Cannabis News of Note for the Week:
Politico Pro Cannabis Newsletter for 11/25: They Don’t Call it Lame Duck for Nothing (paywalled, text below)
Politico Pro Cannabis Newsletter for 12/6: Miracle on Constitution (paywalled, text below)
Punchbowl News: Steve Daines plots Banking exit for Foreign Relations
Green Market Report: Cannabis finance experts at MJBiz Con predict ongoing uncertainty under Trump administration (paywalled, full text below)
Cannabis Business Times: Trump Is In: Will Pro-Cannabis Reform Be In or Out?
Wall Street Journal: Marijuana Industry Could Stay in Limbo Under Trump
Ask a Pol: Sen. Moran undecided on SAFER but bankers bring it up to him
Cannabis Wire: Jokes, Barbs, and Bureaucracy: DEA Holds Preliminary Hearing on Cannabis Rescheduling (paywalled, full text below)
Politico Pro Cannabis Newsletter for 12/4: A New Role for Cory (paywalled, text below)
Cannabis Reports of Note for the Week:
HUB International: 2025 Cannabis Outlook and Insurance Market Rate Report
Forbes: Cannabis Sales Hit Record In October, Market Data Show
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Politico Pro Cannabis (11/25): THEY DON’T CALL IT LAME DUCK FOR NOTHING
SAFE Banking Act rumors continue to swirl on Capitol Hill. We do not have any clear plan for passage to tell you about — and the odds are slim, but not impossible. Here’s the lay of the land as we know it and the questions keeping the cannabis industry awake at night.
There are two vehicles primarily being discussed to move the banking bill: the National Defense Authorization Act and a continuing resolution to keep the federal government funded.
There are big hurdles facing both options. The must-pass NDAA often draws lots of amendments, and SAFE has been added to it multiple times before in the House. But Minority Leader Mitch McConnell has blocked its inclusion in the Senate’s version of the NDAA in the past.
When asked last week if SAFE was still on the table in negotiations for the NDAA, Senate Banking Committee Chair Sherrod Brown (D-Ohio) told Natalie: “I hope so — it should be.”
The CR, meanwhile, does not need the same kind of buy-in from McConnell. Some sources told us they think there’s a better chance that the cannabis banking bill could hitch a ride because of that. But the CR exists because lawmakers can’t agree on a full appropriations package. Adding a lot of amendments to it could create further complications.
There are also challenges caused by the transition. In January, Republicans will have a trifecta — leaving them little motivation to work with Democrats in the waning days of this Congress. Getting amendments added to the NDAA tends to require buy in from the “four corners” — the GOP and Democratic leaders in the House and the Senate, as well as the heads of the relevant committees in both chambers.
But the four corners are nearing a shakeup.
Majority Leader Chuck Schumer will be in the minority come January — but McConnell is not taking his place. Instead, Sen. John Thune (R-S.D.) is poised to become Senate majority leader. Thune is thought to be more open to cannabis-related legislation, but it isn’t a priority for him.
And there are also major changes coming to the Senate Banking Committee. Ranking Member Tim Scott (R-S.C.) — who is not a supporter of the cannabis banking bill — will take the gavel in January. Brown, meanwhile, is leaving the Senate after losing his reelection bid in November.
Scott’s critical view of the banking bill adds complications. Sen. Steve Daines (R-Mont.), the GOP lead sponsor of the bill, is on the Banking Committee. Daines played a key role — leading the NRSC — in helping Republican retake the Senate. But ultimately, Scott’s weed banking skepticism may prove to be a hurdle that is hard to overcome.
“From my sense, I don’t think Tim [Scott] likes SAFE banking,” Sen. Kevin Cramer (R-N.D.), who is also on the Banking Committee, told Natalie last week on the Hill. Cramer said that he thinks Scott will be a “member’s chairman,” but acknowledged that “it is harder when the chairman is against it.”
And then there’s Trump. The president-elect said on Truth Social in September that Congress should “pass common sense laws, including safe banking for state authorized companies.” Trump’s verbal support of the cannabis banking bill is a wild card.
The bottom line: There are multiple options for passing cannabis banking in the lame duck, but it’s still unclear if any of them have a shot at success.
