#041 - Cannabis Business News Round-up: Schedule III, the Farm Bill, and CAOA part deux

Celebrate with us as we pop the cork on High Spirits' 41st episode and our brand new look, toasting to a groundbreaking shift in cannabis policy reform. Ben and AnnaRae guide us through the DEA's landmark decision to reschedule cannabis. You won't want to miss the insights gained from the recent draft of the Farm Bill and the vital discussions on the Senate's latest legalization bill. Let's raise our glasses to the trailblazers and the continuing support of our vibrant listener community - the heartbeat of our podcast's success.

As we venture into the world of hemp and cannabis, we spotlight the growth spurts and roadblocks following the 2018 Farm Bill and what the newest draft means. Witness how hemp continues to fragment, akin to cannabis, like Georgia's vertically integrated program and California's AB2223 are reshaping the hemp industry, creating opportunities as well as regulatory headaches. We peel back the layers on AB 2223's attempt to streamline the chaos in CA, all while keeping an ear to the ground for the scientific insights shaping tomorrow's policies. Together, let's navigate the shifting tides of cannabis policy across the US, understanding the challenges and embracing the potential of this green revolution.

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Transcript

Ben Larson: 0:00

Hey everybody, welcome to High Spirits. It is our new look. Look at us, Anna Rae. You're looking great today. Everybody so are you. It is episode 41 and we're recording May 2nd 2024. And yeah, a lot of big news this week. We have rescheduling, caoa, farm Bill news and we mentioned some other things earlier in the week, but I don't even know if we'll get to that. But first, anna Rae, what's top of mind for you today?

AnnaRae Grabstein: 0:32

Obviously, all the news that we're going to be talking about today is huge. There's just so much excitement federal action. In terms of the way I've been spending my week, probably one of the highlights for me this week has been that I've been learning a lot and digging into the way Canadian companies are exporting cannabis around the world and this really exciting supply chain opportunity out of Canada that is alive and well and, with all of the different global policy changes happening in places like Australia and Germany and Portugal, it's just opening up incredible opportunities for producers in Canada who are used to EUGMP.

AnnaRae Grabstein: 1:14

So I've been learning about EUGMP, talking with producers and really enjoying learning about how different countries are approaching cannabis.

Ben Larson: 1:28

Yeah, your buddy Mike Elkin, his ears are burning. I love it. We're going to have to sit down and talk about that.

AnnaRae Grabstein: 1:36

Well, shout out to Mike Elkin for really actually being a person that got me curious about the whole topic, so I'll be calling you later, mike.

Ben Larson: 1:44

Yeah, we have a big operation with our partner up in Toronto, tyma, and we've actually been talking about setting up those pipelines. But I need to hear the update from you. I've been traveling again this week. Luckily I'm back at home, but I was down in LA for the beverage forum. It was not cannabis related, in fact. I found it very interesting, sat through a day and a half of talks all about beverage a lot of alcohol, non-alcohol, functional beverages, mood enhancement is the new big category and not a mention of THC. So I thought that was just really interesting. It tells me how early we are still, but also exciting in the fact that we have that much more room for growth. Like we always talk about total wine and DoorDash and what's happening across hemp and cannabis and still just the beginning. You know we always say in cannabis like it's the first inning. In some ways it really still is, which is kind of wild.

AnnaRae Grabstein: 2:49

Yeah, first inning, man, I don't know when do we get to the second inning. How do we know when we win?

Ben Larson: 2:54

It's the longest effing innings ever.

AnnaRae Grabstein: 2:57

I mean, I think that, within the context of the work that I do with leaders, I often ask people like how do you know when you're winning, and what does winning look like? And I don't know if I have really thought through the answer. When it comes to this incremental reform, some of this stuff feels like wins, but is it winning? No, we're not there. There are wins along the road, though, for sure.

Ben Larson: 3:25

Yeah, incrementalism right, like one step in front of another, as long as you're making progress which progress takes weird shape sometimes, but we're getting there. It does feel like, if you look at the big picture, that things are progressing, and the big news that we're going to be embarking on today is a sign of that, I think.

AnnaRae Grabstein: 3:47

Absolutely Well, should we jump in? I think today's going to be a little different for listeners. It's one of the days that it's just going to be me and Ben, and we are going to be diving into a bunch of news stories that happened this week and just bantering back and forth. We love doing these episodes and we've got great feedback about them. We don't always need a guest. We've got plenty to say on our own. And since today also marks the first day with our new brand which probably doesn't mean that much to most of you, but you know, when we started this journey over a year ago, Ben, you were a real advocate for just building in public.

