Weekend Update Unlocked
Reviewing the cannabis landscape.
The following is a sampling of Cannabis Confidential content—random paragraph grabs, charts and notes, interesting happenings and other stuff— from last week.
You can click the title to access any article; most stock stuff and analysis is behind the paywall and you can access a free trial by clicking below; thanks for your support.
Passed Over
The risk rally snubs Cannaland.
April 22, 2024
It’s been more than a decade since Colorado and Washington state made adult-use cannabis legal and in the years since, 24 states and Washington D.C. have followed. Seventeen other states legalized MMJ, with varying exceptions in each state’s laws.
Four more states—Florida, Idaho, Nebraska and South Dakota—may soon join them as advocates in each state are hoping to get a referendum on their November ballots so voters can decide if they want to legalize (adult-use or medical) cannabis.
Talk Soup
President Joe Biden and Vice President Kamala Harris both touted their support for marijuana reform to mark the cannabis holiday 4/20 at exactly 4:20 p.m. on Saturday.
The comments were the latest sign that the administration will continue to focus on this popular issue ahead of their November reelection bid.
“Sending people to prison just for possessing marijuana has upended too many lives and incarcerated people for conduct that many states no longer prohibit; it is time that we right these wrongs.” -President Joe Biden
Poll Position
The overwhelming majority of U.S. adults favor the federal legalization of cannabis and most perceive it to be safer than tobacco or alcohol, according to nationwide polling data.
About two-thirds of adults said that the regular use of alcohol and tobacco is more harmful to a person’s health than the use of cannabis, one in four reported using cannabis in the past year and 62% said it should be legal in the United States.
Re/Descheduling Marijuana Through Administrative Action 👇
Morning Glory (written at 8:00 AM)
We power up for a fresh five-session set after the 4/20 weekend came and went with a spike in sales and even more talk—but no walk—on the federal front.
While many were likely disappointed by yet another nothing done, focusing too much on what happened, or didn’t, on Saturday misses the bigger picture and larger trend.
If we step back to revisit some of the bread crumbs that have been dropped along our pathway thus far in this young year, the list is long:
Jan. 4- Punchbowl reported the DEA told House lawmakers that the canna scheduling review is ongoing.
Jan. 12- Fed’s release 252-pages of documents confirming HHS SIII recommendation based on ‘Accepted Medical Use.”
Feb. 12- Vice-President Kamala Harris releases a video saying, “We changed federal marijuana policy, because nobody should have to go to jail just for smoking weed.”
Feb. 23- Germany moves to legalize cannabis.
Mar. 8- POTUS pitches pot at the State of the Union.
Mar. 15- VP Kamala Harris, at a WH event for criminal justice reform says, “the Drug Enforcement Administration must reschedule marijuana as quickly as possible,” calling it “absurd” and “patently unfair” that it is still classified in the same category as heroin.
Mar. 18- VP Kamala Harris signaled the next phase of the adminstration’s cannabis policy agenda is to fully legalize the plant and address the criminal justice chasm.
April 1- Cannabis makes the Florida ballot in November.
April 10- Politico reports that a concensus has emerged among lawmakers that could pair SAFE Banking with stablecoin legislation in time to potentially attach it to the FAA Reauthorization bill [←currently set to lapse on May 10].
April 20- Joe Biden And Kamala Harris Tweet About Marijuana At Exactly 4:20 On 4/20.
We’ve been doin this long enough to know that the outsized speculation in MSOS options (ahead of perceived action on 4/20) had entirely more influence on the ETF (+ the underlying equities in that ETF) than the fundamentals on a day-by-day basis.
It reminds me of the saying that my pal J-dubs likes to channel, “in the short-term, the market is a voting machine and in the long-term, it’s a weighing machine.”
Perhaps that’s apropos given it’s an election year (with three potential swing states in play) but we know this: there won’t be sticky liquidity or primary exchanges until there is movement on the federal front, which is why that remains the only game in town.
Random Thoughts
Food inflation is being exported from Ukraine, energy inflation via the middle east; the only place with price deflation is canna ofc.
If the DEA makes a final ruling, it'll likely have a binding interpreation on medical and abuse cases (via HHS) and the treaty obligations (via OLC); the longer we don’t hear anything, the more likely that outcome becomes IMO.
I am less enthusiastic about SAFER banking, not bc I've heard anything new/ different /other than they're trying to pair it with stablecoin legislation and stuff it in the must-pass FAA bill, more bc it feels a lot like the NDAA and it's hard to bank on legislators.
Green Day
U.S. canna rang the register on 4/20.
April 24, 2024
Although the precise origin of 420 remains hazy, one thing has become abundantly clear: it is the unnofficial holiday for the canna culture and the unequivocal leader in canna discounts and promotions, much like what Black Friday is for retail giants.
