Cannabis Legislation Update

This week, Politico published an article that looks at cannabis legislation efforts across multiple states in the US. Thus far, 19 states have embraced full-scale cannabis Legislation with enacted recreational cannabis laws. While another 19 states have moved forward with medical cannabis platforms. With most state legislative sessions coming to a close this week, November’s ballot initiatives remain the key vehicle to push cannabis reform in potentially transitioning states. Below we highlight reform efforts undertaken in states through 2022:

  • In January, the state passed medical marijuana reform after seeing efforts fail during the 2020 referendum. The state is now amidst its application process for patients and businesses, with sales potentially starting later this year.
  • Rhode Island. This past May, Rhode Island became the 19th state (and only state in 2022) to pass adult-use referendums through its legislature. As structured, the bill allows for 33 dispensaries in six regions, with sales expected to kick-off on December 1st.
  • Maryland voters are set to vote on a ballot initiative calling for adult-use reform in the state later this year. The measure would require the legislature to pass a framework for the proposed recreational market, likely resulting in first sales in 2024, if enacted.

Cannabis Legislation

  • South Dakota

  • In 2020, South Dakota voters approved legislation to enact both medical and recreational markets through the state ballot measures. However, the state supreme court later struck down the referendum as unconstitutional, leaving South Dakota residents with only a formalized medical cannabis market.
  • Following up on this, South Dakota residents have re-submitted an initiative to certify adult-use cannabis in the state. Cannabis legislation with a proposed program that allows up to 1 ounce of possession and the ability to grow up to three plants if no dispensaries reside in their county/city.
  • Licensed operators in the Arkansas medical cannabis program submitted. A ballot initiative that will see state residents vote on adult-use reform as part of the November Ballot initiatives. The proposed cannabis legislation would allow Arkansas’s existing medical shops to add recreational sales at their stores on March 8, 2023, and the option to open another recreational-only location. Further, a lottery would be held to allocate another 40 additional retail licenses to serve adult-use customers.
  • After efforts to push adult-use legalization through the state legislature failed earlier this year. An effort has been made to put adult-use legalization on the November ballot. Signatures were submitted this past May. However, it remains unclear if the initiative will pass the state’s requirement to collect signatures. From all six of the state’s congressional districts.
  • State voters will likely see adult-use legalization as a question on the state ballot later this year. After advocates submitted twice the required number of signatures for consideration last month.

  • North Dakota

  •  After adult-use cannabis legislation failed to pass the state senate in 2021, last month saw advocates submit ~25,700 signatures. (~10,000 signatures above the required amount) to place the initiative on the November ballot.
  • Nebraska remains one of three states without any form of medical cannabis access in the US today. Earlier this year, advocates submitted ~90,000 signatures to have the initiative placed on the November ballot. However, disputes are currently ongoing regarding the state’s geographic requirements (which call for at least 5% of voters in at least 38 of the state’s 93 counties).

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Cannabis Administration and Opportunity Act

The Cannabis Administration and Opportunity Act, sponsored by Senate Majority Leader Chuck Schumer, would decriminalise marijuana at the federal level and provide states the freedom to enact their own marijuana regulations without fear of interference from Washington.

 

Cannabis Administration

 

Senate leaders are introducing sweeping legislation Thursday meant to lift federal prohibitions. On marijuana more than 50 years after Congress made the drug illegal.

Read the full story here.

US senators raise heat on President Biden, demand marijuana reform

A group of U.S. senators is trying to increase pressure on the Biden administration to remove marijuana from the federal Controlled Substances. Act, citing earlier promises of marijuana reform.

marijuana reform

Six senators, including New Jersey’s Cory Booker, Vermont’s Bernie Sanders, and Massachusetts’ Elizabeth Warren. Asked the Biden administration in a letter on Wednesday to utilise its authority to decriminalise marijuana.

See the full story here.

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Cannabis Industry News Exciting Developments See Some State Highlights Below!

Cannabis Industry News

Connecticut: Cannabis industry news, State marijuana regulators were inundated with more than 15,000 applications for retail recreational dispensaries before the May 4 deadline.