AnnaRae Grabstein: 4:29

I was concerned about making everything perfect before we started and I wanted to have a logo and the right music at the beginning and figure out if we needed an editor. And, ben, you told me, let's, let's just, let's just put our conversations on the internet and see if anyone cares. And we did.

Ben Larson: 4:49

Yeah.

AnnaRae Grabstein: 4:50

And a lot of you have come along for the ride and supported us as we built in public. And so, as we were getting towards the end of last year, we thought, okay, we're going to just keep cleaning up a little bit and try to take this to the next level. So, that's what we've done. We launched an Instagram account this week you guys should go follow us and we're going to keep trying to incrementally have little wins to broaden the platform and make sure that the conversation stays fresh.

Ben Larson: 5:19

I mean, it is a hallmark of the cannabis industry, right, it's a we're. We're building this industry in public, so to speak, and yeah, I love it and all the positive feedback that we've received. No one has at least said it to my face that they're tired of hearing us on the internet, so I'm just going to take that as a positive signal to keep going.

AnnaRae Grabstein: 5:42

Yeah, we don't have that many trolls. I don't know, maybe that means we haven't actually made it.

Ben Larson: 5:46

That's exactly what that means.

AnnaRae Grabstein: 5:52

So we're going to be talking about three main big stories today. The first is the rescheduling announcement that the DEA is pushing forward with Schedule 3. That the DEA is pushing forward with schedule three. The second is that the Senate Democrats uh, reintroduced the CAO, a legalization bill, in the Senate. And then we're also going to be touching on the announcement about the new farm bill language, uh, that came out yesterday and specifically how it relates to intoxicating hemp. So jumping right in rescheduling.

AnnaRae Grabstein: 6:30

So April 30th, just a couple of days ago, we heard that the DEA is going to be moving forward with the process to move cannabis from schedule one to schedule three. There was a lot of excitement about the news. The market definitely responded. We saw cannabis stocks shoot up, some as high as 60% gains within the day. Most of the massive gains were temporary and now, a couple of days later, we've seen that the majority of cannabis stocks have seen a gain of somewhere in the 15 to 25%, which is still a lot. So huge, huge news on that side.

AnnaRae Grabstein: 7:18

In terms of what this actually means for a pathway for implementation, there's a couple of ways to look at it, but at the low end and at the fastest implementation of moving to Schedule 3, there are two key steps. The White House Office of Management and Budget has 90 days to review the rule, and then the next step is a public comment period that lasts 60 days, and then the DEA has to respond to comments, and that could take a couple months, but it could also take a year, and we're seeing two really prominent voices in this discussion have very different opinions about how long it will take. Howard Sklomberg, from a former FDA official, predicted that it would happen before November, which is about as optimistic as it could get based on those numbers. But then we've also heard from Shane Pennington, who's a cannabis policy lawyer and administrative expert, and he thinks it could take three years. So a little uncertain of when the rules and regulations that the DEA will create will launch, but still huge news.

Ben Larson: 8:28

Absolutely.

AnnaRae Grabstein: 8:28

How'd this make you feel Ben when you heard it?

Ben Larson: 8:30

Yeah, I'll just read a note that I sent to my team. Okay Sounds great.

Ben Larson: 8:39

I had thoughts Full stop. This is a momentous point for the industry and the history and its history right Like nothing like this has yet occurred. And actually Wes uh from mammoth said it really good yesterday on on the cannabis beverage association board call. He said if for some reason we were in schedule three and someone tried to move us to schedule one, how negative would that be. And so the way we should be feeling about that is the inverse of that feeling right. And so it is really a momentous occasion and it's a great signal and it's an incremental step forward. The potential tax benefits that cannabis businesses will see is huge.

Ben Larson: 9:27

And sorry I'm not reading, but now I'm just thinking. But it is just that right and it is not legalization, it does not right the wrongs of the war on drugs that we absolutely have to keep fighting for justice for the people and the plant and the industry should feel this as wind in the sails to double down on efforts and continue to do the policy work on the Hill. Yeah, if you have public stocks, I hope you sold them on Wednesday because there will be a chilling effect, as there always is after news like this when we realize it's not a panacea for solving everyone's problems in cannabis.

AnnaRae Grabstein: 10:09

I hear you. I agree that it is a momentous occasion and I also see how it's not enough. I was receiving so many texts as it was happening and one of them, from Leah Heiss just said I'm sobbing and you know she's someone who entered this industry as a medical patient and has had like an incredible career as an executive after that, but cannabis truly has changed her life and I think that for people who have a really strong commitment to the power and the validity of medical cannabis, this is very reinforcing and the validity of medical cannabis. This is very reinforcing. This is saying that, like we see you, we believe that there is not just an abuse potential for cannabis.

