Business

Rebel Cannabis Celebrity Ed “NJWeedman” Forchion Calls Instagram His Biggest Foe Since the DEA

January 6, 2022 by Staff Writer

Ed “NJWeedman” Forchion’s personal battles with politicians, the police, the courts, the DEA and even the FBI have been widely documented for decades. Now that the formerly embattled marijuana rebel is finally reaping the spoils of his longtime weed legalization war, he has found himself up against a new foe. With a record of activism that spans over 30 years, Forchion is calling out Instagram as his biggest adversary yet. Though verified on Facebook, the cannabis celebrity has been unable to secure the widely acclaimed blue check for his Instagram account. The matter has caused hundreds of fake accounts to launch and imitate him, much to the detriment of his reputation, businesses and most importantly, his safety.

“My life is in danger because of the fake accounts on Instagram. The situation has gotten wildly out of control. There are impersonators out there literally stealing money online with promises of delivering cannabis. My business does not mail or deliver weed and we don’t conduct any business online ever! I’ve actually had angry customers affront me, my children and my staff in person after having been duped out of thousands of dollars by these scammers online. Some of these situations have gotten very scary! These impersonators are allowed to run rampant, while my team and I have tried repeatedly to secure Instagram’s support and attention,” cites Forchion. “A verified account would at least help to mitigate the situation.”

“I am appealing to the public and our thousands of supporters. I’m hoping that they will report any fake accounts and I’m just trying to get the word out that there is only one real “NJWeedman” account on Instagram, with over 23,000 followers,” notes Forchion. “I’m also filing a report about these cyber-crimes with the FBI in the hopes that their National Cyber Investigative Joint Task Force (NCIJTF) can take on this case. The scammers have fake websites linked to their IG accounts that are impersonating me and they are making off with tens of thousands if not hundreds of thousands of dollars from unsuspecting victims!”

Forchion has achieved worldwide notoriety for his longtime battles for legalization. As the former co-owner of NJWeedman’s Joint, a popular cannabis themed restaurant in Trenton, NJ, six years in business, the famed cannabis culprit made astonishing headlines this past year for opening a dispensary across the street from the state capital city hall. His ‘outlawed’ success has garnered him speaking engagements on virtual panels at Stockton and Princeton University, and he has been featured across international and mainstream news including NBC News in New York, ABC-TV Nightline, Cheddar News, VICE News and MSNBC’s “Into America.”

Forchion has expanded his brand to Miami, FL with the opening of a cannabis friendly art and music lounge, The Joint of Miami. His daughters now oversee his Trenton operations, while his son has taken over the Miami business.

Much to his distress however, even The Joint of Miami business account on Instagram has been hacked and shut down, with imposter accounts now posing as the actual operation. The original account @thejointofmiami, which was linked to major advertisements and publicity, is now replaced by several fake accounts that are compromising the brand’s integrity.

“I know everyone has issues with social media. I happen to love social media. It has given me a voice and a presence that has literally fueled my activism, brand and business ventures. But now, the fake accounts situation has spiraled out of control. I’ve got 99 problems and Instagram is all of them!” adds Forchion. “Adam Mosseri, the head of Instagram, if you are reading this, or any of your team – ‘HELP!’ Can I get verified on Instagram??? Please get me back my @jointofmiami account and delete the fake ones. In fact, we can discuss the matter over a bowl on me!”

For more information about The Joint of Miami, get lit at https://thejointofmiami.com/. Follow them on Instagram only at @theofficialjointofmiami (https://www.instagram.com/theofficialjointofmiami/).

For more information on NJWeedman’s Joint in Trenton, NJ, catch a buzz at https://njweedmansjoint.com/ .

Take a puff with NJWeedman and read all about his continued ‘budding’ adventures at https://linktr.ee/NJWeedman.Most importantly, find him on Instagram only at @njweedman (https://www.instagram.com/njweedman/) and verified on Facebook at @NJWeedman (https://www.facebook.com/NJWEEDMAN).

The post Rebel Cannabis Celebrity Ed “NJWeedman” Forchion Calls Instagram His Biggest Foe Since the DEA first appeared on The Marijuana Times.

