Welcome And Subscribe Request

Ben Larson 0:00

Hey everybody! Welcome to episode 135 of High Spirits. I'm Ben Larson. And I'm Anna Ray Gramstein. And we've got a real special episode for you today. A special rescheduling episode. Have you heard of it? It's very good. It's going to be the best episode.

SPEAKER_06 0:17

The best episode.

Ben Larson 0:19

Best episode ever. And uh I'm gonna do a little something special. I'm gonna take something from the end and I'm gonna put it at the beginning because there's gonna be a bunch of you here. I know you're gonna be watching live, and if not, you're gonna be listening to our podcast. So I'm gonna have you pull up a seat real quick. We need you to pause and go and like and subscribe our podcast, uh, whether it's on Apple, iTunes, or here live in LinkedIn World, if you want to follow us here, uh Spotify, YouTube, wherever you listen to us, please subscribe, like, share, do all the things. We really appreciate it.

SPEAKER_06 0:53

Okay.

Ben Larson 0:54

Anna Ray, are you excited about our show today?

SPEAKER_06 0:58

I'm so excited. Ever since this happened uh last week with the rescheduling announcement, every single day, I am starting to unpack or see this other opportunity or how this might shift the trajectory of the industry. And uh, this really does feel like one of the biggest changes that we have been faced with in a long time. And we wanted to have a really all-star discussion about it today. And I think we put that together. How are you feeling?

Ben Larson 1:27

Uh, you know, I I've said this to you. I think the word you use to describe yourself was giddy. And I was like, I don't know if I can get myself there. I'm too skeptical of government in general, um, but especially the government when it comes to cannabis and especially the federal government of all governments uh when it comes to this stuff. So um, as polarizing as our perspectives might be on how much progress this is or might be, uh, I'm excited to dive in with our our legal uh mastermind here and and see what we can what we can unpack and see if I can get a little bit closer to Giddy because I'm just not there yet.

Meet The Legal All Stars

SPEAKER_06 2:05

Yeah, and I promise to hold the optimism um between us. But I think that uh the the plan for today, folks, if you're listening in, is a little bit of a different format. We've got um three guests and we're gonna bring them on, let them introduce themselves, and then um Ben and I have a ton of questions and we're just gonna go through uh what happened and what it might mean and and really try to have have the questions out in the open that all the operators are asking and haven't been able to figure out yet. So if you're um if you're tuned in, feel free to drop questions in the comments. We'll see if we can get to them. But we have a million ourselves.

Ben Larson 2:48

All right. Well, let's go ahead and bring them on. We have Alyssa Samuel uh from Hoosh Blackwell, and we have Eric Berlin from Dentons and Michael Cooper from Madison J Solutions. Uh let's go in that order. Uh Alyssa, why why don't you introduce yourself?

SPEAKER_01 3:05

Thanks, Ben, and thanks, Anna Ray, for inviting me on. I'm really excited to get to talk about this topic. And for all of us that have been in the industry, I think we did not we were starting to lose faith that we would ever be able to have this conversation. So it's exciting to get to take part in that. Um, so I'm an attorney at Hush Black. Well, I have been working with cannabis companies and tangentially those in the space, including Vertosa, one of my favorite clients, um, since 2011, 2012 in Colorado. So very, very early date. So some of my opinions will be based on what I've seen in the industry over that period of time and my flaw from government involvement in multi-states. Hush has offices in 18 states, and we have practitioners in most of the states. So I've done in work, work in a lot of the different state-regulated models. Um, so I'm really excited to to dive in with both Eric and Michael, who are great colleagues.

SPEAKER_00 4:02

Amazing. Awesome. Eric, you're up. Yeah, thank you both for having me, and I'm honored to be here with uh Alyssa and Michael. I am Eric Berlin. I have been an attorney now for 33 years and in the cannabis space for 18 of those. Uh I lead the U.S. and global cannabis sector group at Denton's, which is the largest law firm in the world. And I have uh really, for now more than a decade, been spending 100% of my time for clients in or impacted by the cannabis industry.

Ben Larson 4:40

Amazing. All right. And Michael Cooper, uh, my colleague at NCIA.

SPEAKER_02 4:46

So Ben Ben revealed, in addition to uh uh being one of the founders of Madison J Solutions, which is a regulatory strategy firm uh that supplies space, cannabinoid space more generally, uh also Spirit, uh on their highly regulated brand strategies. Uh I am also, I was on the board with Ben of NCIA for a number of years, and I am the uh the chair of policy for NCIA. So uh I I'm excited to be here with Eric and Alyssa and and with Hannah Ray and Ben. Uh uh let's get down to it. I'm excited.

Ben Larson 5:23

And we'll acknowledge that Michael is three hours ahead of us. So if he's a little bit darker than normal, that it is precisely why.

SPEAKER_02 5:31

Yeah, I also like to think I'm just three hours ahead. I thought you were saying that's we give three, we're that far ahead on on this analysis. We're just cutting stuff here.

SPEAKER_00 5:42

Yeah, that too.

SPEAKER_06 5:44

I'm gonna get us started and I want to toss the ball to Eric uh to just give us a download of of what happened for people that haven't been paying attention. But if you could just give us give us the overview of what just took place and where we are today.