AnnaRae Grabstein: 10:52

Cannabis might be able to help people to be determined, but now we can study it and that that's just. I think it's really important on the psyche of a lot of people that have been in this movement for a long time and it has been.

Ben Larson: 11:05

It has been a long time 87 years since the marijuana tax act uh was put in place, 54 years since the controlled substances act like damn near a century of of work just to just to see some progress in the right direction. It's massive.

AnnaRae Grabstein: 11:27

It is massive, and the fact that the schedule even exists for drugs in general is a part of the drug war creation that happened over the past century, but really over the past 50 years, and so the work of dismantling the drug war, this is a part of it. This is one of those bricks on the wall. So I'm celebrating and and let's talk about the the opportunity presented by getting rid of 280E. I mean, holy shit, I'm just going to say it because this is a big effing deal.

AnnaRae Grabstein: 12:08

Every single cannabis operator has such a challenge when it comes to structuring their business from an accounting perspective that other businesses do not face and it's been unfair since the beginning. And not only is it a tax structuring issue, it's it's a massive extra tax liability huge and it's been one of the things that I have been skeptical about kind of create. I've been skeptical that the feds would move on this rescheduling because of this, because I think that the federal government loves the revenue that they're getting from the industry and maybe it will be replaced by some other type of federal excise tax and we'll talk about that in a little while. But but this, this could really free up a lot of capital for businesses in a way that just is fair. You know, if other businesses get to write off marketing expenses, cannabis companies companies should too.

Ben Larson: 13:06

Well, the most important thing as a business like that you rely on in a typical business right is like in the first few years, especially if you're operating at a loss, that you're not going to have to shell out even more cash and send it to the federal government. But that is actually happening right now, like people are sending all their profits to the federal government and still having a remaining tax bill, and so to have that go away and be able to make the standard deductions and you know if you are, you know running at a razor thin, you know margin or something like that, like not having to go into debt because you don't yet have a viable business yeah, I wonder when 280e really is is recognized as going away, if if the the prices are going to shift across the supply chain and the costs will just go down for wholesale product and at retail, or if the money will stay into the pockets of operators.

AnnaRae Grabstein: 14:08

We've just seen so much price compression across the industry and so often, even when there is tax reform, it's just been metabolized so quickly because there's just been so much oversupply. So I mean to be determined how much people are able to hold on to these tax wins.

Ben Larson: 14:27

So I remember postulating on that in California when we removed the cultivation tax, but I don't know if we actually witnessed it and tell me if I'm wrong. I'm not that close to the flower market, but I do think it was around the same time where the market was rebounding from such severe compression that we actually were kind of getting back to this point of sustainability, right, which is what you hope for in a freer market. Is like things figure themselves out. You can't operate an unsustainable business forever. I don't know, I'm just I'm trying to think from a positive angle on this one. Like especially the MSOs, where they have this massive federal tax bill that's largely going unpaid, right, like I think the last count was like well over a billion dollars in total with your tax bill, hopefully and I don't think it's sustainable in the long run to absorb that and reduce costs only to once again find yourself operating at a loss. So maybe there's an opportunity to see an equilibrium here and maybe it just gets absorbed into people trying to be somewhat profitable.

AnnaRae Grabstein: 15:41

I sure hope so. I mean, you brought up when California eliminated the cultivation tax and I wish I was more optimistic about that money staying in the pockets of cultivators. I think what happened is just the price of weed mostly became reduced by the cost of the tax that was removed and that's mostly what went down. It's hard to say exactly because, you're right, it was at a time of major price fluctuation across the market and maybe folks were able to hold on to it for a little while. But everyone in the supply chain knew what was going on and knew that all of a sudden the cultivators had around $200 a pound more in their pocket that they didn't have to pay to the state and it just worked itself out. So we will see.

AnnaRae Grabstein: 16:31

I think on the con side of rescheduling or just on the what's left to be done, I think it is important to platform a lot of the voices that are talking about what's next and what we're not going to see with rescheduling, with the 280E going away and medical being recognized and I think you said some of it. But let's go a little deeper. I think that what this doesn't do is it really does nothing on the social justice front in terms of people that are currently in jail for cannabis or any type of criminal penalties that are on the books are still there, are left unchanged. We are not seeing anything that's related to interstate commerce. There isn't any new clarity around what regulations will be, and there are some fears that people think that this will now invite pharmaceutical companies into the space. Do you have those fears?

Ben Larson: 17:38

Yeah, uh, starting at the end, no, um, so as far as pharmaceutical companies coming into space, I'm they've been allowed to come into the space ever since it was on schedule one. Um, nothing was stopping them, and building pharmaceutical products out of cannabis is is just very challenging. It's, it's, it's not, it's not going to be in the form of flower, because flower is not highly repeatable, like, if you understand, like, what it takes to get, like a drug you know approved, you have to go through an immense amount of proof that you have a very highly stringent, you know repeatable process for the resulting product. And so it's just like the plant and the pharmaceutical industry, kind of like oil and water. Pharmaceutical industry kind of like oil and water, uh, not to mention the pharmaceutical industry makes a lot of money off of making sure that they aren't carrying people's uh issues with low-cost items.