Rebel Cannabis Celebrity Ed “NJWeedman” Forchion Calls Instagram His Biggest Foe Since the DEA
Source: Marijuana Times

Yellow Dream Farm Announces Successful GoodGood Cannabis Brand Preview at Hall of Flowers

January 5, 2022 by Staff Writer

Yellow Dream Farm, a family-owned California company of robust cannabis brands that provides premium craft products and sustainably-grown wholesale flower at scale, announced today that the Company enjoyed a rapid year of growth in 2021 that included the soft launch of its first in-house lifestyle brand GoodGood at Hall of Flowers in Palm Springs, Calif. GoodGood is a suite of premium THC cannabis-branded products that captures the intersection of culture of cannabis, hailing from CEO and Founder Jeffrey Garber’s vision to bring craft, boutique grown cannabis to a larger audience at an affordable price.

Hall of Flowers is the industry’s leading industry-only, highly curated B2B show designed to facilitate commerce between a vast network of premium licensed cannabis brands and retailers. At the show, Yellow Dream Farm was able to attract some of the best brands in California to their booth and solidified their presence as a powerhouse brand of boutique products for consumers to enjoy. Additionally, GoodGood garnered coverage in news outlets including L.A. Cannabis News, WeedWeek, and others.

“Debuting GoodGood at Hall of Flowers was a collaborative effort made possible by the incredible amount of talent on our team,” said Jeffrey Garber, CEO and Founder of GoodGood and Yellow Dream Farm. “The overwhelmingly positive feedback we received from attendees supported our excitement around the GoodGood brand, and we are more eager than ever to share our premium suite of products with consumers throughout the Golden State.”

The cannabis industry’s generally long-held belief that premium cannabis can’t be grown affordably has been turned on its head with Yellow Dream Farm’s efficiencies and environmental and feeding automated processes, bringing craft cannabis to consumers looking for affordable options.

In less than one year of operation, Yellow Dream Farm’s team was able to purchase the 30,000 square foot facility with 22,000 square foot of canopy, and undergo build-out and licensing, as well as a full flowering cycle for each of their seven flower rooms. The family-owned and operated company has a strong leadership team and currently employs nearly 50 people in San Bernardino County.

Garber added, “Our family is proud to do what we love and share our passion for eco-efficient, boutique, craft cannabis by providing it at scale and at an affordable price so our customers can access this high-quality flower that matches their lifestyle. We look forward to expanding our retail footprint in 2022 and bringing new strains to market under the GoodGood brand.”

To find available strains locally, visit WeedMaps.

To learn more about Yellow Dream Farm, visit www.yellowdreamfarm.com. To learn more about GoodGood, visit smokegoodgood.com.

The post Yellow Dream Farm Announces Successful GoodGood Cannabis Brand Preview at Hall of Flowers first appeared on The Marijuana Times.

Yellow Dream Farm Announces Successful GoodGood Cannabis Brand Preview at Hall of Flowers
Source: Marijuana Times

Why the Illicit Cannabis Market is Alive and Well in California – Part 2.5 – Taxes

April 15, 2020 by Staff Writer

One thing we all need to remember is: To lawmakers, tax revenue is heroin. If regulators believe they can extract more tax revenue from an industry, they will. This is especially true of the cannabis industry. The belief is that the industry will not push back all that much. After all, what leverage do they have. What they are producing, distributing, and selling is still Federally illegal. The belief of lawmakers is that any concessions they make to allow cannabis businesses to operate should be welcomed with open arms by the industry. The alternative is operating in the illicit market, where doing so can come with serious risks to ones liberty. So the Faustian choice they force the industry to make is; break the law, or pay excessive taxes for the privilege of State legality. To date, their belief is misguided as it appears that roughly 75% of the California industry are happy to remain outlaws, rather than become upstanding cannabis business owners. The primary reason for this are profit and taxes. And while objectively I can’t condone illicit behavior, while others are doing their best to walk the line, to paraphrase the famous words of Chris Rock; “I’m not saying you should break the law…but I understand”.

Why do I understand? Because despite the fact that the IRS, the State House, and the Municipalities love the tax revenue that these businesses produce, they don’t love the industry. They only love the money. For the outlaws, why support those who will not support them. Better to be a profitable outlaw than a business owner trying to do the right thing when everyone else has their hand in your pocket. The goal of any business is to turn a profit, but if the deck is so stacked against you and the regulations are designed to make it more likely than not that you will fail, then why transition from the shadows to the light? The way the system is currently designed, there is no incentive to do so in California when the tax burdens are so heavy.

