WEBVTT - Marijuana Rescheduling in Washington 0:00:15.600 --> 0:00:18.360 Hello, and welcome to the Votes in Verdicts podcast, hosted 0:00:18.360 --> 0:00:21.759 by the litigation and policy team at Bloomberg Intelligence. Bloomberg 0:00:21.800 --> 0:00:25.160 Intelligence is the investment research platform on the Bloomberg Terminal, 0:00:25.320 --> 0:00:28.200 with five hundred analysts and strategists working across the globe 0:00:28.240 --> 0:00:30.880 and focused on all major markets. Our coverage includes over 0:00:30.920 --> 0:00:33.400 two thousand equities and credits, and we have outlooks on 0:00:33.440 --> 0:00:36.960 more than ninety industries, one hundred market industries, currencies and commodities. 0:00:37.240 --> 0:00:40.560 This podcast series examines the intersection of business policy and law. 0:00:40.800 --> 0:00:44.040 I'm Nathan Dean, an analysts with Bloomberg Intelligence covering financials policy, 0:00:44.640 --> 0:00:47.199 and joining me is Holly From, an analyst with Bloomberg 0:00:47.200 --> 0:00:51.479 Intelligence covering consumer and trade litigation. We're delighted today to 0:00:51.520 --> 0:00:55.680 be joined by Jeffrey Schultz, partner at Foley Hoag, where 0:00:55.680 --> 0:01:00.000 he focuses on practice is practice, on representing cannabis, indie 0:01:00.040 --> 0:01:04.520 street operators, investors in ancillary businesses, on corporate and security 0:01:04.600 --> 0:01:08.520 law matters, early stage corporate structuring and financing, joint venture, 0:01:08.600 --> 0:01:12.320 strategic partnerships, as well as state and federal regulatory matters 0:01:12.640 --> 0:01:17.160 impacting the cannabis industry. Jeff also advises cannabis industry operators 0:01:17.160 --> 0:01:20.120 on m and A, banking laws, and intellectual property matters. 0:01:20.400 --> 0:01:23.240 So with that, Jeff, welcome to the Votes and Verdicts podcast. 0:01:23.760 --> 0:01:26.560 Thank you very much for having me, No, thank you, 0:01:26.720 --> 0:01:29.240 It's always great to have you on, especially the timing 0:01:29.280 --> 0:01:32.400 of this podcast just giving me so much as happening 0:01:32.400 --> 0:01:36.160 with reschedulization on marijuana. So just as a little bit 0:01:36.200 --> 0:01:37.720 of a background, can you just tell us a bit 0:01:37.760 --> 0:01:39.399 of how you got to where you are and what 0:01:39.520 --> 0:01:41.479 drew you to the cannabis industry in the first place. 0:01:41.920 --> 0:01:42.800 Sure, great question. 0:01:43.360 --> 0:01:46.119 Nobody's in my root, and I don't think anybody's root 0:01:46.240 --> 0:01:47.960 into this industry and through it is. 0:01:49.880 --> 0:01:51.200 A straight line for sure. 0:01:51.320 --> 0:01:54.680 But my background is a corporate insecurities law I've worked 0:01:54.680 --> 0:01:57.800 on Wall Street for twenty years, and I got into 0:01:57.840 --> 0:02:03.240 the industry because I started work at a hybrid venture 0:02:03.280 --> 0:02:06.520 capital hedge fund private equity fund called Navy Capital in 0:02:06.520 --> 0:02:10.400 twenty eighteen. I was deeply interested in the industry for 0:02:10.440 --> 0:02:15.320 a variety of reasons, really recognizing that medical has cannabis 0:02:15.440 --> 0:02:20.360 use many many many years ago, and also seeing the 0:02:20.400 --> 0:02:23.840 opportunity in a total white space for this industry. Is 0:02:24.360 --> 0:02:27.560 I've always viewed legalization as a one way road, and 0:02:28.520 --> 0:02:31.200 here we are, eight years later, a little bit further 0:02:31.240 --> 0:02:31.839 down that road. 0:02:32.800 --> 0:02:35.200 No, that's great, and I think just I think, and 0:02:35.200 --> 0:02:37.800 I'm just going based off of your LinkedIn profile that 0:02:37.880 --> 0:02:39.560 you went to law school at the same time as 0:02:39.600 --> 0:02:43.799 Holly did, and also as Elliott Stein, who is one 0:02:43.800 --> 0:02:47.680 of our Vootz and Verdicts podcast individuals, and you are 0:02:47.760 --> 0:02:51.600 a Michigan grad, which our text analyst Andrew Silverman is 0:02:51.639 --> 0:02:53.680 also a Michigan grad I went to produce. So we 0:02:53.720 --> 0:02:57.080 won't talk about football all right now. But so let's 0:02:57.120 --> 0:03:00.560 just get a little bit further into the marijuana do discussion. 