DEA Registration Fear And Risk

SPEAKER_00 5:58

Yeah, sure. Well, we had a watershed moment in uh cannabis and legal cannabis history uh following up on President Trump's executive order from December for the attorney general to reschedule cannabis. The attorney general issued a final order that did several things. Number one, it um moved medical cannabis into schedule three. So I think as your viewers know, we have five schedules. Uh marijuana, as it's currently defined, sits in schedule one, which is reserved for substances that have no currently accepted use in medical treatment in the United States and are considered among the most dangerous drugs. So medical cannabis was moved to uh schedule three. And here's the really interesting part the definition of medical cannabis included the state legal medical cannabis programs. So that is, as of last Thursday or Friday, officially in Schedule Three. The next thing that the final order did was to provide a pathway for federal legalization under the Control Substances Act for those medical cannabis operators, and what they need to do is to file a mandatory DEA registration for legalization to apply to their operations. So those who obtain a DEA registration uh for their medical cannabis operations will be operating legally under federal law. And to be clear, the portal for registrations opens tomorrow morning. So as of sometime tomorrow, our view is that the companies that have registered will be operating legally because what these rules say is if you put the registration in within the first 60 days, the DEA has to act on it within six months. But in the meantime, you're deemed to be compliant. The next thing that the federal order did, because it did not reschedule adult use cannabis, was to set a hearing for the determination of whether adult use cannabis, as it's defined, would be moved under Schedule 3 as well. That is set for the end of July, the early part of um, excuse me, end of June, early part of July. Uh I think it starts uh June 29th and is mandated to end by July 15th. And then, of course, something that's really important, and it's more of an implication, but it was addressed, is 280E, uh uh Revenue Code Section 280E. And immediately after the final order, Treasury came out not with guidance yet, but with notice that it was going to come out with guidance. And the question here is there is no no question that for medical cannabis, 280e will not apply retroactively at least to January 1st, 2026. And the question is how much more retroactively uh it will not apply, and we're waiting for guidance on that. Um those are the highlights, and um, I can pause there because I think there are probably many questions that tumble off of that.

Ben Larson 9:39

A few. A few just popped to mind. Okay, I I was having a I was having a conversation earlier today. And let's start a little hopefully this is lighthearted. Uh, but it's not lighthearted for a lot of operators in space because we're highly skeptical of the of the federal government, like I've been saying, you know, it's like we have not always been in the good graces of the federal government, especially a Republican one. And I was speaking with someone today, I'll I'll leave them anonymous, but they're like, hell no, I'm not getting on some DEA list. Uh and I'm like, oh, that that's a fair concern. Like, how do we know it's not just a trap? Anyone could jump on this. I mean, I wouldn't say it's a trap. Alyssa, I'm gonna let you jump in.

SPEAKER_01 10:19

Like I don't think it's I don't think it's a trap. I certainly don't think that, but I think it's a very fair concern that if we remember a lot of these markets, like Colorado, Washington, came online when we were operating with really just some loose guidance from the DOJ, that they would not interfere with these programs if you adhered to eight specific principles. But it was sort of a shield. And the federal government said, hey, well, we won't come in and we won't bother you if you just do these eight things. And in those days, the state programs were very stringent because it was unclear, you know, if you cross that line even a little bit, would you have federal interference? But as more states came online and we saw in 2018 the cool memorandum was repealed and the market still remained, things have become a lot more lax. But we're now entering a period where the state programs are going to be analyzed by the government agency that is in charge of enforcing drug laws to ensure that they're compliant with the single convention. And yes, the order was very permissive and um acknowledged it was very favorably acknowledged that these state programs do a very good job of doing most of the things that would keep them compliant with the treaty. But it was also very permissive in the discretion it gives the DEA to say no to them at any time. So, I mean, the language in the order over and over again is is state legal medical cannabis medical cannabis will be schedule three, the DEA will give these licenses unless they deem it against public policy or against compliance with a single convention. So if there's a state program that isn't operating correctly, you know, they could mandate changes to that. There, you know, our state medical programs could become a lot.

Interstate Commerce And State Pushback

SPEAKER_06 12:28

Well, so you're you're bringing up kind of the complexities of the state medical programs and how in a federally legal world they seem to not make as much sense anymore. And and there is the question about does this actually create a pathway for interstate commerce between medical operators? Uh and if so, that inherently breaks a lot of medical programs. Like I think about Florida um famously, where Truleave is from. And we all know that TruLiv has been a very vocal um proponent of this order. And uh I think Forbes had Kim Rivers on the on the front front page of the magazine or all over the internet this week.

Ben Larson 13:09

The Trump Whisperer.

SPEAKER_06 13:10

The Trump Whisperer, yeah. And so I guess maybe I'll turn this to Michael. You say regulatory strategy. I think of regulatory strategy as the path to how do you get to do business within the regulatory landscape. And and everyone's asking now, how do we do business within this new landscape? Do we get to transport cannabis over state lines? And if so, that seems to go against a lot of this existing state programs. And how does that work?

SPEAKER_02 13:38

Well, so let's step back for one second. Uh, to answer your question. What this says is you have to operate within the bounds of your state medical program. Now, that is not a fixed-in-stone concept. So if you have a thank you, Eric, thank you.

SPEAKER_00 13:57

Uh, exciting utterance.

SPEAKER_02 14:01

Sorry, spoiler jokes. Uh so currently most markets are closed loops, right? You need to have everything within them by law, not just by practical requirements. That is something that can evolve. Now, there are some states that have entered into these compacts, um, and there are questions about whether those have been triggered, but stepping back, what will happen is that states will evaluate what makes the most sense for their medical programs, right? Because what the this order does is provide a fair amount of flexibility and leeway, in my view, to states and how they craft the contours of their programs. Now, that does not mean that uh any of this will change overnight. And frankly, that is going to be a dynamic process, in my view, because some states are probably going to be more restrictive, maintain more of a closed loop. And I think that you're going to see litigation that explores the bounds of that. Um, so I think that, you know, uh I appreciate the the plug regulatory strategy. This is exactly where it gets interesting because how do you build your business for today, the future? Um, and I think that one piece of that, which uh is something that I think Alyssa was picking up very nicely, is there's going to be differences um in what this looks like and how you might want to structure your business going forward, um, depending on what the where the wheel stops, right? Um, and just how far progress goes um and how easy it turns out to be to get some of these DEA licenses, because there may be things that make it easier to secure one of those licenses, which as Eric noted will have tremendous benefits to the holders. So I think that that's why it's a a dynamic game. And can I throw in one thing which I I just wanted to add um to something that I'm absolutely positive that Eric and Alyssa will agree with, um, but I just didn't want our listeners to uh or viewers, I guess you guys can see me. Uh I didn't want to get said, um which is the the rescheduling of medical went into effect immediately. It is my suspicion that there will be legal challenges to it brought by prohibitionist groups. I say that not because I think that those are well-founded challenges, but because inevitably that is just a fact of life in this country. So uh that is something that you need to pay attention to. You need to uh hire someone like Eric or Alyssa uh to give you advice on what that means as those things trickle through, because that will have a real impact on the kind of strategy you want to employ. Um, so I just wanted to mention that because I do think that's an important piece of this um to level set on.

