Business
Opinion: Why MSOs should embrace hemp-derived delta-9 THC products
What if I told you that you could sell real cannabis edibles in traditional grocery, convenience and liquor stores in a few dozen states without being bound by local marijuana laws and regulations?
What if I told you there’s a huge opportunity for cannabis companies to get their edibles in front of millions of consumers who would never consider walking into a marijuana retailer, but the biggest players in the MJ space seem too scared to take advantage of it?
I’m talking about delta-9 THC products derived from hemp.
The great loophole of 2018
In 2018, U.S. lawmakers passed and signed into law the 2018 Agricultural Improvement Act, colloquially known as the 2018 Farm Bill.
This bill legalized and defined hemp as a cannabis plant containing no more than 0.3% delta-9 THC on a dry-weight basis – specifically when grown on a farm in compliance with a state hemp program approved by the U.S. Department of Agriculture – in order to create a regulatory structure for industrial hemp.
The result? The U.S. accidentally legalized THC nationwide – sort of.
Minnesota blows the door open
After the 2018 Farm Bill became law, most business owners still were scared – and understanding the rules of the measure became a real master class in how laws get interpreted and applied between regulators, law enforcement, the judicial system and the real enforcers: banks and insurance companies.
For the most part, many business owners wouldn’t touch hemp-derived delta-9 THC for a long time.
Then, in 2022, Minnesota lawmakers managed to sneak one past the goalie and legalized hemp-derived delta-9 edibles in the state with a THC cap of 5 milligrams per serving and 50 milligrams per package.
Since then, hemp-derived delta-9 edibles sales have soared in Minnesota, with dozens or even hundreds of players entering the space.
Some states have loosened their hemp laws; others have tightened them.
But the opportunity? It’s bigger than anything the state-regulated system could offer.
Scalability is the key
There is a dirty secret to the regulated marijuana retail system: The more restrictive and specialized it is, the more difficult it is to distribute and scale.
Beverages, in particular, are a tough sell to licensed marijuana manufacturers because they can’t justify the size and expense of equipment for use in one state market.
Hemp-derived delta-9 products, on the other hand, don’t require a marijuana license.
They can be made by people who also make other beverages, solving the overhead problem for manufacturers and making them cheaper and easier to produce.
They can be distributed by firms that have decades of experience getting products to retailers.
They can be sampled, stocked and sold in stores just like other beverages.
Thus, there is a branding opportunity far more scalable than anything state-regulated marijuana programs have to offer.
Within months of launching its hemp-derived delta-9 beverages, infused drinks producer Cann announced that more than 50% of its sales were from hemp channels – despite the company’s products being among the most widely available THC-infused beverages in state-regulated marijuana programs.
Where are the big players on this?
Why are large multistate operators not taking advantage of hemp-derived delta-9?
Some have theorized that these companies are threatened by the idea that cannabis could exist outside of existing regulatory models.
Being among the few licensed manufacturers and retailers is certainly a good business model.
But, as we’ve seen in Massachusetts, it’s not everything: Trulieve Cannabis announced just weeks ago that was shuttering all its Massachusetts operations.
In 2022, I attended a conference where Boris Jordan, Curaleaf Holdings’ board chair, said he saw “highly formulated” products as the entry point for many consumers – and that the company’s data reflected the same.
Hemp-derived delta-9 edibles create a pipeline opportunity: Make great brands that consumers can find at liquor stores, fall in love with and then seek out other cannabis products.
So, if I were the CEO of a cannabis MSO, I’d stop feeling threatened or fearful of this opportunity.
No one is better positioned to do this than companies with a lot of capital, vehicles for fundraising and internal knowledge about how to make cannabis products safely.
Adam Terry is the CEO and co-founder of Cantrip, a cannabis beverage company based in Framingham, Massachusetts. He can be reached at adam@drinkcantrip.com.
New Mexico regulators fined a cannabis operator nearly $300,000 and revoked its license after the company allegedly created fake reports in the state’s traceability software.
The New Mexico Cannabis Control Division (CCD) accused marijuana manufacturer and retailer Golden Roots of 11 violations, according to Albuquerque Business First.
Golden Roots operates the The Cannabis Revolution Dispensary.
The majority of the violations are related to the Albuquerque company’s improper use of BioTrack, which has been New Mexico’s track-and-trace vendor since 2015.
The CCD alleges Golden Roots reported marijuana production only two months after it had received its vertically integrated license, according to Albuquerque Business First.
Because cannabis takes longer than two months to be cultivated, the CCD was suspicious of the report.
After inspecting the company’s premises, the CCD alleged Golden Roots reported cultivation, transportation and sales in BioTrack but wasn’t able to provide officers who inspected the site evidence that the operator was cultivating cannabis.
In April, the CCD revoked Golden Roots’ license and issued a $10,000 fine, according to the news outlet.
