WeedWeek edition / May 25, 2020
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FREE from WeedWeekOur Guide to the California Cannabis Industry.

Written by editor and publisher Alex Halperin, the report features interviews with 14 luminaries on navigating the world’s biggest and most complex cannabis market. Plus: An exclusive market research survey by SoapBox Sample.

FREE at WeedWeek!  

1 HOW MEDMEN COLLAPSED

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Politico goes long on the "cautionary tale" of MedMen's precipitous fall from "Apple of pot" to "WeWork of weed:" 

"[It all began to unravel [in 2018.] The company got hit with a class-action lawsuit from employees alleging labor law violations. Miffed investors sued the founders, accusing them of self-dealing and other underhanded tactics. A former chief financial officer filed a blockbuster complaint in a Los Angeles court accusing the founders of a slew of misdeeds, from manipulating MedMen’s stock price, to bank fraud, to seeking private intelligence groups to get dirt on their enemies, to calling an L.A. city councilman a “midget negro” and making an illegal straw man contribution to a Nevada politician."

The story notes:

"The company’s fall reverberates far beyond its stakeholders, because its glitzy rise was propelled by the promise of an entire industry. Its woes reflect the precarious status of the cannabis business: legalized by states but still criminalized by the federal government, its position makes traditional bank financing impossible and puts companies at the mercy of a patchwork of regulators."

  • MedMen declined to comment for the story.

In other MSO news:

Pot stocks jumped last week. New Cannabis Ventures analyzes why.

PLUS: Bloomberg suggests the pandemic's economic fallout means big things for the cannabis industry.

A note from the editor

Since 2015, WeedWeek has been the best way to keep up with the Green Rush. WeedWeek’s audience includes many of the most influential figures in cannabis because we are editorially independentAdvertisers have no influence on our editorial content.

We put out three free newsletters:

1) WeedWeek by founder Alex Halperin

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We also publish the WeedWeek Podcast and original reporting. The original WeedWeek newsletter has more than 8,000 subscribers and a weekly open rate above 25%.

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

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2 WAS THE L.A. EXPLOSION BAD FOR WEED?

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(Photo by Mario Tama/Getty Images)

Following last Saturday's explosion at a Downtown Los Angeles headshop warehouse, the L.A. Fire Department launched a citywide inspection of butane use by cannabis businesses.
Los Angeles Times

  • The business which exploded, Smoke Tokes, sells smoking accessories including butane, which dabbers use to fill their torches and illicit extractors use to make concentrates.
  • While no evidence of illegal activity has emerged, as far as I'm aware, the businesses on Downtown's "bong row" are thought to supply illegal manufacturers.
  • The incident sparked fear of a backlash against the industry, WeedWeek's Hilary Corrigan reported
  • At Forbes, Chris Roberts suggests the response reflects anti-weed bias. 🌴 WW California has more.
  • I'm normally a fan of reporter David Downs, but think he gets it wrong in Leafly, blaming the illegal market for the explosion.

Quick Hits

  1. Two months after being denied "essential" status, Massachusetts' REC dispensaries re-open today. Shoppers can expect a "drastically changed" experience.
    Boston Globe
  2. Virginia Gov. Ralph Northam (D) signed decriminalization into law.
    CNN

3 BANKING’S “EPICENTER OF RISK”

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WeedWeek business columnist Dan Mitchell looks at the increasing untenability of weed's banking situation in the Emerald Triangle:

It’s also a logistics problem. “Farmers are often remote and in less populated areas so access to banks and choice of banks is limited,” said Hezekiah Allen, chairperson of Emerald Grown, a growers’ cooperative. Fully legal businesses in rural areas don’t have much of a problem, but if there is only one local bank, and that bank won’t deal with cannabis companies, growers are out of luck, he said.

Read the whole thing.

Quick Hit

  1. MJBiz wonders if California's many industry groups can work together.

4 OREGON: FROM BASKET CASE TO “MODEL” MARKET

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WeedWeek reporter Hilary Corrigan found her home state of Oregon has emerged as a "model" industry.

  • In April, the state hit a monthly record of $90M in sales, up about 7% from the previous record, set in March.
  • For years after stores opened in 2015, the state was notorious for its product glut.
  • “That’s kind of all worked itself out,” BDSA exec Tom Adams said. He called the state market well run, reasonably regulated and reasonably taxed.
  • The story also discusses how a group of more than 30 state attorney's general urged Congress to pass cannabis banking reform.  The Orange County Register has more.

Here's what else Hilary was up to:

Quick Hit

  1. Green Entrepreneur surveys the bleak outlook for Nevada's tourism dependent market.

5 POWER PLAYERS: CANNASAFE COO DERRICK FRIEDRICH TALKS “EXPONENTIAL” GROWTH

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For this week’s Power Players interview, we’ve got a very interesting conversation with Derrick Friedrich, COO of testing company CannaSafe. The company, which tests more than 30% of the legal cannabis in California, has seen revenue skyrocket 12,000% in the last three years.