Ben Larson 16:50

Oh, yes, I am sure Kevin Sabet is frothing at the mouth for uh to think it's yeah, right.

SPEAKER_00 16:56

I mean, he already said that he's gonna bring in action, and all we can hope is that Sam's action here is brought as incompetently as their lawsuit against the Siena monitor.

SPEAKER_01 17:09

I mean, what one aspect of litigation that I am curious about is not from prohibitionists, but from other schedule three medical providers who may say they may bring unfair trade practice litigation in the sense of, you know, we're schedule three and we have to go through all these FDA processes or we and we have to operate a certain way. But now you're giving the cannabis industry a pass to continue operating under their state market. You know, how what does that look like?

SPEAKER_00 17:39

Oh, it's a good question, Alyssa. I I question whether those folks would have standing uh for the challenge, right? I mean, I I could see what their argument would be and and that competitive effect, but I don't think that that I don't I I I don't want to get over my skis here, but I don't think that that would give them standing. Uh I mean they may have a valid complaint, but that doesn't necessarily give you standing. Yeah.

Ben Larson 18:07

I just want to tie uh tie a bow on on uh some things that we were talking about earlier. For so for starters, like the the interstate commerce. So California did have SB 1326, and similarly, Oregon had SB 582, and then I think Washington also had this kind of interstate clause if if it was allowed by the federal government. So essentially we have a unified western coast as far as interstate commerce can go. And the nice thing about the that legislation, it creates kind of a blueprint that other states could potentially copy and pass theoretically, right? Is any any objection to everything I said as a non-lawyer?

SPEAKER_01 18:43

Uh no, that that was correct. And I was I was gonna mention that too of what happens with 13 SB 1326 with this. But my question with it, it will be will states like Missouri want that or Colorado?

Ben Larson 18:57

Oh, well, they want it, yeah.

SPEAKER_01 18:59

They may not, because you are opening up a huge market where you can grow marijuana outdoors very efficiently, where they've had to grow it much more expensively indoors.

SPEAKER_06 19:12

Well, so this plays into exactly also what you said, Alyssa, about maybe it was before we got on, but about there being winners and losers in all of this. And and my my question is about, and maybe Missouri is is one example, or Oklahoma or Florida. If we were to look at an existing medical only state like Oklahoma or Florida, can they stop it um because of the dormant dormant commerce clause? Uh that's I guess that's the question. Can can they say that we don't want it and we want to be protectionist with our existing product? I think so.

SPEAKER_01 19:51

I think they would have I think they would have a claim. All is you would have to really make, and we you saw this in the the pork case that made it all the way up to the Supreme Court a couple of years ago because California enacted some laws that said, unless you follow certain standards, um, you cannot, when you raise these animals, you cannot sell that pork in California. And this was challenged by the pork industry. It went all the way up to the Supreme Court and the Supreme Court side of California saying California has the abil the ability to protect their citizens if they have a vested interest in their public policy and public health. I think a state could easily make the claim, whether or not if it's for a protectionist reason, I think they could make the claim that opening uh commerce, like they they lose control over the security of it. I and there's quality metrics that they could put in place. Like all of these different states have different testing requirements, every single one of them. And so there's not going to be uniformity on that. So I think there would be enough there for them to make that claim.

SPEAKER_06 20:50

Eric, do you agree or disagree?

Export Rules And Global Medical Sales

SPEAKER_00 20:52

I disagree. Yeah, I don't I I don't know. I mean, I under I don't I think those are valid arguments for sure, and well made. It's not that I disagree with Alyssa. I I disagree that that um that ought to be sufficient. Um I mean, those uh the the example of the California case was very specific, but just sort of the vague, like, hey, they're they're um, you know, our labels different. And therefore, I mean that's something that normally uh we overcome. And let's be clear on this. By far uh the default position is interstate commerce. Um, we are a country founded on the strength of interstate commerce. I live in Chicago, I can have orange juice in the morning in January, we don't even think about it, right? I mean, it's just one of the strengths. Um and it applies to all legal products, at least, arguably all products, but court cases disagree on that. And so when medical cannabis is Legal writ large. Certainly what is clear is the state can't say, well, we want it produced here and we want the city, you know, it it only citizens of the state can participate. Um how far out they can go to claim that they're protecting the citizens of the state, Alyssa pointed out the exact right argument. I said it was well made. But like I think we see that all the time, right? And and we ought to have interstate commerce of medical cannabis. We have interstate commerce. I I can't think of another medicine that we don't have interstate commerce of, I suppose, in some of the states that permit psilocybin, but not on the federal level. I mean, any medicine that is federally legalized is available in interstate commerce. And I don't know why cannabis as a public policy reason should be different.

SPEAKER_06 23:01

Well, and it it cuts both ways too with import-export as well, correct?

SPEAKER_00 23:09

In in the state and and internationally as well. I mean, notably that it provides the state medical cannabis providers, operators uh that register with the DEA to participate in the export of products for uh scientific and medical research.

SPEAKER_06 23:30

And what about for medical commerce internationally?