Every day we see news stories discussing how much revenue cannabis excise taxes produce for the state. In the first two quarters of 2019 the state of California realized $137.3 million in excise tax on roughly $900 million dollars in retail sales. This based on a 15% excise tax rate at the retail level. But that is just the state. And that is just the excise tax. And that is exclusive of the state’s 8.5% sales tax or the 10% cannabis business tax. And that is only on one portion of the supply chain. The municipal tax rates can be equally egregious. Oftentimes these taxes are another 5 – 15% on top of the state tax at the retail level. These taxes are all on top of the cultivation taxes imposed by the state and the municipality. They are also in addition to taxes on manufactured products and distribution. Simply stated, the state of California has been taxing the cannabis industry out of existence.

This means that at every level of the supply chain there is a tax. A tax on the cultivator. A tax on the manufacturer. A tax on the distributor. A tax on the retailer. And finally, a massive tax on the consumer. Ultimately, if the price of a good across the counter is significantly more expensive than the same product that can be accessed just as easily in the still existing illicit market, the consumer will choose not to access the legal market. From a financial standpoint, they are making the prudent decision. In the illicit market, there is no tax on the cultivator, manufacturer, distributor, retailer, or consumer. Almost every dollar of gross margin becomes net margin and the consumer wins. It is not even a close call, the illicit market product is often half the price of its legal counterpart, which makes it all but impossible for one market to compete with the other.

But even with the excessive taxes levied at the municipal and state level, they all pale by comparison to the most onerous tax of them all: Section 280(e) of the Internal Revenue Code. This section of the tax law in and of itself all but guarantees that the illicit market will remain strong and active. This point was discussed in detail in part 1 of this series, but more emphasis should be made with respect to how much pressure this section of the tax code places on cannabis retailers. If 280(e) were to be eliminated, the mark up in price between wholesale and retail cannabis could be significantly smaller and retailers could still be profitable, even with all the other taxes listed above. But the IRS has refused to budge and Congress has refused modify the law to remove this section of the code. Why? Because money. This section of the tax code provides an enormous windfall to the Federal Government every year. It is the proverbial example of having their cake and eating it too. The Federal Government is more than happy to keep cannabis illegal, but that does not mean it does not want to take as much money out of the industry that it can. The Feds do not care if a cannabis business survives or fails. In fact, based on all that we have seen over the past six years of adult use cannabis at the state level, they would prefer that cannabis businesses fail. But, so long as they are alive, they will take every dime from the business that they can.

It should be noted at this point, that since the valuations of cannabis businesses began to decline significantly in 2019, there has been a great deal of criticism directed at cannabis executives by those outside of the industry including those who claim that California based cannabis businesses are failing due to the lack of business acumen in the C suite. The common refrain is that these executives spent too much capital on trying to seize market share through marketing and promotions. While it is true many of them exhausted critical investment capital while the market was flush with money, many executives realized that due to these tax burdens, scale was the only way to ultimately make their businesses profitable. The fixed costs on many of these businesses remained static and until the business scaled, they would be operating at a loss due to high tax rates. This forced many of these companies to try and go through an aggressive ramp, even though in any other industry they would likely have not made these decisions, because they would not have been contending with the same regulatory headwinds. If the same businesses attempted to grow holistically and organically, they likely would have been suffocated by the margin compression that came largely at the hands of high tax burdens and not robust competition from other legal operators. Essentially, this is a polite way of saying that while many cannabis executives made mistakes with their capital allocations in 2018 and 2019, those mistakes are not the primary driver of why these businesses were struggling; taxes were.

Make no mistake, no matter how many times the industry is told by most lawmakers that they support the cannabis industry, what they are really telling you is that they support the production of tax revenue that feeds the insatiable appetite of their respective budgets. There is no altruism. The tragedy of this position, at the local, state, and Federal level, is that all they are accomplishing is wiping out shareholder value, destroying otherwise good businesses, and handing the cannabis industry right back to the outlaws who have controlled it for the last 40 years. Until lawmakers accept this reality, the illicit market never goes away. If lawmakers were to realize that the most important thing they can do over the next several years is to eradicate the illicit market, they would eventually get the tax revenue they so desperately want today. They just need to learn that there is a difference between being short-term and long-term greedy. The former destroys the legal industry. The latter eradicates the outlaws.