Cannabis Industry News

Florida:  Miami, the state’s second-largest city, with a population of 450,000, will finally allow its first medical cannabis dispensary.

Illinois:  A state judge lifted an August 2021 court order that stood in the way of 185 new business licenses being issued for recreational cannabis stores.

Louisiana:  State legislators passed a bill to expand the number of medical marijuana dispensaries from nine to 30.

Massachusetts:

Lawmakers in the Massachusetts House of Representatives joined their state. Senate colleagues in approving legislation to promote greater diversity in the state’s licensed cannabis industry.

Michigan:  The city of Detroit issued its first recreational marijuana business license.

Missouri: Cannabis industry news, A campaign working to legalize adult-use marijuana in Missouri. Has submitted almost 400,000 voter signatures to the state in support of a November ballot measure.

New Jersey:  In the first month of recreational cannabis, New Jersey retailers sold $24 million worth of adult-use products in the 13 state-licensed dispensaries.

New York:  The state Cannabis Control Board signed off on 16 conditional adult-use marijuana cultivation licenses. Along with a slew of proposed industry rules.

Ohio:  The state’s pharmacy board approved 70 provisional licenses, which could more than double the 58 dispensaries previously licensed.

South Dakota:  A group advocating to legalize adult-use cannabis, South Dakotans for Better Marijuana Laws. Turned in roughly 25,000 signatures to the office of the Secretary of State, which could be enough to get the issue on the November ballot.

Vermont:  Seven additional cannabis grow licenses were approved as the state increases suppliers for the recreational cannabis market that is expected to launch in October.

Contact Us today to discuss how we can support your business growth in this exciting industry

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Know Your Cannabis Business Overhead Ratio

The majority of cannabis business owners stress out about costs every day overhead ratio. This makes it challenging to invest additional money in the company to grow it.

How much overhead is too much?

That is a ruse of a question. Focus on overhead as a ratio, as a percentage of sales, rather than as an ideal, fixed monetary figure.

Check out this article in MJBiz Daily regarding calculating your overhead ratio here

overhead ratio

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Contact Us to get a quick cash infusion for your business!

The top 3 things to consider when investing in cannabis ETFs

The top 3 things to consider when investing in cannabis ETFs

Cannabis stocks have been climbing since the November 2020 election in the United States, when more states approved legalizing recreational cannabis. That vote and the optimism that the federal government will finally relax restrictions on cannabis and make it lawful for recreational use nationwide have caused many investors to have high hopes for the industry’s future. Furthermore, many investors saw the cannabis industry’s recognition as an essential industry during the Covid-19 pandemic as a sign of good things to come for cannabis in Washington DC. The top 3 things to consider when investing in cannabis ETFs

As a result of the excellent press that cannabis is getting, many investors are rushing to add cannabis stocks to their portfolios this year. One of the cannabis securities that investors are rushing to is cannabis ETFs.

Numerous well-performing cannabis ETFs would satisfy the demands of many investors looking for significant gains in this volatile cannabis stock market. However, it is critical to exercise caution when entering the cannabis stock market because of the volatility. Therefore, we’ve put together some key points to assist you through the cannabis ETF marketplace.

investing in cannabis ETFs

What are cannabis ETFs?

ETFs or exchange-traded funds are funds with a collection of different stocks to minimize the downside risk for investors in the ETF. They are typically designed to track a specific index, like the S&P 500. This means that the ETF will generally behave the same way as the index it is tracking. If the index goes up, so does the ETFexisted

Although ETFs have been in existence for decades, the first marijuana ETF wasn’t established until last year. Horizons ETFs debuted on the Toronto Stock Exchange in April of 2017, tracking the performance of the North America Medical Marijuana index. This opened up a new, less-dangerous method to invest in cannabis etfs stocks, which we want to help you take advantage of. But before we geconsiderthere are a few things to think about.