The company requested a hearing, which the regulator scheduled for Sept. 1.
At the hearing, the CCD testified that the company’s dried-cannabis weights in BioTrack were suspicious because they didn’t seem to accurately reflect how much weight marijuana loses as it dries.
Company employees also poorly accounted for why they were making adjustments in the system of up to 24 pounds of cannabis, making comments such as “bad” or “mistake” in the software, Albuquerque Business First reported.
Golden Roots was fined $298,972.05 – the amount regulators allege the company made selling products that weren’t properly accounted for in BioTrack.
The CCD has been cracking down on cannabis operators accused of selling products procured from out-of-state or not grown legally:
- Regulators alleged in August that Albuquerque dispensary Sawmill Sweet Leaf sold out-of-state products and didn’t have a license for extraction.
- Paradise Exotics Distro lost its license in July after regulators alleged the company sold products made in California.
Golden Roots was the first alleged rulebreaker in New Mexico to be asked to pay a large fine.
Source: https://mjbizdaily.com/new-mexico-cannabis-operator-fined-loses-license-for-alleged-biotrack-fraud/
Four marijuana companies, including a multistate operator, have filed a lawsuit against U.S. Attorney General Merrick Garland in which they allege the federal MJ prohibition under the Controlled Substances Act is no longer constitutional.
According to the complaint, filed Thursday in U.S. District Court in Massachusetts, retailer Canna Provisions, Treevit delivery service CEO Gyasi Sellers, cultivator Wiseacre Farm and MSO Verano Holdings Corp. are all harmed by “the federal government’s unconstitutional ban on cultivating, manufacturing, distributing, or possessing intrastate marijuana.”
Verano is headquartered in Chicago but has operations in Massachusetts; the other three operators are based in Massachusetts.
The lawsuit seeks a ruling that the “Controlled Substances Act is unconstitutional as applied to the intrastate cultivation, manufacture, possession, and distribution of marijuana pursuant to state law.”
The companies want the case to go before the U.S. Supreme Court.
They hired prominent law firm Boies Schiller Flexner to represent them.
The New York-based firm’s principal is David Boies, whose former clients include Microsoft, former presidential candidate Al Gore and Elizabeth Holmes’ disgraced startup Theranos.
Similar challenges to the federal Controlled Substances Act (CSA) have failed.
One such challenge led to a landmark Supreme Court decision in 2005.
In Gonzalez vs. Raich, the highest court in the United States ruled in a 6-3 decision that the commerce clause of the U.S. Constitution gave Congress the power to outlaw marijuana federally, even though state laws allow the cultivation and sale of cannabis.
In the 18 years since that ruling, 23 states and the District of Columbia have legalized adult-use marijuana and the federal government has allowed a multibillion-dollar cannabis industry to thrive.
Since both Congress and the U.S. Department of Justice, currently headed by Garland, have declined to intervene in state-licensed marijuana markets, the key facts that led to the Supreme Court’s 2005 ruling “no longer apply,” Boies said in a statement Thursday.
“The Supreme Court has since made clear that the federal government lacks the authority to regulate purely intrastate commerce,” Boies said.
“Moreover, the facts on which those precedents are based are no longer true.”
Verano President Darren Weiss said in a statement the company is “prepared to bring this case all the way to the Supreme Court in order to align federal law with how Congress has acted for years.”
While the Biden administration’s push to reschedule marijuana would help solve marijuana operators’ federal tax woes, neither rescheduling nor modest Congressional reforms such as the SAFER Banking Act “solve the fundamental issue,” Weiss added.
“The application of the CSA to lawful state-run cannabis business is an unconstitutional overreach on state sovereignty that has led to decades of harm, failed businesses, lost jobs, and unsafe working conditions.”
Alabama regulators are targeting Dec. 1 to award the first batch of medical cannabis business licenses after the agency’s first two attempts were scrapped because of scoring errors and litigation.
The first licenses will be awarded to individual cultivators, delivery providers, processors, dispensaries and state testing labs, according to the Alabama Medical Cannabis Commission (AMCC).
Then, on Dec. 12, the AMCC will award licenses for vertically integrated operations, a designation set primarily for multistate operators.
Licenses are expected to be handed out 28 days after they have been awarded, so MMJ production could begin in early January, according to the Alabama Daily News.
That means MMJ products could be available for patients around early March, an AMCC spokesperson told the media outlet.
Regulators initially awarded 21 business licenses in June, only to void them after applicants alleged inconsistencies with how the applications were scored.
Then, in August, the state awarded 24 different licenses – 19 went to June recipients – only to reverse themselves again and scratch those licenses after spurned applicants filed lawsuits.
A state judge dismissed a lawsuit filed by Chicago-based MSO Verano Holdings Corp., but another lawsuit is pending.
Source: https://mjbizdaily.com/alabama-plans-to-award-medical-cannabis-licenses-dec-1/
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