SPEAKER_01: 0:10

Welcome to this week in Cannabis Live. I am Jay Rosenthal. That is Mark Hauser. That is German Burke. And that is Ben Larson from High Spirits. We come to you, uh, some combination of these people plus some others come to you every Friday at noon Eastern 9 Pacific to talk about what is happening in the cannabis industry world. It's never a dull moment. This week is uh also not dull. Uh but I want to start with something um fun, I guess. We'll call it fun. Uh this was part of the president's 365. He celebrated his one year in office this week. Number 305 of this year's accomplishment says sign an executive order reclassifying marijuana to Schedule III, accelerating medical research and patient access. I mean, he definitely signed an executive order. That part is true. Mark, what say you about this accomplishment?

SPEAKER_00: 1:03

Well, it's uh yeah, I mean, you're right, it's half true. Um, he did sign an executive order. It's missing some qualifiers in there, like to possibly reclassify. So, yeah. So it's it's an active rather than a oh, I I wish I knew the tense here. Um you know, and then uh is it to potentially reclassify, yeah.

SPEAKER_01: 1:28

And then is it is it clear the attorney general saw number 305 on this list?

Ben Larson: 1:34

No, it's it's a you know, I I haven't heard of any movement yet, so uh I think we have a ways to go on this, but uh congratulations, Trump. It's probably indicative of the validity of all the claims of that very thick book he he held up in the in his press conference. So, you know, I don't know how many of these actually did he do? That's a good question.

SPEAKER_01: 1:55

Jeremy, I know you're a big fan.

SPEAKER_02: 1:56

You like number major, major Republican myself. Uh uh, you know, jokes aside, look, uh, you know, he should be commended for signing the executive order. Uh, you know, this is not my brilliant idea. You know, Mark just mentioned this right before we went on. Look, uh, you know, it's been over a month since the executive order has been signed. Uh, you know, there's been missed deadlines um on the attorney general's part. And so, you know, the longer this drags out, I think uh, you know, the worse it looks for this occurring anytime soon. And I know that's not a revelatory insight, but you know, I do think the time uh the clock is ticking, and the longer this drags out, you know, the more Trump will get distracted with uh buying Greenland or, you know, something of the like. And so look, I think uh, you know, we need to see some substantive action on this front. And I think the industry does want to see that too before the administration goes along and counts this as a win.

SPEAKER_01: 2:53

On that exact note, next year we're gonna do This Week in Cannabis Live from Davos. Anybody in?

unknown: 2:59

Anybody?

SPEAKER_01: 3:00

Although I did hear they were actually thinking about moving the World Economic Forum. Uh one option was Detroit, uh, another option was Dublin. Those were the two other things I heard.

SPEAKER_00: 3:12

Detroit's lovely in January.

Ben Larson: 3:13

Yeah.

SPEAKER_01: 3:14

Well, so is Davos. Yeah. Yeah, I have to start with a D.

unknown: 3:19

Yeah.

Ben Larson: 3:20

I I I will say that Howard Kessler, who was generally responsible for getting the EO done through Trump and the Commonwealth Project, are very active in hammering this home until it gets done. And so uh it I don't think we're just in a wait and see moment. I do think people are pressing hard on this, and there's a lot writing on it, right? This is not only progress for for regulated cannabis and and rescheduling, but it was tied to a lot for for the the hemp category, of which we know is also very active on the hill right now.

SPEAKER_01: 3:52

Yeah.

Ben Larson: 3:52

Right.

SPEAKER_01: 3:53

While we're on Greenland, I just want everybody to know that I'm not just wearing any hoodie, I'm wearing a Canada hoodie. Uh Canada's for the news. Uh the prime minister has for sure. And we leave we have legalized weed, just so you know, um nationwide. Just want to make sure we tout that as I wear the sweatshirt. As the Olympics start in a couple weeks, uh, we'll be following along if there's any weed stories related to that, because there sometimes are. I call out Rostra Bigliati, uh Canada's uh famous schoolworker. Um uh that's not the only news this week. Um uh Ben, let's go to you first, talking about things happening on the hill. You just brought up before we came on a CBD bill that is more than a CBD bill.