SPEAKER_00 23:35

Yeah, that would be included. I mean, my uh the it like Germany is a good example, right? Germany legalized for adult use, but a large portion of sales in Germany are because it's a narcotic it's it's a non-narcotic, right? It can be prescribed now uh freely for any condition by any doctor. And so my view would be that um if this is set out to comply with the single convention, as it does, and um these basically um I'm I'm gonna not put this in a good way, so don't hold me to it, but kind of it expands uh uh the definition of bulk manufacturers. Our DEA registered bulk manufacturers could always sell uh internationally. I mean it has to go, it always had to go through the DEA, it's the same process, but they could, and now this order expands that definition of who can legally produce for that purpose. So we are reading it. I I think we'll get clarity and don't hold me to it, but it means that you know, you mentioned Florida as a wholly legal state and a well-regulated state, right? I mean, it's viewed differently than Oklahoma. And I don't mean that against uh regulators, I mean that as the laws drafted, right? Um so Edgar Barry, don't I'm not calling you a bad regulator. You just got a bad law. Um and and and uh Florida is not considered that way, right? And so it's made a good point of like what is the public policy uh denial. But I think Florida is not going to be among them, right? If they're if that does exist. And so the medical producer in Florida that gets DEA registered and is complying with those standards, our interpretation is they have the ability to export outside of the country. And they don't yet, because the state laws don't allow it. But once the state laws allow it, they would be able to, and that goes to the question that Alyssa was addressing, which is like when there's a challenge to the state laws on dormant commerce clause, which there will be, will will will the states be able to win or not? And I don't think any of us know for sure. I mean, it'll probably go to court. And my view is is uh probably not, and Alyssa's is probably, and it's so hard to tell. I mean, that's why having lawyers on is fun.

SPEAKER_02 26:16

Can I just say I feel like it's actually going to be even right between those two? It's going to depend on the specific state and the rationale and the basis and what they're requiring, and it's going to make it even more interesting. So I think that this is going to shake out not over weeks or months, but it's going to be years as different states pull different levers with the best of intentions, some of them winding up where Alyssa thinks, some of them winding up where Eric thinks. Um, and it's going to be a fact-based determination until such time as you get more clarity, um, which could come from, in theory, the Supreme Court saying, hey, I have two cases that look like uh two circuits are applying different rules, or potentially Congress preempting some of this. And I think that, you know, Eric makes a great point. There is language in the order that talks about export permits. So that is considered, but it's a great point. You have to operate in conformity with state law requirements until those states' programs are amended to allow you to sell that. Today you can't just sell to an export broker. It's a closed loop in a lot of these states. So it's going to be interesting, it's going to be dynamic. And there's going to be every lawyer that you talk to will have a slightly different, more nuanced. I just wanted to make sure that you didn't have two views. I could slide right in with that.

SPEAKER_00 27:42

Yeah, and I'm being optimistic. I'm talking more about the long term, just to be clear. But uh, this is a great point of irony. Like the states, the state laws were written to be intrastate in order to not violate one of the priorities in the coal memorandum. Right? So the state laws were written to be intrastate so that they would not trigger federal enforcement. And now they need to rewrite their the laws to be able to comply with the federal law to accomplish what the federal law is trying to do. It's kind of a weird situation.

Adult Use Hearing And Treaty Limits

Ben Larson 28:18

And in in some of those states, like the one four of us are sitting in, or anime, you're actually not sitting at home, so you're out. Three of us are sitting in. Uh, that's going to require two-thirds vote to rewrite, so uh yay for California. Um so this is all creating this uh what I'm amass like imagining is this massive gravitational pull back to like a medical construct, which is kind of weird. Um, but before we get there, because we did acknowledge that there is this hearing in late June about the uh trying to get adult use into this conversation. And and I don't know what the potential for that actually being successful is. Could we just have a little sidebar about that aspect? Um, do we do we think adult use is gonna be looped into this and it's gonna remove that kind of uh differentiation uh between the same plant?

SPEAKER_01 29:15

I don't think it can under the language of the treaty. And even if it can get moved to schedule three from say the say this hearing is successful, it gets moved to schedule three. I still don't know how it's integrated into a DEA license. So because right now, if you went to get a DEA license to be a hemp testing lab, they wouldn't give you one if you were testing marijuana in a part of your facility.

Ben Larson 29:38

But this is the Trump administration. We don't we don't care about treaties, right?

SPEAKER_01 29:43

Like we just set those things on fire all the time. Because historically, not just the Trump administration. U.S. foreign policy has relied on drug interdiction as a reason for involvement in a lot of other countries. And even right now, as of 2026, we have renewed involvement in Bolivia and Ecuador. It relates to cocaine interdiction, but it makes it very hard to violate international treaties that we sponsored and we helped put into place that we use as reasons to go into other countries when we're violating at home. And you saw that the order was largely about treaty compliance.

SPEAKER_00 30:20

Right.

SPEAKER_06 30:21

Canada got around it, right, with their adult use legalization.

SPEAKER_00 30:26

I I'm I'll give my prediction, but it's not worth much, right? I mean, like, I mean, it's kind of uh and and and it's not based on I think Alyssa's correct on on the law there to to, you know, in terms of how they're trying to work it out. But I think that uh adult use will get rescheduled to three, but there will be no similar mechanism for DEA registration and legalization, at least at that time. The next step hopefully will be to get Congress to uh legalize, you know, to set up something or at least decriminalize or or allow uh state adult use to be legal. But my guess uh is that you know, whether it makes sense or not, there will be a hearing, whether it makes sense or not, adult use will be rescheduled to three, but there will be no legalization mechanism. As I said, that's like you know, don't hold me to that. Okay. That's interesting.

SPEAKER_06 31:28

It begs it begs.

SPEAKER_00 31:29

I say that in what some way, let me just clarify. I say that not from like a deep public policy or international law review. I say that from just kind of reading the political tea leaves as to where it's going. But I also think there are some complexities, as Alyssa pointed out in law. And it's who knows, right? I mean, like things change. And things change quickly. So even if if something is anticipated now, there can be a change of circumstances, and getting it done could be challenging.