0:03:00.680 --> 0:03:04.000 So we always have to timestamp this discussion today's June 0:03:04.000 --> 0:03:06.960 twelfth at eleven oh one eight am. The reason why 0:03:07.000 --> 0:03:09.840 we timestamp it is just because things happen so quickly 0:03:09.880 --> 0:03:12.280 in the policy landscape. But let's start with the state 0:03:12.320 --> 0:03:14.320 of play of marijuana and its role in both the 0:03:14.320 --> 0:03:18.040 federal and state legal system. So, going back on April 0:03:18.120 --> 0:03:20.520 twenty seventh, we saw orders on the federal register up 0:03:20.560 --> 0:03:25.000 here after a long winded thought out there in terms 0:03:25.040 --> 0:03:28.919 of rescheduling, where it took marijuana from Section three sorry, 0:03:28.960 --> 0:03:32.320 Section one to Section three, and there were some limitations 0:03:32.320 --> 0:03:35.160 about marijuana. This wasn't full marijuana, correct, this is just 0:03:35.200 --> 0:03:36.360 a small subset, right. 0:03:37.360 --> 0:03:41.320 The DOJ took two distinct actions a couple of months ago. 0:03:41.520 --> 0:03:46.440 They immediately placed state licensed medical cannabis operators with state 0:03:46.480 --> 0:03:51.240 licenses on Schedule three as well as FDA approved drugs, 0:03:51.680 --> 0:03:53.440 and they use the treaty pathway to do that, which 0:03:53.440 --> 0:03:58.800 we can get into. And they also established hearing that 0:03:58.960 --> 0:04:01.400 that begins on anounces the hearing that begins on June 0:04:01.400 --> 0:04:05.480 twenty ninth to deal with the best way to say 0:04:05.480 --> 0:04:08.840 it is everything else anything that is not medical cannabis. 0:04:09.520 --> 0:04:13.440 So two very different pathways. They do intersect with one another. 0:04:13.520 --> 0:04:16.800 But I think the big headline and takeaway, which I 0:04:16.960 --> 0:04:20.160 still think is syncing in, is that medical cannabis is now. 0:04:20.160 --> 0:04:21.640 Legal at the federal level. 0:04:22.400 --> 0:04:26.040 If you have a state licensed state medical license, you 0:04:26.120 --> 0:04:32.000 are now invited to apply for a DEA license. There 0:04:32.040 --> 0:04:34.080 is this whether there's a sixty day window. 0:04:34.080 --> 0:04:35.719 We're in the middle of it. We're actually close to 0:04:35.760 --> 0:04:36.400 the end of that. 0:04:36.400 --> 0:04:41.240 That window ends essentially right before the hearing begins on 0:04:42.400 --> 0:04:44.560 everything else type of cannabis. 0:04:45.160 --> 0:04:47.279 So we're in the middle of that process right now. 0:04:47.720 --> 0:04:49.840 So can you explain a little bit more about like, 0:04:49.880 --> 0:04:55.520 so federally illegal for state marijuana, So is this recreational 0:04:55.560 --> 0:04:59.040 federal illegal or is this for certain types of product 0:04:59.320 --> 0:04:59.960 use in service? 0:05:01.000 --> 0:05:04.720 So adult use to recreational cannabis is still Schedule one, 0:05:05.000 --> 0:05:07.520 meaning that according to the federal government, it has no 0:05:07.600 --> 0:05:11.279 medical accepted use, and most importantly, it's still a crime 0:05:11.400 --> 0:05:15.640 to possess it, let alone cultivate it or sell it 0:05:15.760 --> 0:05:16.600 or distribute it. 0:05:17.480 --> 0:05:20.039 That again is going to be subject that is going to. 0:05:20.040 --> 0:05:22.960 Be the primary subject of the alj hearing that begins 0:05:22.960 --> 0:05:24.880 on the twenty ninth very soon, and we'll be watched 0:05:24.960 --> 0:05:29.400 very closely by a lot of folks. So it remains 0:05:29.440 --> 0:05:32.280 as a Schedule one drug. I think the biggest impact 0:05:32.279 --> 0:05:35.520 for the industry is remaining on Schedule one, at least 0:05:35.520 --> 0:05:37.960 for the time being, is the tax status and the 0:05:38.000 --> 0:05:41.440 distinction in the tax status between medical and adult use cannabis. 