So what can the California cannabis industry do about these issues? The answer in the short term is not very much. The industry can and will continue to lobby the state to amend its regulations, but in a state the size of California, change happens slowly. For the first time since adult use launched in California we are finally seeing some hope on the horizon. Lawmakers, such as Assemblyman Rob Bonta, Assemblyman Tom Lackey, and state Treasurer Fiona Ma, have come together to propose new legislation that would help prevent a mass wave of cannabis business failures. After several years of being told by entrepreneurs, industry groups, and now lawmakers, Governor Gavin Newsom is now beginning to realize the gravity of the situation. If the state does not act rapidly and decisively, there may not be a legal cannabis industry left in California, and billions of dollars of investment capital would be wiped out due to overburdensome taxes that have all but crippled an otherwise great industry.

While these changes would not alleviate the issues associated with 280(e), they would go a long way in bringing the cost of legal cannabis in California down to a price that is closer to the illicit market. Should 280(e) go away, which the IRS independently has no motivation to budge on, then California would easily have the largest and most profitable stand alone cannabis industry in the world. The migration from illicit to legal at that point would happen very quickly and all the promise that the industry had from an investment standpoint would be realized. After all, at that point the consumer would have no reason to access cannabis from anyplace but a legally licensed shop. No illicit market exists for any good, in any industry, unless the price on the illicit market is less expensive than the legal market.

With COVID-19 acting as an accelerant that will drive cannabis business insolvencies, the time for the state to act is now. Without a major course correction on the tax side, the illicit market will remain alive and well. When the legal industry collapses and reverts back to the illicit market, lawmakers will have no one to blame but themselves. The problem is, they likely won’t care. Remember, lawmakers love the money the industry produces for them, but they don’t love the industry. If they did, these issues would have already been addressed. The fact that they have not tells you that short term greed is still winning over common sense.

Parts 1 and 2 of this series may be found here and here.

Why the Illicit Cannabis Market is Alive and Well in California – Part 2.5 – Taxes
Source: Future Cannabis Project

NFL Hall of Famer Joe Montana’s Big Marijuana Investment

January 28, 2019 by Staff Writer

I usually don’t relate personal stories in this space, but today I’m making an exception.

January 22nd, 1989, almost 30 years ago to the day that I’m writing this. I don’t remember what the weather was like around my home in a suburb of Cincinnati, but I’m sure it was cold. In fact, thirty years has clouded most of my memories of the mundane aspects of that day, but there are a few things about that night that I will not forget any time soon.

Those of you who are old enough to remember Super Bowl XXIII (see video below) probably know where I’m going with this. With about 3 minutes to go in the game, my beloved Cincinnati Bengals led the San Francisco 49ers 16 to 13. The 49ers offense, led by already legendary quarterback Joe Montana, had the ball at their own 8-yard line, meaning they had to drive 92 yards to score the game-winning touchdown.

And, of course, they did. Joe Montana marched his team down the field and hit wide receiver John Taylor in the back of the end zone with 34 seconds left in the game. I was nine years old and I was crushed. Tears streamed down my face.

What’s the point of all this? Well, besides being kind of cathartic for me, this story is my long way of leading into Joe Montana’s recent monetary investment in the legal cannabis industry. While I applaud investments in the legal marijuana industry that will help grow the industry in the years to come, Joe Montana’s name and face give rise to a visceral reaction in me, like my nine-year-old self trying to fight his way out and exact his revenge.

Well, maybe not something as dramatic as all that, but you get my point. It’s like seeing the bully who beat you up in grade school reading to blind children thirty years later. It creates mixed emotions.

Yet one thing fans and haters of Joe Montana alike know very well is that he is a winner. And the marijuana industry needs winners now more than ever as it fights its way through a myriad of rules, regulations and tax rates to take its place as the mainstream multi-billion dollar industry it should always have been.

As for the nuts-and-bolts of the investment itself, Montana is part of a $75 million stake in Caliva, a San Jose, California-based group that said it’s using the money to grow a company that includes a farm, a retail store, distribution center and a delivery service. He’s part of a growing group of NFL veterans that are publicly questioning the way players are treated for their ailments, saying cannabis “can provide relief to many people and can make a serious impact on opioid use or addiction.”

Despite my feelings, when it’s time to get something done, I would put my money on Joe Montana to get it done.