Ben Larson: 18:31

I don't think the intention of any of this is is to affect what the states have have enacted. Um, again, you know, going back to wesley heinz comment, if we were moving from schedule three to schedule one, like we would expect whatever the states had done in the past to to withstand that, that shift in the very least, right, and so why would that not be the same, like going in a more positive direction as far as everything else goes? You know, I, yeah, I don't see a ton of benefit to it. So we have so much more work to do on on the that's what I was saying Like we have so much more work to do on on the lobbying front.

Ben Larson: 19:17

Um, because we need legalization or decriminalization, we need to get people out of jail, we need to make sure that more people don't go into jail, we need to make sure that, yeah, eventually we do get interstate commerce. And none of that is going to happen with any sort of rescheduling. So, uh, it's deschedule or bust, but I'll take the incremental step. That's the difference, you know. I think there was a big deschedule or bust movement that kind of meant that like we don't want rescheduling, I'll take the rescheduling, but that just means like we wake up in the morning and we get back to fucking work.

AnnaRae Grabstein: 19:54

Yeah, absolutely, and we'll talk about what was just introduced in the Senate. But do you think that the reason that the Senate and the Senate Democrats just reintroduced a legalization bill is because it's the timing of? Okay? Now we're on schedule three. Now is the time to have this conversation. This is the next step.

Ben Larson: 20:15

Exactly, exactly, I think it's. I was surprised. Actually, I wasn't even thinking that that was going to be coming in such lockstep with the announcement of the rescheduling. It's almost as if they had it planned um. But it is important because it's that critical realization for the general public, because I too was receiving a lot of text messages like congratulations, man, this is huge. I'm like kind of uh, but like I'm not gonna give you my diatribe over text and I can't call you know like 30 people when I'm already trying to lobby in california and in dc. And so it's like it's actually helpful for the cannabis community, for our, our, our policymakers, to actually start this conversation right on the heels of a big, big announcement, so that we can explain to everyone broadly that this doesn't solve all those problems that we're trying to get across with the CAOA.

AnnaRae Grabstein: 21:11

It also seems like from a public perception timing moment, this announcement was widely celebrated. I was surprised to even get a notification from the New York Times news app on my phone about rescheduling. Holy crap, that's wild. Okay, we're hitting the New York Times with this announcement, and so I'm sure that the Senate Democrats are paying attention to that excitement and looking to utilize that wave of momentum.

Ben Larson: 21:42

Yeah, yeah, utilize that wave of momentum. Yeah, yeah, hopefully we can get some notifications from the new york times being like and here is why chuck schumer has reintroduced the caoa right after this announcement, like, yeah, you know that's hopeful, as we're looking towards november.

AnnaRae Grabstein: 21:56

It's interesting. I would think that that they would be introducing this if they thought that they could actually get movement on it, but maybe it is just a pr and a messaging game. It's so hard to know with the way that things really generally don't get done in washington. Uh, yeah, why. Why now, like, do they think they're going to be able to pull this off?

Ben Larson: 22:18

no, I mean I. I don't like who knows where biden stands on all of this and I don't like who knows where Biden stands on all of this and I don't know what the prospects are like. Is it maybe? I'm in denial? I'm still having a very hard time imagining that I show up to the ballots in November and I'm really picking between Biden and Trump. It's very depressing. So I'm hoping there's this off chance that there's another candidate waiting out there in the shadows because one of them kicks the bucket. Not that I'm hoping in a proverbial sense, like you know.

AnnaRae Grabstein: 22:49

Well, so RFK did just qualify for the ballot in California, so you'll also be able to to vote for Robert Kennedy Jr.

Ben Larson: 22:57

And I could see him picking up the CAO as a potential like platform Right, but I don't think he's, unfortunately, with the other two in the race. Still, I don't think he's a viable candidate. But this is this is not a political pundit podcast. So well.

AnnaRae Grabstein: 23:13

So okay, caoa has been talked about in the past, but I will refresh folks memories about what it's all about. It is a pretty broad, sweeping legalization and decriminalization bill. It stands for the Cannabis Administration and Opportunity Act. It deschedules and taxes cannabis. So marijuana would be removed from the Controlled Substances Act and a federal excise tax would be implemented that escalates. So it would start at 5% for smaller businesses and escalate over time and with business scale up to a maximum of 25% for larger businesses.

