Loud Music And Labor Day Banter

SPEAKER_02 0:10

If you're gonna play finish, play it loud. That's what I like to say. I have no control over the audio of that, so it just comes on and it blares. But I'm kind of down with that as we wrap up summer. This is this week in Cannabis Live. I am Jay Rosenthal from Cultivated. That is Ben Larson from High Spirits. That is Mark Hauser from Cannabis Fusings. This is the first time this exact triad has been together. Is that the right word?

SPEAKER_03 0:35

Triads are trilateral.

SPEAKER_02 0:38

Yeah. We're having trilateral conversation now.

SPEAKER_03 0:42

Star Chamber, if you will.

SPEAKER_02 0:44

Sure. I'll do that. Sure. Well, welcome everybody. This is the Friday before Labor Day week, and I'm sitting here just north of Lake Ontario. I'm going to say that every time we talk over the next week. Yeah, I don't know what that is. Check MapQuest. It's Lake Ontario. You just said the word map quest and it's 2026, but that's the world we're living in. Only only the power of President Trump could bring back MapQuest. That's how much that's that's how much people don't like him, and uh, I guess people will go to any any lengths, even downloading MapQuest's app, which I didn't know was a thing. How many of you use MapQuest and when was the last time you used it? You use MapQuest?

Ben Larson 1:26

I did use MapQuest, yeah. Still no, no, no, not anymore. Yeah, I think it's I think it's an infrastructure thing now. But like I think this it's uh we're having this whole throwback week with with President Trump. You know, he's he's bringing back MapQuest, he's bringing back 8-bit graphics in in the White House arcade. Uh if you haven't heard of it, whitehouse.gov certainly has a backslash arcade now. I don't know why. It just happened.

SPEAKER_02 1:54

It looks like it's to teach kids horrible things. That's I just went there, that's what it looks like.

SPEAKER_03 1:59

If I could get my blue my BlackBerry back, I'd be happy with that.

SPEAKER_02 2:03

It'd be great for Canada if you could, actually. That would be great. Uh I did so this is one thing because I just heard it. You probably won't hear it, but this is like our equivalent of state fair here in Ontario. It's called the uh Canadian National Exhibition. It's down the street, and today is the day they practice the air show, which runs over Labor Day weekend and it ends Monday of Labor Day weekend. There was just a story yesterday that the F-16s from the US, US the usually the US Navy usually sends the F-16s, whatever it is, they will not be flying here over Lake Ontario or Lake America during this air show, which is interesting, fun fact, as we are at a a trade war, not a real war, but a trade war, and I guess they pulled the plug.

Hemp Reprieve And DC Deadlines

SPEAKER_02 2:44

So, speaking of nothing, uh Hemp got a one-month reprieve officially this week. Ben, we're gonna go to you for your thoughts. So let me let me get this straight. There's a one-month, so now the ban or the proposed ban will go into effect, I guess, December 11th. Will it go into effect that day? That's what I want to hear from you. And if not, what do you expect to see from it? And what do you think of the month extension?