How States May Redesign Programs

SPEAKER_06 32:05

Well, I think it begs the question to dive deeper into what's going on at the state level and how these laws might change or not change, or how people's businesses might change at the state level in order to try to execute on the opportunity that's right in front of them. And I've heard people that are throwing up their hands saying, don't change your business right now just because they're saying uh that the focus is on medical. If you're adult youth, stay adult youth, stay the course, eventually it's gonna work itself out. There's others that are like, no way, the whole world is going back to medical. This is this is the future. Um, that's what the rest of the world is doing. And and then Ben brought up the point of that a lot of states legalized their adult use systems through voter initiatives, which are notoriously challenging to change. And I'm wondering how you guys are seeing what is about to happen at the state level in order to try to fit uh, you know, the square peg and a round hole of what's happening with this new scheduling. Like, are are we gonna see states end their adult use programs and go back to an all-medical but highly open medical environment in order to comply with the federal government or something else altogether?

Ben Larson 33:28

And then that starts to be a question like what defines medical? You know, it's like I it makes me think back to the early days. You remember Hello M D? Uh like people and Hadfeld H Hadfield, Hadfeld. Uh and yeah, you dial a doctor and you get like is that just gonna is that gonna come roaring back? Is that gonna be a requirement?

DEA Portal Questions And Co Location

SPEAKER_02 33:45

And you just yeah, go ahead. Look, one of the things is what defines medical at the moment is the order that that was issued last week. So it says uh it's uh marijuana or products that contain marijuana for medical purposes, it's just the plain text words are what's in the definition in the order. And so I think that what you're going to see because it's bound by sorry, I should have read the beginning, which is uh a license issued by a state entity or the District of Columbia or a territory for those purposes. So I think that what you may see is an expansion over time of medical programs and qualifying conditions, particularly as additional research is conducted and people find uh what works better and what uh does not. But I think that I I don't believe that overnight uh or in the foreseeable future you're going to see adult use markets disappear because I think that they will uh still serve a different audience. So one thing that I think of on this, um, and that this is the definition of a dynamic game, right? Because this is going to play out over time if if Eric is right, and uh, I don't know that you said by the end of the year, but I'm going to say by the end of the year, right, all of cannabis is rescheduled to three. There are going to be advantages in the Eric framework to being medical. You'll have this DEA license and additional protections, but you'll still be in a schedule three world if you're on the adult use side. In that case, I still think that you're going to see folks operating in the adult use side. And, you know, then it says Vertosa belonging to me. When I think of beverages, I think of social occasions, right? And that's sort of an adult use framework. Um, I'm sure that there are medicines that aren't just, you know, in a dropper, but that are in a beverage. But when I think of that, I think of a of a more adult use situation. I think that that's something that voters want. And that is one piece of this. I think it's easy to look at all this in a vacuum and say, hey, you know, what does this mean looking solely at at the text? But all of this was animated for a purpose, right? Um I think Anna Ray, you asked that this was a trap at the beginning. Uh I honestly do not agree that any of this was intended as a trap, certainly not by the folks That was Ben, by the way. But I'll take responsibility for that. I was quoting someone to be clear. For me remembering which one of you said it. I'm sorry. Um I think that that's I always say to people, look, there are actual human beings in Washington who put this in motion. And I think that they have done it. Um, if you listen to what's being said around this, if you look at what the president said when he signed the executive order, they think that they're pushing this forward. Right. And so I don't think that this is all one big trap. Um, and as a result, I think that you're going to see continued progress. But yes, there may wind up being for a variety of reasons litigation delays, bureaucratic delays, advantages to operating in one way or another, and smart operators who have the means will be consulting folks to figure out how to put themselves in the best position. Um and I think that what what's important to remember there is this is because of positive momentum, though. Um and so I would not sort of panic. But there there may be real opportunities in medical that we didn't foresee a year ago. That said, I don't think that the category of adult use is going away, particularly if you get the same kind of momentum later this year.

Ben Larson 37:45

Um so we we do have like a definitive like 60 days starting tomorrow, right? That that we have the opportunity act quickly, uh, it sounds. Do we have visibility into how the DEA is thinking about the supply chain? Because if you go to the site right now, you'll see a dispensary license thing, but nothing else. And like, so do we know kind of how they're thinking about the different applications? As someone who operates in the supply chain, we often get left out of the conversation because people don't think of like intermediary ingredients as a segment. They think about finished form products, they think about growing, maybe extraction, and then dispensaries.

SPEAKER_00 38:25

Um Eric? I we don't know the answer to that. We're trying to get the answer to that, honestly. We're I think it's an excellent question. And the even the portal and what goes into what portal and all of that is not yet at least clear to me and my team. If anyone else has information, I'd love to hear it. But I think I'm hoping that there'll be guidance on that in in the coming days and quickly, hopefully.

SPEAKER_02 38:55

Ben, I'll I'll say for what it's worth, when you look at the types of registrations that they talk about, one of them is a manufacturer um who can, among other things, process marijuana, Bronas and Kaney marijuana, and then transfer them to other registered manufacturers. That sort of sounds like what you would be, but I think that the point is well taken. There are so many levels of this, right? Um, for example, how they will treat a business like yours, right, that might have production for both medical and adult use, right? Um, these are just things that we're learning more and more about how they want things to be set up. Um, that you know, it's not shocking that we haven't gotten all these answers since last week. Um, but I know uh I'm sure that both Eric and Alyssa are working very hard, um, as are many other lawyers around the space, trying to get those answers. Um fair did I fair to say, Alyssa and Eric?

unknown 39:57

Yeah.

