Andrew Livingston: 0:00

It's kind of that field of dreams, right? Like if you build it, they will come. But the dynamic is you have to build a system that actually attracts consumers and provides them with a set of goods that is better than what they can get in the illicit market, right? So this is why and we'll talk later about, like, why places like Texas haven't really succeeded in their medical program is because the program there does not provide consumers with what they want.

AnnaRae Grabstein: 0:32

Hey everybody, welcome to episode 90 of High Spirits. I'm Anna Rae Grabstein and today we are recording on Thursday, may 29th 2025, and we have a great show for you today. You might notice if you're watching on video that my amazing co-host, ben Larson, is not with us today, but that means that I am going to be bringing on our guest early to do the news roundup with myself, so I'm going to queue up our guest. Andrew Livingston is a trusted economist and policy, so welcome, andrew, thank you so much, Anarae.

Andrew Livingston: 1:32

It's really a pleasure to be on the podcast and looking forward to diving into news. Before we dive into more news.

AnnaRae Grabstein: 1:39

Yeah, and even before that, how's your week going? What's going on in your world?

Andrew Livingston: 1:44

It's going pretty well. We're a little bit late because of my technical difficulties associated with a slow computer, so you got a slightly different angle of me on my phone. But everything's going relatively well. Had a good Memorial Day weekend, so just very busy tracking legislative news which sadly mostly has not been good, but we'll try to keep it bright and cheery, even if we have to talk about things that aren't.

AnnaRae Grabstein: 2:09

I know Sometimes looking for good news in cannabis these days can be more difficult than I would hope.

Andrew Livingston: 2:15

I just wish that wasn't the case. At least we have a product that makes it a little easier.

AnnaRae Grabstein: 2:19

Good point, very good point. Well, let's jump into our news roundup. I want to start today with talking about HB 46 in Texas. Most of the news has been gobbled up by people talking about the hemp ban, which we'll talk about later, but for now we do want to talk about some potential opening up of some aspects of the market in Texas. Texas HB 46 is a bill to expand the existing medical marijuana program in Texas, which right now is extremely limited. You want to share a little bit about what it does do and what it doesn't do, this HB 46?.

Andrew Livingston: 2:55

Well, it's important to know that this has been amended quite a bit over the last. You know, 28, 48 hours. So in its current iteration, of course, by the time I don't know, this gets posted live, right, so this should still be the iteration by its posted. So, depending on when you listen to this, we're currently at 12 licenses. So that's not 12 new licenses, that would be nine new licenses, given the three existing. It also three out of those nine new licenses would be given to applicants who applied during the 2023 round, which was never scored or acted upon, and I think that's hopefully to reduce some litigation, as it's kind of crazy to put forward. This is also not the first time that Texas has has opened up an application phase and then never really done anything with it. So there's that, the other you know interesting thing. It opens up a few more qualifying conditions, which is really exciting, and it also Form factor allows.

AnnaRae Grabstein: 4:05

It allows vape.

Andrew Livingston: 4:06

Exactly, exactly.

AnnaRae Grabstein: 4:10

But some other form factors that are less popular in the market, like lotions and certain different types of topicals and tinctures and things.

Andrew Livingston: 4:19

Yeah, I mean, those have been effectively legal through hemp anyway and while while they're going to be likely going to be prohibited, at least thc topicals you know for, uh, you know with, with sb3, um, that's, you know, not that big of a deal. There's also like nebulizers and stuff like that. Those don't really exist. The predominant thing is vapes. Yeah, if that really opens up, then honestly we will see, hopefully some expansion. I mean, beyond that too. There's also a big thing is satellite locations. So you know there's some technical changes over the last few rounds of floor amendments about what that's actually going to be. Do you get grandfathered into satellite locations? If those were, you know, previous pickup locations or not? I think that was actually changed in some of the floor amendments. But part of the big problem now is you only got three operators. Only two are really operational and they can't open additional locations because there's no overnight storage. How do you get cannabis to El Paso from the facilities in and around Austin in a day? It's just, it's not really feasibly possible.

AnnaRae Grabstein: 5:29

The current program in Texas is really messy. It's hard for the operators to be successful, so this does provide some pathways to potentially making access a little easier. A couple of things I'll quickly mention that it doesn't do is it doesn't allow smokables, it doesn't automatically qualify veterans, which was originally proposed in the first version of the bill. This is something, but it certainly is not a fully open, accessible adult use marketplace by any means, and it's not even a very open medical market. But it will. It will have conditions from what they are right now. Let's move on to the next news story, which is Canna Provisions versus Garland, sometimes also called the Boys Schiller lawsuit. This is a really notable law firm that has done a lot of work getting cases to the Supreme Court, and yesterday there was another one more step closer, potentially, to getting this case before the Supreme Court. What are they trying to do? Kiana Provisions and Boies Schiller?

