America the Beautiful

Stripe goes AWOL but freedom still rings.

I planned to take the week off as many others have to celebrate America or, at the very least, use that as an excuse to gather among friends and family and not work.

I wasn’t expecting to pick up my laptop—the iPhone was fair game bc that has my Bloomberg—and despite Substack recommending that I not pause subscription payments for less than two weeks, I did so bc it seemed like the right thing to do.

Alice + Sam, sitting in a tree (written June 26)

In housekeeping news, our youngest leaves for camp tmrw and I'm planning on taking Friday through next week to recharge my brain and spend QT with my wife and twins. Substack payments will be paused—and unless I resolve this issue…

…which, despite three appeals, remains ongoing, that pause might last a while.

Remember, I started this paid gig June '23 in the throes of a terrible bear market…

…with an eye toward helping pay for our daughter's bat mitzvah in the Spring.

[the English translation for bat mitzvah is "very expensive party."]

That was mission accomplished last month—mazel Rubes and thank you subs—and I’ve contemplated whether this Stripe thing is a sign: maybe this should be free and I’ll write when the mood strikes versus a comprehensive daily recap.

Summer Breeze

It’s now Wednesday, July 3rd. My wife and eldest daughter stepped into Sag Harbor for one of those Hampton’s dinners at a see-or-be-seen place. There’s nothing wrong with that—I had my run in the day—but these days I prefer to sit on a porch and puff with our pups as another stellar summer day fades away.

I am, of course, making this week sound sexier than its been, thus far. I mean, yes, I’m enjoying good music and inhaling my favorite flower with Sandy and Bo standing by…

live shot; digesting burgers; don’t tell mom please.

…but since last Friday, when this vacation started, the news flow has been nothing if not persistent. In no particular order, we got:

• a (cough) subpar performance from President Joe Biden, with nary a mention of cannabis despite several softball-sized opportunities to do so. On the flip side, candidate Harris could be good (for canna into the election) as today’s strength (MSOS +4%) seemed to coincide with the release of the below poll.

^ I don’t think Trump will let dems bogart this issue. As I wrote—and a prominent Florida publication echoed today—cannabis is waaay too juicy an issue for Trump to not to make a play, not the way it’s polling in the swing states and nationwide.

• SCOTUS overturned the Chevron deference, which some at first thought was an ExxonMobil rewards program, but it caused an absolute uproar in Cannaland as everyone from lucid law veterans to recent online law grads weighed in. For our money, Sugar Shane Pennington gave a great take and TDR nailed it too.

• The I.R.S issued a statement on their position re: all the money they’re owed by U.S cannabis companies. Shockingly, they wanna get paid as 280E will continue to apply until a final rule is published (retroactive to the calendar year?). Wasn’t so much news as it was bad timing on a late summer Friday into a holiday wknd.

Mr. Tax Man

That last bit wasn’t a shocker as U.S. operators knew the tax stuff would be litigated (see Trulieve, see Boies, and see ya in court, bitches). And I’m no lawyer but if this Chevron thing helps neuter outdated three-lettered U.S. gov’t agencies, pardon my French but the I.R.S can go fuck themselves with a shovel.

Or, as ATB’s Freddy Benson Gomes put it, a bit more professionally,

The IRS published a press release on June 28th reminding taxpayers that “until a final rule is published” on marijuana scheduling, they remain subject to section 280E of the Internal Revenue Code. This comes following numerous US cannabis operators filing amended tax returns claiming 280E tax refunds.

In the press release, the IRS states that “the grounds for filing such claims vary, but these claims are not valid”. Despite the IRS release, based on our conversations with different companies, we expect legal and tax strategies to remain unchanged—companies who have filed for refunds are still awaiting a response from the IRS and will continue to accrue the unpaid 280E portion of taxes as an uncertain tax liability on their balance sheet.

Of course, the previous buckets of uncertainty remain and so you don’t miss any, we’ll list them— timing/ viability of Schedule III, Farm Bill hemp loophole landing spot, pay-no-mind possibility under a GOP regime, Florida, Pennsylvania… and that’s before we get into the ultimate model and path we take to get there.

Let’s Get Technical

They say false moves lead to fast moves and exhibit A is the failed breakout by U.S. cannabis ETF MSOS when it got stuffed trying to push through $10ish the third time…

Someone sat there and sold a couple of hundred million dollars of merchandise into that April 30th move on reports DOJ was gonna push forward in moving canna to a schedule III. We (the general public) wouldn’t know for another two weeks that that would happen despite the DEA which, in the absence of buyers, helped to trigger a landslide through the moving averages and the March lows.

Here’s the thing: given the custody fuckery (97% of the average daily volume (ADV) is via the NYSE-listed ETF MSOS), this sector is more reactive than most, with the buyers higher and as levels break, sellers lower. There’s a mini-double bottom down near $7 and a potentially messy but still viable double bottom vs. the March lows if the space can hold and trend higher into July (and ahead of a possible final rule in Aug./ Sept).

^ MSOS $7.30 is the March low and the 200-days are up near $8. There’s been seven moves of 30% or more since the HHS news last August and on that last push into the debate and double resistance, it had gained almost 20%. The first fail made sense, I guess—Biden didn’t look like he could finish a sentence, much less an agenda—but levels get weaker with each subsequent test, both ways.

Can’t sugarcoat the structural impediments—the space needs pipes (custody) before there can be real liquidity, sans MSOS—but make no mistake, the greatest trick the US cannabis bull ever pulled was convincing the world it didn’t exist.

Plus, it’s always darkest before the dawn, even if tomorrow’s dawn will be different.

Stripe’s Gripe

So, this is the reason I picked up my laptop tonight, while sitting on the porch with my pups and that delicious flower. The dogs are sleeping now, tucked safely inside, while I finish this up because I like to finish what I start.

I keep waiting for Stripe to say, "oh, you're not actually a cannabis business—you just write about cannabis businesses," or even, “GOTCHA YOU BEEN PUNK’D!” but no, they quadrupled down in their rejection/denial. I feel like I’m in middle school again.

We’ll figure it out eventually but until we do, I’ll continue to write for free—maybe not every day but when there’s something to say—and if/ when Stripe gets their shit together, or if there is an alternative mechanism, we’ll go from there.

A lot is about to happen in the cannabis space. This issue will get loud into November on both sides of the aisle, and sentiment is about as bad as it’s been. It’ll be bumpy af from here to there, that much is for shit sure, but we didn’t come this far to get this far.

Have a safe holiday and please enjoy responsibly.

If you’d like to help Mission [Green] change federal cannabis policies, please click here.

CB1 has positions in / advises some of the companies mentioned and nothing contained herein should be considered advice