Ben Larson: 4:33

Yeah, it's the long-awaited Morgan Griffith bill. And so it's the Hemp Enforcement Modernization and Protection Act. So the Hemp Act. But if you go to Morgan Griffith's website, it does say it's a CBD bill. Um, but what the bill is doing is directing the FDA to begin formal rulemaking around establishing milligram limits for for hemp-derived cannabinoid products. Uh, it requires HHS to act quickly or face automatic statutory limits, and then it reorganizes federal laws. And so in this, it it goes through some of the the interesting mechanisms that we've identified for broad cannabis reform. One of the key ones being creating a cannabinoid section in the federal uh food drug cosmetics act, right? And so it's it's it's interesting that this is so focused on hemp and kind of standing up a hemp marketplace under the guise of CBD. So I guess that's just more politically palatable. But this is exactly what we want to do if we wanted to legalize Canvas broadly and just create a cannabinoid economy. And I'm I'm what I haven't had enough time because it literally just dropped this morning is like, does this actually create the bridge to have that eventual regulatory convergence? And how do we get Pam Bondi and HHS to get the CSA out of the way? Um, so that is what's happening right now. Um, the details are coming out. It's it seems like it's relatively well thought out, but you know, there's the common pitfalls of like, oh, every product has to have a COA on on it. It's like, does that mean like every batch has to be uniquely labeled for like nationwide products? Like that's like a whole new muscle for for CPG, you know. Um, so there's a lot of nuance in it, but interesting for this to all to come out while people are also lobbying for an extension. We know these bills take a long time to get through Congress, so this might, if it gets traction, might be a motivator to get an extension getting into the later part of the year, um, although it doesn't seem like it's happening in any type of minibus right now.

SPEAKER_01: 6:41

Fair enough. Fair enough. Uh Mark, I want to go to you. Different issue.

SPEAKER_00: 6:45

Before if actually, thought on that, you know, one the look, I mean, you know, to me, if this could get passed, I mean, this would be this would be great. Because to me, you know, one of the one of the uh the frustrations I think that a lot of you know a certain swath of the industry has had, that certainly the you know, the non-hemp licensed side of cannabis, um has had is that you know, is that is that hemp is has been able to flourish under a loophole. Whereas, you know, doing something like this, this is building an industry, you know, from the ground up. It's it's sort of creating affirmative regulation. And in a way, you know, to me, you I you know, I've always said you can't build an industry on a loophole that will last forever, that's financeable, that's trustworthy, you know, trustworthy is the one that that investors and and third parties can say rely on to be there because it could go away like that. This is the way to do it. And so if we can, you know, if this could get done, you know, that would be amazing. You know, that is the way to do it. And that's the way to create a sustainable long-term industry. Um my concern about you know, tossing it to the FDA is is the FDA sort of punted after six years on CPD. You know, so how do you know, is that how do we ensure that the FDA isn't just gonna gum it up forever? Now, again, I I realize that then you haven't read this document in in detail.

Ben Larson: 8:13

Well, there's there's there's actu I I read enough, or it's actually been rumored for well over a year now. So like I have had some time. Um, but I do know that there are mechanisms in it by which there are automatic caps. So if the FDA doesn't act within like the 60 days that's required of them, which is lightning speed for FDA, um, then some automatic caps go in. And some of those caps, like I said, like five milligram THC limits per serving, 30 milligrams or 50 milligrams per package, which I think is an interesting number because that preserves that above 50 milligrams for for the regulated market and kind of creates this bifurcated market that we've often talked about in different different ways, but it's like creating low dose essentially, um broad access to low dose, and then a a more tighter restricted access to the higher dose products.

SPEAKER_00: 9:05

No, they make sense. They make sense. Um, and sorry, go ahead.

SPEAKER_01: 9:09

Well, I just want to shift gears a little, not because this isn't fascinating, but I'm sure we'll find out more about the bill, its possibilities, what it does and does not include as time goes on. But Mark, you put in our show notes, um, sort of our our prep about a U.S. International Trade Commission uh cease and desist order. You want to give us a little bit of background because it looks like it pertains to one of the sort of better known brands in the industry.

