Vireo Sues, MN Chamber Grumps & Hemp-Derived THC Has Its Moment in the Sun
PLUS: Our detailed analysis of the data from two new polls on Minnesotans' support for legalization
The Pre-Roll curates the most important cannabis news and developments at the intersection of policy, politics, and industry development. With over 1,500 subscribers, the Pre-Roll is Minnesota’s premier source for cannabis-related information and intelligence.
The Pre-Roll is written by Blunt Strategies, Minnesota’s first and only full-service strategic consultancy cultivated exclusively for the cannabis industry.
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1. Vireo Sues the State
ICYMI, last week, we broke the news that Vireo, one of Minnesota’s two licensed medical cannabis providers (and one of the largest multi-state operators in the country), is suing the state on the basis that the new hemp-derived THC edible law unconstitutionally discriminates against it. In the lawsuit, which was filed with the Fourth Judicial District Court last week, Vireo asks the court to allow it to sell its medical cannabis-derived THC edibles in the same manner as hemp-derived THC edible products.
Twin Cities Business Magazine published several statements from Vireo about the lawsuit:
“The so-called ‘hemp statute’ that took effect on July 1 allows ill-regulated, THC-infused products to be sold at unlicensed gas stations, smoke shops, corner grocery stores and virtually any other retail location across Minnesota,” Vireo wrote in a statement addressing the lawsuit. “The THC (tetrahydrocannabinol) in these products – supposedly derived from hemp – is chemically identical to the THC derived from cannabis and produces the same effects. Consumers can’t tell the difference – nor can chemists, regulators or manufacturers – because there is no difference between THC derived from cannabis and THC derived from hemp.”
…
We are ready and eager to sell lab-tested edibles derived from cannabis. We hope that the Court will look favorably on our request and will act to protect consumers, patients, and Minnesota’s medical cannabis industry,” the statement reads.Per the article, cannabis attorney Jason Tarasek agrees neither with Vireo’s assertion that there’s no difference between hemp-derived and cannabis-derived THC, nor its claim that Minnesota’s new edibles law is discriminatory.
It is true that there is no chemical distinction between hemp-derived THC and marijuana-derived THC. But the legal distinction, Tarasek says, is significant because marijuana, legally defined as anything with 0.3% delta 9 THC or greater, still falls under the federal Controlled Substances Act. Tarasek doesn’t believe a judge could legalize this product recreationally. That would be up to the legislature.
Plus, there’s nothing to stop Vireo from selling edibles that abide by Minnesota’s new law. “Essentially what this boils down to is they’re saying they’re being discriminated against in an unconstitutional manner because they’re being forced to change their business model,” Tarasek said. “But there’s nothing to preclude them from opening a subsidiary and just competing in the new hemp-derived THC market.”Cannabis attorney Carol Moss told Fox9 that, were the court to rule in Vireo’s favor, it would, in effect, legalize adult-use cannabis:
“They’re asking the court to give them permission to sell products that would be illegal under state and federal law," she says. "They are asking for a court to approve recreational marijuana."
Speaking of Carol Moss, she has written a fantastic overview of why the Vireo lawsuit is significant, what it might mean for Minnesota’s hemp industry, and what could happen next with the lawsuit. Here’s a snippet:
So, what does Vireo want? Vireo is not suing for monetary damages but rather is seeking a declaratory judgment from the court. A declaratory judgment does not order a party to take an action or award monetary judgment; rather, it defines the rights of parties in regard to a certain dispute. In this case, Vireo wants a declaratory judgment from the court allowing it to sell and distribute medical cannabis-derived edibles to the same extent hemp-derived edibles are allowed. It also wants an order from the court preventing the Office of Medical Cannabis or other state agencies from taking any prosecutorial action against it or revoking its medical cannabis licenses for selling such medical cannabis-derived edibles.
Vireo’s lawsuit is silent as to how hemp-derived edibles are treated legally different than the medical cannabis-derived edibles Vireo currently manufactures and sells. Limiting the sale of products to hemp-derived cannabinoids is how the state’s hemp law stays compliant with state and federal controlled substances laws. To grant Vireo what it requests, the court would have to issue an order allowing it to sell products derived from marijuana in violation of state and federal controlled substance law – in essence allow recreational marijuana to be sold.
The lawsuit comes on the heels of North Dakota’s medical cannabis program director telling state legislators that legalization of adult-use cannabis in that state could reduce the number of people in the medical cannabis program by at least 80%.
→ ⚖️ Vireo’s full complaint filed with the court in the premium content section for paid subscribers.
2. Focus on Hemp-Derived Cannabinoids
The Vireo lawsuit raises an interesting question about whether and how consumers differentiate and express preferences between hemp-derived cannabinoid products versus cannabis-derived cannabinoid products.
The Star Tribune published an article explaining not only what hemp-derived THC is, but also a glossary of cannabis-related terms, an explanation of how THC gummies are made, and an explanation of the state and federal law.
