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5/12/18

“LEGAL MARIJUANA” Can Lawyers Be Part of a Budding Industry?

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Marijuana Legalization Status

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2018 Seminar May 17-19, 2018 CH. 2 Page 1 5/12/18

Cannabis

Cannabis has now been legalized for medicinal use in 29 states and the District of Columbia. It is also legal for recreational use in eight of these states and the District of Columbia.

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CONTROLLED SUBSTANCES ACT

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Controlled Substances Act

The Controlled Substances Act is Title II of the Comprehensive Abuse Prevention and Control Act of 1970 (21 USC section 801 et seq). • Consolidated laws regarding manufacture, and distribution of , , , , anabolic steroids and chemicals used in the illicit production of controlled substances.

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Controlled Substances Act

• Restricted access to controlled substances. • Identification and Classification of Controlled Substances. – CSA places all regulated substances into one of five schedules based on: • Substances medical value • Harmfulness • Potential for abuse and addiction – Schedule V least dangerous-Schedule I most dangerous.

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Drug Schedules –Schedule I

(1) Schedule I.— (A) The drug or other substance has a high potential for abuse. (B) The drug or other substance has no currently accepted medical use in treatment in the United States. (C) There is a lack of accepted safety for use of the drug or other substance under medical supervision.

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Drug Schedule-Schedule II

(2) Schedule II.— (A) The drug or other substance has a high potential for abuse. (B) The drug or other substance has a currently accepted medical use in treatment in the United States or a currently accepted medical use with severe restrictions. (C) Abuse of the drug or other substances may lead to severe psychological or physical dependence.

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Forfeiture

720 ILCS 646/85 (a) The following are subject to forfeiture: All real property (including, but not limited to, any leasehold interest or the beneficial interest in any land trust) in the whole of any tract of land or appurtenances or improvements which is used, or intended to be used, or intended to be used, in any manner to facilitate the commission of, any violation or act that constitutes a violation of this Act, or is the proceeds of any violation or act that constitutes a violation of this Act.

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Seize the Guilty Property CIVIL FORFEITURE

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Civil Forfeiture

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Forfeitures

The following shall be subject to forfeiture of the United States and no property shall exist in the…All real property, including any right, title and interest (including any leasehold interest) in the whole or any tract of land and any appurtenances or improvements, which is used, or interest to be used, in any manner or part, to commit, or to facilitate the commission of, a violation ..punishable by more than one year’s imprisonment. 21 USC section 881

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Illinois Forfeiture Reform

HB 00300-Creates the Seizures and Forfeiture Reporting Act.

Statutes amended include: 725 ILCS 150/1 Drug Asset Forfeiture Act

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Asset Forfeiture Act as Amended

• Adds Section 3.1 (a) Actual physical seizure of real property subject to forfeiture..requires the issuance of a seizure warrant. Constructive seizure can be done through filing a complaint for forfeiture in the Circuit Court and recording a notice of lis pendens (can be done without a warrant)

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Asset Forfeiture Act as Amended

• Adds Section 3.3 Safekeeping of seized property pending disposition (5) place the property under constructive seizure by posting a notice of pending forfeiture on it, by giving notice of pending forfeiture to its owners and interest holders, or by filing notice of pending forfeiture in any appropriate public record relating to the property.

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Asset Forfeiture Act as Amended

(6) provide for another agency or custodian, including an owner, secured party, or lienholder, to take custody of the property upon the terms and conditions set by the seizing agency (c) The seizing agency is required to exercise ordinary care to protect the seized property from negligent loss, damage, or destruction.

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Asset Forfeiture Act as Amended

Section 9-Judicial In Rem Proceeding is amended • Complaint to be filed in the circuit court within whose jurisdiction the seizure occurred • Time period to bring forfeiture is shortened from 45 days to no more than 28 days

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Asset Forfeiture Act as Amended

• State’s Attorney has the authority to consider – If violation occurred without willful negligence or intent – Can consider mitigating circumstances • Bond no longer required • Contents of complaint enumerated • Non-named interested party may intervene

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Notice Added to Complaint

"This is a civil court proceeding subject to the Code of Civil Procedure. You received this Complaint of Forfeiture because the State's Attorney's office has brought a legal action seeking forfeiture of your seized property. This complaint starts the court process where the state seeks to prove that your property should be forfeited and not returned to you. This process is also your opportunity to try to prove to a judge that you should get your property back. The complaint lists the date, time, and location of your first court date. You must appear in court on that day, or you may lose the case automatically. You must also file an appearance and answer. If you are unable to pay the appearance fee, you may qualify to have the fee waived. If there is a criminal case related to the seizure of your property, your case may be set for trial after the criminal case has been resolved. Before trial, the judge may allow discovery, where the State can ask you to respond in writing to questions and give them certain documents, and you can make similar requests of the State. The trial is your opportunity to explain what happened when your property was seized