Andrew Livingston: 6:39

So essentially what they're and I'm not an expert in this specific case, not involved in the case Essentially what they're trying to say is that by the federal government uh, both implicitly and to some degree explicitly not enforcing the controlled substances act, whether interstate or intrastate really intrastate with regards to, you know right, state regulated cannabis that essentially they're looking to um and overturn, amend in certain ways the Reich case from decades ago. And so Gonzalez versus Reich. The Supreme Court reasoned that because Congress intended to eradicate cannabis from interstate commerce and because, essentially, you know, even cultivating cannabis in your own property for medical use would impact interstate commerce, because it would affect your demand for so it was a very broad reading of interstate commerce. And so you know, I think some of the strategy is is that the current Supreme Court is like would likely take a less open view of the federal government's power to regulate intrastate commerce, because it says that what Gonzalez-Friedrich said is that pretty much any action is in the purview of the federal government If it affects a market that could affect things interstate.

AnnaRae Grabstein: 8:00

I bet on a more conservative-leaning Supreme Court being more in favor of states' rights and that being an unlock for the state level cannabis regimes. Yeah, so we'll see what happens. This is going to take years. To be honest, it's faster than I thought it would.

Andrew Livingston: 8:19

Well, it may or may not take years, right? Because if the Supreme Court decides not to hear the case, I don't know what the dynamics are for, like, if you don't get heard in that year, can you get heard in the next year? I don't think so. So I mean, it just depends upon whether or not the Supreme Court wants to, you know, wants to overturn precedent associated with drug enforcement. Because the other dynamic too is that, like, if the federal government doesn't have purview over intrastate commerce as it pertains to marijuana, that changes a lot of other things that are predicated on that federal power.

Andrew Livingston: 8:57

For instance, let's look at, like you know, state level psilocybin regulation. There's that right, Like it's, you know it wouldn't just be marijuana. You know, if you're cultivating psilocybin regulation, there's that right, Like it's, you know, wouldn't just be marijuana. You know, if you're cultivating psilocybin and it's state regulated and it's not impacting interstate commerce, then do we have protections there? How does that change? Things like 280E and, you know, are you trafficking in a controlled substance if you are engaged in purely interest state legal commerce, State?

AnnaRae Grabstein: 9:28

state yeah.

Andrew Livingston: 9:30

So so I think there's there's larger questions here. You know this. Some of this gets into legal analysis that I am not qualified for, but as a news watcher on these sorts of things, I think it is exciting that cannabis companies are pursuing various different avenues of federal reform. Let's not forget that a bunch of other countries have legalized cannabis through the court system. Now some of those have resulted in federal regulatory systems. Others are slow but may do that in the future. So, for instance, like Mexico, our neighbors to the south, their federal legal cannabis regime, although it hasn't really been implemented in a regulatory perspective, was created because of federal lawsuits. Initial medical marijuana in Canada were also a series of federal lawsuits.

AnnaRae Grabstein: 10:17

You bring up a great point, because we often are talking about the way that we need to change the laws in the cannabis sector in general, and the path that most people think of when they think of that is sort of a two-part path, which is one like either moving through the legislature or the other doing some sort of ballot initiative, and there is another way, which is going through the judiciary, and that's what this case is attempting to do.

AnnaRae Grabstein: 10:44

Great, let's go on Some news from California. We have covered this a little bit, but California operators are rallying together in ways that they haven't in years to try to stop a tax increase that is scheduled for July. It's moving through the legislature pretty quickly under the leadership of a member of the state legislature, matt Haney, who reigns from San Francisco, my hometown. It seems likely, based on its committee passages, that it will move through. But the question that I think is really worth asking is what will Governor Newsom do? Is he going to sign a tax relief bill when he has been incredibly clear that he is not looking to remove any revenue from the state right now because of an intense deficit and budget crunch that the whole state is faced with, and he's definitely pushing back on Trump's tariffs as the reason that he's making these policy proclamations. So we'll see what Newsom will do you following this one.

Andrew Livingston: 11:45

Not really in a significant way. I, you know, wish the best for all of our California businesses and the California industry. It is a challenging environment, to say the least, and I think it really demonstrates that the initial regulatory structure that was put under you know, macrsa, and then MACRSA and all the other acronyms that happened between 2015 to 2016, when, eventually, you know, adult use was passed, were not designed in a way that was sustainable for a industry that had to survive on thin margins.

AnnaRae Grabstein: 12:26

Yeah, let's be real. Californians legalization initiative was created on the back of drug dealer margins. They thought that. They thought that they were going to print money in California.

Andrew Livingston: 12:37

I don't think the businesses thought they would print money. I think the legislators thought they would print money. The legislators, yeah, good point.

AnnaRae Grabstein: 12:44

Well, let's move to some quick good news and then we'll we'll jump into the in-depth conversation with you about all the things that you work on daily and that good news was hard to find this week but I did make from the BBC, so a reputable news source that is covering the news that London Mayor, sir Sadiq Khan, has come out in support of a report by the London Drug Commission which, among other things, calls for the removal of cannabis from the Misuse of Drug Act and a full decriminalization path. And while this is municipal level news, the mayor of London is a really important person to stand up for cannabis policy change in the UK and this makes a cannabis market and potentially decriminalization in the UK look a little bit more likely in the coming seasons at some point. It's exciting.