AnnaRae Grabstein: 23:59

Then there is social justice aspect to it, where it mandates expunging low level federal cannabis convictions and sets up a regulatory framework for regulation under agencies like the FDA, the ATF and the TTP.

AnnaRae Grabstein: 24:18

On the interstate commerce front, it allows States to keep production and sales illegal if they choose, but does not allow states to block the transport of cannabis through their state. So you know, if Idaho said absolutely not, we still don't want cannabis here, but someone wants to drive cannabis from Washington to South Dakota, you would still be able to. And then it does establish grants for job training, reentry services, promotes industry participation by disadvantaged groups through various funding programs and definitely makes an effort to address some of the harms caused by the war on drugs. So pretty broad, sweeping measure. You know, the skeptic in me thinks that this is all just about money and that the way that I mentioned earlier that all of on the federal budget that are going to be pushing this to make sure that the feds are not missing an opportunity for a money grab yeah, if we did see some traction with this, like to your point, it helps fill a hole.

Ben Larson: 25:39

that removing 280 reinserts some tax revenue. It would pale in comparison to what they're owed by 280. I won't say what they're collecting by 280, but what they're owed. It replenishes some of that. But what I think it also opens the door for is the proliferating hemp market, and so if you suddenly have a federally legal cannabis market that has interstate commerce, does it help solve a lot of this ambiguity and problems that the hemp industry is is facing?

AnnaRae Grabstein: 26:17

Wait, you're saying it helps the hemp industry or harms it?

Ben Larson: 26:20

Hemp is cannabis.

AnnaRae Grabstein: 26:22

Okay, yeah, okay.

Ben Larson: 26:24

I hear what you're saying, I think that I mean it brings the conversation to a, to a head right, where it's like hemp is cannabis we're talking about cannabinoids cannabis is is suddenly federally legal, and then there's straight frameworks to kind of like help frame it up and support it. It removes the need, I guess, for hemp to be anything but rope, not dope sure?

AnnaRae Grabstein: 26:49

yes, I hear what you're saying, so what it? I could see that it could lead to existing hemp companies that have leaned into thc and intoxicated hemp cannabinoids. Those companies maybe would choose to have a different supply chain to get their thc inputs. Um, they wouldn't necessarily need I would.

Ben Larson: 27:10

I think they'd much rather use plants that produce 30 thc versus 0.3 percent.

AnnaRae Grabstein: 27:16

Yeah right, but it doesn't necessarily mean those companies go away or that industry suffers. It means that there's a reshuffling of the supply chain dynamics to support those brands and almost a consolidation of customer acquisition channels.

Ben Larson: 27:33

Yeah, I mean I always have a little bit of a unique lens on this because the beverage industry is a little bit more fluid across the lines. We've seen brands like Cannes and Mary Jones and a number of others make those transitions pretty fluidly between supply chains. I do think there would be a time of pain as the market all figured itself out, but I do think it is a pathway to potentially an equilibrium that makes a little bit more sense and is like contiguous right, Like from federal statute to state statute.

AnnaRae Grabstein: 28:09

I love where this conversation is going when we're thinking about a legalization measure and what it could do and the impacts that it could have.

AnnaRae Grabstein: 28:18

I've been looking at the way that e-commerce is moving around in the hemp space, and one of the things that has been really clear is just how many more technology tools are are available to hemp operators.

AnnaRae Grabstein: 28:34

Like you see, a lot of the brands using Shopify and WooCommerce and and more traditional payment gateways, and it's a huge barrier for cannabis companies who are not able to use those same platforms, and that just makes business a lot harder. And so that's just one example of the way that something like a federal legalization bill could have just widespread opportunity opening effects to create opportunities for cannabis companies to maybe have access to the same types of tools that hemp companies have. And, at the same time, the double-edged sword there is that we've had a lot of technology companies that have formed in cannabis to serve cannabis specifically, because there are so much larger behemoths that have excluded cannabis from their terms of services and said we won't, we won't serve you. And so then what happens to all of those e-commerce menu platforms if, um, if now companies don't need to go to the cannabis specific tool and they can use a more widely commercialized mature solution.

Ben Larson: 29:44

It's an interesting question that we've brought it up in the past in certain conversations, where at the end of the day, it still might be perceived as a vice industry. In other ways it might not. Maybe there's more opportunities for it to be recognized as wellness and all that as well. There's more opportunities for it to be recognized as wellness and all that as well. But gambling, alcohol and sex work. These different economies do have significant barriers in compared to soda. Right, there's a lot of constraints that would probably still remain or take a significant amount of time to transition, which would give these other companies time to adapt or adjust. But, like with all things, there would probably be a time of pain if there was something very substantive like that to change Any last points on this before we move on to the Farm Bill.

