SPEAKER_03: 0:04

Welcome everybody to This Week in Cannabis Live. I am Jay Rosenthal. That is Anna Ray Grabstein. And beyond that is Jeremy Burke. Uh Jeremy Burke is my co-founder and our editor-in-chief. Anna Ray Grabstein is, of course, from High Spirits, the Cannabis Business Podcast. And I am Jay Rosenthal, Manager Director of Cultivated. We're here today at the beginning of the year, even though last week was actually the beginning of the year. We're going to quitly, Jay.

SPEAKER_00: 0:28

It's your birthday, I heard. It's also Jay Rosenthal's birthday today.

SPEAKER_03: 0:32

It is my birthday. Thank you very much. Um, I was saying before we came on, it's almost my bar mitzvah for my 40th birthday. So uh you guys can do the math. Um next year, everybody will get the bar mitzvah invitation.

SPEAKER_00: 0:45

Are you um putting you know joints on a on a birthday cake or what do you what kind of thing are you doing today to celebrate?

SPEAKER_03: 0:52

My son said I'm having the most Jay Rosenthal 52nd birthday ever. Well, working now, um and then uh having afternoon drinks with some friends because at six o'clock uh my son has hockey practice, which goes till seven, and then we are going to dinner as a family. And my birthday lasts exactly like one day because my son's birthday is tomorrow. So like we start doing stuff for my son's birthday tonight, so we overlap a little bit, and then tomorrow is his day, which starts at 8 a.m. with hockey. So good.

SPEAKER_00: 1:22

Yeah. Well, we have not too many birthday drinks. Yeah, it's pretty good.

SPEAKER_03: 1:28

You know what's funny, actually, and I'll I'll this will lead into what we're talking about, but um uh we had on uh Christine Apple from Grun um uh earlier in the week. And I and I didn't even try to do this, but I have on my desks her these products, the pearls, which I think are just amazing. Um, so that'll that'll be a big part of the birthday as well, starting as soon as we come off. Just a shout out to Perls and Groom. Um so thank you. It is my birthday, thank you very much. Um today we have built it as the prediction show, uh 2026 prediction show. We're gonna structure it in the form of some questions, which you both have been given ahead of time. Anna Ray, I know you love them all. So we'll get to you second on the first question, um, or third. I'll go after Jeremy. But Jeremy, the first question in this 2026 prediction show is when you look back, when we all look back on 2026 from five years from now, so 2031, when I will be old as fuck, what will we say actually changed in cannabis? And what will we realize was mostly hype?

SPEAKER_02: 2:34

My heart is uh pounding with the way you address the question to me. So now I feel like I'm on the spot. Um, but I I I I think two things. I think one, you know, I'm gonna go on record and say rescheduling is happening this year. And I think that uh it may even happen in Q1, but I'm not gonna be uh uh as as you know heavily convicted on that front as as the rest. Um I will say this I think I think 2026 is the year where the cannabis industry gets normalized with regards to other industries, right? I think this is the year when big Wall Street banks suddenly start to look at the industry, look very carefully at the industry. I think this is the year where the NASDAQ and New York Stock Exchange start, uh, you know, the wall starts to break down with allowing them to list. And I think all this will happen um, you know, very shortly following rescheduling. So that's my big prediction. It's not earth-shattering. I mean, I think I could have made this prediction in 2018 as well. And so um I don't want to get burned by that, but but I do, I do think it's real. I do think uh big institutions are starting to think about this with Trump's executive order in ways that I haven't heard previously. And so uh, you know, I'm I'm looking forward to covering that. I'm looking forward to seeing what happens there.

SPEAKER_03: 3:44

Well, I uh I appreciate what you've said, and so this is a and but uh or but and I am less optimistic about rescheduling happening, notwithstanding the December. Um since the announcement in December, I'm gonna list some of the things that have happened from the White House and around the world. The administration has taken over another country, threatened to take over at least three more, at least one of them is a NATO ally, reversed decades-long policy on vaccines, reversed the food pyramid, and created chaos on the streets of major cities. And so there's not a lot of breathing room for heavy duty policymaking, which they're not particularly good at anyway. And this is an administration that can't really walk and chew gum at the same time. So that's my and then eventually it's gonna come into a and then it'll be a political issue heading into the um potentially into um the midterm. So like, and and I think it will be if there will be Republicans coming out and saying they don't agree with this because that'll help them win or they think it'll help them win uh later in the year. Yes, Jeremy.