Andrew Livingston: 13:43

Yeah, yeah, it makes me think about Professor David Nutt, back a decade or so ago, who was a UK advisor on drugs and he was one of the individuals who put out reports saying that cannabis is less harmful than a lot of other substances. He was the one who's the famous line about how MDMA is less harmful than riding a horse, which is it's also because horseback riding is real dangerous, but it's very true. And you know his report and actions were not acted upon. So hopefully things are changing. And you know, the more cultural change we see in the European in Europe, the better on this.

Andrew Livingston: 14:19

You know, when speaking with people in the UK, it's like you guys are generally more progressive than the United States on certain drug issues. Like, why have you not moved on cannabis? And it's in large part because it's like they have less of a cannabis culture there to the same extent, also because they didn't throw people in cages for decades. And so there's, you know it's kind of the for every political force there's a equal and opposite reaction, right? You know United States drug reform movement that happened in the you know, 1960s and 70s. You know it's really. They started the decriminal movements in the 70s and then obviously you know it was resurgent in into the 90s and 2000s and then, you know, with medical cannabis and all of that was caused by the fact that the federal government was so illiberal. When you've got a regime where people aren't going to jail in the same regards and it's kind of a hear no evil, see no evil, speak no evil, of course there has been enforcement you just generally don't have the same forward push.

AnnaRae Grabstein: 15:16

Yeah, absolutely Well, hats off UK.

Andrew Livingston: 15:19

Let's see what happens.

AnnaRae Grabstein: 15:20

Okay, let's jump in. So you have spent your career really following both cannabis policy change but also economic impact, and I thought it would be interesting if you could give us a little bit about your background while also sharing overall the economic impact of cannabis legalization since Colorado and Washington legalized and what has happened in the US economically, yeah, yeah.

Andrew Livingston: 15:47

So let me tell you a little bit about my background. So I became I was going to say like, infatuated with cannabis policy that's probably the best word for it in high school. So I became obsessed with cannabis policy honestly, like about the same time I started using cannabis. So it was, you know, 16, 17, started, really, you know, and my, my like constitutional structure and my essence is very much, at least at that point in my life, about, you know, finding things that just didn't make sense associated with federal policy, like you know, ways in which our system of governance was wrong, right, which is very like oppositional high school type thing, and you know this was during the Bush administration, and you know, opposition to the Iraq war and all that sort of stuff. So I became really fascinated in the drug war and in the harms that drug war does. My father is a trauma surgeon and ran the trauma center in Newark, new Jersey, for 30 plus years. So I would hear all these stories about, you know, growing up at the dinner table of you know, essentially taking care of generations of families who were involved in drug trade, and I became really interested in why certain drug markets were violent and some weren't. I also go to school every morning, would listen to Kai Risdahl on Marketplace, and became very interested in economics in high school and so I became kind of fascinated in this. One of the things you guys remember Freakonomics the book back what is it? 20 some odd years ago. So Stephen Levitt, one of the economists there, has actually written a lot on the economics of violence and has some really interesting papers that I looked at in college and things like that. So I was really fascinated on that realm of things.

Andrew Livingston: 17:38

When I was in college at Colgate University in upstate New York I was kind of at the height of the Mexican drug war so I spent a lot of time looking at the economics of retributive violence, so when people kill each other and then other people kill each other and like all those sorts of dynamics, but then really kind of you know why. There was a period of time when Juarez was one of the most dangerous cities in the country and El Paso was one of the safest. So learning about how justice systems are utilized or not utilized and that sort of thing. So I began really interested in that and I helped to start a chapter of students for sensible drug policy on my college campus back in 2009. Campus back in 2009.

Andrew Livingston: 18:21

So that is a national and a little bit international organization on college campuses of students advocating to end the war on drugs and, you know, have a drug policy rooted in, you know, human rights, compassion and harm reduction. And so I was really involved in that organization and came out in 2012 to Colorado to work on the Med Mid-64 campaign. I did voter registration coordination when I first moved here and then just came in full-time at the campaign and then, after it passed which was really crazy to have a height of achievement when you were 22, I went to every single regulatory meeting and took notes and integrated myself at the law firm and kind of joined semi-officially at the end of 2012, officially in 2013 as kind of their first non-administrative, non-attorney as a policy analyst, and then worked my way up and been there for 13 years, which is a while.

AnnaRae Grabstein: 19:15

So you're in your first job out of college? Yes, actually, which is a while. So you're in your first job out of college? Yes, actually, well, congrats, yeah, well, so answer the question of the economic impact of cannabis.

Andrew Livingston: 19:27

Sorry, sorry, sorry, sorry, yeah.

Andrew Livingston: 19:28

So a little bit about, but that's the history. So you know what. Okay, so what have we seen? Right, and I think the most fascinating thing with what we've seen in the economics of cannabis is the way that consumers are willing to transition their purchasing over to a legal and regulated market if it meets their needs. So cannabis has provided a really fascinating laboratory of democracy across all of these origin histories, right? So for the first decade or so, from 1996 to about 2008,.