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Asset Forfeiture Act as Amended

State’s burden of proof is differentiated- preponderance of the evidence unless defendants are found not guilty of the underlying offence(s)(Section G-5)

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Asset Forfeiture as Amended

New Provisions: 725 ILCS 150/9 (M)-exception for a Bona Fide Purchaser for value without notice

(N) Joint tenant or tenant in common-court shall determine each owner’s interest

725 ILCS 150.9.1-Innocent Owner Hearing.

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HISTORY OF CANNABIS

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History of Cannabis in the US

• Cannabis origin probably from Central Asia • 1611: Jamestown settlers brought the L, commonly known as , to North America. • 1774-1775 George Washington grew hemp at Mount Vernon. According to his ledgers he was interested in the medical uses of Cannabis with a High THC content • .Marijuana is added to he US Pharmacopeia (official public standards-setting for all prescriptions and over the counter medications. • 1906 Food and Drug Act requires labeling of including marijuana. • 1911 Massachusetts outlaws cannabis.

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History (continued)

• 1930-extract of Marijuana sold as medicines. • 1931 bans Marijuana. • 1936 Reefer Madness. • 1937” Marihuana Tax Act” Federal regulation- imposed registration and reporting requirement and tax on growers. • 1942 Marijuana removed from the Pharmacopeia. • 1951 Boggs act-minimum sentences for drug crimes. • 1956 Marijuana included in the Narcotics Control Act.

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Controlled Substances Act of 1970 1970-Congress passes the Controlled Substances Act (CSA) of 1970 part of the Comprehensive Drug Abuse Prevention and Control Act of 1970. Five Schedules to Classify Substances- Cannabis is scheduled under the first (strictest) category.

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Drug Schedules –Schedule I

(1) Schedule I.— (A) The drug or other substance has a high potential for abuse. (B) The drug or other substance has no currently accepted medical use in treatment in the United States. (C) There is a lack of accepted safety for use of the drug or other substance under medical supervision.

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Slouching Towards Rescheduling (Schedule II)

1970-NORML founded (National Organization for the Reform of Marijuana laws 1972 NORML petitions the DEA (Drug Enforcement Agency) to reclassify Marijuana as a Schedule II drug: • The Drug has a high potential for abuse • The Drug has a currently accepted medical use in treatment in the US or a currently accepted medical use with severe restrictions • Abuse of the Drug may lead to severe physiological or physical dependence.

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Medical Marijuana

• 1974 US v Randall-allows patient with Glaucoma access to government supplies of medical marijuana.

• 1981-1985-Patent for Marinol-synthetic THC used to control nausea in patients.

• 1994-Final decision in 22 year litigation keeps marijuana as a Schedule I drug

• 1996 California first state to legalize medical marijuana. ©2017 First American Financial Corporation and/or its affiliates. All rights reserved. NYSE: FAF

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Medical Marijuana-Enforcement

• 2013-Assistant Attorney General James Cole Issues a Memorandum “Guidance Concerning Marijuana Enforcement” • 2014-Rohrabacher-Farr amendment prohibits the Justice Department from interfering with implementation of State medical marijuana laws-must be renewed each year.- currently renewed on February 9th through March 23rd 2018 as part of the stopgap spending bill. • February 16, 2017-Formation of the Congressional Cannabis Caucus

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Repeal of

January 4, 2018-Attorney General announces a repeal of the Cole Memorandum. Throws U.S Attorneys into confusion.

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Medical Marijuana-Enforcement

April 2018-President Trump tells Senator Cory Gardener of Colorado that his administration is abandoning the Justice Department threat to crack down on recreational marijuana in Colorado. • Move is not coordinated with the Attorney General. • Not clear if this affects other states with recreational use of Cannabis.

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Pending Legislation

• Respect State Marijuana Laws Act (introduced by Dana Rohrabacher R-CA) • Industrial Hemp Farming Act (James Comer R-KY) • (-D-NJ) • Regulate Marijuana Like Act (Polis-R-Co)

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ILLINOIS

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Medical

Compassionate Use of Marijuana Pilot Program Act, 410 ILCS 130 (2014-scheduled for repeal July 1, 2020 410 ILCS 130/220)

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Medical Cannabis in Illinois

• Seed to Sale System • Tracked • Tested

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Medical Cannabis in Illinois

• Tracking • Security • Zoning

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Medical Cannabis in Illinois

• Patents • Trade Secrets • Federal Trademarks • State Trademarks

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Medical Cannabis Patient Registry

Medical marijuana is legal in Illinois under the Compassionate Use of Medical Cannabis Pilot Program Act. Currently, buying and using cannabis medically in Illinois is temporary. The program expires January 1, 2020, unless it is extended.