SPEAKER_01 39:58

And I think questions around how the DEA is I think the DEA has a lot of work to do. Um, I'm sure that they've been planning this for a while, but maybe not. But you know, maybe this is just an outgrowth of that order. And, you know, six months in regulatory time is not that long. So there may not be full processes yet. And so, and they're gonna be newer to this game. You know, they haven't really been involved so far. So I think there's gonna be times where this doesn't go particularly smoothly. You mentioned one thing that is my biggest point of curiosity is how are they going to treat the state regulatory systems like Missouri or California or Colorado that have folks that have not just co-located, but sort of co-terminist or rule and rules that encompass bowl. Like they're there, like in Colorado, there used to be rec rolls, med rolls, and they consolidated them all into one set. California did the same thing, Missouri has somewhat done the same thing, and you you don't even have a a lice of medical license and an adult use license at a location anymore. It's just you have a combined comprehensive license. So this will be the only substance where the DEA would be saying, okay, you can have both your illegal drug commercial activity at the same time that you know we license to it as a med as a medical. It would be like saying, sure, you can continue to sell prescription ketamine at the, you know, out of the same place that you also sell illegally, like for adult recreational use. So I'm it's just this would be the first substance that the DEA would treat like that. So I'm very curious to see how they approach that particular piece.

Banking Capital Markets And Exchange Listings

SPEAKER_06 41:43

We love anomalies in the cannabis industry. We just want to do it different, make it up as we go. Just yeah, we can't follow the case study ever. Um, we can't have nice figs, they say. Uh putting the DEA aside for a minute, uh, I want to talk about capital markets and banking and the NASDAQ and the public companies. You know, the the biggest issue that cannabis has been lobbying on for the past decade has been safe banking. And uh and we also know that there are a number of public cannabis companies, and they're all they're American companies, they're listed up in Canada because of just this issue that we are faced with. And I have heard people talking over the last few days that the ability of a company to get registered with the DEA should be enough for that company to be eligible for banking more broadly and potentially credit cards if Visa and MasterCard were to come on board after that. And then taking it a step further, even to look at listing on an American exchange as a public company. And I'd like to dive into that and the ramifications of of this order on on the capital markets and banking. Who feels like they could talk about that with the group?

SPEAKER_00 43:09

I can talk about that. Okay, go ahead, Elizabeth. No, go, go for it.

SPEAKER_01 43:15

I think theoretically having a DEA license would shouldn't suffice, but I it also gets back to the earlier question of if you're a company that is participating in lawful activity, but also still participating in illegal activity to a degree, does that still work? And so that that gets back to my original, I don't know how adult use really survives here, even if it's schedule three, because if a portion of your revenue stream in the same entity is still coming from illegal proceeds, um, you've still got the same problem.

SPEAKER_06 43:51

Make it a simpler answer. Picture a company that isn't playing in adult use.

SPEAKER_02 43:54

Only meant is line to Alyssa, make it simpler, give it the simpler.

SPEAKER_01 44:00

What if what if it's only a medical lawyer? My opinion would be that yeah, that that should on the medical side a hundred percent you should you should be able to do that. I think Eric Eric we're relying on Eric to have a a a different and more interesting opinion.

SPEAKER_00 44:16

No, I mean in terms and I'm sorry my video is freaking out again, but um my view is the co-location and and co-licensing issue is not yet resolved, and we'll have to see what comes of that. But in terms of your question, I mean, take a company that's operating in Florida or Pennsylvania or both, right? And and that's all their operations are, just hypothetically, right? They're only medical, state legal medical operations, and they get them all DEA registered. Uh my view unequivocally is that they should be allowed to be publicly listed, banked, uh avail themselves of bankruptcy, avail themselves of trademarks and patent enforcement. Um whether everyone follows that view, it I don't know, right? Because the decisions to not bank or serve cannabis are not always about that legality. Sometimes they're about kind of the reputational risk or the uncertainties that there'll still be somewhat attached here. So I I think we'll see movement in that direction. But in terms of like the question of should uh one of the US public exchanges be able to list a fully state licensed DEA registered medical cannabis company, my answer is an unequivocally yes, they should.

SPEAKER_06 45:57

Make drop.

SPEAKER_00 46:00

Yeah, it's a really big deal. Uh right? I mean, that's a like that's a that's a that's a big deal. My view is that they should list more than that, to be clear. You know, I think there are lots of compelling reasons for the exchanges to list beyond just medical cannabis at this juncture. And to be clear, there's nothing really preventing them from doing so, in my opinion. And they're not really, they're not uh selling cannabis, they're not aiding and abetting, they're not conspiring. And the fact that there is an adult use tail shouldn't make a difference, but I think that's more the legally nuanced issue as opposed to What about SBA loans?

SPEAKER_06 46:43

If we're thinking about maybe smaller operators being able to benefit from something that they can't access in a public market, but government For sure.

SPEAKER_00 46:51

Putting aside the issue the ELISA raised. Yeah.

SPEAKER_01 46:54

Yeah. If they're fully legal, if they're operating fully legally under the US and state law, there should be no reason why they would be excluded.

SPEAKER_02 47:02

And look, Anna Ray, I think that you posed a great hypothetical, which is, well, what about these government loans? Um I think that where this gets interesting, and a point that I think Eric was was alluding to is some of this is legal and some of this is house rules. Some of this is companies that have made decisions, um, particularly when you talk about things like uh current code processing. Um, what does lending look like here? It removes obstacles, but you may still have lenders who say, well, I don't understand how to underwrite this, right? They are not compelled to do that. Um, so I I'm 100% with Eric and Alyssa. This is very positive, especially for those who get these licenses. The question is just how positive. And one reason for that is some of these decisions are not being made based on the law. They're being made based on risk assessments undertaken in board rooms. And how loans are going to be affected and how long that takes isn't known now. Um if somebody tells you they know, um, unless they represent them, I don't know how they would.