Andrew Livingston: 20:00

All of these laws that passed almost all of them were patient caregiver systems. These were non-commercial, either implicitly or explicitly non-commercial laws. These laws were used so that a patient could either grow their own or have a patient caregiver grow for them. In some places these were very popular. You know. Even in states where they were explicitly non-commercial, there weren't really storefronts. You know, a lot of medical cannabis patients got access through these. Hundreds of thousands, if not millions, of people got access through these kind of non-commercial systems. Then we started to see them commercialize. This was in the end of the Bush administration. Early Obama that's when the you's when the first Ogden memo came out said we're not going to go after patient caregivers. That exploded into a lot of different stores and we still saw some enforcement in California on these sorts of things, but once we started having storefronts they became even more popular, right? So it's kind of that field of dreams, right, like if you build it, they will come.

Andrew Livingston: 20:57

But the dynamic is you have to build a system that actually attracts consumers and provides them with a set of goods that is better than what they can get in the illicit market, right? So this is why and we'll talk later about, like why places like Texas haven't really succeeded in their medical program is because the program there does not provide consumers with what they want, right? And I always talk about three main things. It's the three A's. You need accessibility, affordability and assortment. Right, you need to be able to get the cannabis products you want, which includes flour, concentrates, edibles, all this, your full assortment. They need to be affordable, so your price can't be significantly higher than the illicit market, right? If your legal prices are twice what your illegal prices are, people aren't going to necessarily switch over. And then, third, they need to be accessible. So you need. You know time is money. To a certain extent, if you have to drive half a state away, you're going to keep going to the illicit market because they either deliver to your house or it's from a drug dealer that's not too far away.

Andrew Livingston: 22:00

So, with that sort of thing, over the last 10 years a little more than 10 years MPP actually just put out today a release that there's been more than $24.7 billion in tax revenue since legal adult use sales. $24.7 billion in tax revenue Since legal adult use sales. $24.7 billion represents many, many billions of dollars that are going to legal businesses, that are going to taxpaying businesses that are employing people and paying tax revenue and the ancillary businesses that are around them. This is really in many of these different markets, whether it's in California, you've got about a $4 or so billion market. Colorado has been up and down, but we see about a $2 billion market. Michigan is over a $3 billion market. Florida is likely similar over a $3 billion market.

Andrew Livingston: 22:53

Pennsylvania is close to two these huge markets across the country and some of them are much smaller. Some of them are growing. They're in different stages, but what we've seen through there is really an opportunity for cannabis to be regulated in the way that it should have been regulated many decades ago and that is essentially in a somewhat similar way that we regulate alcohol. Although we'll talk about beverages, those are actually going through an alcohol regulate regulatory standpoint, but from the cannabis standpoint standpoint it's it's really different regulations at the state level. Now, hopefully eventually we'll get federal standards in production. But different states are going to. You know some will allow delivery, some, will you know, have lots. Know some will allow delivery. Some, will you know, have lots of stores. Some will have a handful of stores. Some, even in the future, may have state run stores in the way we have state run alcohol stores, although that bill failed in Pennsylvania. But it's really just an opportunity for that laboratory of democracy to show what succeeds.

AnnaRae Grabstein: 23:52

Okay, and so cannabis legalization has been through many different chapters really, and it has had a fast movement and momentum across lots of different states.

AnnaRae Grabstein: 24:02

But a lot of states didn't legalize cannabis for adult use or for medical, or didn't do so in a way that really hit all those A's that you just talked about, which I love.

AnnaRae Grabstein: 24:12

But on the back of that came hemp, and hemp through a series of different farm bill iterations, starting in 2014 and then more in 2018, a door was opened for the creation of hemp-derived cannabinoids to enter the market in various ways, and we've seen some states choose to add a regulatory layer on top of what the farm bill kind of created and some states haven't, and, as a result, we've had this growth of a huge hemp market that is separate but different and similar to the cannabis market. Ed has created a bunch of confusion, which we've talked about in various different ways, but also an enormous amount of opportunity, and within that, you've been really focused on it, on your work, and I think my guess is that a lot of that has to do with because that has been where there's business opportunity and there is shifts happening within the hemp space, and I want to talk about some of those policy shifts, both from the federal perspective and at the state level, and ultimately get to the discussion about the alcoholization of hemp and where you see that going. So let's talk about some of the state level news that's been happening as it relates to hemp, instead of cracking open the full farm bill discussion at this point. Okay, and let's talk about alcoholization and really what that is. That is a word that doesn't exist if you look it up, but I think a lot of us don't know what it means, so why don't you?

AnnaRae Grabstein: 25:53

use some recent legislation and define alcoholization for us.

Andrew Livingston: 25:58

Yeah, so you know, I think we could look at Kentucky, we could look at Tennessee in some degree. In other States you know things to be considered in Ohio or others. So I would consider the alcoholization of hemp it's really hemp beverages to be a regulatory policy that seeks to integrate hemp beverages either directly or indirectly through traditional alcohol supply chains. So that is things like you know, only alcohol licensees and marijuana licensees could produce the product. Or things like you need to have a three-tier system and there's a distribution tier and alcohol distributors are the only ones that can distribute hemp beverages. Or things like you can't have a cross-ownership between production and distribution and retail unless you, you know, qualify as the equivalent of a microbrewery, you know, that produces itself.

