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WeedWeek Podcast
65. A Very Canadian Pot Scandal with Jesse Staniforth

Jesse Staniforth, Editor of WeedWeek Canada, updates Alex and Donnell on breaking Canadian stories. There is no lack of scandal: Cannabis giant Canopy Growth fired founder and CEO Bruce Linton and CannTrust, a major licensed producer, is estimated to lose C$350 Million for ignoring the law. New regulations limiting THC in edibles exacerbate the over-packaging crisis. The country continues to battle the illicit market which is now also available online and is known by the cool name "MOMS" (mail order marijuana sites). Plus, Alex and Donnell discuss Jay-Z's partnership with Caliva.

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Cannabis VC Investments Soar

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Drew Angerer/ Getty Images

Axios published a multi-part feature on the industry. Key takeaways:

  • Racial minorities are still struggling to join the Green Rush. In a televised interview, former Speaker of the House John Boehner (R) said, "I don't know that there's any harm that's been done," by any delay in legalization. Boehner opposed legalization while in office and received a stock package now valued at $12M to join the board of MSO Acreage Holdings.
  • Big Pharma is interested, but there won't be much investment while cannabis remains a schedule I drug. It would also have to "break past the ongoing relationships medical cannabis suppliers and dispensaries currently have with doctors."
  • Cannabis VC investment topped $1.3B between January 2019 and mid-June, up from $1B in all of 2018 and $370M in 2017.

Quick Hits

  1. New Jersey Senator and presidential candidate Cory Booker said he was "absolutely disappointed" legalization didn't come up in the first Democratic primary debates.
    Business Insider
  2. Leafly runs through where the 2020 candidates stand on legalization.

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Editor Note

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 independent: Advertisers have no influence on our content.

We publish three free newsletters: 1) WeedWeek by founder Alex Halperin 2) WeedWeek California by Donnell Alexander and 3) WeedWeek Canada by Jesse Staniforth, as well as the WeedWeek Podcast and original reporting. The original WeedWeek newsletter (this one) has more than 11,000 subscribers. Alex can be reached at alex@weedweek.net.

To advertise contact john@weedweek.net and ellen@weedweek.net.
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Brad Bogus
VP Growth and Marketing, Confident Cannabis Confident Cannabis is creating transparency in the cannabis industry.

Pamela Hadfield
Co-founder, HelloMD
HelloMD: The largest online community of health and wellness cannabis consumers. HelloMD on Instagram and Facebook

*
Correction: Last week we said video content company Green Flower Media raised a $20M Series C Funding. It was a Series A.

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Colorado: The Sky Didn't Fall

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The New York Times assesses the Colorado market five and a half years after REC went on sale:

Reporter Jack Healy writes, "Colorado’s first-in-the-nation experiment has reshaped health, politics, rural culture and criminal justice in surprising ways that often defy both the worst warnings of critics and blue-sky rhetoric of the marijuana industry."

  • The rate of users is about twice as high in Colorado as in the rest of the country but youth use does not appear to have climbed.
  • While low level arrests have fallen far, racial disparities persist in those which occur.
  • Some law enforcement officials say legalization has fueled illegal businesses exporting product out of state.
  • Federal prosecutor for Colorado Jason Dunn calls the state "the epicenter of black market marijuana in the U.S."
  • Weeks ago, federal authorities raided 240 Denver area homes, the biggest operations since legalization.
  • Violent crime in Colorado climbed 20% between 2012 and 2017 but it's not clear how much, if any, of the spike can be attributed to legalization.
  • The state's $1.5B annual industry looks primed to grow since industry ally Jared Polis (D) is now governor.

Westword discusses the changes, effective by the end of the year, which will make Colorado more hospitable to companies seeking investors.

  • Despite many requests, Colorado authorities have not answered my questions about whether the state has effectively enforced its existing investment rules.

Quick Hit

  1. As expected, Illinois became the 11th state to legalize REC. With the law, almost 800,000 criminal records will be elligible for expungement.
    AP 2x
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Canopy Growth to Industry: Eat our Dust

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Noam Galai/Getty Images
Bruce Linton

Bloomberg profiles Bruce Linton, CEO of Canopy Growth, the world's largest cannabis company.

Linton says he wants to build a company so big that there’s “no question who’s No. 1. [and] It’s difficult to see who’s behind us because they’re so far behind.”

  • Canopy has a market cap of roughly $15B on the New York Stock Exchange. In 2018, it notched $120M in revenue. "For sure the opportunity is overstated, but what else is exciting right now?" Linton says.
  • Linton doesn't use cannabis.
  • Canopy is developing a product line with Martha Stewart. The first offerings will be for pets. It also has partnerships with Snoop Dogg and Seth Rogen.
  • Canopy has more than 3,400 employees, about a third work at its headquarters, a former Hershey's chocolate factory in Smiths Falls, Ontario.
  • Canopy sells MED in nine countries.
  • The company says it has about 20 trials planned or underway to test MED's effects on sleep, pain and mood.
  • Before cannabis Linton spend three decades as a serial entrepreneur in divergent industries.