Ben Larson 3:13

Yeah, so I I want to be very clear. It wasn't a pure clean extension. Uh, the November 12th deadline still stands for for synthetics and and some other things. But uh yeah, uh hemp got a little bit of a reprieve and an extension in the CR, which pushes it to the same deadline that that the federal government has for its total funding bill. So it makes it a part of the Super Bowl of political conversations as we head into the year. So uh if we thought it was a lot of work for the hemp industry going into this decision, which it was, uh, it's gonna be that tenfold uh heading into the end of the year. And so what does 30 days do? It does certainly doesn't build a lot of confidence for distributors and retailers, which are the source of a lot of revenue for these hemp companies. And so you're gonna still continue to see a significant amount of drawdown, but it is that momentum builder. And we know momentum in DC is is super important when it comes to these conversations, and we know that there's a number of bills that have dropped. There's the Beth Van Dyne and Lansman bill uh that is focused on the hemp beverage category, which has uh I think built more support across um the aisle, so to speak, uh, than say all the other categories. Of course, there's the Andy Barr bill, and we hear that there's other things in motion as well. And so I think this time period allows for these discussions to be had and see what could build momentum. Now, a standalone bill, not likely to get done before the end of the year, although the White House has signaled that they really don't want to do more extensions, and so how much momentum can be built to force a narrowing of you know what might be called a bridge legislation or something like that to allow time for something like that to get through. I think the big outlier here that everyone needs to pay attention to is just the functionality of Congress, and we are in a midterm election where there is potential big swings coming. And so, what happens if the Democrats get everything they want and they flip the House and the Senate? Are they going to be wanting to play ball with the administration? Or would they happily go into a little bit of a pause and you know not work for a little while because they haven't funded the government? So all this um is a lot of politics. I haven't historically been involved in a lot of it, but this has certainly sucked me in and it's really interesting. You know, it's uh people ask me this week, they're like, you must be stoked. And I'm like, I don't know, I just see a lot of work ahead of me. Um, but thinking about the inverse of how I would have felt uh had we not gotten that that extension, um, yeah, I I think the the feelings would have been much different.

SPEAKER_02 5:59

Well, can I ask a question, Mark? Then we'll get to you. But can I ask you a question? Have you been one thing that it definitely did do this? Uh it made people take sides, right? It had it made people take a position on this. We saw a U.S. senator from New York, a Democratic senator from New York, say she was against the hemp extension and hemp overall. But a lot of other U.S. senators, certainly from Midwestern states that have hemp farmers, were quite keen on it and actually have like it did it did make some odd bedfellows, but also made those bedfellows talk about which side of the bed they were on.

Ben Larson 6:30

Yeah, I you know, uh I think no matter where you're at, if you're watching the show, you're probably in the industry in some fashion, that we are the top of people's minds, whether you're an MSO or you're a hemp operator, like THC is at the top of Congress's mind and it's a top issue. And and you know, frankly, you know, there's all this these conversations about who gets it. Like, you know, is this a Republican issue or is this a Democratic issue? And as our lobbyists have told us, like when people are fighting you over you as a category, yeah, it might make things a little volatile in the interim, but like that's a good thing. Like, like big things are happening for this industry that we've all been fighting for in one way or another. And so um, I'm excited for just what it signals like heading into it. And there's a lot of conversations that are gonna be had, and it's gonna be Democrat and Republican to make sure that people are aligning and whatever they support that that's how they're voting.

SPEAKER_02 7:25

Mark, I want to go to you because uh well, get your thoughts on what sort of what happened in Washington. Um, and I think it was last week you said um I think in your losers, talked about the industry sort of referring it to only from the economic sense, right? My sense is that the the folks in Congress are not talking about the economics as much as like understanding what their their constituents are doing with their lives.

SPEAKER_03 7:48

Yeah, I mean, yeah, yeah. I mean, I I've always, you know, there's always been the argument that Congress will do XP for the industry, you know, for cannabis because it's good tax revenue or it's jobs. And that's you know, that's like reason number 15. Reason numbers one through 14 is it's drugs. You know, and and we we can never forget that, you know, that that is what clouds all of this. Um, and that's what plays drug policy plays into these politics. And so um, you know, I think, and I'm sort of spoiling my um my my winner and loser of the week here, uh, that, you know, I think the the bit one of the other big challenges here is that, you know, Speaker Johnson announced, I think it was yesterday, that you know, that that the house is going to be in recess until like what November? Um and so there's only a handful of days left pre, you know, certainly before the before the um election, but then also even into December. There's only a handful of legislative days left in the House this year, um, or before the deadline. And so I think that that, you know, that only creates sort of more of a challenge to get this done. Um, you know, it's and I again I'm not a an expert by any stretch of the imagination in legis, you know, legislative procedure. But but that doesn't, you know, it doesn't help.