SPEAKER_00: 9:32

Yeah, so I mean this just is kind of an interesting little um sort of under-the-rader thing that um that STISI was um was has been PAX uh had been uh brought up a case in front of the US International Trade Commission uh over a number of years trying to get uh for an argument that that STISI with its vape sort of devices was um and the manufacture of the vape devices uh for STISI were violating certain patents and intellectual property of PACs. And the US Trade International Trade Commission recently uh determined that it indeed was, that STISI was indeed violating as well as this third party, the the manufacturer. And so um basically putting out a cease and desist on these products um and barring the importation of it. Now I haven't dug too deeply into it yet, but you know, it it's it will STISI is a big brand with a lot of you know with national coverage, um, and you know, and vape is one of its big products. Uh, and so it will be interesting to see how this impacts the market. Um you know, I would imagine that STISI will pivot pretty quickly uh with its you know, with its vape manufacturer to pivot to you know the devices themselves, but it's just a um, you know, another another another sort of example of just sort of the pitfalls of of sort of navigating this space, um, as well as uh, you know, just just the uh that intellectual property is is really is is hard, you know, and and and understanding, you know, how can you push that line? It's this isn't this stuff goes on all the time in other industries, but it's it's uh you know, it's just sort of an interesting little uh thing. And it'll be interesting to see how that flows through the data, sales data. No, yeah, good point.

Ben Larson: 11:32

Well, I I I think the the really interesting thing here is the potential repercussions later on when the when the civil suit kind of goes through. So, like this is you know a feather in Pax's cap and in in what could later be a fairly significant damages suit, right? It's like I think STISI started selling vapes. I don't know if they were this exact style that that is infringing on the patent, but 2017 and Stizzy's been on a terror, like they just did the the gold flora acquisition. They they they have a very significant amount of revenue. Like, how much revenue did they make off this device since 2017? Those all are recoverable damages uh in a case like this, if if Pax is successful, right?

SPEAKER_00: 12:16

And it's not the only vape device suit out there. I mean, there's been a number of successful claims against SMOR, which is or C Cell, uh the vape, the vape device manufacturer from China, which which does a lot of the vape devices that go in that are used in the US, um, brought by other uh by by other industry players. Um, this is you know, the technology behind this is is very proprietary and ripe for uh for lawsuit. I'm remembering now there's been a few antitrust cases revolving around and Rico cases revolved around it.

SPEAKER_01: 12:52

Ah, now it's juicy. Yeah. Rico, we got trademark infringement, we got patents, we got the whole now. It's like a real industry. Now we're having a lot of people.

SPEAKER_00: 13:01

Throw in mail and wire fraud and you've got yourself.

SPEAKER_01: 13:04

That was part of that. There was an issue around that related to vapes a year and a half ago, two years ago, where the government wanted to crack down on sort of mail order vapes, regardless of cannabis at all. Um interesting times, and and actually not a not the same issue, but we had a webinar recently about um rescheduling and banking and if that would affect bankruptcy laws as well, because you file bankruptcy federally in uh the U.S., not state by state, which is interesting as well. Um, Jeremy, speaking of stories that were written this week, we covered a story today that's in our newsletter today. Everybody can find it at cultivated.news about the um, I'm gonna choose my words judiciously. Let's just say the metric rollout in New York, which was the BioTrack rollout in New York before it was the metric rollout in New York, which is years late. Uh that's that is a fact uh because the market's been open for a number of years. Give us some thumbnail sketch of what the story said and what the status is right now of that rollout.