Following a string of acquisitions, Canopy is no longer interested in buying cannabis producers, Reuters reports.

There's no Seeing Green column in this issue.

Next week we'll publish an exclusive WeedWeek interview with Kevin Murphy, CEO of Acreage Holdings, which Canopy plans to acquire for $3.4B upon federal legalization. (Or perhaps sooner.)

Quick Hit

  1. In a separate piece, Bloomberg suggests the industry needs standards.
  2. Barron's says Canopy competitor Aurora could be one of the first big pot companies to turn a profit.
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Federal Prohibition Still Matters in Bankruptcy Court

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While federal authorities have not cracked down on state legal cannabis, the WSJ reports a section of the Justice Department called the U.S. Trustee Program is blocking companies and people connected to cannabis from obtaining bankruptcy protection.

  • The rules have been applied not only to plant-touching businesses but also to individuals who have worked in the industry and ancillary businesses.

Separately, a WSJ piece suggests interstate trade, should it arrive in a few years, could undermine indoor growers with high costs.

Quick Hits

  1. Atlanta-based Surterra Wellness raised $100M from investors including Ed Brown former CEO of the Patrón Spirits Company.
    Press Release
  1. High Times is exploring OTC trading after failing to qualify for the NASDAQ.
    MJBiz
5.
   

Canna Law Blog: California's Five Most Dangerous Contracts

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Canna Law Blog has a post warning about the five most dangerous contracts for cannabis businesses in California. By dangerous it means contracts that may not be defensible in court, or where the law remains untested or unclear.

They are:

  • Distribution agreements
  • Real property leases
  • IP Licensing
  • Influencer agreements

Quick Hits

  1. Oakland may cut its highest in the state 10% tax on gross receipts for REC sales, which opponents say is driving business out of the city. 🌴For more see WW California.
    S.F. Weekl
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  2. California is escalating its crack-down on unlicensed businesses. 🌴For more see WW California.
  3. The threat of closed social media accounts remains a "nightmare" for cannabis companies.
    MJBiz
6.
   

CBD Shows Promise as an Antibiotic

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A new study found CBD is "remarkably effective" at killing bacteria. In test tubes CBD showed promise for its ability to kill bacteria which have shown resistance to other drugs as well as staph and strp.
Live Science

  • The researchers caution the results are preliminary and emphasize people should not use CBD to treat infections.

Stat reports the booming popularity of CBD is becoming a dilemma for doctors.

  • The question they confront is, "Should they encourage a treatment that may not work but also may not hurt their patients, if it gives them hope? Or should they reject any treatment out of hand that hasn’t been proven effective?"
  • Doctors who go ahead with it have questions about dosing, where to find safe product and how to determine if it's effective treatment.

Quick Hit

  1. The growing prevalence of CBD-infused products may force the FDA to regulate them.
    Washington Post
  2. The Economist says MED won't solve the opioid crisis.
  3. Abercrombie & Fitch will start selling CBD products.
    CNBC
7.
   

A Leftist Case Against Legalization

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In Crain's New York Business, progressive filmmaker Jane Wells argues New York is better off for failing to pass its REC bill:

"No matter how we might have allocated tax revenue from marijuana, or incentivized people of color to become cannabusiness entrepreneurs—side issues which vexed legislators for months—legal cannabis in our state would have damaged the cause of social justice.

"The real social injustice of legalizing weed arises from how the explosive growth of the cannabis industry enables it to escape government regulation in states with legal weed, while rectifying the harms of the War on Drugs is relegated to the back burner."

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UN: Global Cannabis Use on the Rise

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Almost 200M people worldwide smoke weed, according to the UN's 2019 World Drug Report. And legalization and/or greater tolerance appear to be ascendant in much of the world.
DW.com

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SCOTUS Declines to Hear 280e Case

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The U.S. Supreme Court declined to hear a case challenging 280e, the industry-hated federal tax rule which blocks pot businesses from deducting their business expenses.
MJ Biz

10.
   

Is There a Christian Case for Weed?

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A New York Times opinion piece by Jonathan Merritt discusses the Christian case for marijuana.

  • "America is sick, and the Christian call to compassion obligates the faithful to act. Chronic pain and illness now affect tens of millions of Americans, and in many cases the cause eludes the brightest medical minds...Christian ethics has long taught that the faithful must take an active role in caring for the ailing among us."

Quick Hit

  1. In the Guardian, I wrote about cannabis use and gun ownership.