SPEAKER_02 9:16

Well, there's an and there's an election midway through that. And yeah, and the government staying open is important. And I think Speaker Johnson didn't say this, but the more they're in town in DC spending time close to the White House, the closer they seem to be with the president, which I don't think is working on the campaign trail. So they're trying, yeah, they're trying to create as much distance as possible while at the same time running for re-election, while at the same time trying to work with the president and stay out of his radar. And I I will say this that does lend itself to a bigger sort of Super Bowl of a bill than as you were talking about to keep the government open, which I think a Super Bowl of the bill is probably easier to slip something into that would extend this deadline beyond December, which I think I I referenced a couple weeks ago. Like it is it is the type of scenario, like almost a perfect storm of all of these things happening at once, and needing to get, you know, I wouldn't say another one month extension. I don't think that'll do a lot of good, but like, okay, let's punt this a year, let's punt this two years, let's wrap it into something else. That I think is a fairly likely scenario when it comes to hemp. But I will is that the conversation you and the hemp folks are having in uh in DC?

Ben Larson 10:23

Well, the the the the hemp folks are diverse and broad, uh, I will start by saying. Um but what I think will happen, and I'll just put it out there, is that I think in the next several months we will start to get more clarity about what CMS wants out of Hemp because we haven't seen that yet. And that's been what's pushing the White House's messaging. Like the White House wants something for CMS, but CMS hasn't said what they want, and so that just leaves everyone twitching their thumbs up.

SPEAKER_03 10:49

To find CMS for the for those in the medical audience.

Ben Larson 10:52

Oh, sure. Uh I I don't know what the actual acronym is, but it's like the it's like the medical you know application for for hemp, right? And so it's like creating funding for that in the executive order late last year. There was $500 that could be ascribed to you know CBD products, but no one has defined what those products are. The FDA hasn't defined what the approved list of cannabinoids are, so it's like there's just a lot of unknowns. And so maybe we start getting some clarity on that end, and then we also start getting some clarity on what is acceptable from a public consumption perspective. To Jay's point, it's not about economics, they just want to control what we put on our bodies. If it was about economics, California would have listened to the the study that they funded before shutting down the hemp industry because I'll have an article coming out about that. Um, but, anyways, by the end of this year, I think we'll have a lot more clarity about what people want, and that instead of having another year or two of kicking the can down the road, down the road, there'll be a slipstream that is created to create space for those bills to get across.

SPEAKER_03 11:58

Yeah. I mean, and a lot of it too. I mean, Jay, you say if the Democrats sort of take both the House and the Senate, um, you know, we have to see. I mean, you know, it'll be interesting to see if they pull a uh uh uh uh uh uh Mitch McConnell, where you remember you may recall uh famously when Obama won the second term, Mitch McConnell basically said outright, uh, we're not gonna pass any legislation for the next four years.

unknown 12:23

Right.

SPEAKER_03 12:24

Um, you know, we'll see if that happens. But you you recall also the Senate requires, you know, 60 votes. And so it's, you know, even if the Democrats take the majority in the Senate, um that still may not be enough. And and yeah, and as Ben said earlier, you know, where the White House is on this is is is a little slippery. I mean, they they it it is extraordinarily clear that they are focused on on, you know, as as Ben notes, the CMS, the Medicare, you know, Medicare, Medicaid reimbursement, uh, they are signaling they are a lot less uh uh uh excited about um about uh you know adult years. Um and so whether the you know, so I I think that's you know, I suspect that's playing into a lot of this as well, and whether you would get, you know, what would be the White House's support for uh a more limited, you know, uh like like just you know uh low-dose beverages to, you know, sort of shorthanded or something like that.

Ben Larson 13:34

And just to Mark said it, but just to clarify the question that was asked is centers for Medicare and Medicaid services. Excellent. Which is too many S's. And and like how do you have multiple centers?

unknown 13:51

Right, right.

SPEAKER_02 13:52

It's government, just just nod and acknowledge that it doesn't make any sense.

SPEAKER_03 13:56

Well, because it has to be a three-letter acronym, so yeah, you know, big, beautiful Medicare. Yeah, yeah, yeah.