SPEAKER_02: 14:01

Yeah, absolutely. Uh so without, you know, I want everyone to read the story. And so without revealing the full details, um, you know, we can talk about a little bit about why we wrote it, what's in the story. Um, Metric is the leading track and trace provider in New York. Um, they recently combined with BioTrack, as Jay said, it was gonna be the BioTrack rollout, it's now the metric rollout. One cannabis company has already sued Metric over the rollout, um, specifically around integration issues, uh, and the issue where Metric is essentially forcing operators to use these 10-set tags that have to go on each product that is logged into metric. And so uh that's a very lucrative business for metric, absolutely. It can add millions of dollars to the contract they signed with New York State. Um, but other companies say, look, like this is creating a lot of headaches. We should let the free market decide what tags we should use and why and how we should use them. Um, you know, I I think the backstory of this is less about, you know, metric's wrongdoing. I think, look, like we'll let the courts decide what is and isn't right. Um, and I think, look, it's it's also very reasonable that there are headaches with rollouts of these systems. Like it's very difficult, it's complex. Uh, you know, New York is an over two or nearly a$2 billion cannabis market at this point. Like there's gonna be headaches, there's gonna be stumbling blocks, right? Um, but I do think it's important from a market structure perspective, right? Uh, New York has had a lot of a lot of lawsuits, excuse me. There has been a lot of problems, and they're layering on a lot of complexity that will go and benefit one specific company. And so I think uh, you know, the very interesting notion from the story that other states should take away is how to handle this a little bit better, right? How to work with metrics, how to work with the operators and make sure that these rollouts do not look like they do in New York and make sure that uh, you know, these issues aren't litigated through the courts and that they are actually regulatory issues and not legal issues. Um and so look, uh, you know, we we spoke with a number of operators. We, I mean, I edited a story. Chris Casey wrote the story, spoke with a number of operators talking about the headaches involved. Um, you know, one operator said they were gonna spend about$2 million complying with metric, uh, and that is about half their net revenue expected for this year. And so uh look, like that's a drag on business. That makes it very difficult to be profitable and make money. And uh, you know, I think when push comes to shove, um, there probably will be some changes to how this happens. Um, but uh, you know, I look forward to seeing what happens in the lawsuit, and uh I'm sure we'll hear about it from all sides today uh going forward.

SPEAKER_01: 16:36

I'm sure we will as well. This I I mean, uh my disbelief in all of this is that New York has been a market for two plus years and hasn't had a track and trace system. Um it's been uh my understanding is like spreadsheets uploaded to a website, and so very difficult to track, certainly without, you know, unless you're like a date, unless you're a unless you put it through chat GPT and say what's going on in this in this realm. Uh metric is not rolled out or bio track, what's it called? BT government now. Um BT government, yeah. Has not been in place. It's um a great story to read. I put up a link to cultivated.news. Um Mark and Ben, I saw you at alternate times shaking your uh nodding your head. Yes, yes, yes. Um does any of this surprise you? I guess that we'll start there. Uh Ben.

Ben Larson: 17:21

Well, yeah, uh you know it's funny. I I've I've done with dealt with a fair amount of investors in my years and and a term that often pops up is regulatory capture, and it often is used in a positive form. And I guess this is just an egregious version of that. But you know, if if I were uh if I were a metric, you know, a potential alternative out the out that out of this is just you know create printers and tags and create the open market around that. Like if your business model is dependent upon tags, like sorry, like it shouldn't be. Um and you can still like make money off of your printers and tags, but allow other people to enter the market and compete on that portion. So a little bit of advice and a little bit of perspective from my from my chair.

SPEAKER_01: 18:04

I will also say on that note, that did come up in a conversation that I had with the metric CEO Michael Johnson on Tuesday um about that. One of his arguments is that tags in other industries cost a lot more. I think he referenced uh beef and cattle, and it's eight dollars a tag, so I guess we should all be grateful. Um, Mark, your thoughts?

SPEAKER_00: 18:25

Yeah, you know, I it it is extremely disappointing that you know that this has happened with New York. Um another is just sort of um, you know, black mark on the uh on the on the the the long-term rollout of that industry there, um which has you know is finally succeeding. Um and yet, you know, it the uh from a regulatory perspective, they keep stepping on the rake, you know, and it keeps smacking them in the face. And it's you know, and it's unfortunate because look, I think, you know, from a policy perspective, it's understandable why we have track and trace. You know, there there are there are good reasons for track and trace. And, you know, we can argue whether or not that, you know, it's necessary. But I understand, you know, from a political policy perspective why something like that is, you know, it's mandated in each state. Um but you know, it just it's from an operator perspective, putting on my operator hat, it's it is extraordinarily burdensome. It is time consuming, the audits, you know, the the cost, the, you know, not just the actual out-of-pocket cost, but you know, the time in compliance. And so it is a hard system, you know, it is a hard system to comply with. Um and just because of the the uh just just because the way it is. And so there is so I you know, I'm I'm very sympathetic to the um to the complaints at the same time. So Yeah.