SPEAKER_02: 4:43

Yeah, I I I do I do have I have one uh you know what one factor I do want to add to that, right? I think with Trump's executive order, it's now been removed from being a political process and is now an administrative law process, right? And those those those gears turn very slowly. But but Jay, to your point, like, no, this administration is not a very effective administration on the policy front, but and no, it it cannot walk and chew gum at the same time. But at the same time, like, you know, the deep state, so to speak, the administrative legal world, the gears are turning on this. And I think the process is such that uh, you know, now we have both a Democratic and Republican president who want this. And I think, you know, there is some inertia there that uh, you know, I'm I'm hopeful will shake this thing loose pretty soon.

SPEAKER_00: 5:26

I I'm also starting with you on that, Jeremy. That's that's I I agree. I think that that the wheels are turning and that we're gonna see it happen this year. But yeah, Jay makes some really strong points. He does, yeah, yeah. I will say to give them, yeah.

SPEAKER_03: 5:40

I will say five years hence, I'm reminded of a conversation that we had here in Canada a year after legalization. So one year to the date of legalization happening here in Canada. Um, I was at a policy conference, we were in a private session with I think people from Health Canada and other regulators. The industry was complaining about some policy points or some regulatory issue. And the regulator said, see, now you're like a real industry complaining about everything like everybody else. And I think that would be a great goal to get this year to be like every other industry and it's Jeremy said. And I think five years from now, we certainly will be. I just don't know if that starts this year or at some point down the line. But I think five years looking back on this relative timeline, I think that is where we are.

SPEAKER_00: 6:21

I think that the the in your question, you ended it with, and what was hype? And I I think that one of the things that I would put out there and predict that is hype for this year is that big CPG is coming. I think that there is going to continue to be consolidation and strategic business alliances. And maybe, maybe even I would make a prediction about a Bev Out company coming into the space. But for years, people have been saying that with rescheduling, big CPG will be coming and big pharma will be coming. And I am not convinced that we're gonna see either of those things in 2026. So that's what I would call out um is likely some hype for the year.

SPEAKER_03: 7:06

I like it. Can we move to the second question? And Anna Ray, get ready because this one's coming to you first. Are you ready? You got it. And I think you may actually have some of these people in your realm. If you were advising a well-capitalized operator today, is 2026 the year to buy aggressively or the year to stay patient and wait for better assets?

SPEAKER_00: 7:26

2026 is definitely the year to buy. Uh, there are incredible opportunities of healthy companies. I think that in 25, it really was the year of restructuring and distressed assets, and there still is going to be a lot of that. But with the big uh announcement this week of uh Grune and Wild coming together, it's an example of the type of company that I'm excited to see uh doing acquisitions, which are healthy good companies that are um getting acquired for growth. And with that, I think that it's not only the year to buy, but there's some really interesting kind of aggressive style calculations of the way to think about valuations. And um, the Virio and Ease deal that was announced, I think, right before the end of the year, uh put some numbers on the board about the way to value cannabis companies today. That was an all-paper deal, no cash was exchanged, and it is a public company buying a private company. Uh, but that deal was done on, I think it was, I think it was like 3.8 EBITA um multiple. And uh that is very low. That is that is a very low multiple. And if healthy companies can do deals at valuations like that, then now is a great time to buy.

SPEAKER_03: 8:50

Jeremy.

SPEAKER_02: 8:51

Yeah, no, I I I mean Anna Ree made the point I was gonna make. I think, you know, if you have capital to buy, whether that is, you know, on paper or or cash itself, uh, you know, these assets are never gonna be cheaper this year. 2026 is the year. Um, I think, you know, when rescheduling hits and if or when you know 280 E goes away and all those cascades that we've we've discussed, uh, you know, everything, you know, the multiples are gonna get a lot higher, the competition, the pool of buyers is gonna get a lot bigger. And so look, I think if you're trying to build scale, 2026 is a very, very good year. And I'm gonna stop there because uh that's gonna go right into the answer to my next question. So I will kick it back to you, Jay.

