The Cannabis Wire Daily newsletter is sent to C-Wire Plus subscribers every weekday morning at 7 a.m. Excerpts are published here later in the day. Don’t miss the full picture. Subscribe now.
South Dakota voters will see both medical and adult use on the 2020 ballot.
In December, Cannabis Wire reported that a medical cannabis measure qualified for South Dakota’s 2020 ballot. And now, the adult use measure has as well. This week, Secretary of State Steve Barnett’s office tweeted that “a petition submitted for an amendment to the South Dakota Constitution was validated and filed … today. This ballot measure would legalize, regulate, and tax marijuana and require the Legislature to pass laws regarding hemp, including laws to ensure access to marijuana for medical use.”
For background on these two measures, read Cannabis Wire’s coverage of South Dakota here.
Another cannabis hearing in Congress.
The House Committee on Energy & Commerce’s Health Subcommittee will hold a legislative hearing next Wednesday entitled “Cannabis Policies for the New Decade.”
“As public opinion continues to evolve and cannabis policies change at all levels of government, it’s important to bring federal agency officials together to discuss current and future federal cannabis policies,” said Energy and Commerce Chairman Frank Pallone, Jr. and Health Subcommittee Chairwoman Anna G. Eshoo.
“We’re particularly interested in examining the implications of changing marijuana’s schedule listing, the potential of cannabis research, and federal efforts to review and approve cannabidiol products.”
We’ll cover the hearing, and let you know more information as it’s released.
Virginia governor talks decriminalization.
Governor Ralph Northam gave his State of the State speech Wednesday night, and took to Twitter to share his goal of decriminalization. He wrote, “We need to take an honest look at our criminal justice system, to make sure we’re treating people fairly—and using taxpayer dollars wisely. And it’s time to temper justice with mercy.”
And from there he continued:
This comes on the heels of a cannabis summit, which Cannabis Wire covered, held by Virginia Attorney General Mark Herring, in anticipation of decriminalization legislation this year (and subsequent adult use).
Illinois adult use sales hit $10.8 million in five days.
This week, the Illinois Department of Federal and Professional Regulation released new numbers from the launch of adult use sales, and they were eye-popping: $10,830,667.91 from 271,169 transactions.
It’s worth noting, as you’ll see below, that the sales are mellowing from Day One, so it will be interesting to see where the average settles once the excitement and novelty winds down.
“The successful launch of this new industry is a historic development for our state that will benefit the very communities that have been disproportionately impacted by the failed war on drugs,” said Toi Hutchinson, Senior Advisor to the Governor for Cannabis Control, in a statement.
“As we move into the next phase, the Pritzker administration is proud to see the robust interest in dispensary ownership from social equity applicants, and we encourage them to apply for $30 million in loans that we have available to reduce the capital barriers to entry. Unlike any state in the nation, Illinois has set the standard for what it means to legalize cannabis in a way that begins to right the wrongs of the past and gives new opportunity to those that have been left behind for far too long.”
South Carolina reiterates: no hemp in animal feed.
South Carolina Department of Agriculture Commissioner Hugh E. Weathers’ office announced late last week that they are “taking steps to notify consumers and animal feed manufacturers that hemp and cannabidiol (CBD) are not permitted ingredients in animal feed products in South Carolina.”
The department “will send manufacturers a formal letter notifying them when illegal products are found in distribution. A company will have the option to reformulate the product to remove the hemp and/or CBD ingredient and submit a formal registration application. Failure to do so within the required time frame may result in further regulatory action.”
Harvest’s new COO, a potential acquisition, and a lawsuit.
The new COO of US multistate operator Harvest Health & Recreation will be Ron Goodson, who held the same role at Verano, which Harvest is in the process of acquiring (at the time the deal was announced, it was valued at $850 million). Harvest is also in acquisition conversations with Interurban Capital Group, Inc., which owns Have a Heart CC, the assets of which include more than half a dozen retail licenses in California, as well as storefronts in Washington and Iowa. The deal, at this stage, is valued at $87.5 million.
Also, Harvest is suing Falcon International. Back in February of last year, Harvest Health and Recreation announced it would acquire Falcon International, Inc, which holds more than a dozen licenses in California. At the time, Harvest said it “will use Falcon as the backbone of its California operations and foundation for national brand distribution.”
But this week, Harvest announced it is “requesting termination and rescission” of the agreement and “return of money Harvest paid to Falcon.”
Further, Harvest’s complaint “alleges that Falcon has failed to meet its legal obligations in multiple ways, including the failure to provide auditable financial records, which precludes Harvest from moving forward with the Transaction.”
We’ll be watching how this goes.
A warning to states: don’t rely on cannabis taxes.
The National Conference on Public Employee Retirement Systems (NCPERS), the largest trade association for public sector pension funds, released a new report that tells states, in short, to lock things down before the anticipated recession in the US.
Most of the advice suggests essentially closing tax loopholes and ensuring other tax revenue, but one note caught our eye:
“Be leery of exotic revenue sources. Revenues from sources such as casinos, racetracks, riverboats, sports betting, and cannabis sales are enticing because they appear to be voluntary taxes. However, they come at a cost. For one, they often end up displacing existing revenues. The introduction of an exotic new tax likely makes it harder to raise or otherwise expand existing, more traditional tax sources. After lotteries were first introduced in the 1980s, states encountered much greater resistance to raising traditional taxes.
For another, the revenues from these sources tend to fluctuate widely year to year and deteriorate over time as the novelty fades and as competition from other states and other activities increases. In addition, revenue sources such as lotteries, gaming, and cannabis frequently have high administrative costs for advertising and promotion, monitoring and enforcement, and so on. They may also have high social costs. For example, states often allocate a significant portion of gaming revenues to treat gambling addiction.”
A first? Cresco says it closed acquisition of Origin House.
Last year was a year of major M&A activity in the cannabis world. As the market wobbled toward year’s end, some deals fell through, others diminished in value. But, still, major deals were in the works as 2019 came to a close. (Scroll to the end of this recent newsletter to read more about how this, and other major deals, were scaled back in late 2019.)
One big hangup? It turns out that even though cannabis is federally illegal, deals in the hundreds of millions of dollars require federal approval. Specifically, clearance from the US Department of Justice and the Federal Trade Commission, as required by the Hart–Scott–Rodino Antitrust Improvements Act.
Well, it looks like the first of these mega deals has closed, and it’s a significant one. Origin House is California’s largest cannabis distributor, and the acquisition will give Cresco a strong grip in the largest cannabis market in the US.
We’ve reached out to the DOJ to confirm this announcement, and will report back.