SPEAKER_02 14:02

Has to say that. I want to

Rescheduling Watch And Fall Forecasts

SPEAKER_02 14:04

shift for I want to shift for a second if we could, because um, in addition to this part of the conversation, addition to the White House talking about it, addition to elections coming up, um, addition to rescheduling what is next, like what we I predict today, so I guess we'll wait and see that we'll hear something today. But if not, sometime in the future. Um the industry has been slow this week, as Mark, you were saying, but I feel like we're on the cusp of a very busy fall for all the reasons we just talked about. But generally predictions fall flat. But um, we had on the uh chief investment officer of Verano this week, Aaron Miles, and you can go watch the whole interview, but something he said we pulled because I I I think it portends to a very busy fall in 2027, although we talked about 2026 being lots of MA. But I want to talk about this, and then I want to talk about what is happening on the ground. Give me one sec to play this.

SPEAKER_00 14:57

Here's Aaron Miles, he's the chief investment officer at Verano. We've also had the luxury of being able to really invest strongly in our footprint. So I think when we don't have to play catch up on a lot of our facilities, I think that's when you start to look at MA. I think consolidation is gonna just be a matter of time before it starts to happen. And we've said that on multiple earnings calls, we could invest in multiple ways, and that's why we try to build optionality. So we have the share repurchase authorization, we can invest in Texas. If Florida starts to pick up steam, Virginia, obviously, at some point do you start to look at basically you want your shareholders to have the best return. And so if you're a shareholder looking at our business, I would want us to invest in our footprint right now. Now, if we get past Texas and Virginia, and then I would say like maybe we could start to look at returning cash in other ways to shareholders. But I think for now it's just investing extremely heavily in our footprint, keeping that optionality across the board.

SPEAKER_02 15:51

I I

Consolidation Bets And Deal Drama

SPEAKER_02 15:52

want to get your thoughts about what he said, not specific to his company, but to the industry overall. And then the big story that continues to play out, which is interesting or fun to watch on the sidelines, is Kira Leaf wanting to acquire um Aurora and them shooting missiles back and forth uh on a daily basis. Um, is this all related to like, are we heading to this a map a big MA time in the cannabis industry, especially with the publicly traded companies? Mark.

SPEAKER_03 16:20

Well, I I mean, no disrespect to I'm not I'll answer your question, but no disrespect to him. But I will be well retired before cannabis public cannabis companies are in a position to start paying a dividend.

SPEAKER_02 16:33

Um I I don't think he I think he he did that's what I heard too. But I think I but I think he meant like uh I mean share repurchasing and all that.

SPEAKER_03 16:44

Yeah, yeah. I mean that's that's not I mean I know that I mean no, and there are plenty of companies with with share repurchase plans, which I also don't get. Um you know, I understand the the the the uh the financial analysis reasoning for it because everybody's stock prices are so freaking low that it makes sense to do it. But I also, you know, cash is so expensive in this industry um that you know I you're you need that, you know. You talk about optionality, you need the cash really makes a difference. But anyway, um, you know, I I've hammered this uh for a number of years in my musings. We've every January, you know, the handful of investment bankers and consultants who are left in this industry are always screaming, this is MA is you know, is it's gonna, this is the year of MA, this is the year of MA. And I was like, no, it won't be. And you know, and I'm usually proven slightly wrong about that, because then like a week later there'll be a big deal announced. But, you know, and look, I mean, there have been some interesting deals this year. I mean, you know, I mean, Varreo has been uh Virio, I don't know fully how to pronounce it, um, is uh has been on a tear, but you know, a lot of it has also been related to Chicago Atlantic borrowers, and so there's some of that. And, you know, and there there have been a lot of small deals announced here and there. I mean, it's not dead, but but I think that it's you know, and it's good for companies that are big companies that are in a position like a Verano to um to you know to be ready for it when the time is ripe, when stock prices aren't so depressed so that their stock isn't, you know, is an attractive, you know, is attractive consideration for a seller. Um, but you know, it's I I'm still not convinced that we're on the cusp of it. But again, I could be wrong.