Ben Larson: 30:53

Yeah, I think that's the natural transition, right? Sure, any last points on this before we move on to the farm bill. I'm stuttering over my next word because I've had a lot of conversations lately about how to position psychoactive compounds from the hemp plant. It feels like every word I try to use is like trying to be relabeled or something Psychoactive, intoxicating, inebriating, whatever you want to call it. Thc-like ingredients from the hemp plant.

AnnaRae Grabstein: 31:23

I like psychoactive. I have actually started using intoxicating against my will, because that's what people understand and that does seem to be the word that makes sense to the most people.

Ben Larson: 31:33

But uh, I I'm gonna say I gotta say one thing about intoxicating, just because I, I, I feel obliged to say it, I, I fucking like being intoxicated. I mean, sometimes that's my goal. Sure, love, love can be intoxicating. Thank you, diana, for that one.

AnnaRae Grabstein: 31:54

But you weren't always intoxicated. This is true.

Ben Larson: 31:57

But you're not always intoxicated when you drink alcohol, exactly, but it's the compound. The alcohol itself is intoxicating. We don't have, we don't have to debate this on there. I just I, I think I use it because it's like just common terminology, like it doesn't even have a negative connotation in my head. But I know I understand what people are saying when, when they don't like couching cannabis in general as as an intoxicant, especially if they're using it as a wellness product or or what have you.

AnnaRae Grabstein: 32:27

But well, either way, let's um, let's just go through the main points. Uh, I I like making sure that we have a good baseline for knowledge here and good yeah and so we're not going to review the whole farm bill.

AnnaRae Grabstein: 32:41

As folks know, the farm bill covers a wide range of topics, from corn and dairy and meat production and all kinds of things that affect agriculture in the U S, uh, but specifically around hemp, um a.

AnnaRae Grabstein: 32:54

So a draft was released of language and people were able to review yesterday or the day before what some of the new hemp language is, and really I mean I'll use the term nothing, burger.

AnnaRae Grabstein: 33:07

There's no new clarity around psychoactive or intoxicating cannabinoids. There is some new definitions around industrial hemp and designing industrial hemp more clearly, and it does appear to be aiming for simplification of regulations for hemp farmers, especially the ones that are working on industrial hemp production, and it proposes removing the ban on hemp production for individuals with felony convictions. So that's positive and and overall I don't I don't know if this is positive or negative I think that this is all just something to manage. I see it. I think for probably a lot of folks that are creating products with hemp, this is a huge, enormous win, and for folks on the regulated cannabis side of the aisle, who have been lobbying hard in Washington to close the quote unquote loophole, this is a fail that, if you've been following this podcast and hearing Ben and I talk about it, we have been predicting all along that there would not be substantive changes to the availability of hemp to produce products and to come to market the way that we've seen them over the past couple years. So it's a win for our predictions.

Ben Larson: 34:42

Yeah, well, as far as the draft goes right. There's probably a lot of conversations to be had over the draft and I'm sure everyone's going to try to be getting their comments in to see what direction they can influence it. Corners of the market that people are still submitting, sourcing various languages. To go as far as putting some of these compounds back into the csa, which I just I fundamentally have have an issue with it. Just because I understand the desire to close certain loopholes and I understand, like I've talked to michael bronstein, that attach and that there's a order of uh operations that we should be seeking to, in an organized fashion, get the plant, you know, into a legalized state. I just like cannabinoids not being on the csa and trying to put them back on there. It it's just like I don't know, it doesn't feel like the right direction. I would like to see everyone's energy go into backing the CAOA so we can because I'm now convinced that this is the way to like just get hemp and cannabis all resolved. It's like legalized cannabis.

AnnaRae Grabstein: 36:00

Yes, amazing, I'm there with you. On the efforts, though, to restrict hemp derived cannabinoids more heavily at the federal level, I just want to remind listeners that that isn't the only path to more regulations of hemp. We are seeing plenty of states choose to put in place their own regulations, and a more open or permissive federal policy does not restrict states from moving to create state-level restrictions, and that's broadly been the way cannabis has worked, even though within the context of federal prohibition. And I don't think that states are going to stop further regulating hemp, because there is lots of internal conflict at the state level between, you know, startup cannabis regulated businesses and hemp businesses, and we're seeing that play out in California just this week and last week and other places. So the game isn't over, and I think, ben, you're really cluing into something interesting that probably the states would be able to back off hemp regulation as well if the federal government decided to legalize cannabis at the federal level, because it would just take away all this complication.