Forbes published an article about a recent report from cannabis research firm Brightfield Group on who consumes hemp-derived THC products and why. From the article:
As regards the reasons that brought people to use this category of products, 56% of users consider themselves more stressed by their mental health than the average consumer and cannabis and CBD users.
Furthermore, 71% of users consume THC hemp-based products for relaxation, while 62% of CBD consumers and 59% of cannabis users do it for the same reason.
The article concludes saying:
The report concludes that brands should take the safety of their products seriously for the good of the consumer and the industry if they want to stay in the market and should focus on sales in states that have pro-hemp-derived cannabinoid laws currently in place, such as Minnesota.
→ Huh? 🤔
USA Today published a piece about the regulatory status of hemp-derived Delta 8 THC products and concerns about their potential health impacts. The article starts and ends close to home:
Suzan Kennedy has smoked marijuana, and says her Wisconsin roots mean she can handle booze, so she was not concerned earlier this year when a bartender in St. Paul, Minnesota, described a cocktail with the cannabinoid delta-8 THC as “a little bit potent.”
Hours after enjoying the tasty drink and the silliness that reminded Kennedy of a high from weed, she said, she started to feel “really shaky and faint” before collapsing in her friend’s arms. Kennedy regained consciousness and recovered, but her distaste for delta-8 remains, even though the substance is legal at the federal level, unlike marijuana.
…In July, Minnesota implemented a law that limits the amount of THC, including delta-8, allowed in hemp products outside of its medical marijuana program. News reports said the law would wipe out delta-8. But the state cannot “control what’s being sold over the internet outside of Minnesota and shipped in,” said Maren Schroeder, policy director for Sensible Change Minnesota, which aims to legalize recreational cannabis for adults.
3. Workplace Issues
Bloomberg Law published an article about the implications of MN’s new THC edibles law for workplace drug testing. From the article:
“Minnesota’s employers should have the right to enforce drug or zero-tolerance policies that maintain their unique operational, safety, productivity and culture needs and manage compliance with appropriate federal drug laws,” [Lauryn] Schothorst [director of workplace management and workforce development policy at the Minnesota Chamber of Commerce] said in a statement provided to Bloomberg Law.
→ The Minnesota Chamber never misses an opportunity to be dweeby.
Minnesota employers can still take certain actions against workers who test positive for THC, attorneys said.
They can bar workers from using, possessing, and being under the influence of THC during work hours or in the workplace. And random drug testing for safety-sensitive positions or testing of employees suspected of being intoxicated on duty also is allowed.
But the scope of what employers can do under Minnesota’s “lawful consumable products” law—which says employers can’t “refuse to hire a job applicant or discipline or discharge an employee” for consuming products like alcohol and tobacco in their free time—is a question the legislature or the courts may need to clarify.
4. Federal Action
The Star Tribune Editorial Board published an editorial calling for Congress to to pass the SAFE Banking Act and the Veterans Medical Marijuana Safe Harbor Act. From the editorial:
Of Minnesota's eight House representatives, only Republican Michelle Fischbach voted against the stand-alone [SAFE Banking] bill, according to the April 2021 roll call vote. The state's other three House Republicans voted yes, as did all four Democratic representatives.
Minnesota's two senators, Amy Klobuchar and Tina Smith, cosponsor the Senate version of the bill. The state's banking trade group also strongly supports the measure, with Minnesota's move to legalize edibles adding urgency.
"It's a complicated issue, but it's risky for a bank to provide service to somebody doing something illegal under federal law. A lot of banks won't even touch it," said Joe Witt, president and CEO of the Minnesota Bankers Association.
…
There's an urgency as well in ensuring that the VA will aid, not hinder, veterans seeking medical marijuana for pain or other medical conditions. Alternatives to opioid medications are especially important with the VA reducing its use of these powerful prescription painkillers to thwart addiction.
Klobuchar is a cosponsor of the Veterans Safe Harbor Act, and her continued advocacy on this is necessary and appreciated. Those who served and are in pain need help, not hurdles.
5. Taxes
In other “you heard it here first” news, the last issue of the Pre-Roll included an item on recent research from the Bureau of Business and Economic Research and the University of Minnesota-Duluth’s Labovitz School of Business and Economics that concludes Minnesota may be forgoing as much $46 million in tax revenue in 2023 by not taxing THC edibles.
Brooks Johnson at the Star Tribune picked up the story last week and provided some additional context and reactions. From the article:
The Minnesota House of Representatives passed a measure legalizing recreational marijuana in 2021, and included a 10% excise tax on retail sales of marijuana products. The Republican-controlled Senate did not advance the bill.
Whether a similar tax is added to THC edibles next year could depend on the partisan makeup of state government following November's election. Some Republicans want to claw back the new rules completely, while DFLers may push again for full legalization.
An edible-specific sales tax of 2-3% is being considered, similar to the 2.5% gross sales tax on alcohol in Minnesota.
"I don't want it too high or we will push people to the illegal market and price them out," said Rep. Heather Edelson, DFL-Edina.