NFL Hall of Famer Joe Montana’s Big Marijuana Investment
Source: Marijuana Times

The Super Bowl Isn’t Ready for Cannabis Commercials Just Yet

January 24, 2019 by Staff Writer Leave a Comment

Acreage Holdings, a multi-state cannabis firm based in the U.S., attempted to get a medical marijuana advocacy commercial in the lineup of Super Bowl commercials this year. Unfortunately – and somewhat unsurprisingly – the ad was rejected by CBS. According to Acreage President George Allen, he had hopes that the advertisement could “create an advocacy campaign for constituents who are being lost in the dialogue.” To Allen it seemed obvious that the most-watched televised event of the year would be a great way to get that message in front of as many people as possible.

“We certainly thought there was a chance,” Allen said. “You strike when the chance of your strike has the probability of success – this isn’t a doomed mission.”

This year seemed like the perfect opportunity for the first cannabis ad, seeing as how both teams playing in the Super Bowl come from states where cannabis is legal for both medicinal and recreational use. With the national opinion on medical marijuana – and marijuana in general – swiftly changing in the last decade to strongly supporting legalization, the timing seemed right.

There are two versions of how the rejection came to happen. According to Bloomberg, Acreage Holdings says the ad was cut after a rough outline was provided; CBS, on the other hand, claims that CBS News asked to see the ad and the company never provided it. However, no matter how it went down, the truth is CBS wasn’t planning on airing the ad.

In a statement, CBS said, “Under out broadcast standards, we do not currently accept cannabis-related advertising.”

On top of being rejected by CBS, the NFL also has the option to reject Super Bowl ads and considering their current ban on players using medical marijuana, it seems unlikely they would allow an ad advocating the plant to be aired during their biggest game of the year. While the NFL itself is not a fan of medical marijuana, many players – both current and former – support legal medical marijuana access, and many former athletes advocate for (and have stakes in) the medical cannabis industry.

“We’re disappointed by the news but somewhat unsurprised,” Allen told CNN Business. “Still, we developed the ad in the spirit of a public service announcement. We feel it’s our responsibility to advocate on behalf of our patients.”

Now the internet is calling out CBS for their hypocrisy, pointing out the several ads we are likely to see for alcohol and pharmaceutical drugs while refusing to let a company advocate for a medicinal plant. Perhaps Acreage Holdings (or another cannabis company) will have better luck getting their message out through the most coveted television advertisement space in the next couple of years.

The Super Bowl Isn’t Ready for Cannabis Commercials Just Yet
Source: Marijuana Times

Ohio Medical Cannabis Dispensaries Officially Open

January 18, 2019 by Staff Writer Leave a Comment

Medical cannabis dispensaries in Ohio officially sold the first legal plant medicine this week. According to a report from Ohio 10 TV, four dispensaries were open for the first day of sales. This is good news for patients in need of cannabis medicine, but the state’s program is definitely not without its fair share of complications.

The state government has issued over 56 licenses to dispensaries, but unfortunately, only four of those were open this week – two in Wintersville, one in Canton, and one in Sandusky. A dispensary in the Cleveland area also expects to open within the next few days, according to Ohio 10 TV.

And only cannabis growers are currently licensed and certified to operate. Processing and manufacturing facilities for cannabis will still have to wait longer to be licensed, which is naturally causing some challenges. The medical program in Ohio currently allows for physicians to recommend patients use medical cannabis if they have one of 21 qualifying conditions. At this time, only cannabis flowers are being sold. Edibles, vape pens and tinctures will be available for purchase once the processing centers are open and operating.

As we are seeing with other legal states, the prices of the first legal cannabis being sold in Ohio are sky-high. An ounce of cannabis in Ohio medical cannabis dispensaries costs an astronomical $500. This, of course, isn’t including what it costs to see a doctor for a recommendation, and any costs for a medical card itself. This is a shame, because such high costs encourage the black market to flourish.

In addition to the high costs of the product itself, the medical cannabis program in Ohio has been delayed several times. Cannabis sales were initially slated to being last September, but regulators say that the quality of license applicants was lacking. Ohio Senate Minority Leader Kenny Yuko, a cannabis legalization advocate, made a public statement criticizing the regulatory officials in the state for delaying sales and making patients wait for the cannabis medicine they need. He says that the number of dispensaries and processor licenses needs to continue to grow, creating “An opportunity for the new governor to do right by people who are suffering,” he said.

Yuko went on to urge Ohio Governor Mike DeWine to prioritize the growth of the medical cannabis program in the state. At any rate, at least some Ohio patients are finally given access to the medicine that they need and have been waiting for, and hopefully the program continues to expand successfully.