SPEAKER_03: 9:31

I I would say yes, and buying assets that suck will still suck if you buy them. I I mean, I think you saw with Drune and Wild, two really good companies now, better together type of thing. Like better buying way worse is never a great deal, and it's bound to be shittier as things go on because they'll drag you down. Uh that's my sense. Some of them are pretty bad operators still, right? Um, they may have some scale, but but a bad operator is a bad operator, whether they work for you or work for themselves.

SPEAKER_01: 10:00

What does Louis think? He's he's got an opinion, I think.

SPEAKER_03: 10:03

This dog, I he's been so good, and you know, Jeremy, you've been on calls, but he's been so good today. He's he's very barky. Um, I apologize. So your dog is being part of the show. That is such an old man name for a dog. I know. Louis Brown, yeah. Louis Brown. Louis Brown. Um, it is an old man name for a dog, but he's a great dog. Um has been a great dog for the past week, I should say. Because it's been only a week that he's been a great dog. Um, we'll move to the third question. If cannabis is rescheduled, see, I put the word if in there. What specifically gets easier in 2026 and what stays frustratingly broken? Uh uh, Jeremy, you're first on this one.

SPEAKER_02: 10:44

Sure. I I think look, the general nuts and bolts of doing business will get easier. I mean, these changes will take time. It's not going to be a flick of a switch after rescheduling. But uh, in terms of banking access, uh employees getting mortgages, all of the above, I think is is really, really impactful for cannabis companies. 280E going away adds so much cash to the balance sheet that can be reinvested and do the things businesses need to do to grow. And so uh I think look, the nuts and bolts, the plumbing of doing business is gonna get a lot easier. What's gonna stay frustrating, frustratingly challenging, excuse me, is the fact that cannabis will still be illegal at the federal level. There's still gonna be, you know, uh a state-by-state marketplace. Each state is gonna have different regulations, cannabis won't be able to cross state lines, uh, you know, packaging requirements will be different uh in in Nevada and California, right? And so I think all those issues are not going away. The fragmentation is not going away, the policy discussion is not going away. Um, but the general plumbing under that is gonna get a lot, a lot easier for operators.

SPEAKER_00: 11:48

Anna Ray. Completely agree. Yeah, obviously 280E is the headline here. That's what what unlocks. And I do think that banking relationships will improve, but it's not going to be as substantive as something like if say for banking moved forward. Yes. Specifically, like payment processors, like when are they going to come on board? Um, and that's ultimately kind of up to them, but I I don't think that that will happen with rescheduling. Uh and the interstate commerce kind of state level patchwork is still an ongoing mess, and it's going to be. So I think that what we're looking at is an incremental move forward that will unlock a lot, but leave a lot of space for more policy uh change that needs to follow.

SPEAKER_03: 12:35

Yeah, I agree with all those things. And we had on uh banker earlier this week uh talking about 280e and the follow-on effect of having more cash flow, which bankers like, which they'll lend against. Like that that certainly helped, maybe not as much as safe banking would. Um, the other thing I will caution, and this I'm not gonna say say it's frustratingly broken, but I live in a country with legal cannabis, fully federally legal, and banking is still an issue that people complain about. Like the banks don't love loaning against it, they look at it as a high-risk business, and there was never as much cash in it as there ever was in the States. So, like I think I mean hard cash, paper cash. Um, I think I would brace yourself for banking relationships that are uh better but not perfect and still very expensive, uh, because it still will be a compliance heavy business, um, and ones that take a lot of uh cash from a bank perspective to actually keep compliant with with their regulations. I will say one thing because um I am the son of a bankruptcy judge. Um I will say bankruptcies may still be really challenging the industry because it's not because they're state-run businesses, not federal businesses. Bankruptcies is a federal court, not a state court. Like it is really challenging, which is part of the reason why banks don't want to lend because there's no assets to lend against that they can go get afterwards. Like it is that is very, very messy. We've seen it a couple of times. Well, more than a couple of times. I think we'll see it much more as things go on, but it's still a very frustrating process. I will say that rescheduling certainly helps businesses that are already really good businesses. It may not save really bad ones that are still in business. Like it's it's just not, it's not the it's not the lifeline that I think everybody will expect.