6. Political Update
In our last issue, we mentioned a recent poll by the Minnesota House Public Information Services of Minnesota State Fair goers that found 61% of Minnesotans support the legalization of adult-use cannabis compared to 30% who oppose legalization and 8% who are undecided. Since then, additional independent polling found similar results.
A KSTP/SurveyUSA poll of 775 Minnesota adults found that 57% support legalization, 28% oppose it, and 15% are undecided.
A Star Tribune/MPRNews/Kare 11 poll of 800 likely Minnesota voters found 53% support legalization, 36% oppose it, and 11% are undecided.
→ 📊 The poll data and our analysis of the cross-tabs is included below in the premium content section for paid subscribers.
The Minnesota Reformer published an article about Legal Marijuana Now Party candidate Paula Overby, who is running for Congress in the tight race for Minnesota’s 2nd District, and her ties to the Republican Party. In the 2020 race for the same seat, a different Legal Marijuana Now Party candidate admitted that he was recruited by Republicans to pull votes from U.S. Rep. Angie Craig (DFL), who has been a staunch advocate in Congress for cannabis legalization. From the article:
This race will likely be Minnesota’s closest and one that will be watched closely nationwide, as Democrats currently hold a slim majority in the U.S. House. The 2nd is a bellwether for the kind of suburban districts Democrats must defend if they are to hold on to their narrow majority.
DFL Chairman Ken Martin said in a statement to the Reformer that Republicans are using the same playbook they attempted in 2020.
“Given her close ties to Republican operatives who have pulled this same trick before, it is clear that Paula Overby is another Republican spoiler candidate who is running for office to get Republican Tyler Kistner elected,” Martin said. “Voters who choose Paula Overby are actively helping elect a Republican whose values are not in line with the residents of the 2nd Congressional District.”
The Post Bulletin published some questions and answers from a recent candidate debate in another closely watched and hotly contested race—that of GOP state senator Carla Nelson and DFL challenger Aleta Borrud in Senate District 24 (Rochester):
Borrud: I absolutely do support the legalization of cannabis. Cannabis has been used for millennia, and people in our community are using it. People should not be going to jail, especially our Black and brown neighbors going to jail for using it. It becomes an issue of equity. If we legalize it, we can regulate it and improve its safety. I’ve heard concern from law enforcement about the packaging of gummies that are now for sale. I think we have to make sure that these are not falling into the hands of our kids.
Nelson: I have the endorsement from the Minnesota Police and Peace Officers Association. And I will tell you what our public safety officials all say in this regard. Until there is a field sobriety test, it is irresponsible to legalize marijuana for the broader population. Now, once there is a field sobriety test, we can open up for that conversation. But before that, it is premature, it is dangerous and it is not supported by public safety.
Speaking of Rochester and Aleta Barrud, the MNisReady Coalition hosted its first Canna-Caravan event last night in Rochester. KIMT reports that among the 50 or so attendees were DFL Rep. Tina Liebling and DFL Senate candidate Aleta Borrud.
7. Our Neighbors to the East
Per an article from WKOK, Wisconsin Governor Tony Evers says that he will include cannabis legalization in the state budget if he is reelected. Evers is currently in a statistical tie with the GOP challenger Tim Michels who opposes cannabis legalization. From the article:
A statement from the governor's office estimated legalizing marijuana in Wisconsin's 2023-25 budget would bring the state about $166 million in the second year of the two-year budget.
Evers, as he's done in the past, said he supports using the marijuana revenue to fund schools.
“It's time for Wisconsin to join more than a dozen states across the country by legalizing and taxing marijuana, much like we already do with alcohol," Evers said, according to the statement. "So we can continue to compete for talented workers to come to our state, expand access to medical treatment for thousands, and have more resources to invest in critical state priorities like K-12 education."
8. Events
Thu., Oct. 6: FLOURISH is holding an event called “LAB TALK: Discovering the Benefits of CBD & THC.” 33% of all ticket sales will benefit Forty Acre Co-op.
Tue., Oct. 25: Twin Cities Business Magazine is hosting an event called “TCB Talks: The Business of Hemp.” No word on who the speakers are.
PAID SUBSCRIBER PREMIUM CONTENT
This week’s premium content includes:
Vireo’s full lawsuit complaint
The cross-tab data and our analysis of the KSTP/Survey USA poll results on Minnesotans’ attitudes toward adult-use cannabis legalization.
There’s so much going on that we’re doing another Bonus Issue next week exclusively for our paid subscribers. This time, the spotlight will be on Corporate Cannabis Creeping Into Minnesota. We’ll discuss what Vireo’s lawsuit reveals about their market strategy, the arrival of big tobacco and patent trolls, and more!
(we also need a hot minute to aggregate all the latest updates on local government actions and add them to our real-time local government tracking tool developed in partnership by O’Rourke Strategic Consulting and Blunt Strategies—so we’ll include that in the bonus issue, too!)