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Politico Pro Cannabis for 12/6: MIRACLE ON CONSTITUTION AVENUE —
Sen. Jeff Merkley (D-Ore.), a lead sponsor of the cannabis banking bill in the Senate, told Natalie on Wednesday that it was going to take something big to get the bill passed in this Congress.
“I will keep trying until the last day to find a miracle,” Merkley said. “But the size of the required miracle is growing.”
The hurdles have been there from the start: Ron Wyden (D-Ore.) told us after the election that the first few days in the lame duck would be key to determining if banking could get attached to one of the must-pass pieces of legislation, but there is still no answer with only a few days left in the session.
The National Defense Authorization Act and the funding CR have both been mentioned as possible carriers, but each present major problems: Senate Minority Leader Mitch McConnellwould need to give his approval for the bill to be included in the NDAA (which is expected to pass with strong bipartisan support), and a CR remains more likely to pass as a clean bill, without controversial add-ons.
While we have not quite reached the end of negotiations on both of the bills, time is running out and proponents of SAFE Banking Act seem to be setting expectations as low as they can.
NEW FACES ATOP HOUSE JUDICIARY — House Judiciary Committee ranking member Jerry Nadler (D-N.Y.), who coaxed the first cannabis decriminalization bill through his committee in September 2021, dropped out of the race for ranking member in the next Congress.
It’s part of a larger trend of older leaders in the House stepping aside for the young: Rep. Raul Grijalva (Ariz.) stepped down from the top Dem spot on the Natural Resources Committee and Rep. David Scott (Ga.) is facing challenges for the top spot on the Ag Committee. With cannabis being viewed as a younger lawmakers’ issue, will this new leadership bring about a more welcome climate for reform? TBD.
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By John Schroyer
December 3, 2024
A swath of cannabis financial gurus who spoke at the MJBizCon Finance Forum in Las Vegas on Tuesday morning shared a wide array of tips, thoughts and insights that essentially boiled down to one major theme: Ongoing uncertainty for everyone in the cannabis trade, particularly with the newly-elected Donald Trump poised to retake the White House next month.
Several speakers noted that although Trump during the presidential campaign committed to finishing the cannabis rescheduling process begun by current President Joe Biden, there’s no guarantee that it’ll be completed, or when it would be finalized, or if that will be the only federal reform enacted during the next four years.
Murky outlook for 2025
That means no obvious path to banking reform, uplisting to major U.S. stock exchanges, or opening up of interstate or international cannabis commerce, at least in the immediate short term.
“What does a post-rescheduling world look like, especially with the Trump administration?” asked Pete Karabas, founding partner of KEY Investment Partners. “It’s very murky. Does Trump push things more into Schedule III, so to speak? Make cannabis more medical, which has its own set of regulations?”
“Rescheduling is going to be far and away the largest catalyst we’ve seen in five years, 10 years. That being said, I think we need other things. We need SAFE Banking, we need access to exchanges,” Karabas said. “All these things collectively will lower the cost of capital, bring more investment into the space, provide more certainty.”
Karabas and others repeatedly hammered on the one major industry benefit from rescheduling: federal tax savings, since the hated 280E provision of the federal tax code would no longer apply to marijuana companies if rescheduling is completed.
But even that has its limits, several experts reminded conference-goers and warned against over-optimism.
“It’s not going to be a panacea for anybody, and any expectation otherwise is misplaced, and anyone whistling that tune to you, I’d be very wary of those whistlers,” attorney Ben Gelt said of the marijuana rescheduling process.
Skepticism over tax strategies
Gelt and others also expressed skepticism at the tax strategies employed by Trulieve and other multistate operators that have filed amended federal tax returns with the Internal Revenue Service to claim exemption to 280E, particularly as more of them have followed Trulieve’s leadafter the Florida-based cannabis giant was able to obtain a $113 million tax refund from the IRS.
“If you have massive (federal tax) arrears going back years and years and years, that’s not going to magically wash away” even if rescheduling is completed under Trump, Gelt said.