Headset kept the receipts from their retail partners in the U.S. and Canada that totaled more than six million units sold and almost $84M in sales on 4/20. Below, they’ll dig into the state markets and other particulars surrounding every stoner's favorite day.
Red + Blue = Green
More Biden voters than Trump voters wanna live in a place where marijuana is legal, according to a new survey, but a separate poll showed legalization itself has majority support among both Democrats and Republicans.
Northern Lights
StatsCAN offered a comprehensive look at Canadian cannabis and found:
Over one-in-three Canadian adults use cannabis.
1-in-10 adults reported using cannabis daily in the previous 12 months.
Dried canna remains the top seller but inhaled extracts are catching on.
Legal sales of adult-use cannabis increased 16% to $4.7B in ‘22/’23.
Dried canna remained the top seller in ‘22/’23 w two-thirds (65%) of sales.
Canadians spent on average $150pp/year on cannabis in ‘22/’23.
Two of every five dollars spent on legal canna enter government coffers. 👀
Over two-thirds who used canna in the past 12 months bought legal canna. 💪
Why buy from legal source? Product safety (38%), convenience (17%) and desire to follow the law (13%).
Cannabis-related drug offenses dropped as a result of legalization.
Mass General
After two years of delays, a Massachusetts social equity fund that was designed to help struggling canna businesses finally began to distribute money, with Gov. Maura Healey handing out $2.3M with plans to grow the fund to $28M later this year.
Random Thought
Some of the better Canadian L.P’s we’ve spoken to are quietly alright with the excise tax cut pushing into next year. Why? The garnishment process will be brutal for most and thin the herd, resulting in opportunities for the solid opererators to gain share.
Viridian: Does Canna Brand Consolidation Predict More Industry Consolidation?
As the industry “normalizes,” additional consolidation is virtually certain. The largest MSOs are still small companies relative to most U.S. consumer-facing industries and need to scale in cultivation, brands. Data from BDSA suggests this trend is underway, with share of the largest 20 brand-houses increasing 700 bps in the last three years.
Breadcrumbs
The clues continue in Cannaland.
April 24, 2024
Today, President Biden used his authority under the U.S. Constitution to advance equal justice under the law by granting clemency to 16 deserving individuals who were convicted of non-violent drug offenses.
While the size and scope of those executive actions have left many observers wanting for more, the move continued the steady drumbeat of positive news for the cannabis complex that some ✋ believe will culminate in federal reform before the election.
Subway Series
Since New York cannabis regulators met earlier this month, a firestorm has emerged among cannabis trade organizations and business license applicants after one of the leading trade associations appeared to argue that the marijuana permitting process should be curbed and there should be a cap on the number of businesses allowed.
The issue quickly escalated on social media as some trade group critics asserted they were undermining its own membership in order to protect the relatively small number of companies that have already landed business permits.
San Andreas’ Fault
California Cannabis companies are facing massive debt issues, with total unpaid taxes of $732M. The bulk of this debt, approximately 72%, is owed by businesses that have already shut down, posing a huge challenge to the state to recover those funds.
In addition to the debts from defunct companies, there are also $173 million in taxes on unlicensed cannabis sales. These illegal sales represent about a quarter of the total market, with an estimated total of $1.2 billion.
Pregame Pep-Talk (written 7:15AM)
We hike to the Hump after a two-sessions risk-asset circle smirk that ran asset classes considerably higher, while U.S. canna, as measured by MSOS, lost two pennies.
We've referenced The Everything Rally*, described the pscyhological warfare, called out our Stockholm syndrome and dutifully monitored each step in our 1169-day Andy Dufrense shit-dig but there's one thing left to call this process and that’s finished.
The chasm betwen U.S. canna and normalcy—normal pipes, normal liquidity, normal cap tables, normal tax rates and normal exhanges—is thisclose to closing but after so many false starts and empty promises, there’s zero benefit to any of our doubts.
Here's the good news, though: it's coming.
As sure as I'm here, as sure as you're there, as sure as either of us can be that we’re actually living in reality and not in some wildly fucked-up simulation designed to test the outer limits of our internal boundaries and capacities, it's coming.
Top D.A.R.E. Officer Says Medical Marijuana Helped His Brother-In-Law Treat Cancer Pain
The Wind Cries Mary
U.S. canna whispers as markets whip.
April 25, 2024
The total US economic impact generated by regulated cannabis sales could top $112B in 2024, or 12% more than last year, according MJBiz. While segments of the industry saw sales declines, especially in mature western states, recent markets like Maryland, Missouri and New York continue to foster growth.
The industry is expected to add upward of $200 billion in additional spending to the U.S. economy by 2030 and those projections do not take into account action from the U.S. government such as federal rescheduling or other legislation.
Liquid Hopium
California Rep. Maxine Waters (CA), the top Democrat on the House Financial Services Committee, said that her panel is on the way to getting a stablecoin bill “in the short run,” during an interview on Bloomberg TV.