What to consider when investing in cannabis ETFs?

investing in cannabis ETFs

1.       What index is the ETF tracking?

This is important to know before investing in cannabis ETFs. The index tha the ETF’s is tracking will determine bide and downside potential of the ETF. Furthermore, you should know the tracking difference between the ETF and the index it is tracking.

The tracking difference is the gap in performance between an ETF and the index it tracks. The trading and rebalancing expenses are generally to blame for this disparity. You may use the tracking difference as a metric to determine whether an ETF is performing well or not and whether its fees are too expensive.

Additionally, you should also know how frequently the ETF is rebalanced. Rebalancing is when the fund manager buys or sells stocks to maintain the desired weighting of the index. For example, if a particular stock in the index goes up in value, the fund manager may sell some of that stock to keep the index’s weighting constant.

The frequency of rebalancing will have an impact on both your returns as well as your costs. If an ETF is rebalanced more frequently, it will likely experience higher transaction costs. This will hurt your return, all other things being equal. You can find this information in the ETF’s prospectus.

2.       Actively managed ETF vs. passively managed ETF

The difference between recouping your investment and making a significant loss may be determined by whether or not a fund is actively managed. Actively managed funds employ humans to make decisions and execute trades, whereas passive funds utilize AI and trading bots to generate profits.

Passive funds tend to be less effective at minimizing losses than active funds. That’s because passive funds have trading cycles during which the fund’s asset composition cannot be changed. Even if significant losses are risked.

However, passive funds tend to have higher gains than active funds in the long term. This is because humans are not as good at making investment decisions as AI. Also, humans tend to buy and sell assets at the wrong time, incurring transaction costs that eat into returns.

So if you’re looking for immediate gains, an actively managed fund may be a better choice. However, if you’re aiming to maximize your profits in the long term, passive funds are generally a better investment.

3.       Percentage of junk stocks

It is not uncommon for funds with baskets of stocks to include some high performers and a bunch of underperformers that are there more for their fundamentals, which help spread out the risk more than they help make any gains. However, that is not to say that the junk assets couldn’t hurt you.

Remember the sub-prime mortgage loans that caused the recession in 2008? Those bad loans were mixed in with a few good ones, so investors and insurers couldn’t tell the difference. You have to know the balance in the ETF between the performers and the junk before investing in it.

Jason Spatafora, the co-founder of marijuana stocks.com, says, “Most of these ETFs will have a certain amount allocated to several companies where the top five marijuana stocks are good, but then there is a huge drop off in quality in the other stocks. Everything else is more risky.” This sums up the nature of most ETFs. They are a mix of good and bad investments hoping that the good will outweigh the bad.

ETFs can be a great way to invest in cannabis without picking individual stocks. However, there are a few things you should consider before investing in one. Specifically, you should look at the index that the ETF is tracking, the tracking difference, rebalancing frequency, the nature of the fund’s management, and the percentage of junk stocks. By taking these things into account, you will be able to decide which cannabis ETF is suitable for you.

Please contact us for more information on how to identify the right cannabis ETF for your portfolio.

 

Why the SAFE Banking Act is a SAFER bet in Congress

Why the SAFE Banking Act is a SAFER bet in Congress than the MORE Act

In a recent blog post, we talked about the MORE Act passing the House of Representatives and moving on to the Senate. And while we remain hopeful that the Senate will see the merits of the Act and deem it necessary for the cannabis industry. We are also apprehensive about its chances since cannabis legislation doesn’t ever make it through the Senate on the first try. However, we have reasons to believe that the SAFE Banking Act has more than half a chance of making it through the Senate.

Should it pass into law, the SAFE Banking Act would open the way for the financing of cannabis businesses by banks and also streamline the state and federal regulations concerning the funding of cannabis businesses.

What is the SAFE Banking Act of 2021?

The SAFE Banking Act of 2021 is a bill in the US Congress aimed at resolving the financing issues faced by legal, licensed cannabis companies as they try to raise capital. Because the federal government has fallen behind the states with its laws governing and regulating the cannabis industry, there are some discrepancies between the state legislation and federal law.