Ben Larson: 37:34

We wouldn't need to be having a debate about did this product source their ingredient from hemp or cannabis, because it has to be hemp in order for it to be allowed in this non-legal market, or whatever the challenge that we're facing now is that, because we are back to kind of states uh, evoking their rights, uh, to frame up their own programs, um, that we're seeing massive fragmentation in in the the rules around hemp, and it's feeling like a third dimension of the cannabis industry now where connecticut just passed, I think, a three milligram cap on, we'll just say, hemp beverages, because that's what my lens is right now which is challenging because all of a sudden you have a very specific rule for one state which starts to remove the benefits of interstate commerce and centralized manufacturing, economies of scale, all that kind of stuff that people are very excited about with the hemp category, especially when it comes to the beverage category, because there's a lot of infrastructure required to create these products.

Ben Larson: 38:41

So, yeah, it's wild to see kind of where this trajectory goes. As we, you know, maintain a kind of what we'll just call the status quo with the farm bill, you know what happens a year, two years from now when you let all the states kind of decide what they want to do with hemp. I heard Georgia is considering doing a fully vertically integrated hemp program in their state where it's grown, manufactured and sold and how that isn't regulated cannabis.

AnnaRae Grabstein: 39:15

I don't know the difference at this point it's solid point and one of the things you got to remember the farm bill is not something that comes up for for renegotiation every year. Uh, it's generally four years, and this time it's been five years, and the 2018 Farm Bill that opened up the door for all of these products. It took industry players really a couple years to understand and realize the opportunity presented in the language, and, ben, you pointed out that it really wasn't until Minnesota legalized that the whole hemp-derived cannabinoid industry really started to grow and grow fast, and so that's been less than two years and we've seen extraordinary growth.

AnnaRae Grabstein: 40:05

We've talked about it in the past. Bo Whitney estimates that this space could be worth $28 billion a year already. Space could be worth $28 billion a year already. So if we've got four more years with similar Farm Bill language, how much more growth and acceleration and innovation are we going to see? Hard to predict the future, but I know a lot of you out there are creating it. Yeah, it is wild.

Ben Larson: 40:32

There's a lot of you out there are creating it. Yeah, it is wild. There's a lot of innovation in the space. Every time you insert a constraint right, it's a breeding ground for creativity and I've heard people even working and I won't pass judgment on whether this is a good idea or not. I'll save that for another show Amplifying the effects of one milligram of THC so that it feels like more because of the constraints that were put into place in some of these markets.

Ben Larson: 41:06

So just one concept like that, how that extrapolates across what we're going to see over the next several years, how different markets are going to react, and I don't know, I don't. I think there will be a lot of growth. I think there will be also a lot of ups and downs and a lot of reactions. And I'll tell you right now and I've been trying to explain this to a number of people it's like the hemp industry has been on a terror, like a great growth trajectory, but it is starting to. That growth trajectory is starting to really find its way into the mainstream channels, like we're seeing with Total Wine and DoorDash and a number of others, and that is catching the attention of a lot of regulators and the broader community and people are starting to react, and so the pendulum has largely been swinging in one direction, and it's a threat of like starting to swing wildly in different directions because of people reacting, and we're seeing it in California right now 22, 23,. The assembly bill that is hotly debated right now, I think, is an example of that.

AnnaRae Grabstein: 42:20

Why don't you give us a quick down low on what's going on with assembly bill, with that assembly bill in California?

Ben Larson: 42:25

Yeah, essentially, when AB45 was released, the intention of it and this was a couple years ago was to find kind of some common ground between the hemp market and the cannabis market. Right, so, to allow hemp broadly into foods in the California supply chain, because CBD beverages and CBD products were actually not even legal in California until about two years ago, which, for being a progressive state, really is not a good look in my eyes and there's a number of things that I could go off on that. So AB 45 was put into place and because of ambiguities in the bill, there was a lot of holes and the policymakers have identified that this indeed is a problem, that there were so many holes that AB45 created that it's created a lot of confusion and that's why you do see THC beverage end caps in total wine all across the state and why you can go on to DoorDash right now and order Snoop Dogg's, do it Fluid right to your door right now and ordered, you know, snoop Dogg's, do it fluid right to your door. And so AB 2223 is trying to right the wrongs of AB 45. And this has been like a four year process. How do we responsibly allow integration or crossover between the hemp and cannabis supply chains. How do we allow manufacturers who manufacture cannabinoids the ability to either incorporate some of the cannabinoids from the hemp plant into the cannabis supply chain where it makes sense?

