Ron Strider
Well-Known Member
We have discussed in this column the explosive growth of the cannabis market, fueled by technology, a receptive market and legislative developments. But there is growing murkiness from the Administration about throttling this growth.
But first, some perspective. The cannabis industry now rivals the retail market for frozen pizza and ice cream. As reported by Eli McVey, with revenue of at least $4 billion, sales of legal recreational and medical marijuana in 2016 topped those of Viagra and Cialis, paid music streaming services, tequila and Girl Scout Cookies. Sales of legal cannabis will likely increase by 28%-35%, pushing revenue to more than $5.1 billion.
Nonetheless, word comes from Washington of reports that Attorney General Jeff Sessions is looking to crack down on the medical marijuana businesses. Experts in the business had some pithy responses.
Emily Gordon, In-House Counsel at Simplifya: “Sessions continues to push marijuana policy stances that are not only at odds with the opinions of the majority of Americans - a recent national poll showed that 73% of Americans oppose Federal interference in state marijuana regulation - but which contradict data on the positive impacts legalization has had in states across the country. If nothing else, this latest attack may spur a renewed push among marijuana businesses to continue to be good citizens and neighbors in their communities, and to make sure their operations are in full compliance with all state and local laws, which can only help to take away any legitimacy that could be possibly be given to this attack and any future attacks Sessions may make.”
Bryan Meltzer, Partner at Feuerstein Kulick LLP: "Attorney General Sessions’ letter to Congress is a reaction to the extension of the Rohrabacher-Farr Amendment and is consistent with his prior hostile position on legal medical marijuana. If anything, the letter indicates that while the DOJ disagrees with the amendment, it will respect the will of Congress. And given the broad bi-partisan congressional support and overwhelming public support for state-regulated medical marijuana, it is much more likely that Congress will continue to move forward on this issue, including by fixing the tax and banking issues that currently plague the industry, rather than moving backward by appeasing Sessions’ request."
I have long been intrigued with the dichotomy between the states that are decriminalizing cannabis and the Federal control of the banking system. Cannabis businesses are essentially frozen out of the banking system, making theirs an all cash business. For instance, when Colorado or California cannabis businesses show up at the IRS with literal wheelbarrows of cash to pay their taxes, it may be the complaints of overwhelmed clerks that trigger alignment of state and Federal laws.
I asked a distinguished panel of experts in the industry several questions on the subject:
•Jeffrey Zucker, President of Green Lion Partners, a Denver-based business strategy firm focused on early stage development amongst firms in the cannabis industry.
•Derek Peterson, CEO of Terra Tech, the first publicly traded cannabis company in the U.S.
•Isaac Dietrich, Co-Founder and CEO of MassRoots, the largest and most active social network for cannabis enthusiasts on the web.
•Mike Weiss, President/Founder of Nature’s Dream, whose Cannacopia mobile app enables you to discover which marijuana strains help you feel the way you want, based on your desired mental mood, physical effects, medical condition, and taste preferences.
Auerbach: What are the main differences in opening up business in this sector compared to other sectors?
Zucker: The main differences between the cannabis industry and most other sectors are the heavy regulations, state-to-state fragmentation, and compliance requirements. Strict federal legislature has fragmented the market, but I think in the long run, it will favor companies who make compliance standards part of their foundation from incorporation.
Peterson: Opening up a cannabis business requires a great deal of research, specifically related to municipal, state, and federal regulations. Profit margins are often thinner for cannabis businesses, due to difficulties in writing off business expenses for taxes due to 280E, so conducting thorough calculations of potential profits and losses are all the more important as well. In addition, many service providers are still unwilling to work with cannabis businesses which can make many simple tasks prohibitively challenging.
Dietrich: Cannabis entrepreneurs face issues and uncertainty not experienced by most sectors. This makes it more difficult to raise capital and mandates an ability to rapidly respond to an ever-changing environment -- it's what keeps life interesting.
Weiss: Cannabis today provides the same type of opportunities for entrepreneurs that the tech industry provided in the early 80’s and the Internet provided in the 90’s when “www” stood for “wild-wild-web,” where new and innovative ideas were born, that have now woven their way into the daily fabric of American life. Unlike other established industries, the uncertainty of federal cannabis legalization, and the resulting current barriers that cannabis entrepreneurs encounter daily, ranging from banking to taxes to advertising opportunities and more, really represent a huge entrepreneurial opportunity. The legal cannabis industry is the only multi-billion industry in America today that is not yet controlled by multinational conglomerates. This provides entrepreneurs, like me, with the opportunity to create a brand and build market share without competition from big multinational companies and become an attractive buyout target.