One of these discrepancies regards banks and the limitations to the amount of business they can do, with an industry considered illegal on a federal level. Banks are currently unable to offer financial services like credit and underwriting of credit instruments like bonds which are mainstream financing tools in other industries in the United States.

First introduced in 2017, then in 2019, and then again in 2021, the SAFE Banking Act would make it legal for banks to conduct financial services for cannabis companies, specifically, providing credit facilities. It would also provide a regulatory framework for banks to follow when doing business with cannabis companies, which is currently missing. This would ease the day-to-day liquidity concerns of the cannabis companies and solve the continuing existential crisis they face without access to financing.

In a press release issued by the House Committee on Financial Services on March 26, 2019, committee chairwoman Representative Maxine Waters (D-CA) remarked, the SAFE Banking Act “addresses an urgent public safety concern for legitimate businesses that currently have no recourse but to operate with just cash.”

However, the SAFE Banking Act has passed through the House of Representatives six times, and it has been defeated in the Senate five times. So why do we think that the sixth time will be any different?

Why is the SAFE Banking Act a safer bet than the MORE Act?

SAFE Banking Act

As Representative Maxine Waters stated in her remarks quoted above, the delay of the SAFE Banking Act has now become a public safety issue. Because banks won’t let cannabis dispensaries and other cannabis businesses open accounts, many businesses are forced to take payment in cash and store it on the premises. Unfortunately, this has resulted in several attacks on dispensary staff by armed robbers attempting to steal the cash and endangering the employees’ lives. Curaleaf’s CEO Boris Jordan recently echoed this sentiment in an interview with CNBC.

“We need some piece of legislation that will allow us to address the real problems in the cannabis industry today, and they are becoming real problems. People are now getting murdered in marijuana shops (for example) in Washington State last week and the week before in California… We need banking,” he said.

It is now clear that the lack of federal banking laws permitting banks to do business with cannabis businesses is having a tangible adverse effect on the safety of those businesses and their employees. Congress can no longer afford to sit around and watch while lives are at risk.

Furthermore, the MORE Act is considered too idealistic by many on Capitol Hill, which is the main reason it is likely to fail in the Senate. Congress is more likely to move slowly and evaluate each element of cannabis legislation individually.

According to Mr. Jordan, it is likely that the MORE Act, which is a legislative panacea for all that ails the cannabis industry, will fail. Instead, Congress is expected to pass separate legislation addressing the different issues of the cannabis industry individually. Starting with the finance and banking issues.

If this assessment is correct, we have enough reason to hope that the SAFE Banking Act will finally pass through the Senate and into law.

How would it impact the industry if it passes?

Why the SAFE Banking Act is a SAFER bet in Congress than the MORE Act

 

1.        Increased Liquidity

As mentioned above, access to liquidity is a big problem for cannabis companies. Most companies in the developed world rely on their cash at hand and other assets to facilitate the operating costs of running the business. And use credit from banks and other regulated lenders to expand and grow their businesses.

Cannabis companies struggle to finance operations and expansion activities with just the cash they are generating from sales. Furthermore, this lack of liquidity is a big turnoff for investors and partners alike who don’t want to take on the liquidity demands on their own.

2.        Increased Regulation

The passing of the SAFE Banking Act would also represent an increase in the regulation facing the cannabis industry, which is much needed for the industry. Because all the states have gone their way with their cannabis laws, there is no regulatory homologation across the different states. As a result, businesses find it hard to operate across the various states.

This increase in federal regulation would be welcome for businesses seeking to expand to other states because they will have a federal roadmap to follow. This saves many resources for companies that currently have to navigate each state like an individual country with its own rules.

3.   Increased security

As mentioned above, cannabis dispensaries need an alternative to storing large amounts of cash on the premises. Since this is attracting criminals and endangering the employees’ lives. The SAFE Banking Act would allow the dispensaries access to bank accounts to keep their money. And reduce the number of cash transactions happening at the store.

In addition to the reduced cash on-site, cannabis dispensaries. Will also not have to invest so heavily in security for the stores, reducing overhead costs.

