WeedWeek edition / September 27, 2020
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1 KUSHY PUNCH SUED FOR MAKING $64M IN ILLEGAL GUMMIES

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@kushypunchlife

California regulators have sued the parent company of Kushy Punch alleging the brand manufactured $64M in gummies at an unlicensed facility in Los Angeles.
WeedWeek

  • The suit stems from a 2019 raid which yielded 58 pounds of concentrate and records appearing to confirm it had manufactured 3.3M gummies at the facility.
  • After the raid, parent company Vertical Bliss had its license at another facility revoked. 
  • The penalty could be as high as triple the $75,000 license fee for every day the unlicensed facility operated.
  • The suit also claims the company was making a product called "Kushy Punch T.K.O." containing more than the legal THC limit. 
  • The brand didn't return a request for comment.
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2 INTRODUCING THE PEOPLE MOVER

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Welcome to WeedWeek's People Mover, a weekly feature to chronicle hirings, departures, promotions and other key personnel changes in the cannabis world.

Email hello@weedweek.net with the subject line People Mover to submit an item. Entries are due by noon, PT on Fridays. And since we're just getting started feel free to send entries from the last few weeks.

This week:

  • Michael Cellucci has joined head shop distributor Greenlane as President of Sales and Marketing North America. He's a 20-year veteran of CPG who served as president of Drew Estate: The Rebirth of Cigars, stewarding that company's sale to Swisher International.

Plus moves at Fyllo, Cann and more...

3 IRS PUSHES TO DISMISS HARBORSIDE’S 280E CASE

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The IRS has asked a federal judge to dismiss Harborside's court challenge of industry-loathed tax rule 280E.
WeedWeek

  • Harborside is appealing a 2018 Tax Court decision which found it owes $11M in back taxes for operations between 2007 and 2012. 
  • The Oakland-based retailer claims it should have been allowed to deduct more of its expenses. The IRS disagrees.
  • More broadly, Harborside argues 280E is unconstitutional, essentially because it is being taxed for revenue while the Constitution allows taxes on income. Harborside says it was operating at a loss for much of the time in question.
  • In its brief before the Ninth Circuit Court of Appeals, the IRS argues the government can tax gross income. It adds that Harborside's Constitutional argument should have been brought before the tax court and not introduced on appeal.
  • Harborside's lawyer, James Mann told WeedWeek “We continue to be optimistic about the outcome [of the case],” he said. “I actually am confident we will prevail on both of the grounds of the appeal.”

Quick Hit

  1. In a rare respite, a new California law means pot taxes won't go up for a year. 🌴WW California has more.
    Sacramento Bee

4 SUDDENLY, PSYCHEDELICS ARE BIG BUSINESS

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Mushroom Observer Alan Rockefeller https://mushroomobserver.org/image/show_image/6514

Compass Pathways, the U.K.-based, Peter Thiel-backed medical psilocybin company soared in its NASDAQ IPO inaugurating psychedelics as the next big psychoactive business opportunity. 
WeedWeek

  • After opening Wednesday at $17 per share the stock closed the day at $36.75 and the week at $43.17.
  • Compass' first backer, a German biotech entrepreneur named Christian Angermayer saw his 22% stake in the company climb to more than $300M.
    Bloomberg 
  • Other companies to watch include Mind Medicine and Champignon Brands both of which trade for less than a buck in Canada.
  • Like cannabis, psilocybin and MDMA are schedule 1 drugs, but for reasons that aren't entirely clear, the FDA seems much more interested in advancing therapies derived from those drugs.
  • Just like with cannabis, the industry is promoting its own euphemisms. So instead of "hallucinogens," executives call them "functional mushrooms."
  • The Washington Post asks who benefits from the mainstreaming of psychedelic medicine.
  • The FDA, however, is showing a new openness to MED research.
    Cannabis Wire

Quick Hit

  1. Discover looks at Delta8-THC the dubiously legal cannabinoid said to get you high without anxiety or paranoia.
  2. A massive new survey aims to learn how Americans used CBD to combat anxiety during the pandemic.
    WeedWeek

5 AURORA LOST $1.42B IN ONE RECORD QUARTER

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Aurora Cannabis, one of Canada's biggest players, had the 🔒 worst quarter ever for a cannabis company, losing US$1.42B on $53M in revenue Q2. The company has lost $2.47B on the year. 
Business Insider

  • The stock ended the week trading at $5.05, its lowest point since August 2016.
  • A Seeking Alpha analyst says the company is heading for "zombification."
  • The company's recovery plan is to bet big on premium brands.
    BNN Bloomberg

In other Canadian corporate news:

6 FED. JUDGES UNDERMINE POT CONTRACTS: LAWYER

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Harris Bricken attorney Vince Sliwoski suggests federal judges' unwillingness to enforce cannabis contracts could damage the industry.
WeedWeek

  • Sliwoski points to several 2020 court decisions where federal judges seem to be backsliding on precedent where they would "sever" illegal aspects of the business out of their rulings. Now a few cases show judges' reluctance to do so.
  • While the trend could have to do with hostility to cannabis from the Trump administration, he thinks judicial caution is a more likely reason.
  • Judges, he said, don’t want to do “intellectual gymnastics to somehow fashion a remedy for someone that’s doing something that’s expressly prohibited federally.”
  • To avoid situations like this, he said companies make want to put severability clauses in their contracts or litigate disputes in state court or arbitration. Though he cautioned neither is a perfect fix.

Also in WeedWeek:

7 ILLINOIS TO ALLOW APPLICATION DO-OVERS

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After a planned retail licensing process attracted widespread criticism, Illinois Gov. J.B. Pritzker said applicants who didn't receive perfect scores on their applications would be able to re-vise them.
WeedWeek

  • Even so, critics say their complaints have not been addressed.

In other state news:

8 GROWERS PREP FOR EXTREME WEATHER

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Fires, floods storms and other Biblical weather are forcing growers to re-evaluate their cultivation practices.
MJBiz

  • Among the changes, Louisiana growers are relocating to higher ground to avoid innundation.
  • Following a flash freeze, Colorado growers are studying heartier strains and in California varietals with shorter growing cycles are getting a new look.

Related: Plant-based packaging is becoming cost competitive with less sustainable alternatives. 
MJBiz

9 RAW WEED JUICE: A NEW SUPERFOOD?

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Dr. William Courtnet of the Cannabis International Foundation is out with a new documentary short called "Leaf" which proposes raw cannabis juice as a new super..uh...food. 

Cannabis Now:

"The healing secret lies behind the immune system boosting process the body uses to absorb what it needs. Vitamins and enzymes rapidly enter the bloodstream when raw plants including fruits and vegetables are in liquid form, giving the digestive organs a chance to rest as the body devours a high concentration of nutrients. According to Dr. Courtney, when fresh raw cannabis is juiced and introduced to the system, its restorative properties are increased."

10 “I MISS SHARING WEED”

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Dante Jordan has an essay in Weedmaps about what the pandemic has taken from us:

I miss sharing weed. And so do you — I see it in your eyes (plus the fact that you're reading this article). The coronavirus has changed everything in the world, and just because weed is essential doesn't mean we're untouched. Cannabis cafés have gone out of business, those fancy THC-infused dinners in Los Angeles are on hold, and Oregon dispensaries — where you could stick your nose into the jars — have shifted to a wafting model.

You can't even let off a public weed cough without people side-eyeing you like you're patient zero.

Read the whole thing.

Quick Hit

  1. In his new memoir "Let Love Rule," Lenny Kravitz writes about a youth saturated with weed and rock 'n' roll.
    Rolling Stone