0:05:41.440 --> 0:05:43.960 To that, well, the longest short of it is that 0:05:44.040 --> 0:05:46.800 there's a section in the tax code called two AD 0:05:47.720 --> 0:05:54.440 two ADE effectively treats it's a punishment for drug dealers. 0:05:54.800 --> 0:05:57.520 And what it says is, if you're a drug dealer, 0:05:57.600 --> 0:05:59.479 you may or may not end up going to jail, 0:05:59.480 --> 0:06:01.160 but you serve, and they are going to pay taxes, 0:06:01.160 --> 0:06:03.240 and you're going to going to pay taxes in a 0:06:03.279 --> 0:06:07.520 punitive manner. Essentially, to ADE does not allow anyone to 0:06:07.520 --> 0:06:11.839 deduct any ordinary business expenses. The only thing that a 0:06:11.920 --> 0:06:15.800 company that's subject to to ADE can deduct from their 0:06:15.800 --> 0:06:17.480 taxes are cost of goods sold. 0:06:18.160 --> 0:06:18.680 It has a. 0:06:18.640 --> 0:06:25.040 Particularly significant impact on standalone dispensaries whose only really material 0:06:25.080 --> 0:06:27.560 cost to get sold as their inventory. So imagine a 0:06:27.600 --> 0:06:30.479 business with effectively a call it seventy to seventy five 0:06:30.520 --> 0:06:34.800 percent effective tax rate. It's very difficult to operate in 0:06:34.800 --> 0:06:39.000 this industry, notwithstanding what the public may view of it. 0:06:39.960 --> 0:06:41.560 So I want to back up a little bit and 0:06:41.600 --> 0:06:45.320 just go back to the reschedulization decision. So you know, 0:06:45.560 --> 0:06:47.960 this is something that started under the Biden administration. It's 0:06:48.000 --> 0:06:51.520 been going on for a long time. President Trump signed 0:06:51.520 --> 0:06:54.919 this executive order back in twenty twenty five, directing the 0:06:54.960 --> 0:06:58.479 DEA to move forward. There's a little bit of hesitation, 0:06:58.680 --> 0:07:01.960 I think least anecdote I've been hearing from the DEA. 0:07:02.120 --> 0:07:04.880 So finally saw the Department of Justice go forth and 0:07:05.040 --> 0:07:08.719 announce this reschedulization from Schedule one to Schedule three. You 0:07:08.800 --> 0:07:11.440 mentioned the treaty aspect. Can you guy a little bit 0:07:11.480 --> 0:07:15.480 deeper into specifically what the treaty impact of this is, 0:07:15.520 --> 0:07:19.760 because I think, I think this is a fascinating justification 0:07:19.960 --> 0:07:21.920 for what they did here. So can you explain a 0:07:21.920 --> 0:07:25.640 little bit about why international treaties come to play in 0:07:25.880 --> 0:07:29.760 something that's largely a domestic, you know product. 0:07:30.640 --> 0:07:34.480 Sure, so, the treaty, the treaty pathway is. 0:07:36.280 --> 0:07:39.880 Very interesting, not frequently used, and has been used before. 0:07:39.960 --> 0:07:42.800 It is not the first time that we've we've gone 0:07:42.840 --> 0:07:48.480 down that process. But essentially, what the treaty pathway does 0:07:48.800 --> 0:07:53.960 and rescheduling is allow for an expedited process and it's 0:07:54.000 --> 0:07:56.880 a look at section at eight eleven D one of 0:07:56.920 --> 0:08:01.880 the Controlled Substances Act. It effectively allows us to it 0:08:01.880 --> 0:08:05.280 allows the federal government to skip some of the notice, 0:08:05.400 --> 0:08:07.960 a lot of the procedural aspects of this, which frankly, 0:08:08.680 --> 0:08:12.240 uh we we dealt with under the Biden administration and 0:08:12.320 --> 0:08:16.960 that process for rescheduling got caught up in an interlocatory 0:08:17.000 --> 0:08:22.360 appeal and and of course the ALJ. Judd retired in 0:08:22.360 --> 0:08:26.000 the middle of the hearing, and effectively everything just got 0:08:26.040 --> 0:08:27.200 it delayed indefinitely. 