Ohio Medical Cannabis Dispensaries Officially Open
Source: Marijuana Times

Only Economics Can Defeat the Black Market

January 7, 2019 by Staff Writer Leave a Comment

Before we begin, let’s make one thing clear: there will always be a black market for marijuana. Alcohol is legal, yet there are still those who make their own illegally. Cigarettes are legal, yet there are still places where you can buy them on the street and avoid the tax levied on legal tobacco products.

As long as some part of the cannabis industry remains illegal, someone will be there to take advantage of the inflated profits that come from selling an illegal substance. And as long as legal marijuana remains much more expensive than illegal marijuana, the black market for cannabis will remain and even thrive. No laws can change this, any more than the laws against marijuana have wiped out marijuana use.

“[A] recent story by the Southern California News Group highlights a more pressing issue,” The San Diego Union-Tribune Editorial Board said in a recent op-ed. “It cited evidence that ‘the illicit side of the weed business is only growing stronger’ in California because illegal sales and cultivation are so much cheaper and have so few hassles compared with legal sales and cultivation.”

Much has been made of the high taxes and burdensome regulations suffered by legal cannabis businesses in California. I’ve remarked on the subject several times, most recently in my review of the Netflix docuseries “Murder Mountain.”

California is a perfect example of how to fail at under-cutting the black market. Legal marijuana businesses are in competition with each other obviously, but their main competition are illegal dealers and unlicensed dispensaries who are free from costly compliance and whose products are free from high taxes. The result is much lower prices from those dealers and dispensaries.

No law will stop illegal dealers, as the histories of alcohol and drug prohibition have taught us. Only economics can do that. If legal cannabis businesses can offer better products at lower prices, they can crush the illegal market. All things being equal, cannabis consumers would rather buy from a legal shop.

I understand this may not be a popular thing to say in some quarters in this day and age, but here it goes anyway: the only way to drive illegal dealers out of business is to lower prices – and the only ways to lower prices are to increase supply and lower taxes. Restrictions and regulations must be stripped down so that the maximum amount of businesses the market will hold can come into being. Taxes that inflate the price of cannabis products must be lowered.

The greater variety and safer buying experience that legal businesses can offer are natural advantages over the black market, but unless legal businesses can compete when it comes to price, those other advantages will never be enough to shrink the illegal market.

Only Economics Can Defeat the Black Market
Source: Marijuana Times

Cannabis Investment, Licensing and Regulatory Trends

January 7, 2019 by Staff Writer Leave a Comment

Join a group of licensing, investment and regulatory experts to talk about trends and expectations for 2019 in states along Amtrak’s Northeast corridor – from Massachusetts to Maryland.

TICKETS

Speakers

Debra Borchardt, CEO and Editor-in-Chief, Green Market Report
Ed Keating, Co-founder & Chief Data Officer, Cannabiz Media
Aaron Lachant, Co-founder & CEO, MMLG
Matt Karnes, Founder, GreenWave Advisors

The post Cannabis Investment, Licensing and Regulatory Trends appeared first on Future Cannabis Project.

Cannabis Investment, Licensing and Regulatory Trends
Source: Future Cannabis Project

A Little More Country, But Getting Ready to Rock and Roll

December 18, 2018 by Staff Writer Leave a Comment

The continuing trend of individual state approvals of cannabis use along with the recent end of prohibition in Canada have sparked a heightened level of interest in the U.S. Cannabis industry among a larger and more sophisticated pool of investors.

This interest has been further inspired by the U.S. Federal Government’s continued reluctance to aggressively interfere with individual state permissions despite early on threats by the Trump Administration’s Department of Justice led by the recently dismissed Attorney General Jeff Sessions.

We continue to believe that the rescission of federal cannabis prohibitions is inevitable, the question is when. Given the confluence of reform measures at both the state and federal levels we are optimistic that a first step for meaningful change to federal policy could come as early as next year with the passage of The STATES Act (a bipartisan bill providing state protections under the Tenth Amendment).

The complexity of the U.S. cannabis industry has been exacerbated by the consequences of states operating within the confines of closed economies that strive for their own interpretations of legitimacy under the shadow of existing federal laws. This variation of standards from one state to another carries an inherent uncertainty for businesses and investors with respect to how the industry will operate subsequent to the delisting or reclassification of cannabis as legal standards evolve.