SPEAKER_02: 20:00

I I would I would just add to that. I mean, I think I think, you know, uh the purpose of the story is not to rinse out metric and to show the usual. Like we understand that um, you know, this is a very crucial service, uh, you know, for for consumer safety, you know, for operators, for the industry to look like a real industry. Um at the same time, you know, there are clearly ways to improve this. And if if the process was going so swimmingly and was so fair, you know, my understanding is that there wouldn't be a lawsuit about it, right? And so I think both things can be true. Um, and I think the story is important in and of itself. And, you know, look, cannabis is litigious, like there are a lot of lawsuits, but I do think uh, you know, you know, I read through the affidavit, uh, you know, there are fair points made, right? And so um I will leave it at that.

SPEAKER_01: 20:50

That's fair enough. Um can I go back to a show that we had earlier in the month, which was our prediction show to shift gears a little bit. And many people in the prediction game, uh, which I think was you, me, Jeremy, uh sorry, Jeremy, you, I, and Anna Ray. I think everybody else was uh uh was was not here. Um, but it was about uh 2026 being uh I'm gonna call it MAPalooza. Uh and we've seen a number so far. I've I can list three Grune and Wild, Thunderstorm and Lyme, Nabus uh uh buying up another uh distribution uh outfit in in California. Uh it's died down this week, but I don't know if that's the the cold weather in most of the country or or just it's died down. Um Jeremy suggested it was going to be a lot more of these because the evaluation on these companies was only going to get bigger. Mark and Ben, I want to get your thoughts on should we anticipate lots more MA activity in 2026? Um or are people sort of keeping their powder dry until or unless something happens on the federal level?

SPEAKER_00: 21:49

Mark. Oh um, you know, I well I wrote a I wrote a whole musings on this because I had a chance to weigh in on um you know in my predictions in the prediction uh episode. Uh but I, you know, I I I've always been a skeptic about the annual calls that this is the year for MA, which we seem to get every year. Um, you know, because I I still think that uh you've got valuations still remain very low. Um we don't know the multiples in the Grand Deal, Grand Deal, um, but uh, you know, and the like, but valuations still remain very low, particularly with the public companies. And um and it you and a lot of these companies still have massive liabilities, uh, you know, in terms of payables, in terms of taxes. Those are hard to buy. Yeah, you know, those are hard to assume. And so I I still remain skeptical that this is a a real true long-term sort of shift in the industry. I think that you've got a couple of them there were just opportunistic. Ease was, you know, I mean, that, you know, that was, you know, ease was opportunistic. The line, you know, Sunderson Lyme deal was opportunistic because these companies were in serious distress and they were picking up, you know, the gold floor was also, you know, so it's I think it was just timing. The Gron Weil deal is a little more interesting in part because it's more of an unknown. Um, and uh, you know, and from all that we know, Gron was not distressed. Um, but again, we don't know. Uh so yeah, so I I don't know. I I'm tepid on this argument that it's you know we're seeing a true seismic shift in the industry.

SPEAKER_01: 23:38

But that does that jive with you, yeah.

Ben Larson: 23:42

Um, you know, we I I kind of look at it in two ways. There's the distressed nature of of acquisitions, and and there will be a whole flurry of those this year, as there probably are every year, just because the industry's tough and it's not getting easier. And there's the hemp side that is going to go through its own cycle, right? And so there's interesting technology on the hemp side that I think everyone should kind of be keeping an eye on, especially as as it goes through the cycle. Um, but on the other side, I I I do think that when MA starts like Grune and and Um and Wild, like that gets people thinking. And you know, just it just takes a seat of thought, and like it's like, you know, what other companies might we combine with to get more power? And we were lucky enough to have Aaron and Draper on on high spirits last week, and they were saying that you know both companies were profitable, uh relatively debt-free, and you know, one was growing very fast, and one was the Titan. And so it's like you combine two companies like that, and and what that does is create a competitive advantage, right? You can create economies of scale, you have sales, distribution, all that kind of stuff. And anyone competing against them in the gummy market, I'm sure, you know, it's not just inspiration at that point. It's like, how do we continue to compete against two of the top brands in the space? Right. So I do think it might inspire a little bit of a flurry. Um, and we're seeing it across sector. So just you you mentioned distribution, brand. Um, and yeah, I mean, it's something that you know we're considering as we we look at the year. So I think it might okay.