0:08:28.520 --> 0:08:29.920 Allowing going through the. 0:08:30.280 --> 0:08:34.360 Treaty pathway allows us to allows the federal government really 0:08:34.400 --> 0:08:35.319 to pick up. 0:08:37.200 --> 0:08:38.720 Almost where they left off. 0:08:39.440 --> 0:08:43.080 It allows the DOJ to follow through with the President's 0:08:43.200 --> 0:08:47.680 order from December. His executive order was very specific about 0:08:48.920 --> 0:08:52.400 getting this done in in an expeditious manner, and this 0:08:52.559 --> 0:08:57.320 is the most expeditious manner. So it's it's really we've 0:08:58.080 --> 0:09:03.320 short circuited part of that process in a completely legal manner, 0:09:03.360 --> 0:09:05.440 in my opinion, But we're as supposed. 0:09:05.520 --> 0:09:07.079 We'll find out and there will be challenges. 0:09:07.400 --> 0:09:09.520 So I guess what's the next step. We have this 0:09:09.600 --> 0:09:13.160 hearing on June twenty ninth. Can you walk us through 0:09:13.640 --> 0:09:16.480 what's going to go through in that hearing and then 0:09:16.800 --> 0:09:19.240 what's the process beyond that after the hearing. 0:09:19.920 --> 0:09:22.080 So the hearing begins on the twenty ninth, and that 0:09:22.240 --> 0:09:24.200 is really to determine what to do. 0:09:24.640 --> 0:09:27.800 Where to schedule the rest of cannabis. 0:09:28.080 --> 0:09:32.160 This is a very complicated, complex issue because even the 0:09:32.200 --> 0:09:35.520 definition of the rest of cannabis is not entirely clear. 0:09:39.000 --> 0:09:42.559 There's a wide spectrum of potential outcomes. I won't begin 0:09:42.640 --> 0:09:47.520 to predict which ones, but it could be anywhere from 0:09:47.640 --> 0:09:52.440 keeping it on Schedule one, which seems exceedingly unlikely, to 0:09:52.640 --> 0:09:55.760 moving it to Schedule two or three or below, or 0:09:55.800 --> 0:09:59.480 potentially descheduling cannabis could be a potential outcome. Alvie, it 0:09:59.520 --> 0:10:04.640 unlikely that is a potential outcome here. All of those 0:10:04.640 --> 0:10:08.640 outcomes will have a significant and very different impact on 0:10:08.679 --> 0:10:12.720 the industry and operators across the country and all the 0:10:12.760 --> 0:10:17.280 investors in this industry. It's just difficult to really tell 0:10:17.320 --> 0:10:20.920 what the outcome will be. However, what I can tell 0:10:20.960 --> 0:10:24.640 you is that they've set a deadline to end the 0:10:24.679 --> 0:10:28.600 hearing on July fifteenth. Whether that deadline is that here too, 0:10:28.760 --> 0:10:31.520 I guess is to be determined. A lot can happen 0:10:31.559 --> 0:10:34.080 between now and then, a lot can happen during that hearing. 0:10:35.000 --> 0:10:38.480 But the President has been pretty clear. DFJ has been 0:10:38.520 --> 0:10:40.200 pretty clear that they want this to wrap up by 0:10:40.280 --> 0:10:42.880 July fifteen. Now, when I say wrap up, that means 0:10:43.040 --> 0:10:48.640 end of the hearing. That does not mean that a binding, final, 0:10:48.800 --> 0:10:51.680 conclusive decision will be made with respect to the rest 0:10:51.679 --> 0:10:52.280 of cannabis. 0:10:52.320 --> 0:10:54.720 What it does is the. 0:10:54.640 --> 0:11:01.160 ALJ judge will notify DJ of their decision and and 0:11:01.160 --> 0:11:05.320 and really DEA has an opportunity at that point to 0:11:05.320 --> 0:11:08.080 to issue a final rule. There is not a clear 0:11:08.200 --> 0:11:11.880 timeline on when the judge will relay that decision to 0:11:11.960 --> 0:11:14.920 da or when the DEA will actually issue a final rule, 0:11:15.000 --> 0:11:17.680 let alone what it will say. That said, you know, 0:11:17.720 --> 0:11:21.719 we've we've heard it from political commentators from government officials 0:11:21.760 --> 0:11:25.440 that they're looking to have everything complete and finalized by 0:11:25.440 --> 0:11:28.439 the midterms, which would make a lot of sense politically. 0:11:29.160 --> 0:11:32.040 And so if you see the DEA or the d 0:11:32.080 --> 0:11:34.760 OJ come out and say, right, we're going to go 0:11:35.360 --> 0:11:38.400 for all marijuana to schedule three or even deschedule it 0:11:38.440 --> 0:11:43.280 is in itself. Is that does that remove all aspects 0:11:43.440 --> 0:11:48.800 of federal Is that a full comparison to full federal decriminalization, 0:11:49.480 --> 0:11:52.480 meaning that if they reschedule this then you can't be 0:11:52.559 --> 0:11:55.160 arrested for it at the federal level or anything like that, 0:11:55.760 --> 0:11:59.160 you know, for and I'm just thinking for recreational aspects. 