Waters also said she is “hopeful” that they’ll overcome concerns from Senate Minority Leader Mitch McConnell regarding the SAFER Banking Act, which would finally allow banks and credit unions to work with the legal cannabis industry.
Dem Apples
Massachusetts reached a new canna sales milestone last week as the state crossed the $6 billion mark since the adult-use market launched, regulators announced. The state also broke a single-day sales record on 4/20, with $8.5 million in sales.
It was only last September that the state exceeded $5 billion in sales, meaning this is “the shortest it’s taken for Massachusetts businesses to generate another $1 billion dollars in gross sales,” the Cannabis Control Commission said.
Teenage Case Land
Authors of a new research letter published by the Journal of the American Medical Association (JAMA) said there’s no evidence that states’ adoption of laws to legalize and regulate marijuana for adults have led to an increase in youth use of cannabis.
The four-author team analyzed results from 207,781 respondents.
Kimala
Midmorning, we picked up another breadcrumb—VP Kamala Harris + Kim Kardashian would host a press conference from the White House at 2:30 PM ET today to highlight recent clemency efforts—which coincided with MSOS grinding back to the flatline.
While we knew breadcrumbs do little to satiate the hunger of canna bulls, the hope, perhaps, was that it would whet enough appetites for the MSOS primary trendline to hold, which was again in play as the ETF faded (-3%) into high noon on paltry volume.
As we hopped the midday hump, we got even more headlines, this time in the form of a letter from 21 Democratic House and Senate members to the DEA urging them to “promptly remove marijuana from schedule I.”
Perhaps more notable than the letter was the DEA response, which went out of it’s way to note that there will be “an opportunity for a public comment period and hearing”…
…which seemingly tells us two things: 1) canna will be rescheduled (let’s just hope not to SII) and 2) it will likely be via proposed rule (which includes comment period) rather than final rule and if that’s true—and if this issue is to be settled prior to the election—we should expect a DEA headline in the next few weeks.
The alternate take, so you hear it, is that the DEA isn’t in any rush and the process will continue for some time, which does little to placate the impatient masses 1170 days after MSOS topped-out at $56. (← that might even be the default take, tbh)
We knew that this was gonna take one of two paths, with a proposed rule perceived to be more durable, so the process is the process—and as long as the proposed rule is SIII, per HHS guidance, the markets should react quite favorably.
Boies in the Hood
U.S. canna brings out the big dog.
April 26, 2024
A federal judge scheduled oral arguments in a case filed by U.S. cannabis companies seeking to shield in-state cannabis activity from federal enforcement. The businesses said in their lawsuit that the prohibition of marijuana has “no rational basis,” pointing to officials’ hands-off approach to state-level legalization.
Litigator David Boies, whose prior clients include the Justice Department, former Vice President Al Gore and plaintiffs in the case that led to the invalidation of California’s ban on same-sex marriage, is leading the suit and in-court arguments begin on May 22.
Days of our Lives
The Biden reelection campaign says the Trump administration “took marijuana reform backwards” by rescinding Justice Department guidance that promoted discretion in federal cannabis prosecutions.
The Biden email omitted the fact that cannabis guidance has not been reissued under the current administration despite Attorney General Merrick Garland saying 680 days ago that the DOJ would address the issue “in the days ahead.”
Flight Delay
Congressional lawmakers have abandoned plans to attach a cannabis banking bill to unrelated must-pass aviation legislation, determining that it’s “insufficiently germane,” according to a top industry association that cited sources familiar with the decision.
That might come as a crotch-kick for canna advocates but there are other legislative paths for SAFER Banking this session, including the continued—if not telegraphed—possibility of advancing it as a standalone measure.
“It’s disappointing to be sure, but there will be ample opportunities to pass SAFER in this Congress. Leadership will now reassess and consider whether to advance the bill as a standalone or through one of the lame duck legislative vehicles.” -David Culver
Bhang for the Buck-eye
Ohioans will likely be able to buy recreational marijuana as soon as mid-June, earlier than the timeline outlined by the initiated statute they voted to pass last fall, and the existing medical dispensaries are actively preparing for the state’s green light.
“I've been assured they’ll be reviewed very quickly once they’re filed out and returned, and they will be fairly straightforward applications. That being the case, we could have recreational sales as early as the second week of June.”
Judge Schedules Oral Arguments In Marijuana Companies’ Lawsuit Challenging Federal Prohibition 👇
A few thoughts before we break for some wellness: 1) the breadcrumbs suggest we’ll solve for SIII and this orchestration is more Kabuki Theater than genuine dissaray and 2) the Boise oral arguments in a few weeks will ensure the intended goal of the lawsuit—to turn the screws on the U.S. government—will indeed acheive it’s desired effect.
Enjoy your weekend, stay safe and please enjoy responsibly.
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CB1 has positions in / advises some of the companies mentioned and nothing contained herein should be considered advice.