Getting on Higher Exchanges

Additional color on today's reported DEA news.

Curaleaf Chairman Boris Jordan spoke on the Higher Exhanges podcast after the close today and shared the following insights:

"Several months until this becomes law, not until first of Sept. for canna cos, will mean no 280e for '24

Info received today is this goes tmo to OMB.

Will probably be at OMB for 1-2 weeks

After that, will make official announcement, DEA will have press conference, may have WH involved as well, 1-2 weeks; then clock starts ticking on 60 day comment period.

CURLF expects fully that there will be challenges to this rule.

Challenges by AGs in some more conservative states, incl FL TX AK.

Efforts have been made to dot I's / cross T's to make sure this doesnt get shot down in court.

Expect fully, that by early voting starts, Sept 1, that they (WH) want this done / advertised widely by then.

Should expect decision on this < Sept 1 early voting start of political season. 👀

OLC really looked at the treaties.

Verified that legal work done, was done right.

Something done by FDA / HHS  was out of ordinary.

Ordinarily there's an 8 point review; they only went through 2 because they didnt have the research available as they normally do, used state / some federal research.

DEA was taken aback; wanted to make sure their 5 point process was done properly.

Why they took all the time they needed, usually 6 months, they took 8 months bc they wanted to make sure everything was done right.

OLC was part of that process, reviewing treaties / legal aspects.

OLC review went to DEA.

DEA formulated the rule.

Rule tomorrow will be at OMB.

There was a shortcut in the HHS / FDA part of the process, largely due to lack of readily available research.

Now, what S3 means, FDA will now be able to fund national research (universities, medical centers, corporations that can receive federal research grants).

Then FDA will take a few years, probably can rule to take it off S3 to S5 or deschedule, depending on where the research comes out.

Rule in place that any time you change a tax code mid-year, its retroactive for the entire year.

Removing 280e for CURLF would be: based on '23 its $150m tax savings, for '24 closer to $175m tax savings.

Filing for previous years taxes as well.

Will really help in terms of balance sheet.

Do know S3 is the rule, but dont know anything else.

Only information leaked is that it will be S3.

Would have been tough, but big companies would have survived it.

In many ways, helps the smaller companies more.

Several risks, dont see them as extraordinary. Risks are:

Believe there will be files for injunction against this ruling.

Question Boris has, dont have an answer yet, is whether or not they can do this on announcement in 2 weeks after OMB review, or can they file injunctions only after the rule is published (Sept 1 / before)?

Doesnt switch from S1 to S3 until finally approved by DEA comment period / rule published.

Rule is simple here, one sentence.

Moved from S1 to S3.

Fairly simply ruling being put out at this point in time.

Will be political challenges.

A lot of Repubs wont want to give this to the Dems as a win.

A major vote getter, everyone knows that.

There will be challenges to this.

Will be injunctions.

Fairly confident those injunctions will be held at the first court level ; want to make sure not held at circuit court level, dont want that to happen.

Believe that DEA did this process right.

Wont go to circuit court.

Injunctions going to criticise lack of medical research / didnt go through full review.

But DEA has the right to do this.

If did it right / followed all the rules, which we believe they've done.

Everyone that doesnt want this to happen will come out over 3-4 months.

Very confident that this will go through.

Heard it from very important people that the work has been done / hard to challenge at this point in time.

2nd risk is that there is a cut off date in August. Dont know exact date.

There is a cut off date where legislation, rules passed by this legislation cannot be reversed by a new administration.

Boris sure that they will get it done by then, why they gave an outside date of Sept 1, the last date they want to get this done by.

Sometime in Aug 20-30 range.

More Repubs want this than you think.

Just dont want to be public about this.

Got a call at 9am this morning from a Trump person that this was happening today.

A Trump person told CURLF that this was happening.

Don't think the Repubs will go against this.

Think southern states wont want to give President a win into the election.

Very confident DEA has done its job and any injunction will be overruled in court.

Good news is, one of largest US exchanges contacted CURLF today. 👀

Said theyre interested to start a conversation.

Dont know if directly tied to announcement, but suspicious.

Came after the announcement that theyd be interested in a conversation.

Think CURLF structure into TSX will allow a meaningful conversation w/ US exchanges on uplisting.

Think can have very constructive conversation, even w/o SAFER banking, given this announcement.

Think there will be a DOJ memo on the back of this. 👈

They need to, every bank will contact FINCEN and ask if they can start servicing.

FINCEN will wait on DOJ memo or lean on S3.

Think by mid-summer will get activity around DOJ, guidance to FINCEN. 👀

Think a lot of convos in the US on uplisting.

Whether on this decision alone, will get more decision that would be favorable.

Nothing holding back exchanges from touching it.

They have plant touching exchanges listed.

But FINCEN couldnt tell them anything, no law on cannabis; now they do.

DOJ said not enforcing, but FINCEN had no document / federal law.

Think this at least opens the conversation for US companies to uplist to higher exchanges. 

Euroclear now clearing CURLF as well.

Have state street, pershing, morgan stanley, goldman sachs, euroclear, schwab, fidelity, etc.

Every investor has said that todays announcement allowed to start looking at making these investments.

They will still need to go through proper channels.

Think they can now start looking at / investing in these stocks.

Think a lot of volatility over the next few months.

A lot of founders / investors / consolidated companies.

Some people will want to sell shares.

Believe the big flows havent even touched the sector yet.

Think next 3-4 months those flows start to enter the sector and a fundamental change in liquidity / price action.

All investors spoken to today were massively intrigued that this will happen.”

Enjoy your night, stay safe and please enjoy responsibly.

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CB1 has a position and nothing contained herein should be considered advice.