0:12:00.080 --> 0:12:01.960 Sure, And I think it's really important to point out 0:12:02.000 --> 0:12:05.520 and answering your question, yes, it would, and it's really 0:12:05.559 --> 0:12:07.760 important to point out that that has not happened yet. Right, 0:12:08.880 --> 0:12:14.760 non non state sanctioned medical cannabis, any adult use, really 0:12:14.840 --> 0:12:21.280 remains a federal crime. Right, possession, distribution, cultivation, or salved 0:12:21.360 --> 0:12:24.600 it and so that has not changed. Now that will 0:12:24.720 --> 0:12:28.760 change the criminal status of adult use cannabis. However, it 0:12:29.400 --> 0:12:33.679 introduces a panoply of other issues. Who's going to regulate it, 0:12:33.760 --> 0:12:36.880 which agency, and a lot of that's going to depend 0:12:36.920 --> 0:12:40.920 on what the actual decision from ALJ is, what the 0:12:41.000 --> 0:12:43.640 DEA final rule is as a result of that decision, 0:12:44.280 --> 0:12:47.960 and really whether you know, whether it's moved to Schedule one, two, three, four, 0:12:48.120 --> 0:12:52.040 five or descheduled completely will have a tremendous impact really 0:12:52.280 --> 0:12:55.680 on what happens next. But suffice it to say, even 0:12:56.040 --> 0:12:59.560 if and when adult use cannabis is decriminalized that the 0:12:59.600 --> 0:13:02.000 federal level, that is not the end of the story. 0:13:02.280 --> 0:13:06.000 The question then becomes who steps in to regulate it 0:13:06.080 --> 0:13:09.480 and how would that happen? And there's you know a 0:13:09.559 --> 0:13:13.000 variety of very interesting ways in which this can proceed 0:13:13.040 --> 0:13:13.840 at that point. 0:13:13.960 --> 0:13:16.000 Do you need Congress to step in at that point 0:13:16.040 --> 0:13:19.000 to provide a framework? I mean, I just call it 0:13:19.040 --> 0:13:21.240 like something like the Safer Banking Act. You know, do 0:13:21.320 --> 0:13:23.920 you think if we were to see that type of 0:13:23.960 --> 0:13:27.440 scenario where you know, on the regulatory side, they decide 0:13:27.480 --> 0:13:30.280 to move forward with this, Do you foresee Congress is 0:13:30.320 --> 0:13:32.120 stepping in here and saying, look, we need to put 0:13:32.120 --> 0:13:34.520 a new regulatory framework on it. We need to actually 0:13:34.559 --> 0:13:37.240 decide how this is going to be managed, because I 0:13:37.280 --> 0:13:40.040 think pretty much every listener votes and verdicts. Plus I 0:13:40.040 --> 0:13:42.680 think most Americans out there know it's very difficult to 0:13:42.679 --> 0:13:46.280 get legislation through Congress these days. What happens in that 0:13:46.320 --> 0:13:47.600 type of scenario. 0:13:48.200 --> 0:13:51.400 Sure, I think I think Congress is going to have 0:13:51.440 --> 0:13:53.280 to step in one way or another. I think the 0:13:53.320 --> 0:13:56.720 extent to which they have to step in and at 0:13:56.800 --> 0:14:01.360 least attempt to legislate a resolution to the regulatory framework 0:14:01.440 --> 0:14:06.840 is TBD. I am not you know, I'm not terribly 0:14:06.840 --> 0:14:13.559 optimistic about how quickly they'll get that done if necessary. However, 0:14:13.679 --> 0:14:17.640 I will say if no matter what happens, the political 0:14:17.679 --> 0:14:22.000 pressure to pass some legislation to handle everything here will 0:14:22.080 --> 0:14:27.440 never has never been greater. And certainly if cannabis is descheduled, 0:14:27.560 --> 0:14:33.040 it becomes decriminalized but pretty much on regulated at the 0:14:33.080 --> 0:14:36.680 federal level, which will be unacceptable. That would, I think 0:14:36.960 --> 0:14:39.800 place the most amount of pressure on lall makers to 0:14:39.840 --> 0:14:45.320 come up with the