AnnaRae Grabstein: 27:05

So, on the one hand, alcohol benefits from pretty broad accessibility, affordability, assortment, all of those things that you talked about, which are key for cannabis markets to be successful, and so at first this sounds pretty compelling, but this is coming after a lot of hemp products have launched into these various markets, and it means that there could be significant shifts for the businesses that are currently in market in places that are moving towards alcoholization as a regulatory pathway. Why don't you explain how it could change existing market environments for businesses that are in markets that are all of a sudden going to go from maybe no regulations at the state level to an alcohol regulatory system?

Andrew Livingston: 27:56

Yeah, so the most significant impact on business would likely be either a restriction or elimination on direct-to-consumer sales. Yeah, direct-to-consumer sales are huge, right, A lot of these small businesses do a lot of their sales through online internet marketing and direct-to-consumer shipping. You know there's probably billions of dollars of hemp beverage sales that occur through these channels. And you know, historically, alcohol direct-to-consumer sales are not permitted. Right, there are some permissions for wine. You know you can go and visit a winery and then have them direct ship you certain alcohol, so there's kind of that in that system.

Andrew Livingston: 28:40

But in most instances, direct-to-consumer sales are not permitted because the setup of the three-tier system for alcohol was designed to reduce the ability for producers of alcohol to directly interact with consumers and even, to some degree, directly push or persuade alcohol retailers, as there's a lot of different laws about what they can do with advertising. You know, essentially, between those two tiers the manufacturers and the retailers. With regard to, you know, incentive programs, advertising, things like that Some of those differ state by state, so that's going to be one of the major things. In other places, you won't be able to have delivery. Alcohol delivery has become more popular, particularly since COVID, but even in some states where alcohol delivery is permissible, hemp beverage delivery may not be. So that gets into the larger question of are you doing full alcohol or just partial?

AnnaRae Grabstein: 29:34

Well, and I think what's interesting is you're bringing up delivery and direct to consumer and sometimes from a consumer perspective it doesn't feel that different.

AnnaRae Grabstein: 29:42

Both outcomes are a product getting delivered to your house, but from an alcohol perspective, the difference between alcohol delivery that's still coming from brick and mortar retail and that means that it is supporting the ingrained status quo of distribution and brick and mortar retail as the backbone of alcohol distribution channels for consumers and that's what the old school players want to maintain. Partner with a group like Total Wine and a consumer like one of us can go onto DoorDash and order a hemp beverage from Total Wine and a DoorDash driver will bring it to our house, as opposed to that consumer going direct to that brand's website and then getting that product a few days later through the mail. And we talk a lot about who has the power and policy and there has been a openness and a excitement about alcohol coming out in support of THC because it is perceived that alcohol has power and has lobbying resources and things. And now it has happened and alcohol lobbies are coming out in support of THC.

Andrew Livingston: 31:03

But it isn't necessarily all unicorns and rainbows because it will mean some shifts for existing businesses and I think some businesses are more open to it than others is that as a cannabis industry or as a hemp industry, you know, delving into alcohol, there's a lot of tension and animosity as well as kind of issues amongst the different sectors in that market, right you know.

Andrew Livingston: 31:31

So everything's not hunky-dory between big alcohol and little alcohol and distributors and retailers and manufacturers, right, like you're stepping into a little bit of an industry quackmire that has, you know, a century of its own skeletons and its own issues. And it's important when you do that that you kind of understand some of those intra-sector dynamics and power dynamics. Who actually has the power? Because I've always thought, actually it's like cannabis companies that are coming in our interests probably a lot more aligned with small beer companies and small breweries and small retailers than the distributors and things like that, and so there's obviously a lot of choke points with alcohol of the distributors and things like that, and so there's obviously a lot of choke points with alcohol, and what companies are able to succeed or not may not necessarily be based upon what consumers demand, but based upon who can get on store shelves, and that's kind of sad.

AnnaRae Grabstein: 32:31

Yeah, absolutely. Let's pivot a little bit more as we're talking about hemp and talk about what is happening in Texas. And as an economist you understand the domino effect of these policy changes in a pretty financial, through a financial lens and I'd love it if you could explain kind of what from your estimation, what amount of the hemp market the Texas ban could eliminate.

Andrew Livingston: 33:03

So I don't really know this for sure. You know I can open up in a little bit Beau Whitney's analysis report on what he estimated for the size of the Texas market. For the total, I would not be surprised if we're looking at 20% or more of the federal market in Texas Is Texas. Yeah, and SB3, if it gets signed by the governor would eliminate 99% of that market. It still allows for CBD and CBG products, but by and large most of the hemp products products that are being consumed are THC products. People would like to have a regulated cannabis accessibility program in Texas and there just isn't one, and the hemp industry was the one that was able to provide that in the most significant ways through what is essentially hundreds of small storefronts. So what will we see in Texas? We'll see thousands, maybe tens of thousands, of jobs lost. We will see significant increase in the illicit market. It's not like people are going to suddenly stop demanding these products. What we're going to see are some retailers I mean not retailers some manufacturers are going to see are some retailers I mean not retailers some manufacturers are going to illegally direct ship to Texas and we'll see busts there. We'll see probably some people get arrested for violating Texas and whether or not Texas is able to prosecute them from another state. We'll see. We'll see. I mean sales on the border in Oklahoma will probably do a little bit better, but we'll see, essentially, a huge illicit market continue in Texas.