Ben Larson 48:12

So I I I'm hesitating asking this because it's kind of diverting off of the direction of progress that we're talking about. But um, I'd be remiss if I didn't insert it here as we talk about this kind of pseudo-legalization. Eric, you used the word legalization, uh, you know, for businesses, um, but it's not legalizing the plant, right? And and it's not addressing anything about people operating outside of the medical framework at current. And so I'm curious is from your perception, is is this opening the conversation for further progress on more of the social equity side and the the harms of of the that the war on drugs has has presented us over the many decades? And maybe the answer is simply, and I'll just say it, maybe the answer is simply not under this administration and maybe under the next administration. But um, I'm just wondering if it's been a part of any of the conversations uh as this has kind of progressed.

SPEAKER_01 49:17

I just don't think the because unlicensed marijuana is still schedule one. So as far as the social equity piece of sentencing reform or those types of things, I don't think that it happens here. But I I don't know that this doesn't start the conversation that starts getting us there. However, the the largest risk I see in this entire framework is that we, you know, we liken the prohibition of cannabis to the prohibition of alcohol. But what we sometimes forget is during prohibition, alcohol was still medically allowed. You could get a prescription for alcohol. It was never Schedule One didn't exist because it was pre-C Controlled September Act. That didn't actually happen. There was a method that you could you could still get alcohol from a um from for medical reasons. And it was really just the commercial activity around it that was illegal. And so that's why it created this sort of, well, it was illegal, but not that illegal. Um, and and so it really opened things up for a gray market and gray and black market, and like that's what we've seen in in California. That's California's largest problem, is that we've got a black market that is just out of control and that really hurts legal operators. So are we just walking further down that path where now we'll have federal oversight on these medical-only programs that become so onerous that they can't operate that way at the same time that now it's perceived to schedule three. And so it's more permissive. I think that's one potential outcome. I'm I'm more optimistic. I'm hoping that the the real spirit of that order, that these state medical programs really do comply with the treaty, is what is followed, and that we don't see any more burdens on the industry so that that it can actually really succeed. But if you put too much regulation over the any more regulation than these industries are than the industry already has, then how does how does it actually move forward? And so I mean, I think we've made progress here, but I still look at it as it was a necessary step, but now we've just crawled out to where alcohol was during provision.

SPEAKER_03 51:33

Interesting.

SPEAKER_00 51:34

So uh Ben, to your point on social equity. I mean, I'm speculating here, but I don't think that the traditional social equity goals were on the mind of President Trump or Attorney General Blanche when he signed this order. I mean, I just it's not anything they've ever spoken about, and I don't think it was something that concerned them. Um, it does create greater opportunities for states, in a sense, now with the federal legalization and, as you said, SBA loans. Um, you know, it does allow something that's different than what is considered traditional social equity, but it is something the president spoke about, which is uh kind of health care equity and health care liberty. And um, I know a lot of people traditionally have used cannabis for medicinal purposes because they don't have proper access to traditional health care. Uh, and the legalization of medical cannabis is a very important step in that direction. It's really important that the people who are using it um you know uh can do that in a safe legal way and don't face the threat of arrest in that. And I know that's not how we've spoken of social equity and reparative justice traditionally, but I do think that this is a good step in that direction, even though it's limited. Yeah.

unknown 53:07

Yeah.

SPEAKER_02 53:08

Well, I mean, one thing which I would just point out on equity uh is uh beyond the fact that obviously this isn't the end of the conversation, right? There's there's a lot more to be done here. I think that it is worth flagging uh the language uh in the order about 280 retroactivity. That's something that at NCIA we we've been pushing that. That's one of the points of emphasis that we've had. And that is because, among other things, there's a really important social equity goal there. Um and so to Eric's point, I don't know if that was what was animating them to talk about it. But when you talk about 280 retroactivity, what you're doing is helping people who have been in business longer. And in many programs, equity applicants were put to the front of the line. They operated for longer. Um, and so if you fail to have a retroactive fix for 280, uh, in many ways you hurt that specific vulnerable population that you put at the front of the line. Uh, so that's one reason why we've been pushing that. Uh, we put out a white paper on it last year at NCIA, and we were really excited to see it here. Um, because yes, it it I had somebody ask me yesterday, oh, doesn't this help bigger operators? Well, it helped anyone who's been operating law for a long time. And in many states, by design, those are equity operators. It also helps holder programs, um, not just newly established ones. So uh there's much more to be done on the equity front, but there are important pieces uh that are very helpful to equity operators with security's license.

unknown 54:48

Yeah.

SPEAKER_01 54:48

I also think it opens up the since we're rethinking these programs, there's an opportunity to work with the federal government on what they look like as far as interstate commerce and all sorts of other things. Maybe it's a it provides an opportunity for states to rethink social equity.

SPEAKER_06 55:01

Well So as we're getting closer to the hour, I I'd love to hear a bit of advice from each of you that you could be giving to licensees in states. Maybe they're adult use, maybe they're medical, maybe they're both. Uh everyone's kind of. Um the the DEA portal is opening up. Should everyone apply? Maybe the advice isn't about the DEA portal, maybe it's to slow down. But I I wanna I want to hear you guys give some people some free advice right now. If you not not legal advice, you're not anyone's lawyer that's listening. Um what what what should people be doing tomorrow um and the next day, this week, really?

SPEAKER_01 55:50

I would start thinking outside the box. And we've been living in this very, very confined market where you can there's just so many things you can't do and so many doors that are closed to you because you're operating in a federally illegal, illegal way. And you have an opportunity here to not be. You can be on the right side of the law doing things legally. What can you do differently, especially now that we're in a place where and we mentioned healthcare in general, but we're looking at food and other products that are being looked at as per looked at as preventative medicine. You know, peptides are everywhere, GLP1s are everywhere, biohacking is the word. Um so I think there's a real appetite for folks to look at alternative uses for cannabis. And I think there could be some really cool products that can be developed because you can now get capital, you can go public, you can do all of these things that I think can create a lot of progress for the kind of products and the kind of access to patients and consumers that we've never had before. So my advice would be start thinking outside the box. You know, what can we do that we couldn't do before?