Viridian Capital Advisors‘ Frank Colombo even noted that multistate operators’ tax strategy of not paying the IRS has become almost a default position because the penalties are cheaper than the interest rates on private capital. A whopping 60% of free cash flows from top public companies, Colombo said, has been from not paying the IRS.
“There’s more than $1 billion of these 280E liabilities, just in the top 10 companies, and they’re all listed as long-term liabilities,” Colombo observed. “It’s the biggest single source of cash flow for the industry right now. … You need cash flow? Don’t pay your bill.”
Whether that strategy will ultimately prove effective, or if it’ll backfire, has yet to be seen, said Melissa Diaz, founder of Arizona-based Rebel Rock Accounting.
That question is particularly germane right now for cannabis companies prepping their current year tax returns and weighing whether or not they should make the same gamble as Trulieve and other major marijuana businesses, or if they should take a more fiscally conservative route and pay their full tax tab under 280E.
“I think it’s really up in the air, and a question of risk tolerance. I know many of the operators I work with are going to be preparing their 2024 returns as though 280E does not apply,” Diaz said.
“Maybe the IRS is going to be cool with it,” she said. “Or they could come back and say, ‘Just kidding, you totally have to, and now we’re going to charge you interest and penalties on your underpayment.'”
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Cannabis Wire: Jokes, Barbs, and Bureaucracy: DEA Holds Preliminary Hearing on Cannabis Rescheduling
A hearing is expected to take place in January to determine whether cannabis should be put into a federal category for substances with a medical use.
December 2, 2024
By Nushin Rashidian
Quotes from the movie Mean Girls. Jokes about raising three girls. A reference to his IQ and lifespan. These were the regular quips from John Mulrooney, Chief Administrative Law Judge for the U.S. Drug Enforcement Administration, that lightened what was otherwise a slow, bureaucratic, and at times tense preliminary hearing on cannabis rescheduling.
One purpose of Monday’s hearing was for Mulrooney to determine when to set the start date for the official hearing on the U.S. Department of Justice’s proposal to move cannabis from Schedule I to Schedule III of the Controlled Substances Act. He also asked hearing participants, who both support and oppose rescheduling, some basic questions about their witnesses and arguments.
When will the hearing process kick off next year? Mulrooney expressed a preference for starting the dayslong process in mid-January, but both January and February are in play. The hearing will take place on Tuesdays through Thursdays, Mulrooney said, “every week, for as long as it takes.” At the end of the hearing, Mulrooney will make a recommendation on rescheduling to the head of the DEA.
“This is not a trial about whether marijuana is good or marijuana is bad because I don’t know whether it’s good or it’s bad,” Mulrooney said on Monday. “My issues are much more narrow than that. It has to do with addiction potential and the several other little pigeonholes that I have. So to the extent that I’ve ever had an opinion, which it never really entered much into my life, it doesn’t matter.”
Cannabis has been in Schedule I, a category for substances with high abuse potential and no medical use, for more than fifty years. A move to Schedule III would acknowledge its medical use, and make cannabis easier to research, but would retain most of the tight federal controls in place today. One advantage to the cannabis industry, however, is that a particularly punitive tax code aimed at drug traffickers only applies to Schedules I and II, so cannabis business owners would see significant tax relief.
President Joe Biden started the rescheduling process in 2022 when he called on the DOJ and the Department of Health and Human Services to reassess how the federal government treats cannabis. In 2023, HHS recommended Schedule III, and, in May, DOJ moved forward with a “notice of proposed rulemaking” on the recommendation and opened public comment. Several commenters requested a hearing.
Throughout the rescheduling process, proponents have raised concerns about whether the DEA, which makes the final call, is on board. It was Attorney General Merrick Garland, and not DEA Administrator Anne Milgram, who signed off on the “notice of proposed rulemaking” in May. Also, the DOJ published a memo from its Office of Legal Counsel along with the notice in May – another unusual step. That memo preempted potential pushback by requiring DEA to give HHS’s “scientific and medical determinations” during public comment and the hearings “significant deference.”
While the interactions on Monday between Mulrooney and participants were generally swift – Mulrooney would flag a questionable witness, or make a procedural suggestion to save time and effort – they grew more technical and terse with a couple of lawyers who have taken issue with the DEA’s approach and role in the rescheduling process.
