WeedWeek edition / August 09, 2020
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1 CALIF. DELIVERY WARS GO TO COURT

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A California judge ruled that the cities and counties trying to stop REC delivery within their borders needed to actually have rules banning delivery. The decision pushes back the trial in the closely watched case until November. 🌴WW California has more.
WeedWeek

  • While this was a victory for the industry and the state's retail regulator, it could be the beginning of a protracted legal battle that one observer suggested could reach the state's supreme court.
  • The localities that do have delivery bans on the books likely have a strong case since California's REC law allows for a substantial degree of local control.
  • Meanwhile, local ballot measures could increase legal access across California.
    MJBiz

Also from WeedWeek reporter Hilary Corrigan:

Quick Hit

  1. The U.S. DEA revealed the license information it subpoenaed from California regulators relates to allegations of illegally importing cannabis oil from Mexico. Thus far regulators haven't turned over the material. In a blog post, law firm Berger Greer discusses the standoff.
    Marijuana Moment
A note from the editor

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Tips, comments and complaints to Alex alex@weedweek.net.

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2 POWER PLAYERS: ROB MCPHERSON, SCOURGE OF CANNABIS LINKEDIN

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Normally we call our weekly interview "Power Players," though former liquor executive Rob McPherson says the moniker doesn't apply to him. He has, however, become a prominent voice on LinkedIn for his scathing, unsentimental assessments of the legal industry.

We discussed why vertical integration doesn’t work, the segment best positioned to succeed and the high-profile U.S. brand he liked a lot, until he didn’t.

Much of his assessment can be boiled down to, "They all built things and put out stuff without ever knowing, and ever asking, and ever really caring about who it was that they wanted to actually purchase this."

He does not mince words.

Quick Hit

  1. Cannabis Industry Journal breaks down the 15 hottest U.S. brands.

3 HOW DID THE GENIUS FUND BLOW $164M?

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Dot.LA ran a three-part series on the collapse of The Genius Fund, a Los Angeles entity that blew through a $164M investment from Russian coal oligarch Dmitry "Dima" Bosov. Bosov died in May of an apparent suicide.

The company had big ambitions in the California cannabis market:

[The two twenty-somethings who ran it] publicly referred to Genius Fund as a private equity fund, but the company functioned more like a family office for their high wealth investor, or a conglomerate that rolled up into one parent entity....

Genius Fund's expansive structure included more than 50 corporate entities, mostly limited liability companies, spread across farming operations, CBD and THC manufacturing processes, product development, delivery operations and a retail front, according to domestic and international corporate filings.

Start here.

Quick Hit

  1. A ProPublica investigation looks at how investors, many with cannabis connections, worked the underground mask trade.

4 HARBORSIDE LAWYER TALKS LANDMARK 280E TAX CASE

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James Mann, the lawyer representing Harborside in its federal case against industry-hated tax rule 280E, broke it down for WeedWeek business columnist Dan Mitchell.

  • First, he argues, the Constitution's 16th Amendment, which created the federal income tax, makes clear that only "income" can be taxed, but for some of the years in question, 2007-2012, Harborside didn't have income because it was losing money.
  • The second point involves the definition of accounting term "cost of goods sold (COGS)," which cannabis companies can still deduct despite 280E.  The IRS charges Harborside improperly categorized deductions as COGS. Mann argues Harborside categorized expenses like buyers and product testing properly because without them it would have nothing to sell.
  • The IRS response is due August 24.

Last week in his column, Dan also discussed 471C, which some in the industry think is a 280E loophole and others warn could be a recipe for disaster. Mann thinks it's the former: “A notable feature of tax law is that it applies to all taxpayers equally,” he said. “Section 471C was written to apply to all small businesses, including cannabis.”

Separately, Canna Law Blog warned to be very careful when your company issues securities, calling it a, "Top 10 'go to jail' scenario."

