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Is Cannabis Beer the Next Frontier

Is Cannabis Beer the Next Frontier?

By Patrick Murphy – Associate at Law Office of Kimberly R. Simms, APC

Federal Prohibitions

Cannabis-infused alcohol has been getting a lot of “buzz” lately and for good reason. Major players in the alcohol industry have recently spoken out about how they perceive the cannabis industry is either a new frontier or a potential threat. We have been receiving calls from clients interested in everything from THC infused tequila to industrial hemp CBD infused craft beers.

Thirty states have legalized medical marijuana in some form and nine states and Washington D.C. have all legalized adult-use cannabis use. That said, most states, including California, prohibit cannabis-infused alcohol products.

Moreover, cannabis remains a federally illegal Schedule 1 drug under the Controlled Substances Act (the “CSA”). Due to cannabis’ federal status, the Alcohol and Tobacco Tax and Trade Bureau (the “TTB”) refuses to award federal alcohol permits to those seeking to infuse alcohol with cannabis. As a result, we will not see “legal” cannabis-infused alcohol in the U.S. until cannabis is rescheduled at the federal level.

What about CBD infused Beers?

Some craft breweries have turned to industrial hemp derived CBDs, which have no psychoactive effect, as an alternative, in order to retain the cannabis taste profile without actually using cannabis. In fact, Dad’s & Dudes Breweria, a Colorado brewery, was even awarded a recipe approval from the TTB, until it was later rescinded due to the DEA’s position on CBD’s legality.

While industrial hemp’s murky legal status warrants its own separate discussion, in short, industrial Hemp is purposely excluded from Congress’ definition of cannabis and was specifically authorized as being legal under the 2014 Farm Bill. Nevertheless, the DEA has taken the position that industrial hemp derived CBDs should be classified as a Schedule 1 drug. The legality of industrial hemp is currently being litigated in the 9^th Circuit (with Dad’s & Dudes being one of the Petitioners) and we expect a decision in the next few months.

What are leaders in the alcohol industry saying?

The biggest news from the alcohol industry came from Constellation brands (Corona), which made a roughly $190 Million USD investment for a 10% stake in Canopy Growth Corp. Canopy Growth Corp. is a publicly traded company from Canada with a diversified cannabis portfolio that has already been awarded liquor licenses in Ontario & Prince Edward Island.

Similarly, MedReleaf, a publicly traded Canadian producer of cannabis products, is partnering with Toronto’s Amsterdam Brewing Co. for production of a 4:20 Pale Ale. These brews are still in the developmental stage and are not yet available as Cannabis edibles (including cannabis-infused beverages) will not be legal in Canada until 2019.

While some alcohol companies are jumping into the cannabis industry feet first, others are cautiously watching on the sidelines, if not taking an entirely defensive strategy. The Telegraph recently reported that Alexandre Ricard, the CEO of Pernod Ricard (Absolut Vodka) recently commented about the cannabis industry, “We look at it closely. The whole sector is watching it closely.” Molson Coors Brewing Co. is certainly watching the cannabis industry and actually cited the spread of legal marijuana as a risk factor to its business in its annual financial report filed with the Securities and Exchange Commission.

Conclusion

It appears that we will not see cannabis-infused alcohol in the U.S. until cannabis is rescheduled. Given that recent polls show that nearly 60% of the population supports some form of cannabis legalization, we anticipate that this will occur within the next five to ten years. Until then, alcohol producers in the U.S. will have to settle for a positive verdict from the 9^th Circuit regarding the legality of industrial hemp. Without underestimating the creativity of the American alcohol industry, it seems that the real frontier for cannabis-infused alcohol will be lead by our friendly the neighbors to the North.