Among other things, we talked about what product companies should look for in a testing lab, how they test for THC and the coming lab consolidation.

Here's what he said about...

Variations in test results:

In our world there isn't a best value. One thing that's limited in this industry is standardization. With it being illegal federally, the resources of the federal government are not available to the states, and the states are basing everything off of their own experience of their budgets to create standardized procedures across that.

That's something that the state of California needs to continue to do, to drive standardization. Once that standardization is driven into the industry, then you're going to start seeing values from lab to lab almost go away. They're going to become very, very similar.

How they keep customers:

The more experienced, the solid companies, the [national brands] are our main customers and they're the ones that are not fly by night. They are looking for us to give unbiased, real value so that if there is a problem they can make changes in their process and procedures and put out a safe product for consumers.

Read the whole thing.

Quick Hit

  1. KushCo CEO and Power Player Nick Kovacevich says the Senate, not the Presidency, is the race for weed to watch.
    Forbes

6 CANADIAN RESEARCHERS SUGGEST CBD FIGHTS COVID

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Researchers at the University of Lethbridge, in Alberta, Canada, say preliminary data suggests CBD may help with the prevention and treatment of COVID-19.
CTV

  • They say CBD can "modulate the levels of the receptors in highly relevant tissues, such as the mouth, lungs and intestinal cells," which are how the virus attacks the body."The virus has the capacity to bind to it, and pull it into the cell, almost like a doorway," Olga says.
  • The Calgary Herald has more.
  • Read their paper, in the journal PrePrints here.

🍁For lots more from north of the border, check out WW Canada.

Quick Hit

  1. Longtime cannabis journalist Amanda Chicago Lewis looks at the hidden origins of the CBD craze.
    New York Times
  2. The FDA warned the public about a voluntary recall at CBD company Summitt Labs, where products tested as high in lead.
    Marijuana Moment 

7 HELIX TCS APPEALS ANTI-LABOR FIGHT TO U.S. SUPREME COURT

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Cannabis security company Helix TCS is appealing to the U.S. Supreme Court in a fight over whether cannabis companies must follow federal labor law.
Canna Law Blog

  • Per Canna Law Blog, "Helix’s main argument is that all participants in state recreational marijuana industries assume the risk that their activities will subject them to federal criminal sanctions and therefore they are not entitled to benefits under federal law, and cannot expect federal court to aid their conduct. Essentially Helix is arguing that the federal government would be assisting employees in drug trafficking if they afforded the employees the protections of the Fair Labor Standards Act."
  • A three judge panel of the Tenth Circuit unanimously rejected the argument.
  • In the unlikely event SCOTUS hears the case, Canna Law Blog suggests a risk of "drastically unintended consequences." The high court "may reaffirm federal illegality in a manner that is very detrimental to states that have legalized cannabis and operators within those states."

8 SHAKEUP AT DEA

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Attorney General William Barr named Timothy Shea acting administrator for the Drug Enforcement Administration.
Herald News

  • Most recently as an interim U.S. Attorney, Shea was at the center of controversy over the prosecution of President Trump's former National Security Advisor Michael Flynn.
  • He'll be the fourth acting administrator of the troubled agency in five years.
    The Crime Report

9 RECORDING SCANDAL GUTS LEADERSHIP AT ALASKA COMPANY

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An eight minute recording which appeared on social media several weeks ago has led to an investigation and the ouster of senior management and the entire board of directors at Great Northern Cannabis, one of Alaska's largest REC companies.

Anchorage Daily News:

"In the recording, Jordan Huss, formerly the vice president of Great Northern Cannabis and the company’s top shareholder, acknowledges switching out samples so that 100 pounds of marijuana would be able to be sold without undergoing the required testing for mold.

"Huss said management in the company was adamant that marijuana still be sold, although the former CEO and the former vice president of the company dispute that claim.

“I was instructed to use different samples so that we would ensure that that cannabis batch would test clean,” Huss said on the recording. “I did that under orders by my management.

“That hundred pounds of cannabis sold.”

Huss says he believes the recording was made illegally and is pursuing recourse.

Read it all.

Quick Hit

  1. In San Francisco, an equity dispensary owner in Union Square says his company is being used as a pawn in a fight between three larger players, HighTimes Holding, and Have A Heart and Harvest Health and Recreation. 🌴WW California has more.
    S.F. Weekly

10 MADE POSSIBLE BY WEED

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Buzzfeed writer Lara Parker reflects what she calls six things she couldn't have experienced without weed.

  • The include "the orgasm," swimming with fish in Hawaii, and the first trip to Disneyland.