Auerbach: Do you think the state/Federal issues will be resolved in terms of money transfer?
Weiss: Yes. There are already bipartisan bills introduced in Congress to open up federal banking to state-licensed cannabis businesses and I believe that these will eventually pass. While there are reports of isolated cases where individual banks do permit activity from legal cannabis businesses, overall the ‘cash-only’ aspect of the industry presents another one of those barriers that resourceful entrepreneurs overcome through non-traditional solutions, such as the use of crypto-currencies.
Zucker: Once cannabis is no longer a federally prohibited substance under the Controlled Substances Act, I expect the industry will be treated like any other by banking institutions. Over the coming years, I am hopeful these issues will be resolved with the support of the cannabis industry, but businesses in the industry, especially those that touch the plant, will have to deal with the lack of security, disadvantages of cash on hand, and tax burdens until then.
Peterson: There's no clear timeline for the cannabis industry resolving its financial issues on a federal level, and until there's a major breakthrough in rescheduling cannabis as a controlled substance, there likely won't be. In the meantime, individual states are making great progress through the passage of well-thought-out legislation allowing for the adult recreational consumption of cannabis.
Dietrich: If President Trump relaxes banking restrictions for the cannabis industry, it will create tremendous amounts of jobs, accelerate the sector's rapid growth rate, and stimulate economic activity in states across the country.
Auerbach: Clearly, the public, the industry and leadership in the Administration are yet to be aligned on the topic of cannabis. In a future installment we will discuss the war on drugs with noted author Don Winslow, whose acclaimed novel "The Force" has garnered attention across the spectrum. It has just entered the top 10 in the New York Times Bestsellers List.
News Moderator: Ron Strider 420 MAGAZINE ®
Full Article: The War on Drugs, The Business of Cannabis and The Judicial Horizon All Remain Murky
Author: Brad Auerbach
Contact: Contact Information
Photo Credit: Getty Images
Website: {{meta.title}}
But first, some perspective. The cannabis industry now rivals the retail market for frozen pizza and ice cream. As reported by Eli McVey, with revenue of at least $4 billion, sales of legal recreational and medical marijuana in 2016 topped those of Viagra and Cialis, paid music streaming services, tequila and Girl Scout Cookies. Sales of legal cannabis will likely increase by 28%-35%, pushing revenue to more than $5.1 billion.
Nonetheless, word comes from Washington of reports that Attorney General Jeff Sessions is looking to crack down on the medical marijuana businesses. Experts in the business had some pithy responses.
Emily Gordon, In-House Counsel at Simplifya: “Sessions continues to push marijuana policy stances that are not only at odds with the opinions of the majority of Americans - a recent national poll showed that 73% of Americans oppose Federal interference in state marijuana regulation - but which contradict data on the positive impacts legalization has had in states across the country. If nothing else, this latest attack may spur a renewed push among marijuana businesses to continue to be good citizens and neighbors in their communities, and to make sure their operations are in full compliance with all state and local laws, which can only help to take away any legitimacy that could be possibly be given to this attack and any future attacks Sessions may make.”
Bryan Meltzer, Partner at Feuerstein Kulick LLP: "Attorney General Sessions’ letter to Congress is a reaction to the extension of the Rohrabacher-Farr Amendment and is consistent with his prior hostile position on legal medical marijuana. If anything, the letter indicates that while the DOJ disagrees with the amendment, it will respect the will of Congress. And given the broad bi-partisan congressional support and overwhelming public support for state-regulated medical marijuana, it is much more likely that Congress will continue to move forward on this issue, including by fixing the tax and banking issues that currently plague the industry, rather than moving backward by appeasing Sessions’ request."
I have long been intrigued with the dichotomy between the states that are decriminalizing cannabis and the Federal control of the banking system. Cannabis businesses are essentially frozen out of the banking system, making theirs an all cash business. For instance, when Colorado or California cannabis businesses show up at the IRS with literal wheelbarrows of cash to pay their taxes, it may be the complaints of overwhelmed clerks that trigger alignment of state and Federal laws.