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Medical Cannabis Patient Registry

Illinois allows you to buy and use cannabis or cannabis-infused products if you have certain medical conditions or if you are terminally ill. To buy and use cannabis, you need to apply for a registry identification card and pay the application fee.

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Medical Cannabis Patient Registry

To buy and use cannabis, you need to apply for a registry identification card and pay the application fee. The card is valid for 1, 2, or 3 years. A card allows you to buy 2.5 ounces of cannabis from a dispensary every 14 days. You can also purchase cannabis- infused products such as brownies, teas, oils, or lotions.

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Medical Cannabis Patient Registry

• Fees for getting a card: • $100 for 1 year • $200 for 2 years • $250 for 3 years cards • You can apply for a registry card if you have any of the conditions listed on the Illinois Department of Public Health’s website. • http://www.dph.illinois.gov/topics- services/prevention-wellness/medical- cannabis/debilitating-conditions

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Medical Cannabis Patient Registry

• You must also: • Be 18 years or older • Be a resident of Illinois • Have a signed medical certificate • Get your fingerprints taken • Not have a school bus permit or Commercial Driver's License • Not be an active law enforcement officer, correctional officer, correctional probation officer, or firefighter

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Decriminalization

In July of 2016, Governor Rauner signed into law Public Act 099-0697. • caps the fine for possession of up to 10 grams of cannabis at $200, • with no threat of jail time • and automatic erasure of records relating to the offense after six months.

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Forms of Cannabis That Are Illegal

• Cannabis is illegal to grow, and it is illegal to possess the cannabis leaves and flowers for recreational use, in all forms including: • Marijuana • (hasheesh, hashish, hash) • • Seeds that are capable of growing another cannabis plant • Infusions, such as brownies, tea, or lotions • Any extraction of resin, such as the extract of pure THC

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Possessing Cannabis

• Possession of more than 10 grams of cannabis is a crime. • Only 10 grams or less is a civil offense. • If the cannabis is mixed with another substance, the total amount of that substance is considered for determining the level of the violation. • Unlawful to deliver cannabis to another person, possess cannabis with intent to deliver it or to manufacture marijuana.

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Cannabis Paraphernalia

Cannabis paraphernalia is also illegal • Paraphernalia can include tools to prepare cannabis for sale and distribution, such as: • Digital scales • Grinders • Zipper storage bags • Paraphernalia can include tools for ingesting cannabis, such as: • Pipes • Bongs • Smoking masks • Paraphernalia can also sometimes include tools to hide the use of cannabis, such as: • Containers that are intended to hide cannabis • Products that are intended to help someone pass a

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DUI

Before the Act, it was illegal for a person to drive or to be in physical control of a motor vehicle while under the influence of cannabis or while there was any amount of cannabis (or other controlled substances, intoxicating compounds, or ) in his or her "blood, breath or urine resulting from (its) unlawful use or consumption.“

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DUI

Under the Act, the trace law does not apply to a registered user in possession of a valid registry card unless the person is impaired by the use of cannabis. The Act further provides that being legally entitled to use cannabis under the Act is not a defense to a DUI charge.

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Addressing the Conflict between State and Federal Law As addressed in the Statute: • States are not required to enforce federal law or prosecute people for engaging in activities prohibited by federal law. Therefore, compliance with this law does not put the State of Illinois in violation of federal law. 410 ILCS 5/3(f) • State law should make a distinction between the medical and non-medical

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As Amended in the Code of Professional Responsibility

Under the Illinois Rules of Professional Conduct, Rule 1.2(d)(3) (as amended): A lawyer may … counsel or assist a client in conduct expressly permitted by Illinois law that may violate or conflict with federal or other law, so long as the lawyer advises the client about that federal or other law and its potential consequences.