Ben Larson: 44:01

But even in the drafting of 2223, there was even more holes. Like, as an operator in the space, I'm like OK, I'm a manufacturer, mid supply chain, can I take in hemp cannabinoids and then ship it back out to the hemp supply chain, or is this only for, like funneling certain things into the cannabis supply chain? Um, it also tries to um ban converted cannabinoids. I think it's. It's like trying to like cover up a symptom when you're not getting to the root cause, right, it's like you don't want people taking hemp, changing it to thc and putting in the supply chain. Then like actually address that. But like, banning converted cannabinoids is just like a complete misstep, because the cannabis industry is loaded with converted cannabinoids. How do you think most people get cbn or cbc into their products? And so it's like we should approach it from a scientific perspective, right, and really like. So there's all these things, but it's on a fast pace.

Ben Larson: 44:59

I think there's a big appetite by regulators to get something into place, which simply means that it's harder to get vetoed, which I think the US Hemp Roundtable would love to see happen. It's just like this is a bad bill, veto it. And so what we're trying to do as at least a beverage community is like get in there and anyone that's been seeing my videos online they know where I stand on this is like low dose beverage, protect that because it's not surviving in the cannabis supply chain. So like let's create an opportunity for people to at least get exposure to these products. We'll have it be a lead gen mechanism for the broader regulated cannabis supply chain. So there's a lot of conversation to be had.

Ben Larson: 45:44

Ccia is a is a big voice here. You know they're trying to protect the licensed cannabis holders. You know the origins council a lot of ogs in the cannabis space have their voice. The us hemp roundtable, because of their prior positions, are kind of not really like a welcome voice, like with a lot of the regulators, uh, in california, and so it's like people like ourselves like trying to step in and kind kind of be in between and try to come up with something responsible.

AnnaRae Grabstein: 46:17

California is the most complicated place to make policy change, especially in cannabis. There's it's. We're such a big state and we have so many cannabis and now hemp businesses here operating and everybody has different incentives for policy and makes it really challenging for the industry to come together and have an aligned position on what should be done.

AnnaRae Grabstein: 46:43

The industry is not one industry, it's many industries, and you hear from the regulators and you hear from the lawmakers. Well, we need to hear an aligned position from the industry. It's like, well, good luck with that, because there's a lot of different ways to see what's going on here and, unfortunately, no change is is like there's nothing about it that's good for anyone in the supply chain, and specifically because of the of the lack of scientific understanding that you touched on and and like we don't. We don't need more complex regulations in California for cannabis operators. That's, that's one thing that's for sure. Like we need to make it easier for people to survive here. It's already too hard, so yeah, Absolutely.

Ben Larson: 47:45

It's, yeah, multiple regulating agencies. You know, I got a list from one of our lobbyists about like all the different conversations we need to have and it was like no joke. I had to scroll like my email screen, like just could like shake my head, like oh, we're supposed to do all this in the next two weeks, uh, and run our companies awesome exactly yeah, yeah, but um, just just one last point.

Ben Larson: 48:11

I I think this is like we've largely been talking about California for the last five minutes Like this is just a microcosm of, like what is happening all around the states, like their individual, like just nuanced conversations, and, unfortunately, what it's leading to is a lot of, again, fragmentation and so like there's going to have to be a huge effort on alignment of regs across states if we do indeed want to someday have the benefits of interstate commerce and economies of scale.

AnnaRae Grabstein: 48:42

I mean good luck with that, but sure Sounds like a utopia. And thanks for the call out about all those other states. And when we announced this episode on Monday, we actually thought we are going to be talking about a lot of more state level, specific, exciting and different and challenging obstacles that businesses are facing and instead we just got this slew of exciting, topical and important information from the Fed. So we decided to shift the conversation today, but we will continue to have important and in-depth conversations about unique markets and if you're out there and you're listening and you have a unique perspective on one of these states that we haven't covered, please reach out to us. We want to learn. We want to make sure that we're platforming the most important challenges and opportunities across the ecosystem.

Ben Larson: 49:39

Absolutely All right. Well, that's another business roundup that I think we've successfully navigated. Big week. I just wow. Yeah, like you said, when we announced on Monday, we had none of these topics really on the docket, and all this has happened in the last like three days.

AnnaRae Grabstein: 49:59

Yeah, so I think we'll wrap. I think that's. It's a wrap. You want to read us out, Ben?

Ben Larson: 50:04

All right, folks, What'd you think? How do we look? Let us know. We really appreciate your constant support and engagement. As Anne-Marie said at the top of the show, we're just going to continue to just keep building in public and doing more and more, and we're doing this all for you. So stay engaged, Let us know what you think, Share like, subscribe, do all the things. I can't wait for next week. We have a really great conversation. Chris Jackson is coming on the line Going to give us a little bit of a Michigan update what's happening with his work with the Black Caucus in Michigan and he's also our chair at NCIA, so I get to grill him a little bit on what it's like to be involved on the national discussion as well. So maybe a little bit of a carryover from this. Until then, folks remember, stay curious, stay informed and keep your spirits high Until next time. That's the show.