As you can see, there’s a lot the industry stands to gain if the SAFE Banking Act is passed into law. Contact us for the latest information on the SAFE Banking Act and for more information on how your cannabis business or investment stands to benefit from it.

3 Must-haves when starting a cannabis dispensary business

cannabis dispensary business

As marijuana becomes more mainstream and public sentiment tends towards the positive regarding both recreational and medical use of the drug, more and more entrepreneurs are setting up the cannabis dispensary business. This trend has also been accelerated by the wave of legalization engulfing the United States. New York, Virginia, and New Mexico are just some of the most recent States to get swept up by the tide last year.

The cannabis industry is quickly becoming one of the major creators of new jobs in states where it is legal. In 2019, the cannabis industry employed over three hundred forty thousand Americans in various stages of the marijuana supply chain. The industry also contributed upwards of USD $13 billion to the national GDP. This was in 2019 when just a hand full of States had legalized the recreational consumption of cannabis. The numbers are much more significant now, with eighteen States having it officially legal and another dozen having it as a decriminalized substance.

cannabis dispensary business

As a result of those startling numbers, it is easy to understand why investors and entrepreneurs are diving headfirst into the cannabis industry. However, some things need to be in place in order to operate a successful cannabis startup that can grow into a large, publicly-traded multinational corporation.

In this article, we will highlight three primary ingredients that you need in your cannabis startup for it to succeed. We hope that this helps entrepreneurs ensure that these elements are all in place before opening their doors. Furthermore, having these in place will help you attract investors since investors always check for them before investing in a cannabis startup.

3 Must-haves when starting a cannabis dispensary business

1.        The necessary licenses

cannabis dispensary business

This is one of the most complicated barriers to starting a legal cannabis business in the United States. The requirements and number of licenses you have to get will vary depending on where you register your cannabis startup in the US. In addition, the body responsible for issuing the license will also depend on which state you are in.

In Nevada, for instance, the Department of Taxation is responsible for licensing and regulating both recreational and medical marijuana dispensaries. In California, startups can apply to either the Bureau of Cannabis Control, CalCannabis Cultivation Licensing or the Manufactured Cannabis Safety Branch. So, depending on which part of the supply chain you are in, you will need to go to one of the above to apply for the appropriate licenses in your state.

2.        A good branding and marketing strategy

cannabis dispensary business
cannabis dispensary business

Now that the cannabis business is being legalized across the United States, retailers and farmers no longer have to operate anonymously. Cannabis businesses now have to brand and market their products just like any other business.

Cannabis startups should also do due diligence on their consumers and profile their target markets. You must know where your consumers go for information on cannabis and establish yourself as a thought leader in those spaces. Running a cannabis business is no different from any other business. Your business needs to develop ways to engage its users, generate qualified leads and convert those leads into sales.

3.        A financial backer

Lastly, cannabis businesses need solid financial partners and investors from the start. Unfortunately, due to cannabis not being legal on a federal level in the United States, many banks are limited in the financial support and liquidity they can offer cannabis businesses. This means that for a cannabis business to succeed, it needs financial partners that are ready to provide the necessary liquidity to get it off the ground.

Prioritizing debt financing allows business owners to retain equity and control over their operations.

Bonus: Location! Location! Location!

Every successful cannabis dispensary has a good location from which to do business. This is one of the general laws of retail trade. Location is everything. However, it might be more critical for cannabis dispensaries than regular retail businesses.

With regional zoning laws and the regulations governing cannabis retail in each state, cannabis businesses cannot operate everywhere that other businesses can. For example, in certain States, cannabis dispensaries are not allowed to operate close to schools, rehab centers and even churches. This makes it even more vital that you find the right location.

And in this case, the right location is where you will have the most traffic and where you are legally allowed to set up as per your state’s laws.

This is our list of the three most important things that have to be in place in order for a cannabis startup to succeed. Make sure you have all of them before diving into the cannabis industry, either as an entrepreneur or an investor. Contact us today for help starting your cannabis dispensary.