to bank opens opportunities for criminal activity,” says Schain. It also presents operational issues for business owners like record keeping or even personal bank accounts getting shut down.

“All of those issues could mean less jobs, less economic activity and less tax revenue for the state,” says Schain. “Fully compliant operations should not have to deal with this.”

Schain formed the committee for a number of reasons, including “Setting the table and starting a dialogue. We want this to be scalable. In the past, the great flaws in banking efforts for cannabis were a lack of cohesion and operating credibility- we hope to approach it from a multi-disciplinary angle and change that,” says Schain.

State Senator Daylin Leach introduced the bill
State Senator Daylin Leach

The committee’s members include three PA politicians: Daylin Leach, State Senator of the 17th District, who introduced the bill that legalized medical cannabis in Pennsylvania, Derek Green, Philadelphia City Councilman and Mary Jo Daley, Representative of the 148th District. Tom Fleming, former assistant director of the Office of Compliance at the Treasury Department’s Financial Crimes Enforcement Network, is also a member of the committee.

A number of committee members are actively involved in the legal cannabis industry and cannabis banking initiatives. Sundie Seefried, a member of the committee, is the chief executive officer of Partner Colorado Credit Union, which is

Lindy Snider, advisor at Greenhouse Ventures and KIND Financial
Lindy Snider, advisor at Greenhouse Ventures and KIND Financial

currently handling over half of Colorado’s estimated billion-dollar cannabis banking market, according to Schain. Lindy Snider, founder and chief executive officer of LindiSkin, advisory board member of KIND Financial and Greenhouse Ventures, is also listed as a member of the committee.

“According to the treasury department, only 301 financial institutions have reported banking cannabis cash,” says Schain. “Few federally chartered banks or credit unions will work with cannabis businesses, but two states-Washington and Maine- have banking regulators sensitive to cannabis banking and we have found 36 banks and credit unions providing financial services to cannabis enterprises.”

The goal with forming this committee is to change that and create an environment where banking for cannabis businesses is much easier. “We plan on drafting a white paper with best practices on compliant and profitable banking on behalf of cannabis-related businesses and financial institutions,” says Schain.

Working from a banker’s perspective is the key here, says Schain. They want to create a working, compliant and profitable system for banks to do business with cannabis cash. One of the problems in the meantime is the high-risk nature of dealing with cannabis companies, leading to an inability to get insurance on those accounts. In the eyes of the federal government currently, conducting cannabis-related transactions may be deemed money laundering and highly illegal. “The real issue is with the federal government and I strongly suspect this is not an issue at the top of the Trump White House agenda.”