SPEAKER_00 57:02

Hmm. Yeah. What about you, Eric? My advice for a while has been be flexible as how do you go to market, meaning avail yourselves of the different ways of going to market. Um and this is consistent with that, right? And consistent with what Alyssa was saying of do we see a retrenchment of adult or more not retrenchment, but more of a shifting into medical? And I think people the operators need to be flexible about that. And they need to be not unwilling to move from what their original business plan was, because you have a change in the law and a change in perception and a change of a lot of things are going to occur. The second thing I would say is, and and and with a thank you for inviting us to talk and spread accurate information, there's a lot of misinformation out there. Don't be making your business decisions based on misinformation. Even paying for a little bit of good information at this point is very, very valuable and and and worthwhile for most businesses. The third and last thing I would say is there may not be a one size fits all, right? I mean, we any client, we need to understand their objectives, their risk tolerance, and and and and what they're trying to accomplish. And there may not be, I mean, there may be a client that we say you should register tomorrow, and there are others that we say you may not want to register at all. So I think there's uh going to be a lot of uh need for flexibility and a premium on good information.

SPEAKER_03 58:45

Awesome. And Coop. Sure.

SPEAKER_02 58:48

I I think that Eric hit the nail on the head with it's important to be flexible, I would say dynamic, uh, and to get good advice. Advice that puts you in a position to understand what you want to do, depending on which ways this plays out. Um, because this isn't a one variable dynamic game. This is a multivariable dynamic game. And uh that is an understatement, to say the least. There are so many pieces, you know. I this reflects my age, I guess, but I think um uh that Donald Rumsfeld's quote during the Iraq War, the known unknowns and the unknown unknowns. We know after this that there are a ton of known unknowns. We also have an idea of some of the unknown unknowns, the things that will occur, but have not yet and may not, right? Things like the litigation risk, how that's going to play out for these orders. Um what is necessary? Will Congress have to get involved in order to effectuate the goals that the president laid out here? I think that you're going to see uh a lot of movement in directions. And when I look at, you know, it could be folks on this panel, right? You're going to need advice. You're going to need advice on the accounting side, how you structure things. You're going to need advice for people like Eric and Alyssa, um, thinking about how you approach this and what makes sense for your company and your goals, uh, especially if you're going out to the markets and you're trying to raise money. You're going to need to have a credible plan of how you're going to be able to deploy that capital and how you're going to be able to deploy that capital in multiple states of the world. So I think that the best thing that I can say is, you know, I'm sure you guys have had this experience. You're on the phone with other lawyers uh in the past few days, just talking about all the different ways that this could vary across, you know, endless states. So I think that the biggest thing that I would say to people is you want to be thoughtful here because there this will produce winners and losers. People who can be more dynamic will potentially be in a much better position. And it's getting yourself there for having a credible plan and then executing it and not just being sort of overtaken by vets.

SPEAKER_06 1:01:06

I'm gonna stay giddy. Um, even though you just kind of freaked me out, Michael. There it sounds like a lot of challenges ahead, but I'm still excited. I'm still excited. Yeah.

SPEAKER_00 1:01:19

Anna Ray, I did want to comment on that. That I that I'm I'm on the giddy side. Oh god. I'm I'm I'm I'm giddy with this. And I understand.

Ben Larson 1:01:29

Eric Berlin's giddy after all these years. I I can get a little closer to giddy.

SPEAKER_00 1:01:33

Maybe giddy is not the right word, but like um I don't know if I'm capable of that, if that's in my butt you know, in terms of that, what you set out, right? And um I also understand that there are a lot of complexities, that there will be winners and losers, but um, you know, this is a good next step. And the fact of the matter is um there will be some fully legal medical cannabis in the country, right? I mean, we can debate about who's gonna get in and who's not gonna get in, but it's not like the D's not gonna do anything. I mean, they have to allow some in. So I think that's we all ought to be pleased about that. So that's why I I lean toward giddy. Yeah.

SPEAKER_06 1:02:21

Lean lean toward giddy. I like that.

SPEAKER_00 1:02:24

That's a good idea.

SPEAKER_06 1:02:25

Who else is with me? Yeah.

SPEAKER_05 1:02:26

Yeah.

SPEAKER_06 1:02:27

Uh wow. There's so much more. Uh, we had a bunch of questions we didn't get to that listeners sent us. And and I think from mine and Ben's perspective, is we're gonna keep having these conversations until we're satisfied. And uh it takes us a long time to get satisfied. We're going to be diving in deeper to the tax and accounting um issues next week uh with a different group. And uh if people have ideas and things that they would like us to dive into, please let us know and we'll make sure to to find experts to uh have the conversations with. I think that uh that we we all want to see see our friends win and to figure this out. And so if we keep having um open, transparent conversations as we're working through this, that hopefully we can rise more boats as the tides continue to change.

Ben Larson 1:03:22

Yeah. Yeah. And thank you so much for for spending the last hour with us. Uh your counsel is invaluable. Uh, you can send your bills to Anna Ray. Um, truly, I I feel so lucky to know y'all and and really appreciate you guys making the time for for everyone. So uh we'll we'll be speaking with y'all soon. Thank you so much. Thank you very much.

SPEAKER_01 1:03:47

Thank you.

Ben Larson 1:03:50

All right, folks. Well, thank you for spending the last hour with us. We've had a lot of attendees live here on LinkedIn. Thank you for engaging, especially Claire Erickson from Bovida, Karen Woodson from Polaris Strategies, uh, Renee Ganyon uh from Maple Brain, and of course, Scott Wessler. Uh, thank you for commenting and engaging and leaving your questions. Thank you to our teams at Virtosa and Wolfmeyer, and of course, our producer, Eric Rossetti. If you've enjoyed this podcast one more time, please drop us a review on Apple Podcasts or Spotify or YouTube or wherever you watch. Just drop us a follow, share it with your friends. Thank you. As always, folks, stay curious, stay informed, and keep your spirits high.

SPEAKER_03 1:04:36

Until next time, that's the show.