SPEAKER_00: 14:09

You know, I always thought that if the government was going to strip 280E as this terrible penalty on cannabis companies, that at the same time they would want to somehow harvest cash from them when they are taking away the this basically this underground tax on cannabis companies, almost like an illegal federal licensing fee. That's how I've looked at 280E as this massive federal licensing fee doing business. And um, I think that even if 280E goes away uh and rescheduling moves forward and there isn't some sort of federal licensing or tax that follows immediately behind, I think that it will not be long before there is some sort of proposal to make sure that the feds are getting some type of tax, hopefully not the level that 280E has been penalizing operators for. But it would be very surprising to me if there isn't some way that the federal government is getting their change here.

SPEAKER_03: 15:12

Speaking of harvesting cash, that's my segue into a question about hemp derived products. Does 2026 bring clarity to hemp derived products, or do we end up with even more fragmentation between states and the federal government and policy? Rigamarole, Anna Ray, Grabstein, this one's to you first.

SPEAKER_00: 15:31

Um I do think that there will be a path forward for hemp products in some way to continue past the November 12th deadline. Um, not all products, but I tend to believe that we likely are gonna see something that looks more like an extension, which doesn't necessarily bring clarity, but it does bring more time. So that's that's Jeremy Gurner.

SPEAKER_02: 15:57

Yeah, I I I don't know. Um, and I'm saying that lightly because I I you know it's very hard to predict what Congress will do on the issue. Um, I you know, I I I will say two things though. One, um I do think there is a likelihood, and I don't know if it's greater than 50, but there is some substantial likelihood that we will see a carve out for uh, you know, low-dose hemp-derived beverages. And you know, the point was made to me, and I think we've discussed on the show, that the federal government did say 0.4 milligrams of THC are allowed even post the November 12th deadline. And so now we're really just discussing moving that number up versus allowing THC in the first place. So that seems to me like a very specific way that uh states can regulate. And and second, I think, you know, in in Kentucky, Rand Paul, you know, is certainly a fighter on this issue and uh is certainly willing to break with President Trump and the rest of his party on this. And so I, you know, we we may see as as Trump's hold on the party starts to break a little bit, this be an issue uh where some Republican lawmakers who have a lot of businesses, hemp derived businesses in their state start to start to move and advocate for it. Uh, you know, I don't know how compelling that will be, right? This is sort of a theory, but uh it's certainly possible we see that. And secondly, I do think that, you know, business, you know, money talks, right, in Congress. And so uh, you know, a lot of these companies who are sitting on inventory are going to be lobbying very, very hard to their lawmakers to give them some sort of relief from the November 12th deadline. So I think within all that alchemy, we may see uh something, but we probably won't go back to the way it was, you know, prior to the uh funding bill being signed.

SPEAKER_00: 17:41

Separate from this prediction, this has been a big week for hemp beverage. Um, Sprout announced that they're launching hemp beverages in 120 stores in Texas and Florida, I think. And and there's been more announcements like this. And uh it's this interesting, funny place that I keep waking up in the morning and thinking, are all these folks in denial or do they know something that I don't know? What's really unfolding here? And and I think that what we have is is time, um, but we still don't have clarity. And it's gonna be about kind of pushing to prove the category while also being very strategic and surgical uh with lobbying and seeing if we can get something to move in this very complex policy environment.

SPEAKER_02: 18:31

Yeah, fully agree. Um, and and I do think like on that front, Anna Ray, I mean, we even saw um a venture investor that was non-cannabis, but beverage focused, invest in a hemp derived THC startup, right? And so look, like venture capital is venture capital, and some funds are sophisticated, some funds, you know, spray and pray. I know that's a terrible metaphor. Um, but at the same time, it's I I would I would say that uh they're not stupid, right? And so they're certainly looking at things that maybe we are not or that many people are not, and thinking that this is a good investment in the first place. It's dry January, so we're getting this sort of you know wind in the sales effect as well. Um, so it's kind of interesting to see that. I I totally agree.