5 IS COVID KILLING THE ILLEGAL MARKET?

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While it's hard to measure, Politico suggests booming legal pot sales imply the illicit market is struggling.

  • “It's understandable that people may be more hesitant to get their products from sources that are unregulated,” Kris Krane, CEO of MSO 4Front Ventures, said.
  • Another Politico story says the spring's protests triggered a "collective awakening" among state and local governments on cannabis policy.

Around the industry:

Quick Hit

  1. Zack Ruskin's Rolling Stoned newsletter looks at what's taking San Francisco's equity program so long to get off the ground.
  2. We're also excited to start posting Jackie Bryant's excellent Cannabitch newsletter. This week she talked to the veteran-owned and run Helmand Valley Growers Company,

6 ARIZONA REC INITIATIVE CAN STAY ON BALLOT, JUDGE

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An Arizona judge ruled the state's upcoming REC vote can remain on the ballot.
Arizona Capitol Times

  • Anti-legalization activists had sued claiming the 100-word summary distributed by signature gatherers was misleading.
    WeedWeek (July 22)
  • Governor Doug Ducey (R) opposes the initiative.
    Marijuana Moment
  • Maricopa County (Phoenix) superior court judge James Smith, a Ducey appointee wrote “This initiative is plain: It wants to legalize recreational marijuana.”

In other state news:

7 INHALING WEED CAN HURT YOUR HEART, STUDY

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A statement in the American Heart Association journal Circulation assessed the existing research and concluded smoking or vaping cannabis has the potential to cause palpitations, heart attacks and other cardiac problems.
CNN

  • The study suggests licensed cannabis products are safer because they're less likely to contain dangerous or unknown additives.
  • Topical and ingested forms of cannabis, may mitigate the danger, the study found.

 

8 WHAT’S YOUR MEXICO MED STRATEGY?

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Canna Law Blog suggests businesses might want to apply to operate in Mexico. 🌴WW California has more.

The blog says:

"It is not hard to foresee legalization bringing a cannabis boom to Mexico, generating big money for its legally licensed participants...

"This means medical cannabis is the only viable means for legally entering Mexico’s cannabis marketplace. This also means those who want a Mexican cannabis license should seriously consider applying for a medical cannabis license right away, before any official regulations for medical use come into reality this fall."

A bit further afield, India has 🔒"the world's biggest cannabis industry that doesn't exist yet."
Quartz

9 “I KNOW THERE’S A GLUT OF CBD”: FOUNDER

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@getfrigg

At Forbes, Kimberly Dillon, CEO of CBD beauty brand Frigg, discussed the complexities of standing out in the market:

I know there’s a glut of CBD but if you really think about it, we’re in the beginning stages. We still have to win consumer awareness and consumer loyalty. CBD has only been legal since late 2018. It’s really about building brand loyalty and community and educating consumers. Maybe the buzz is saturating the market, but a year and a half does not make the industry so it’s very long road ahead.

10 LET’S TALK ABOUT HASH

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The Dank Dutchess and Frenchy Cannoli, photo by The Dank Dutchess

This week, WeedWeek culture writer Ngaio Bealum discusses his fondness for old-style hash, and catches up with artisan hashmaker The Dank Dutchess, an acolyte of Frenchy Cannoli.

Here's Ngaio:

Sometimes, the old ways are still the best ways. For me, “Temple ball” style hash retains more earthiness and complexity in its flavor -It’s not just terpenes and THC, like what you get from a good wax – but a little more of a “whole plant” experience. And while modern waxes and concentrates are hella strong (some concentrates are up to like 85% THC these days), hand-pressed hash usually registers around 60-70 percent: Still powerful, but not overwhelming.

Treat yourself.

Quick Hits

  1. Seth Rogen talked pot and politics with Entertainment Weekly.
  2. A grandmother is suing after she was arrested at Disney World with CBD oil.
    CNN
  3. Advanced Nutrients CEO Big Mike is hosting a new reality show: "The Next Marijuana Millionaire."