Ben Larson 18:41

Yeah, no, I mean, look, I it's uh Aaron seems incredibly smart, um, but also uh preserving optionality has been the strategy for the last 10 years, right? Um, so um that's how we've remained alive. Um and also, yeah, it's like the cannabis industry is gonna be fraught with distressed assets, and MA's can continue to be a thing, and the more complex this industry becomes, size does play into your favor as far as survival goes. However, like all these uh acquisitions are gonna be done without a lot of clarity still, and so like you can build in a certain direction ahead of having that clarity, but then you're placing bets instead of preserving that optionality, right? And and that creates waves, and so um I don't I think the big question for everyone is like, do we think clarity is gonna come before the end of the year? And then I would get excited about MA because then it's strategic, right? And so um, am I confident that we will have clarity before the end of the year? Jay, you say maybe we'll know something today. I don't know.

SPEAKER_02 19:55

I I that's nothing other than if I wanted to drop news. Oh, you wouldn't want people to know about it, yeah. I would drop today.

Ben Larson 20:02

Yeah, you could be like most your dumbass. Um, you know, uh we yeah, I just I don't know if we're gonna get clarity, and if we do, I don't think it's gonna be as great as everyone thinks. I think we're still trying to figure out what medical schedule three is gonna look like and how that's gonna benefit everyone, and until we actually know uh acquisitions are guesses.

SPEAKER_03 20:24

Yeah, Ben, I think that's an uh I think that's a great point. Um, is that we you know we're lucky to be in a position where something might something good might big and good might actually happen for this industry. And as you said earlier, you know, we've been working a very long time for this. And you know, and there is so much forward momentum that it continues to be made. But it's very possible that all of it comes to a grinding halt, you know, that we with that that the that the DEA, the DOJ and the DO DEA don't reschedule adult use, or they do reschedule adult use, but don't provide the you know the DEA as drug dealer mechanism to really open it up. Um, and so, you know, which or you know, the litigation succeeds, you know, the litigation fighting the change to, you know, the shift of medical, and medical then, you know, jumps back to schedule one until that process restarts again. You know, we've got these, you know, we've got all these judges who are about to make decisions. And so, um, you know, but if all of that tips in the right way, I I I agree. I think that that could be the catalyst then to really, you know, because then we'll have some, you know, we'll have you know, we'll have that that certainty, or at least, you know, more less uncertainty. Less uncertainty.

SPEAKER_02 21:51

So we're gonna get we're gonna get t shirts made that says preserving optionality for the next decade or something like that.

SPEAKER_03 21:56

That's what, you know, I mean, when I you know, I'm when I worked for um Sam Zell, the investor, for 15 years. You know, that was one of the key things that I always learned from him is, you know, A, cash is king, but B, uh, you know, optionality is is is is what you work for.

SPEAKER_02 22:16

All right.

Winners, Losers, And Popcorn

SPEAKER_02 22:17

It's now time for our favorite segment of the show, winners and losers. Ben, you got a winner or a loser, or a winner and a loser? Who you got?

Ben Larson 22:32

Well, I mean, uh the the winner has to go to everyone that worked really, really hard to get this, the the hemp language to stay in the the CR. Um, you know, working with the White House, with Speaker Mike Johnson, who's also winner for staying true to his word and saying we're gonna get this thing through quickly, um, and we're not gonna let all these side conversations hang it up. Losers, uh, the inverse of that would be Senator Ted Budd out of North Carolina and Representative Andy Harris. Um, I can't dance on their graves or anything like that because they're gonna still keep fighting and being loud against this. Um, but uh yeah, you know, it's like prohibitionists like fighting tooth and nail for for like to block that extra 30 days if it's only 30 days, like the the fervor of which they're fighting against it just shows like it's more than just a 30-day extension.

SPEAKER_02 23:25

Well well, Congressman Harris has been a thorn on the side of the DC cannabis industry for a very long time, and he he's a true prohibitionist.

Ben Larson 23:34

Yeah, like he believes you're he's not messing around.

SPEAKER_02 23:37

He he truly believes it.

Ben Larson 23:38

Yeah, yeah.