resolution not just safer banking, but 0:14:46.480 --> 0:14:50.560 essentially the Democrats have introduced their their federal legalization bill 0:14:50.640 --> 0:14:53.600 and what you could call it the federal regulation of 0:14:53.640 --> 0:14:57.520 the industry, and so has the GOP. That the Democrats 0:14:57.560 --> 0:15:00.680 have a growing list of sponsors for the MORAC and 0:15:00.760 --> 0:15:03.360 the GOP has a growing list of sponsors for the 0:15:03.360 --> 0:15:07.920 state's reformat. They're different, they differ in ways that down 0:15:07.960 --> 0:15:13.720 party lines with the amount of regulation, the addressing social 0:15:13.760 --> 0:15:18.000 equity in similar issues, I think, you know, Congress has 0:15:18.000 --> 0:15:20.080 to really would have to come together at that point 0:15:20.480 --> 0:15:25.800 and agree on a bipartisan pathway that is likely borrowing 0:15:25.840 --> 0:15:27.320 from both of those draft. 0:15:27.160 --> 0:15:28.320 Pieces of legislation. 0:15:29.240 --> 0:15:31.400 As it relates to safer banking, I think it's a 0:15:31.720 --> 0:15:35.440 really fascinating issue. Because of the way things have transpired 0:15:35.440 --> 0:15:38.120 over the last two months with medical cannabis being legal, 0:15:38.920 --> 0:15:42.440 safer banking is still necessary and I'll continue to say that, 0:15:43.160 --> 0:15:45.400 you know, in many respects, to allow for credit cards, 0:15:46.320 --> 0:15:52.000 really to introduce much cheaper access to capital, both equity 0:15:52.040 --> 0:15:56.200 and debt, and really remove a lot of the barriers 0:15:56.240 --> 0:15:58.600 that create a lot a lot of the friction in 0:15:58.640 --> 0:16:02.400 the industry right now, like being primarily cash. And I 0:16:02.440 --> 0:16:06.120 say safe for banking is needed because the bank Secrecy 0:16:06.160 --> 0:16:09.200 Act is the Bank Secrecy Act. At the end of 0:16:09.240 --> 0:16:12.760 the day, if you are engaged in money laundering and 0:16:12.920 --> 0:16:16.080 you are handling the proceeds of a crime, you're still 0:16:16.080 --> 0:16:19.800 handling the proceeds of crime. So until adult use cannabis 0:16:20.000 --> 0:16:23.600 is removed from Schedule one, that will be the case. 0:16:23.720 --> 0:16:27.920 Whether we need safe safer banking will depend on the 0:16:27.920 --> 0:16:31.760 outcome of the alj hearing. Uh, what's interesting about that, 0:16:31.800 --> 0:16:34.160 and I think some people may disagree with the need 0:16:34.320 --> 0:16:36.120 for for safer banking. 0:16:36.920 --> 0:16:37.600 What it will say. 0:16:37.600 --> 0:16:40.720 And then the last week right uh, two days ago 0:16:40.920 --> 0:16:43.840 truly started trading publicly on the New York Stock Exchange. 0:16:44.680 --> 0:16:47.000 What a massive paradigm shift. 0:16:46.760 --> 0:16:51.240 And what a positive uh you know update that is 0:16:51.280 --> 0:16:53.640 really for the entire industry. For that to have happened, 0:16:54.440 --> 0:16:57.480 uplisting to the New York Stock Exchange, naw is deak 0:16:57.560 --> 0:16:59.720 really unlocks I think, in my opinion it has been 0:16:59.760 --> 0:17:04.880 for ae eight years the real value for publicly traded companies. 0:17:05.080 --> 0:17:09.520 And they were able to do that by restructuring their 0:17:09.560 --> 0:17:15.320 business to basically to hold non voting shares in any 0:17:15.359 --> 0:17:18.160 of their adult use license operations. 0:17:18.280 --> 0:17:18.880 They own it. 0:17:19.080 --> 0:17:22.360 They don't have voting shares but its effectively they went 0:17:22.440 --> 0:17:24.960 to you know, went to Nisen and said, we are Look, 0:17:25.000 --> 0:17:29.040 we are a state sanctioned medical cannabis company. Yes, we 0:17:29.160 --> 0:17:33.639 have financial exposure to adult use at the moment, but 0:17:34.320 --> 0:17:37.720 look at us, we're federally legal now, notwithstanding the fact 0:17:37.720 --> 0:17:40.560 that their DA registration is still very much in process. 