SPEAKER_03: 19:10

Yeah, I I agree. I think actually something, even though I don't think there's gonna be a lot of policy coming from Congress, this one might actually get revisited. And I think in the positive sense, because I think people will see that there's economic benefit to them as they head into um into the fall elections. So I think we may see it revisited. The best thing to do is just punt it or reverse the sort of ban and like let things happen as they will. Because I think it is wildly popular in southern states, and Southern Republicans are gonna start hearing it from their constituents as they go to the polls in November. So that was is my sense. Um, without great insight into sort of what's happening down there. Although I did listen to a podcast that I would encourage people to listen to, uh, the Dime podcast uh had on Thomas Wynne Stanley, who we've all sort of talked to individually. Like I he's they had the conversation before the ban, I think, uh just judging. From when it got released, but also I think the future is this bifurcated system where low dose happens, is my sense. And I'm here for it. Um, we're gonna move to the last question. Uh I don't know if anybody here is in the business of starting a cannabis company from scratch in 2026, but if you were, which part of the value chain would you avoid entirely? Jeremy, I heard you're starting a retail location in the heart of Manhattan. Is that true?

SPEAKER_02: 20:29

Yeah, no. Uh I think, you know, personally speaking, I would avoid anything to do with cultivation, right? I think, you know, the economics are such that uh there are some big players who who have you know monopolized the market in certain states, it's very hard to compete with them. On the other side, you know, wholesale prices are declining um everywhere, those companies aren't. Uh, you know, and so I think that's a very tough environment to start a business in. Um, I think that uh, you know, the people that are gonna make money doing that have either already made it or already have captured the market. Um, you know, and I think second, uh, you know, I recently listened to a podcast um about retail and restaurants. Uh that's a tough business. Margins are really tight. Um, you are relying on word of mouth, goodwill from consumers. I think uh, you know, while I admire a lot of brands that already started, I would not want to be starting right now to compete with them. I think that's a very, very difficult business. Uh, you know, the one I think sliver of that, I would say um with you know the Grune and Wild deal, uh, you know, some of these asset light brands are very, very strong businesses. Um, and I think that to me, whether I would want to start one this year, no. Um, but if I was, you know, a very smart person with some business and finance skills and some marketing skills and I wanted to work in this industry, that's very much where I would look.

SPEAKER_00: 21:54

Uh I mean, all of us have started cannabis businesses before. So we're old.

SPEAKER_02: 21:58

No, no, I didn't say media.

SPEAKER_00: 22:00

What is wrong with us? What is wrong with us? You know, it in my work and on the show, we've been talking about build versus buy. You know, we're we're just talking about, well, what's going to be the MA environment? And and I think that overall, 2026 is the year to buy, not to build. Um, and so what it's not about really the the pieces of the value chain, because I think throughout the supply chain, um, there's there's opportunities and there's good companies that exist everywhere. I would say that opportunity in cannabis right now, when you're talking about starting, has to do with with new markets turning on more generally. And and that's where there tends to be at least sort of a short-term runway for opportunity. And and there are some interesting, unique, small niches of of the market where people could be looking. And I think that Louisiana is one of them, Kentucky is another. There's southern states that have very underbuilt cannabis opportunities that are launching medical markets. And I think Louisiana has two cultivators. Um, it's not going to be a huge market, it's a restrictive market right now. But to be one of those producers in that highly limited market is an opportunity if you really needed to build something. But if you had capital to start a company, uh, I would look at buying companies right now. I think this is the year to do that.

SPEAKER_03: 23:29

Well, if someone had capital and wanted to invest in a cannabis media company, I know exactly where they could do it. You can find us on LinkedIn and YouTube, all the all the rest of the ways. Um, I agree, of course, uh, I agree, of course, with everything that everybody said. Asset light, of course, is the way to go. I would really shy away from retail or certainly undifferentiated retail. If you own a location, yeah, sure, give it a whirl if the licenses are there. I would say if I were to invest in something and I was an individual and I thought it would be good business, I would go to law school, I'd become a um a regulatory expert in some specific market that is emerging and like double down because there's a lot of business right away when that happens. Um or become a uh hemp or a cannabis lobbyist, there could be good work over the next year or two in that REM as well. That's where I would sort of spend a bit of time. We did a good prediction show.