Andrew Livingston: 34:49

Now some Texas legislators would say the entire market was always illegal because we never intended this. But it's also just going to be less safe. Right, you're going to see more of those BS, copycat products. Right, you're going to see more of those BS, copycat products, more things that are mislabeled, more money going to you know, truly organized crime and less money going to legal and regulated businesses that pay payroll taxes. Yeah, it's really sad, but I think it's also important for us to understand that, like, texas never voted to have an intoxicating hemp program, and so the reason that conservative legislators in the state are up in arms is because they feel like something was brought into their house they didn't approve of, and so I think it's very important to think about it from a conservative mindset of being the master of your home, and I think that's why it pissed off Lieutenant Governor Patrick. So much is that he felt like these were a criminal invasion of poisonous products into his home and he has to protect his home, which is Texas.

AnnaRae Grabstein: 36:05

Yeah, I think that perspective doesn't deserve much platforming, but I, I, I understand that that is how we got here.

AnnaRae Grabstein: 36:14

I think that that that, broadly, texas is a bellwether for a lot of conservative states.

AnnaRae Grabstein: 36:22

It is the largest by population and I think that there could be a ripple effect to this action in other states as well. Ways here is that, as we're watching legal cannabis states like New York make progress in their adult use programs to finally turn on their track and trace programs, which could potentially create a new challenge for product that was being illegally inverted into the New York market, actions like this in Texas are creating new outlets for that product that might have been going to New York before now, is going to have some regulatory challenges to do so, and is creating a new market opportunity for people to pivot their illegal supply chains directly into Texas. So the folks that benefit from this ban are certainly not the good operators that are compliance focused, but I think it's going to be the groups that are willing to fill the consumer demand, no matter the repercussions from a criminal perspective, because unfortunately this does create new criminal penalties that didn't exist before as well. So it's more dangerous than it was to take these risks.

Andrew Livingston: 37:40

And I was just looking at Beau Whitney's 2023 report. So he estimated that Texas was about $2 billion market and the total market was $28 billion. I think the total market's a little less than $28 billion, but that would have it at a little less than 10% of the total market. I think, personally, it's probably higher than that as a percentage of that market, but it's going to be kind of interesting to see out at the.

AnnaRae Grabstein: 38:03

There was a press, really a big press conference, and the lieutenant governor made a lot of reefer madness like statements, but he also pinned the market at seven billion in texas himself that's far too high.

Andrew Livingston: 38:16

Yeah, it's far too high.

AnnaRae Grabstein: 38:18

But it is kind of what what he said, and it is also back to other hemp related trade trade association groups in Texas who are all saying that this is just a massive market. If that is actually true, it would be the largest cannabinoid state-level market in the US, which is pretty crazy by far, and what it shows is that there is a massive demand for cannabinoids in Texas.

Andrew Livingston: 38:45

The other thing that I think is really interesting is that it's a demand for regulated products. Consumers in Texas are chomping at the bit to get better regulated products that they can purchase from storefronts that they can purchase from storefronts, right Like. We all know that, if well-designed, a commercial adult use cannabis market in Texas would do awesome, but that just might require different legislators.

AnnaRae Grabstein: 39:09

Yeah Well, so a lot of this. As we're talking about the alcoholization and what's happening in Texas. The question is for lots of the people that listen to this podcast, who own businesses or starting businesses or operators in hemp and cannabis, is that, what does this podcast? Who own businesses or starting businesses or operators in hemp and cannabis is that. What does this all mean? How do you look ahead? How do you decisions about where to launch, how to launch, what to launch into? As you're working with your clients, how are you helping them find the right path?

Andrew Livingston: 39:38

Yeah. So what I do a lot is help people navigate the intricate patchwork of state laws. You know, understanding market opportunities really requires understanding what you can and can't do in certain markets. But not only that how the what you can and can't do affects the actual business opportunity. And with hemp it's really important because, while there are a lot of cannabis businesses that are multi-state operators, essentially all hemp businesses are multi-state operators because of their ability to sell into these different markets and their ability to Commerce.

Andrew Livingston: 40:16

Basically, exactly yeah, I wanted to say federally, legally, but of course that all depends upon you know, your view of the farm bill and all of that sort of stuff, and I'm not going to say things are legal or aren't legal, but the vast majority of, if not all, hemp manufacturers, you know, sell across state lines, and so, okay, can you suddenly not do this in, you know, alabama, based upon the passage of House Bill 445? Or might you be able to do this in Massachusetts, based upon House Bill 160? And so there's a lot of legislative tracking right now, what you can do and where. But let's just talk about what this means in terms of yeah.

AnnaRae Grabstein: 40:57

I wanted to jump in there and say so, what you can do and where, and also a little bit of predicting the future. And I think that, as we're focusing on hemp and trying to predict the future which is impossible and no one has a crystal ball states and the way that the legislation is changing, and one of those specifically, I think, has to do with smokable products and, in some ways, inhalable products, which would be smokable plus vape, and if there's a future there and I'd like for you to talk about that.