SPEAKER_03 23:39

Uh Mark, winners, losers? Yeah, I I sort of I I dropped one loser last week was or earlier in the in the stream, but with you know, everybody for or at least you know the the hemp effort for Mike Johnson basically uh you know uh shortening the number of days or reducing the number of days that that the house is going to be in session to make all of this happen. Um the winners are the folks that make popcorn, because um, all of us who are who are eating popcorn as we are watching with delight the public fight between Aurora and and and uh and cure leaf. It is just like it's it's just awesome.

Ben Larson 24:25

It is so much fun to watch because it's I don't know, it's just I do hope it ultimately ends in a successful transaction because I think that would generally be good for the category, and that they don't just destroy each other, because I think that would actually be bad for the category.

SPEAKER_02 24:44

Yeah, well that also this also has a deadline of December, I think. So it's it's a very busy time between now and December.

SPEAKER_03 24:49

Um I mean, yeah, who knows, or whether, you know, whether Aurora will will open up a process or um yeah, I know. I mean, it's it's totally fascinating. And I I mean, in a way, this is good for the industry, even though I'm not I, you know, it's so typical that the way we do things in this industry is um amateurish is too low, is to a little too loaded a word, but you know, we don't do anything the way that that you know normal finance folks would do anything. Um, but you know, but look, I mean, uh, you know, it's it's fun. I I don't think this is the very first um uh true hostile takeover bid. Uh I think there was one a few years ago. I'd have to really dig back, but this is definitely the biggest. And you know, it just shows that it's another way that this industry is is being treated like any other.

SPEAKER_02 25:42

Yeah, yeah. It'll be uh the popcorn, I hadn't hadn't thought of the popcorn farmers. Um, I got a winner and loser

Tax Hikes And Diminishing Returns

SPEAKER_02 25:49

too. My winner, although Ben's not gonna like it because I know people in California have mixed feelings about Governor Gavin Newsom. He's been tweeting a bunch about cannabis and the cannabis industry in California. Um, I think some regulations that have changed, but he is talking about tax revenue generated. This was one tweet, but there's been others this week um talking about that. So um I'll give him my winner of the week. My loser of the week um is uh a different state, which is uh Michigan. And a Michigan Jeremy wrote about this today in his thought bubble. Cannabis taxes are in a magical level for uh thinking about lever uh for state legislators to pull when they need revenue. Michigan, the state raised its cannabis tax to 24% in Q2. It generated about $37.38 million per the state data. The quarterly projection was $105 million. That is the loser number of the week because you raise taxes too high and uh it doesn't actually it's diminishing returns, obviously. Uh and I think that's an important conversation we like to have, certainly with regulators, but also overall in the industry because it is uh there are diminishing returns if you think this is a cash register for the state. Ben, I saw you do this.

Ben Larson 27:02

I'm just it's like this has been top of mind, and I'm really glad you chose this this week because yeah, it's like I'm I'm gonna try to encourage my kids to become economists because that's what I think our governments need the most.

SPEAKER_02 27:14

Well, the one thing you have to teach them is this. On the other hand, that's all they need to know. That's what economists do, right? It's like this, but also on the other hand, on the other hand, it will not raise as much revenue. And I think in that case, that the Michigan's proving the point because they did raise it. People were raising a stink then, and certainly the state is seeing they're actually generating less revenue than they were before. So um lucky that.

Long Weekend Wrap And Sign Off

SPEAKER_02 27:36

Um, Mark, Ben, thank you for joining us on this Friday before Labor Day weekend on the northern shores of Lake Ontario, which I think is a lyric in several um Canadian songs, which I'll say.

SPEAKER_03 27:48

It's a gorge it sounds like a Gordon Lightfoot song, yeah.

SPEAKER_02 27:51

It does right with Gerald on a later show. Um uh Mark, Ben, thank you so much. We'll see everybody next week when school finally starts here in Ontario. Uh everybody will be a little bit more relaxed. Um, enjoy your long weekend. Thanks, everybody. We'll see you next week.

Ben Larson 28:07

Bye bye. Bye y'all.