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Real Estate Issues

• Title Insurance is unavailable for properties where cannabis is involved in the transaction. Title Insurance companies will not insure a transaction that may be viewed as facilitating a criminal enterprise. • Being the owner, operator, financier, banker, landlord or vender for a marijuana business is illegal under Federal law. • Cannabis business is a mostly cash business. Federal Law requires banks, trades and businesses-including Lawyers to report any cash transactions, or series of transactions, that exceed $10,000.00 I.R.C. ss 60501; 31 U.S.C. ss 5313

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Bankruptcy • Marijuana Businesses do not have the right to Bankruptcy Proceeding – The Federal prohibition of Marijuana takes precedence over State Laws to the contrary – Gonzalez v Raich 545 U.S. 1 , 125 S CT 2195 (2005), Under the Commerce Clause of the US Constitution (Article 1, Section 8, Clause 3) , Congress may criminalize the production of homegrown cannabis even thought the state approve its use for medicinal purposes

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Bankruptcy

White Memo: April 26, 2017 “It is the policy of the United States Trustee Program that the United States Trustee shall move to dismiss or object in all cases involving Marijuana assets on the grounds that such assets may not be administered under the Bankruptcy Code” Even if assets are not illegal under state law.

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Banking

Bank of Springfield sent a letter to its cannabis clients in March of 2018 informing them that their accounts will be closed May 21. The decision is tied to the reversal of an Obama-era policy that discouraged prosecution of those operating under state marijuana laws.

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Cannabis in Colorado

Since the enactment of Colorado Amendment 64 in November 2012, adults aged 21or older can grow up to six marijuana plants (with no more than half being mature flowering plants) privately in a locked space, legally possess all marijuana from the plants they grow (as long as it stays where it was grown), legally possess up to one ounce of marijuana while traveling, and give as a gift up to one ounce to other citizens 21 years of age or older. Any adult in Colorado's territory may possess up to one ounce of marijuana at any time, regardless of whether they are an in-state resident or an out-of-state visitor, as of 2016. Retail concentrate/edible limits are as follows: 8g of retail concentrate will be equal to 1oz of flower, and therefore 800mg of THC in the form of retail edibles will be equal to 1oz of retail flower. Consumption is permitted in a manner similar to alcohol, with equivalent offenses prescribed for driving

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Cannabis in Colorado

• The Colorado amendment 64, which was passed by voters on November 6, 2012, led to legalization in January 2014. Colorado's 8% increase in unemployment rate since 2014 was not as bad as that of other states in the region, like Nevada. Some experts argue that unemployment would have more than doubled without legalization. The Colorado state budget has shown dramatic increases in education, often used to build, upgrade, and increase school safety and funding due to tax revenue from legalization. • The number of teenagers sent to emergency rooms more than quadrupled after marijuana was legalized. The state has also seen car crash claim rates increase after legalization, but there has been no increase in fatalities in comparison with other states. Colorado's youth marijuana use rate dipped after legalization and is lower than the national average. • In 2017, the government of Colorado collected over $247 million in taxes, fees, and licensing costs. ©2017 First American Financial Corporation and/or its affiliates. All rights reserved. NYSE: FAF

Cannabis in Louisiana

• Penalty Details • Marijuana is a schedule I(C) hallucinogenic substance under Louisiana law.

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Cannabis in Louisiana

• Possession for Personal Use • For first offenders, possession of 14 grams or less of marijuana is punishable by a fine of up to $300 and/or up to 15 days of imprisonment. • For first offenders, possession of more than 14 grams but less than 2 ½ pounds of marijuana is punishable by a fine of up to $500 and/or up to 6 months of imprisonment.

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Cannabis in Louisiana

• There is a one-time two-year cleansing period for first time convictions. • All second convictions regarding less than 2 ½ pounds are punishable by a fine of $1,000 and/or up to 6 months of imprisonment.

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Cannabis in Louisiana

Medical Marijuana • Louisiana has medical marijuana laws enacted. • The act currently covers cancer, HIV/AIDS, or wasting disorder, seizure disorders (including but not limited to ), spasticity, Crohn’s disease, muscular dystrophy, and multiple sclerosis.

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Cannabis in Louisiana

Tax Stamps This state has a marijuana tax stamp law enacted. This law mandates that those who possess marijuana are legally required to purchase and affix state-issued stamps onto his or her contraband. Failure to do so may result in a fine and/or criminal sanction.

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Cook County Ballot Measures

Approximately 68 percent of Cook County voters on March 20, 2018 approved when asked if Illinois should legalize "the cultivation, manufacture, distribution, testing, and sale of marijuana and marijuana products for recreational use by adults 21 and older."

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Estimated Illinois Tax Revenue

24/7 Wall St. reports “marijuana sales could add to state coffers an estimated $566 million in excise tax revenue per year and as much as $133 million in sales tax revenue annually.”

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Conclusion

Photo Michael Coghlan

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QUESTIONS? Martin J. Cann IL State Underwriting Counsel First American Title Insurance Company [email protected]

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