We have in the past promoted a bullish stance as to the prospects of the cannabis industry’s potential development. Beginning with our first publication, “The GreenWave Report: State of the Emerging Marijuana Industry – Current Trends and Projections” (October, 2014) we suggested five primary underpinnings we believed would sustain development and growth moving forward towards national legalization. Since then, we have observed a steadfast progression on all fronts:

1. “Compelling economic benefits that are derived from the creation of new jobs and tax revenues”. Since 2014, we conservatively estimate the cannabis industry has created ~100K jobs in the U.S. From 2014 through the end of this year, we estimate total sales tax revenues (medical and recreational) will have totaled $3.5 Billion (excluding tax collections from wholesale and manufacturing).

2. “The U.S. Department of Justice planted the seeds for reform by allowing each state to determine and enforce its own marijuana laws under a set of mandated guidelines established by the Obama Administration (“Cole Memo”)”. While the federal government has continued to maintain the prohibitive legal status of marijuana, the pressures brought to bear by the multitude of state and multinational statutes that have locally decriminalized and regulated its use have steadily comforted business development within the industry. Post this year’s elections, there are 33 states (plus D.C.) that allow medical marijuana (up from 24 (plus D.C.) at the end of 2014) and 11 states (plus D.C.) where cannabis is fully legal (up from 4 (plus D.C.) at the end of 2014). Additionally, we expect legislative measures allowing recreational use to soon pass in several other states (including New Jersey and New York).

3. “Shifting opinions and demographics have led to bipartisan support”. Americans in favor of legalization has increased from 58% in 2013 to 68% in 2017 (Gallup Poll). We note 89% of cannabis related bills introduced in the current Congressional Session are bipartisan supported (at least one Republican Co-sponsored) and out of this count, 44% are Co-sponsored with a majority of Republicans. This is a notable difference from legislation introduced in prior sessions (61% and 22% respectively).

4. “The Federal Drug Administration (FDA) signals a willingness to understand the medicinal benefits of Cannabis”. Epidiolex was recently approved by the FDA as a treatment for young children that experience severe seizures from epilepsy. Subsequent to the FDA approval, the U.S. Drug Enforcement Agency placed this drug in Schedule V (least restrictive classification). This medication is now commercially available and as we understand, covered by most insurance plans. The FDA approval is significant because it marks the beginning of an inevitable inflection point that will recalibrate and redefine medical marijuana (as it exists today) with precise dosage and efficacy.

5. “The federal government has stepped up spending for marijuana research”. Production requirements for medical marijuana research has increased steadily from ~1,400 pounds in 2014 (up from just 46 in 2003) to ~5,400 pounds earmarked for 2019. Additionally, the federal program has extended eligibility to other participants besides the University of Mississippi which has historically been the sole source of all cannabis research. We believe that the government’s willingness to make substantial further investment in marijuana related research suggests a higher probability that a change to the current Schedule 1 classification will occur sooner than we had originally anticipated.

EXPECTATIONS FOR THE NEXT PHASE OF INDUSTRY GROWTH

We remain bullish on the overall prospects of the cannabis industry and this year’s election results in which 3 states passed reform measures (MI – Recreational Use, MO, UT – Medical), supports our trajectory for its growth potential before federal prohibition ends. Since 2014, we have taken the non-consensus view that every state will permit medical marijuana or fully legalize its use before the end of federal prohibition. Accordingly, we maintain our estimate that the U.S. retail cannabis market could reach ~ $35B by 2022 up from ~ $9.6B in 2018 with much of its growth attributed to newly established markets (fully legal or medical only in all remaining states).

Along the way, we expect the following:

A green wave of consolidation: Subsequent to the initial euphorias of “limitless entrepreneurial potential” fostered by individual state cannabis permissions, unforeseen pitfalls and consequences (such as ill- defined rules and regulations, delays in state license issuances, lack of funding etc.) have taken a toll on many first actor enterprises. These unforeseen consequences of the incremental advancement of legalization from one state to the next has in many ways defined this early phase of development. We predict that some of these new realities will become the cornerstones of a mature cannabis industry.