0:17:41.280 --> 0:17:45.080 That the final order said if you have a state 0:17:45.160 --> 0:17:47.840 licensed state medical license, you are federally legal now, and 0:17:48.480 --> 0:17:51.960 I'm certain that's what they relied on. So you already 0:17:52.040 --> 0:17:54.760 have a company that is uplisted as a result of 0:17:54.800 --> 0:17:58.160 the order, notwithstanding the fact that's safer banking has not passed. 0:17:58.920 --> 0:18:00.520 Yeah, and I think this is probably a good time 0:18:00.520 --> 0:18:02.720 for me to plug that. Every time I talk about 0:18:02.720 --> 0:18:05.840 marijuana equities on Bloomberg TV or radio, I like to 0:18:05.840 --> 0:18:08.800 say that these things have hot sauce because they're spicy, 0:18:08.840 --> 0:18:11.640 they're volatile, and so anything happens in Washington. You see 0:18:11.640 --> 0:18:14.879 these stocks go at fifteen percent and then people like you, 0:18:15.000 --> 0:18:17.200 Jeff come in and say this is actually what it means, 0:18:17.200 --> 0:18:19.560 and some of these investors are like, oh wait, wait wait, 0:18:19.600 --> 0:18:22.560 and then subsequently they either declients, So it's it's really 0:18:22.600 --> 0:18:25.800 a volatile trade out there. So We've talked about a 0:18:25.880 --> 0:18:28.360 lot of like, you know, a lot of cool things 0:18:28.400 --> 0:18:30.320 that are happening in the industry at the moment. We've 0:18:30.320 --> 0:18:33.520 talked about, you know, the original decision. We've talked about 0:18:33.760 --> 0:18:36.440 the DA hearing on June twenty ninth. We've talked about 0:18:36.440 --> 0:18:40.840 Congress coming in potentially after the fact, depending on what 0:18:40.880 --> 0:18:43.800 that decision says. What are and I think this is 0:18:43.840 --> 0:18:46.040 my last question before I turn over to Holly. What 0:18:46.119 --> 0:18:48.880 are probably the three things that you're advising your clients 0:18:48.960 --> 0:18:52.639 right now that they should keep in mind for the 0:18:52.680 --> 0:18:54.880 rest of the year or twenty twenty seven. Is their 0:18:54.960 --> 0:18:57.920 business planning as they're trying to figure out the murkiness 0:18:57.920 --> 0:18:59.879 that we're you know, looking at the moment. What are 0:18:59.880 --> 0:19:01.960 the three things that you really think those clients should 0:19:01.960 --> 0:19:02.320 be aware of. 0:19:03.480 --> 0:19:06.760 So the top three things, I mean, there's there's one 0:19:06.760 --> 0:19:08.560 in two and then the third one. 0:19:08.480 --> 0:19:09.400 Is a little bit more general. 0:19:09.480 --> 0:19:12.000 I'll start with that, which is everyone who is an 0:19:12.000 --> 0:19:14.360 operator in this industry needs to be paying very close 0:19:14.400 --> 0:19:17.119 attached to what is happening. You have to have your 0:19:17.119 --> 0:19:20.199 head on a swivel because a lot can happen. It 0:19:20.240 --> 0:19:23.800 can happen very quickly. Often with very little or known notice. 0:19:24.000 --> 0:19:27.520 So it's a call to action to everybody's who's an 0:19:27.560 --> 0:19:30.960 operator in the domestic cannabis industry to keep. 0:19:30.800 --> 0:19:32.639 It extremely close on what's going on. 0:19:34.160 --> 0:19:38.560 Two and more practically speaking, operators should be doing two things, 0:19:38.680 --> 0:19:42.320 which is looking at their tax status whether you are 0:19:42.359 --> 0:19:47.800 adult use, medical or hybrid, understanding what you may or 0:19:47.840 --> 0:19:50.239 may not need to do, particularly if you're both. If 0:19:50.280 --> 0:19:54.040 you operate in the medical and adult use industry together, right, 0:19:54.160 --> 0:19:57.840 you can take advantage of to the removal or disapplication 0:19:57.920 --> 0:20:02.320 of two ade, but only to the extent of your 0:20:02.400 --> 0:20:08.240 medical operations. So that involves a few things, right, making 0:20:08.240 --> 0:20:12.320 sure that your books and records are separate and effectively 0:20:12.520 --> 0:20:17.160 bifurcating your operations both operationally and on paper. I think 0:20:17.160 --> 0:20:21.280 it's critically