ACT Resources Cannabis News – May 2019
The cannabis industry is developing day by day, making each month a hotbed of activity. April was no different, especially as multiple reform efforts gear up on Capitol Hill. This month in Cannabis News, we’ll take a look at how federal regulations could be changing toward cannabis, as well as how massive deals between cannabis giants continue to drive consolidation in the space. And of course, we’ll take a look at how the cannabis holiday 4/20 impacted demand this year.
U.S. Considers Expanding Federally Authorized Cultivation for Research
A group of U.S. senators has requested that U.S. Attorney General William Barr provide guidance on the Department of Justice and Drug Enforcement Agency’s handling of applications for federally authorized cannabis cultivation for research purposes. The bipartisan group of senators includes Sen. Dianne Feinstein (D-CA), Chris Coons (D-DE), Brian Schatz (D-HI), Tim Kaine (D-VA), Cory Gardner (R-CO), and Lisa Murkowski (R-AK).
Currently, the U.S. maintains just one authorized cultivation facility that produces cannabis for research purposes. The University of Mississippi has been cultivating cannabis plants for research, but the DEA has been accepting applications from other proposed facilities since 2016. As of August 2018, more than 20 applications had been submitted without approval. The senator’s request for information could be a signal that the federal government is getting more serious about researching cannabis.
While some scientific research into cannabis and cannabis-derived products is underway, thanks to states that have legalized medicinal or adult-use cannabis, federal research remains significantly limited by the plants Schedule I status. In order to build on the body of evidence scientists have gathered in initial studies, more comprehensive and widespread research is needed. Expanding the number of
federally authorized cultivation facilities could help support those efforts, as would ending the federal prohibition on cannabis.
Federal Legislative Update
Last month there was significant movement in Washington D.C. regarding several legislative efforts to reform cannabis policy. Specifically, the progress of the SAFE Banking Act, reintroduction of the STATES Act could impact the industry throughout the whole country. Meanwhile, the FDA continues to weight exactly how it should regulate CBD products following the legalization of industrial hemp in December 2018 with the passage of the 2018 Farm Bill.
The SAFE Banking Act, which would extend protections to financial institutions that work with cannabis businesses, has gone the furthest in the legislative process thus far. Last month, the bill passed the House Financial Services Committee by a commanding 45 to 15 vote. The SAFE Banking Act would help ameliorate the lack of financial and banking services within the cannabis industry, which has been caused by the hesitance of financial institutions to fully engage with an industry still technically illegal under federal law. The bill has been reintroduced in the Senate by Sen. Jeff Merkley (D-OR) and Cory Gardner (R-CO) since its passage in the House committee last month. While it is unclear whether the legislation will gain the approval of Senate leadership, it does already have a significant amount of support with 20 cosponsors to speak of thus far.
The STATES Act, which was reintroduced in Congress just after the passage of the SAFE Banking Act by the House Financial Services Committee, remains untouched at the moment. The STATES Act would go a long way to ending the federal prohibition on cannabis by amending the Controlled Substances Act of 1970 to restrict federal intervention against cannabis businesses acting in accordance with state law.
While the STATES Act would not end the federal designation of cannabis as a Schedule I substance, it would empower states to fully regulate their own cannabis industries and take the possibility of federal enforcement off the table completely. The measure has gained the support of U.S. Attorney General William Barr as a preferable approach to current policy.
Finally, the FDA’s public comment period regarding the regulation of industrial hemp-derived CBD products is underway, and comments have already started pouring in. As of April 25, nearly 450 people had already submitted comments on Regulations.gov, many of them supportive of not just the hemp- derived CBD industry but also cannabis products. The public comment period precedes an upcoming public hearing regarding hemp-derived CBD products, which is scheduled for May 31.
Federal Government Scrutinizes Cannabis Industry Work History for Immigrants
In a blow to the cannabis industry, U.S. Citizenship and Immigration Services released a policy guideline on April 19 that reiterated the agency’s stance that any work history related to the cannabis industry could be grounds for the automatic denial of citizenship for immigrant workers. Some applicants have already had their request for citizenship denied as a result of the policy, regardless of the state-legal status of the companies they’ve worked for.
For the cannabis industry, which is rapidly growing with a high demand for labor, restricted access to immigrant labor and guest workers could pose a problem. With an even tighter labor pool to draw from, fierce competition for experienced workers is inevitable. Denver Mayor Michael Hancock has called upon U.S. Attorney General William Barr to issue formal guidance on the policy in hopes that the hardline stance toward immigrant workers in the cannabis industry could be relaxed. The issue will undoubtedly play a role in the evolution of the cannabis industry, its job creation, and the growing demand for labor.
Canopy Growth to Acquire Acreage Holdings in $3.4 Billion Deal
The cannabis industry has continued to generate large deals that drive consolidation. Last year, the industry saw $13.8 billion in mergers and acquisitions, as well as other investment deals. That represented a four-fold increase over 2017, when $3.5 billion in deals were struck. Now, a single deal has added $3.4 billion in value. Canadian cannabis giant Canopy Growth has agreed to acquire Acreage Holdings, contingent on the U.S. federal government eventually ending the prohibition on cannabis. If the deal goes through, which it would once the U.S. legalizes cannabis, it would usher in Canopy’s entrance into the American market and become the first major Canada-U.S. transaction in the industry.
While the deal is contingent on the end of federal cannabis prohibition, it is an important indicator that the cannabis industry is maturing and continuously geared more towards consolidation. So far, 2019 has been characterized by vertical integration and brand acquisition, signaling that large companies and leading brands are prepared to make a big move. This trend has been bolstered by the bevy of reform legislation churning its way through Congress and new regulations in the works in several federal agencies.
4/20 Cannabis Holiday Drives Massive Demand
Finally, April is host of the unofficial cannabis holiday “4/20,” a day in which consumers celebrate the plant and the culture around it. The holiday is marked by widespread consumption of cannabis products, which the legal industry experienced firsthand.
The celebration of 4/20 has also expanded beyond the cannabis industry alone. Other brands are capitalizing on the holiday and offering 4/20 deals to those celebrating. For example, Pizza Hut offered customers its Hershey’s Triple Chocolate Brownie for $4.20 during the holiday. Burger chain Carl’s Jr. announced a one-day only CBD-infused cheeseburger in honor of the holiday. Ben & Jerry’s Ice Cream took the opportunity to donate 4.20% of their proceeds for the day to Clear My Record, a non-profit criminal justice reform project aimed at removing cannabis convictions from peoples’ records.
Brand engagement with 4/20 is yet another clear signal that the cannabis industry and the culture surrounding it is going mainstream. Despite the challenges that still remain due to federal prohibition, the cannabis industry continues to find a way.
ACT Resources knows the cannabis industry
Partnering with an experienced professional with intimate knowledge of the ins, outs, and complications of the cannabis industry is critical to your success. If you’re in need of assistance when it comes to financial and accounting needs for your cannabis business, ACT Resources is here to help. Don’t wait – ACT. Several cannabis delivery websites went down to immense traffic during the holiday, and many retailers found they were unable to keep up with demand. The lack of supply wasn’t due to under- preparation, though; retailers everywhere had stocked up on products for the 4/20 green rush, it simply proved to not be enough to meet the demands of consumers. Contact ACT Resources today!