I asked a distinguished panel of experts in the industry several questions on the subject:
•Jeffrey Zucker, President of Green Lion Partners, a Denver-based business strategy firm focused on early stage development amongst firms in the cannabis industry.
•Derek Peterson, CEO of Terra Tech, the first publicly traded cannabis company in the U.S.
•Isaac Dietrich, Co-Founder and CEO of MassRoots, the largest and most active social network for cannabis enthusiasts on the web.
•Mike Weiss, President/Founder of Nature’s Dream, whose Cannacopia mobile app enables you to discover which marijuana strains help you feel the way you want, based on your desired mental mood, physical effects, medical condition, and taste preferences.
Auerbach: What are the main differences in opening up business in this sector compared to other sectors?
Zucker: The main differences between the cannabis industry and most other sectors are the heavy regulations, state-to-state fragmentation, and compliance requirements. Strict federal legislature has fragmented the market, but I think in the long run, it will favor companies who make compliance standards part of their foundation from incorporation.
Peterson: Opening up a cannabis business requires a great deal of research, specifically related to municipal, state, and federal regulations. Profit margins are often thinner for cannabis businesses, due to difficulties in writing off business expenses for taxes due to 280E, so conducting thorough calculations of potential profits and losses are all the more important as well. In addition, many service providers are still unwilling to work with cannabis businesses which can make many simple tasks prohibitively challenging.
Dietrich: Cannabis entrepreneurs face issues and uncertainty not experienced by most sectors. This makes it more difficult to raise capital and mandates an ability to rapidly respond to an ever-changing environment -- it's what keeps life interesting.
Weiss: Cannabis today provides the same type of opportunities for entrepreneurs that the tech industry provided in the early 80’s and the Internet provided in the 90’s when “www” stood for “wild-wild-web,” where new and innovative ideas were born, that have now woven their way into the daily fabric of American life. Unlike other established industries, the uncertainty of federal cannabis legalization, and the resulting current barriers that cannabis entrepreneurs encounter daily, ranging from banking to taxes to advertising opportunities and more, really represent a huge entrepreneurial opportunity. The legal cannabis industry is the only multi-billion industry in America today that is not yet controlled by multinational conglomerates. This provides entrepreneurs, like me, with the opportunity to create a brand and build market share without competition from big multinational companies and become an attractive buyout target.
Auerbach: Do you think the state/Federal issues will be resolved in terms of money transfer?
Weiss: Yes. There are already bipartisan bills introduced in Congress to open up federal banking to state-licensed cannabis businesses and I believe that these will eventually pass. While there are reports of isolated cases where individual banks do permit activity from legal cannabis businesses, overall the ‘cash-only’ aspect of the industry presents another one of those barriers that resourceful entrepreneurs overcome through non-traditional solutions, such as the use of crypto-currencies.
Zucker: Once cannabis is no longer a federally prohibited substance under the Controlled Substances Act, I expect the industry will be treated like any other by banking institutions. Over the coming years, I am hopeful these issues will be resolved with the support of the cannabis industry, but businesses in the industry, especially those that touch the plant, will have to deal with the lack of security, disadvantages of cash on hand, and tax burdens until then.
Peterson: There's no clear timeline for the cannabis industry resolving its financial issues on a federal level, and until there's a major breakthrough in rescheduling cannabis as a controlled substance, there likely won't be. In the meantime, individual states are making great progress through the passage of well-thought-out legislation allowing for the adult recreational consumption of cannabis.
Dietrich: If President Trump relaxes banking restrictions for the cannabis industry, it will create tremendous amounts of jobs, accelerate the sector's rapid growth rate, and stimulate economic activity in states across the country.
Auerbach: Clearly, the public, the industry and leadership in the Administration are yet to be aligned on the topic of cannabis. In a future installment we will discuss the war on drugs with noted author Don Winslow, whose acclaimed novel "The Force" has garnered attention across the spectrum. It has just entered the top 10 in the New York Times Bestsellers List.
News Moderator: Ron Strider 420 MAGAZINE ®
Full Article: The War on Drugs, The Business of Cannabis and The Judicial Horizon All Remain Murky
Author: Brad Auerbach
Contact: Contact Information
Photo Credit: Getty Images
Website: {{meta.title}}