important to be doing that now. The second, 0:20:21.520 --> 0:20:23.879 the second piece of advice in the section called the 0:20:23.880 --> 0:20:27.000 second call to action is really if you have a 0:20:27.040 --> 0:20:30.720 medical license to be looking at and making a decision 0:20:30.840 --> 0:20:35.840 in the very very near future, with only two weeks left, 0:20:36.119 --> 0:20:38.679 is DEA registration. We have a number of clients who 0:20:38.720 --> 0:20:40.960 are applying for DEA licenses right now. 0:20:42.000 --> 0:20:43.160 It is, on. 0:20:43.080 --> 0:20:46.280 Its face appears to be a relatively simple process, but 0:20:47.520 --> 0:20:51.199 as you unpack the questions in the DEA application, a 0:20:51.240 --> 0:20:55.040 lot of issues begin to rise. So I think that 0:20:55.440 --> 0:20:58.760 anybody operating in this business, I'm sure they're already doing it, 0:20:58.800 --> 0:21:00.840 but get to jump on it and try to figure 0:21:00.880 --> 0:21:03.840 out whether it's appropriate for you to apply for a 0:21:03.920 --> 0:21:07.320 DEA licenses and with with any of your medical licenses 0:21:07.440 --> 0:21:12.800 or not, and really to manage your tax situation very 0:21:12.880 --> 0:21:15.199 very carefully. Speak to your tax advisors, speak to your 0:21:15.200 --> 0:21:19.080 attorneys about whether you need to take any actions proactively, 0:21:19.480 --> 0:21:23.040 whether you know it could be a variety of things, 0:21:23.080 --> 0:21:25.560 but they should be speaking to their professional advisors about 0:21:25.560 --> 0:21:26.160 that now. 0:21:26.760 --> 0:21:30.080 Yeah, So you talked about the final order that went 0:21:30.080 --> 0:21:34.960 into effect April twenty second, rescheduling medical marijuana, about state 0:21:34.960 --> 0:21:38.880 licensed medical marijuana and at the approved medical marijuana. And 0:21:39.440 --> 0:21:45.440 the President did that by invoking international Treaty organized obligations, 0:21:46.440 --> 0:21:49.600 and that allowed him to avoid notice and comment, which 0:21:49.680 --> 0:21:53.120 he talked about, which expedited things. Is that the only 0:21:53.160 --> 0:21:57.040 reason why he did it that way to expedite things? 0:21:57.119 --> 0:21:59.840 Or do you see another reason why he avoided why 0:22:00.720 --> 0:22:02.080 notice in comment was avoided? 0:22:02.680 --> 0:22:03.880 Uh, it's a it's a good question. 0:22:03.920 --> 0:22:07.760 I mean I think that it was done because it 0:22:07.840 --> 0:22:11.120 made a lot of sense to pursue the Treaty pathway 0:22:11.600 --> 0:22:15.879 on an independent legal basis, not simply not simply for 0:22:15.960 --> 0:22:19.080 efficiency's sake, and and and it goes into a lot 0:22:19.080 --> 0:22:22.399 of technical rules in the Controlled Substances Act around monopolization 0:22:23.160 --> 0:22:29.520 and an inventory control related to the CSA, and specifically 0:22:29.560 --> 0:22:33.399 around compliance with the Single with the Single Convention on 0:22:33.520 --> 0:22:37.639 Narcotics uh UN Single Convention on Narcotics. So there's a 0:22:37.680 --> 0:22:42.920 completely independent and valid reason for for pursuing the Treaty pathway, 0:22:43.080 --> 0:22:47.760 why it was, why it was requested, beyond trying to 0:22:47.840 --> 0:22:51.639 avoid some of the traps that frankly that the Biden 0:22:51.640 --> 0:22:52.879 administration fell into. 0:22:53.720 --> 0:22:55.280 So I think it had a dual purpose. 0:22:55.440 --> 0:22:59.040 One, it was arguably required by law to pursue the 0:22:59.080 --> 0:23:02.119 Treaty pathway. And too, yeah, it does have the It 0:23:02.160 --> 0:23:05.680 certainly has the added benefit of accelerating the timeline here. 0:23:06.880 --> 0:23:13.959 So do you foresee any legal challenges being raised based 0:23:14.000 --> 0:23:18.440 on the invocation of the obligation, the treaty obligation rather 0:23:18.480 --> 0:23:21.680 than you know, rescheduling and their normal procedures and the 0:23:21.720 --> 0:23:22.960 Controlled Substances Act. 0:23:23.920 --> 0:23:27.359