The DEA was first up on Monday, followed by one such lawyer.
“I’ll start with the hard question. What’s your position? Are you arguing in support of your agency’s rule?” Mulrooney asked James J. Schwartz, a lawyer for the DEA, referring to the rescheduling proposal.
“We are the proponent of the rule. Absolutely. Yes, your honor,” Schwartz replied.
Matt Zorn, a lawyer representing MyDocApp, an app that collects medical cannabis patient data, and the Connecticut Office of the Cannabis Ombudsman, came up next and said he found this exchange “concerning.”
“‘Proponent’ just means that they’re proposing the rule,” he said. “I still don’t know if the government is supporting the rule.”
“Every party here managed to put together all their exhibits,” he continued. “The government is apparently still compiling the exhibits. They have more attorneys here than any other party. And I just think that they’re sandbagging us. And I hate to put that on the record, but –”
“If you hate to put something on the record, Mr. Zorn, then don’t,” Mulrooney said, cutting him off.
“Half the people in the room are not entitled to have the [DEA] Administrator be a cheerleader. What they’re entitled to expect, and what the American public can expect, is that I do my very best to make a decision that’s consistent with the evidence, whether people like it or they don’t. But as far as this business with who’s a proponent and who’s not,” Mulrooney continued, “I don’t want to hear it.”
A short while later, Zorn referred to ongoing cases related to the rescheduling process. Zorn has a Freedom of Information Act case against the DEA in which he is seeking “e-mails related to Defendant DEA’s improper ex parte communications related to the ongoing, high-profile marijuana rescheduling hearings” with Kevin Sabet, the head of anti-legalization group Smart Approaches to Marijuana, which is also a participant in the hearing. Sabet shared information about the process on X in May before it was public.
Zorn told Mulrooney that he “may seek a stay in these proceedings” due in part to the ongoing case related to the communication that “everyone in this room can admit existed in some small form.”
“Nobody said it didn’t,” Mulrooney said. “But ask yourself, is it really what you want to do?”
“Before you proceed, it’s probably worth giving it a thought. Like, where it’s going to end up,” he continued. “And the next time you might not get a handsome guy like me sitting up here.”
Later, Shane Pennington, an attorney representing Village Farms International, an ag company involved in the cannabis industry, returned to the possibility of a stay, which could delay proceedings. The company brought a lawsuit that sought the “removal of DEA from the role of proponent of the rule in these proceedings,” due in part to the issue Zorn raised, and argued that the DOJ should be in the role.
“That calculus, I think, from our perspective comes down to: okay, well, can we build a record that will allow us to have meaningful judicial review at the end or can we not?” Pennington said, referring to a possible stay.
On the anti-side, the lengthiest exchange played out with David Evans, an attorney representing three entities – Community Anti-Drug Coalitions of America, Cannabis Industry Victims Educating Litigators, and the National Drug and Alcohol Screening Association – and two doctors.
“You said that you don’t want opinions,” Evans said to Mulrooney. “Most of my testimony is going to be an attack on the DOJ Office of Legal Counsel legal justification for the change in this rule.”
Evans then laid out a range of concerns around advertising and labeling and other requirements that the U.S. Food and Drug Administration has for medicines that he feels the DOJ did not take into consideration.
“It sounds like a fine thing to go into a brief that you might file,” Mulrooney said. “Apparently, the Office of Legal Counsel tells me that that’s nothing to worry about.”
“Well,” Evans said, “you should read my opinion.”
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Politico Pro Cannabis (12/4): A NEW ROLE FOR CORY
Sen. Cory Booker (D-N.J.) — a longtime champion of cannabis legalization — was elected to the fourth spot of conference leadership on Tuesday, our colleague Anthony Adragna reports. Sen. Amy Klobuchar (D-Minn.) also joins leadership in the third ranking spot.
Majority Leader Chuck Schumer (D-N.Y.) was once again voted into the top post, meaning two backers of the Senate’s marquee cannabis decriminalization bill are now members of leadership.
While that means there is support for cannabis in higher places, it comes with a major caveat: Democrats will be moving to the minority come January, and will have far less power to push their priorities forward.