Andrew Livingston: 41:33

I want to go even further, because I think that you know and this is going to be a little more controversial, but I think that the future of hemp consumable products, from a regulatory standpoint, is almost entirely in just beverages.

AnnaRae Grabstein: 41:48

Not even ever.

Andrew Livingston: 41:50

No, I think that there is a future in edibles, but that is going to be within the regulatory system of cannabis, of cannabis. So I would be and this is again just me prognosticating I would not be surprised if more and more regulated cannabis companies become hemp companies, with edible products being sold through cannabis stores and then beverage manufacturers existing through an alcohol supply chain. But I mean in terms of the legality of THCA, flour and smokable and concentrate forms. I do not think there will be many states left in three years where that is permitted under the hemp system.

AnnaRae Grabstein: 42:35

And why three? What's three years all about?

Andrew Livingston: 42:37

Two to three years. I'm also saying that because of how long it might possibly take to get a new farm bill passed, so may that be longer. I just wanted to give a short-term time horizon Because you know, it's not just this year, but it's a few legislative sessions. That's what I mean.

AnnaRae Grabstein: 42:53

So if you're a business that's currently selling inhalable hemp products, the time horizon is not really more than three years in your predictions.

Andrew Livingston: 43:03

I would be surprised if there are many markets, you can do that legally, but I think a lot of some of the companies that are selling in THCA flour, I mean, that's essentially a design to make money where you can, when you can, which is awesome. This is, like you know, the ethos of of cannabis businesses that have kept cannabis consumers happy and supplied for decades. Right, Like I got nothing wrong with people who existed in the illicit market. Right, you know, you just got to do it ethically. You got to try to create products that are safe and good for consumers. You got to be a big, good business operator. Right, but we all knew plenty of great drug dealers, and so if we want to look at it from the standpoint of where those businesses are, if you want to stay legal, it's about okay.

Andrew Livingston: 43:53

Well, what can I do within these regulated systems? But I personally think that if you want to try to analyze where cannabis will be accessible, I think you need to look at what makes sense for policymakers in terms of a regulatory apparatus, and I think they look at it in two different ways. They say either cannabis is going to be regulated through a cannabis supply chain, through a cannabis supply chain, which is typically state licensed and state compliant businesses that produce and sell cannabis products and manufacture those cannabis products through that cannabis-only supply chain or through alcohol, which are accessible not just at liquor stores but also at grocery stores and corner stores and things like that. Whether or not we see onsite consumption, I think, is a whole nother question. We really haven't seen as much onsite consumption and we can talk about that in terms of a full alcoholization model.

AnnaRae Grabstein: 44:54

Yeah, more on premise.

Andrew Livingston: 44:55

But if we look at like, how do we divide the products? I think absolutely flower smokables are going to be through that cannabis supply chain. I think clearly, beverages which never really succeeded because of the way they were formed factor and we could talk about that why are going to be in the hemp beverage alcohol supply chain? And what do we see with edibles? Right, and stop me, anna Rae, if you want to jump in too but there is really no difference in a potency perspective between a five milligram gummy produced from hemp and a five milligram gummy produced from higher than you know 0.3% THC cannabis.

AnnaRae Grabstein: 45:35

Yeah, you're right, there is no difference from a consumer experience perspective. I will say that, like what you're bringing up, I think is this broader point. That we actually talk about a lot on this podcast is regulatory convergence, which really the point of regulatory convergence is, like understanding that cannabis and cannabinoids are an ingredient and that when we're talking about creating products like, ultimately the best outcome is to be able to use the most efficient input to make the product, and use of hemp to create a five or 10 milligram edible is a much less efficient input, if you're truly using efficient biologically, but not legally.

AnnaRae Grabstein: 46:19

Yes, yes, absolutely Good point. From a manufacturing perspective, yes, sure, much more efficient.

Andrew Livingston: 46:27

Well, I mean because it's about the cost of production, right? So what is the cost of production of, essentially, a pound or a kilogram of pure THC? It is much more expensive to do it in a cannabis regulatory system than it is to grow a giant field of hemp, even if you need far more hemp to harvest and then extract it.

AnnaRae Grabstein: 46:49

It's a good point. It's a very interesting point really, because I don't think that was the point of cannabis. Compliance was to make it so expensive that the actual, more potent and efficient ingredient from an ingredient perspective became more expensive than the less efficient input of a field of hemp. But we are diverging. I think that we're getting. Oh, you're good, this is all part of the fun. I think that we shouldn't end the episode without talking a little bit about the farm bill and what's next, because I know this is something you pay a lot of attention to and we're halfway through 2025. We still don't have a new farm bill. What do you think is coming?

Andrew Livingston: 47:32

I don't know. I mean, the Republicans are more interested in utilizing the farm bill to literally take food out of children's mouths, to provide tax breaks for billionaires while also blowing up our deficit. And so they're interested in the Farm Bill because they want to eliminate SNAP, because they feel that you shouldn't get healthy food, or even food, unless you meet certain requirements. I think that's abhorrent. Certain requirements I think that's abhorrent. I think it's unlikely we're going to get a you know, a full new farm bill that touches on a hemp in a way that is productive, soon. I think we're probably going to continue to see continuing resolutions, and I think it really just also depends upon are we able to get anything passed before the midterms? If we're not able to get anything passed before the midterms, I think it's more than likely the Democrats take the House and if that happens, then all we're going to see is continuing resolutions. So I personally would bet on the continuation.