SPEAKER_00: 25:18

So well, and and I think with edibles, it does create, you know, it is the it makes a little more sense in a way in some ways with edibles because you've got, you know, you've got in some ways fewer SKUs, you know, the product is a little tighter, it's it's a little easier to to white label, you know, and produce somewhere else. And so, you know, and and if you've got, you know, if you've got a target that is um, you know, that that's doing white labeling in other states and doesn't have licenses, you as the acquirer have licenses, you can capture that margin. Um, you know, so there is a lot of benefit there. Uh, so it does kind of make sense, you know, on a certain level, why uh there is a lot of scale potentially with with with edibles that wouldn't necessarily be there with um with you know with uh with flour and the like companies. I don't know. It's just me special.

SPEAKER_01: 26:13

I would say I'm gonna give a plug to someone that's not on the show. If you listen to Brian Field's conversation with um uh uh uh MerriMed, actually really interesting is sort of how they approach new markets and sort of how they keep consistency across markets. An interesting one there. So, Brian Field, shout out to the dime and your podcast because it was a great listen. I listened to the whole thing. Uh I can't get enough of Boston accents, and Merrimed's based in Boston. So that that was sort of uh Ryan Crandall is the guy's name, uh, who started Betty's Eddies and then got acquired by MerriMed. So uh shout out to that podcast. I want to call out a couple of the things uh before we wrap up. One, um, sort of the passing of Curo Wellness CEO Michael Bronfein. Uh suddenly we saw that on LinkedIn. Um, a great guy and great family sort of running the operation at Cure Wellness. So that and Bob Weir, Mark, I know that's close to your heart, uh, passed this week. So um cannabis people abound um uh this week to send our thoughts and uh to their families and fans um across. Um and some announcements from our end. Uh we have our event next Thursday, the high rise in New York, that we're putting on with our friends at Gotham. That is now a sellout event. We're very excited. Jeremy and I will be there. And uh we just decided we're both going to be wearing suits. So we'll get a we'll get a photo of that uh to make sure we spread that around socials. And yesterday we announced um we are headed to Chicago for the Midwest Cannabis Forum, a project we're working on with our friends at Grown In. That is March 12th in downtown Chicago. Mark and Ben, what do you guys have coming up?

Ben Larson: 27:42

Um I'll be in DC next week for the National Governors Association cannabis meeting. And so excited to talk some sense into the governing bodies of our our collective states. And then uh yeah, I think uh New York after that. But nothing.

SPEAKER_01: 27:57

Is Jared does is Jared Pullis the governor that knows the most about cannabis?

Ben Larson: 28:02

I yeah, I think that yeah, I think so. Certainly not Gavin Newsom.

SPEAKER_01: 28:07

No, no, although he's he's dressed off his trip to Davos, right?

Ben Larson: 28:12

He's yeah, I do wonder if he's gonna make a pit stop in New York for for this. We'll see. I heard I heard California will be represented, but I'm not sure if it's him or the the new uh DCC director.

SPEAKER_01: 28:22

Mark?

SPEAKER_00: 28:23

Nope.

SPEAKER_01: 28:25

Nothing.

SPEAKER_00: 28:28

I I just taught, I was just in Las Vegas teaching cannabis law at UNLV for the week. Um, and I've got another conference coming up in April uh for another cannabis law conference in April, but um I'm available to do bar mitzvah's weddings.

SPEAKER_01: 28:46

Uh uh great. I'll I'll keep that in mind. We have a bar mitzvah coming up in 2027. We'll book you next. Yeah, we'll we'll book you now uh for May 1st, 2027. Uh size bar mitzvah date. Uh Jeremy, Ben, Mark, thanks so much for being here. Thanks for those watching online. Be sure to follow us at cultivated.news, get cannabis musing, follow uh high spirits podcast, um, and uh we'll connect with everybody next week. Thanks, everybody.