SPEAKER_01: 24:19

We did.

SPEAKER_03: 24:20

Even if it was like a week, a week late. A week late. We want to see where things shook out.

SPEAKER_02: 24:26

I yeah, I I I think uh Jay, to your point, that was actually my my secondary answer was I I would go to law school and uh you know, do licensing in New States, explain regulations. I think you know, yeah. So lawyers are gonna get work.

SPEAKER_03: 24:41

Your mom is gonna be happy.

SPEAKER_02: 24:43

My mom finally, yes, at 30, what, almost 34 years old. I can finally uh tell her I'm a lawyer.

SPEAKER_00: 24:48

I'm gonna cut back up and tell folks that I work with that there is no justice, only legal fees. And uh that I think you guys are proving the point.

SPEAKER_03: 25:00

Yeah, well, you can also become a cannabis MA lawyer, which is also gonna be good business, as we've discussed. So there's for investment.

SPEAKER_00: 25:08

Folks have done very well with the the the people that do the debt agreements, the lawyers. Those are those are good good jobs too. Yeah, see? So go to the loss for it, don't start a cannabis company, folks. That's our prediction. Um I appreciate it hard right now. A AI has really challenged the lawyers, you know. All of the redundant templates and contracts are now.

SPEAKER_02: 25:33

That is totally true. That's a good point.

SPEAKER_03: 25:37

Small violin. Very small violin for the lawyers and stuff. I'm just kidding, everybody. Don't don't don't at me on Twitter with that. Um uh Anna Ray, Jeremy, thank you for being here. Anna Ray, anything to plug as we go into uh go into the weekend?

SPEAKER_00: 25:54

I just I just hope that people are are feeling the acceleration of the beginning of the year. No big plugs for me, but just like keep your head up. There's a lot of excitement happening right now. It's been wild to see how everyone's just ready to get to work. So don't don't lose that momentum, and this can be a great year. I think that's right.

SPEAKER_02: 26:16

No, Anna Ray said it better than I could. Um look, we're we're excited to build cultivated. I mean, I I we're still in this industry, we're still excited about it. And I think, you know, the one the one thing I'll say about 2026 is we're actually going into it with momentum, like Anna Ray said. And so that's fun. That's awesome.

SPEAKER_03: 26:31

Yeah. Yeah. I will do two plugs. One, uh, we have this webinar that didn't happen in December because uh we have technical glitch. We're gonna do it on Thursday next week, January 15th. Banking implications of cannabis rescheduling. What's next? Anna Ray, we already know how you feel about it, uh, but we'll have some reflection upon folks who have had a month to think about it, probably as it relates to um payment processing for sure, about lending, about compliance, all of those things. So join us on Thursday. You can register on our LinkedIn page as well. And this is um, of course, self-serving. That's what we're here for. Um we have our event coming up in New York on January 29th, presented in partnership with Gotham called the High Rise. Um, those of you who have applied to attend, you will get an email probably today um with how to purchase your ticket and secure your seat. So look for that in your email. Other than that, it is going to be a great year. We're very excited about it, and uh I feel the momentum, Anna Ray, and we look forward to carrying on with you and your crew as we head in uh to the rest of January.

SPEAKER_00: 27:31

Yeah, and I I did get a text, apologies from Ben. He got caught up in a in a policy meeting and uh was not able to be here, but uh but endorsed my predictions.

SPEAKER_03: 27:43

Yeah, I I got a real-time text as well, but not from Ben. It was from it was from um uh Brian Fields actually about the Thomas Wynn Stanley interview at edibles.com. It was the week before the ban, but I think we knew it was coming. So the the conversation is still relevant.

SPEAKER_00: 27:58

Hey Brian, what's up, dude?

SPEAKER_03: 28:00

Yeah, oh just so you know, Anna Ray, Brian's gonna join us sometimes on this, I think. Um I I I love him and uh we look forward to having him on um as we go. So look forward to that as well. Some guest spots here on this week in cannabis live. Anna Ray, Jeremy, thank you so much. We'll see everybody next week. Thanks, everybody. Thank you, Louie.

SPEAKER_01: 28:21

Thanks, Louie.