AnnaRae Grabstein: 48:38

For people that don't understand what the impact of a continuing resolution is for the Farm Bill. Can you explain kind of the broader picture?

Andrew Livingston: 48:45

Yeah, so a continuing resolution on the Farm Bill would pretty much just keep in place the provisions from the 2018 Farm Bill. So a continuing resolution is essentially just you extend the deadline by which a bill would normally expire. So we see this often with budget bills. It's you know, sometimes there are little tweaks here and there, but it's essentially we're just extending the budget at its current rates and current allocations for you know, another period of time. So you know, typically the farm bill gets done every four years or so. Last one was 2018. That's what is that Seven years ago now. And one was 2018. That's what is that seven years ago now. And so I think this is representative of Congress's inability to pass effective legislation. I personally put this on Republicans, but that's also because I find what they're doing to be abhorrent. But they currently control everything. They could pass a farm bill. They just don't want to prioritize it. I think it's also, to some degree, is because the president looks down upon Congress, even Republican Congress, and he would rather just do things by fiat.

AnnaRae Grabstein: 49:54

Amazing, you know. I think that, on the one hand, focusing on continuing resolutions as an ongoing status quo is what a lot of people want and, at the same time, it creates endless uncertainty over what might happen next year. What might happen, and it's like I would love to be able to get to a place where I could stop talking about the farm bill for another four or five years and just know that we have one in place and that it becomes manageable. I think that what the continuing resolutions are doing is putting regulations into the hands of the state, and that is creating what is starting to be a complex patchwork for hemp that is almost starting to look more like the way cannabis is, so different from market and it's really in a lot of ways and that's not just congress's inability to pass a new farm bill that is the fda's desire to, or lack of desire to, regulate finished products.

AnnaRae Grabstein: 50:58

Yeah, and if they, if they got in it, then there would be something for the states to just support and to say, okay, we're To anchor upon With what the yeah, so you have this patchwork of different.

Andrew Livingston: 51:08

I mean, it's not just like what are the different milligrams, but it's like do you need to have a DEA license to be tested for testing? Pretty much all states have said no, you don't, even though, because the DE, you know, are trying to waive that process, but Georgia still does, right. So it's like, what needs to be tested, how products need to be produced, when all of these things are different. Right, like you know, we try to create a universal label, but, like every state has different labeling requirements, right, that's not the case for alcohol. And so, because we don't really have any good finished product regulations from the FDA or you know, guidelines, there, you have this complex patchwork and it's, you know, again, it's more similar to cannabis, but it's cannabis that you can move between state lines.

AnnaRae Grabstein: 51:53

Yeah, but you still need to make new packaging for every state, all right, well, I think that we've probably taken this as far as we could go. We could talk all day about this stuff, but, andrew, I think it's time for our last call, and that is when we give you the mic for a final message to our listeners, advice, call to action or a closing thought. So, andrew Livingston, what is your last call?

Andrew Livingston: 52:14

So my last call, when we think about laboratories of democracy, is to remember that there's not just states, there are also sovereign tribal governments.

Andrew Livingston: 52:25

There is indigenous communities around the United States, and I've been doing some really interesting work with the ICIA, the Indigenous Cannabis Industry Association to map out and study indigenous cannabis programs and, essentially, sovereign regulatory regimes, and so I think that this is interesting for a few things. One, indigenous communities in the United States have a lot of experience with regulated products, with tobacco and gaming and how they also need to. You know how they regulate alcohol, and so this provides a cool opportunity for them to figure out how to regulate cannabis in a way that I think could be more efficient than what some states do. It could be less efficient depending on how they're required here or there, but there's over a hundred indigenous cannabis and hemp programs across the United States, and let's not forget about the people who were here first and their experience with cannabis and how, you know, we can assist and learn from the indigenous community in the United States. So look out for a you know, forthcoming report on that. There's been. I have a cool map that I did with ICIA, and so, yeah, excited.

AnnaRae Grabstein: 53:36

Awesome, Thanks for that. That was a whole whole new, whole new topic. Yeah Well, thanks for joining us today. It was a really great conversation and thanks for all your work.

Andrew Livingston: 53:47

Thank you, Anna. I really appreciate you and the podcast and Ben.

AnnaRae Grabstein: 53:50

Awesome, thanks. Have a great day, andrew. Thank you, yeah Well, so there you have it, everybody. That's our episode. Thank you so much for being with us today and if you liked the episode, if you found it valuable, please drop us a review on Apple Podcasts, spotify, youtube or wherever you tune in, subscribe, engage, get in touch with us, let us know what kind of topics you want to hear us talk about, and thank you to our teams at Wolfmeyer and Vertosa and to our producer, eric Rossetti, who make all of this possible. And, as always, folks stay curious, stay informed and, most importantly, keep your spirits high. Have a good one. That's the show.