In our 2014 report, we suggested that “larger players in cultivation will have the ability to accommodate mass market production with higher profit margins due to economies of scale, and smaller competitors will likely need to consolidate for survival”. The headwind of IRS Section 280E (disallows most operating expenses for tax purposes), pressures most of these plant touching enterprises from achieving positive free cash flow. Today we witness increased competition within maturing state markets and as standards become more defined and federally mandated and regulated (under agencies such as the FDA and Department of Agriculture) an economy of scale will be a priority for sustainability and growth particularly as new and sizeable entrants emerge ready and able to compete aggressively (Big Pharma, Big Alcohol etc) .

Maturation of existing markets following the Colorado Peak: We expect Colorado to report flat to negative revenue growth this year which establishes a benchmark of 5 years to maturity (Jan ’14 – Dec ’18). However, the trajectory of growth in any one state may not be congruent with other markets as the velocity of falling wholesale prices is not consistent within each state. Additionally, Colorado may be an outlier because it benefited from “canna” tourism in the early years as the only state to allow cannabis consumption for recreational use. As we continue to evaluate the fundamentals of other fully legal states (Oregon and Washington) we observe that these markets, while not fully mature, have slowed.

Product quality and reliability will likely differentiate business profiles: Within the cannabis ecosystem businesses will establish and endeavor to maintain more specific niche identities. Whether individual enterprises seek to penetrate the market from the lower or upper end of perceived consumer demands, successful market penetration will be heavily dependent upon the allocation of increased branding efforts.

Following federal legalization there will be a “true” divergence of medical and recreation use enterprises: Although medical use legislations were the first to burst the prohibition dam, the development of true medical applications has been slow to develop. Subsequently, many recreational users have previously gained access to cannabis products through quite general qualifying medical conditions (such as chronic pain). As new states implement recreational use, we believe that many of these “patients” have become “consumers” evidenced by the decline in cardholder counts.

While we do not intend to understate the importance or necessity of medical marijuana as an alternative treatment for many debilitating health conditions, there presently appears to be little distinction between the various designated medicinal use products and those offered in a recreational market. We reiterate our belief that the medical marijuana market will in time, be recalibrated when the pipeline of new, more targeted medicaments become available and as the medical profession gains more comfort in “pushing” a cannabis treatment rather than a patient having to “pull” a recommendation.

Further to this is our expectation that states with both legalized medical and recreational use will continue to evaluate the practicality of merged regulatory regimes. Our research suggests that the medical community’s participation has been insignificant, as ~5% of licensed physicians in existing medical marijuana states are registered to recommend marijuana to qualified patients thus inhibiting the full potential of a medical market. Hence, we believe that it will be increasingly more difficult for medical marijuana sales to thrive in a dual market environment (particularly as our findings suggest that average monthly dispensary revenues are near half that of recreational retail outlets).

It is logical to assume that regulatory oversight and enforcement will be less redundant, more cost efficient, and less confusing in a merged platform. For all intent and purposes, we see this effort presently in most of the states that allow recreational use. (See our report, “The State of Colorado- Year One: The Co-Existence of Legalized Medical and Recreational Use Marijuana Markets” March, 2015).

Banking Reform on the Horizon: The implementation of California’s recreational use market in January continues to raise public safety concerns due to the magnitude of cash collections (we estimate ~ $3.5B in 2018 including sales tax). Unlike sales consummated through the black market, the legal retail channels contain an added element of risk – a known address where a cash transaction occurs (i.e. dispensary). California failed to pass legislation this year that would have created a state backed bank to serve its cannabis businesses. The U.S. market is heavily concentrated in California (~ 40%) and as such we think Congress will soon take action to ease federal restrictions.

With the advent of federal acceptance, cannabis businesses across the board will have access to traditional banking services. This normalized financial environment will enable businesses to not only execute point of sale transactions in a safe and secured manner, but will also enable access to competitive short and longer term financing options.

(See our report, “Navigating the Shoals of Cannabis Banking Regulations” (November, 2017) for more on this subject matter).

The CBD market and ancillary businesses provide compelling investment opportunities. The proliferation and diversity of the various state legalized marijuana markets have spawned numerous and different ancillary enterprises that are eagerly seeking a permanent foothold in the evolving cannabis eco-system. Lab testing, Seed-to-Sale Software and Delivery Services are particularly appealing to us. Also, we believe the CBD market has promise for tremendous growth which will likely ignite soon after the Hemp Farm Bill is passed. We will provide further discussions around these topics in a subsequent edition of “The GreenWave Buzz”.

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A Little More Country, But Getting Ready to Rock and Roll
Source: Future Cannabis Project