High Spirits: The Cannabis Business Podcast
Hosts Ben Larson and AnnaRae Grabstein serve up unfiltered insights, reveal their insiders' perspectives, and illuminate transformative ideas about the cannabis industry for people who want to make sense of it all.
High Spirits: The Cannabis Business Podcast
#052 - Hemp v. Cannabis is Bigger in Texas w/ Nico Richardson of Texas Original
Join Ben and AnnaRae on High Spirits for a lively discussion with Nico Richardson, CEO of Texas Original (fka Compassionate Cultivation), the leading medical marijuana and cannabis dispensary in Texas. This episode delves into the complex landscape of hemp and cannabis in the Lone Star State, exploring the regulatory, economic, and societal challenges that shape this rapidly evolving market.
๐ ๐๐ฏ๐ผ๐๐ ๐ง๐ต๐ถ๐ ๐๐ฝ๐ถ๐๐ผ๐ฑ๐ฒ:
Texas is at a crossroads with its hemp and cannabis policies, creating a dynamic battleground for legislation and public opinion. Nico Richardson will share his firsthand experiences and insights into the challenges faced by the cannabis industry in Texas, where subtle differences between hemp and cannabis under the law can have significant implications. We'll discuss the ongoing lobbying efforts, the current state of affairs at the Texas Capitol, and what the future holds for both markets in one of America's most conservative states.
๐ก ๐ช๐ต๐ฎ๐ ๐ฌ๐ผ๐'๐น๐น ๐๐ฒ๐ฎ๐ฟ๐ป:
๐๐ข๐ท๐ช๐จ๐ข๐ต๐ช๐ฏ๐จ ๐๐ถ๐ข๐ญ ๐๐ข๐ณ๐ฌ๐ฆ๐ต๐ด ๐งญ: Understand the key differences and challenges between the hemp and cannabis industries in Texas.
๐๐ฐ๐ฃ๐ฃ๐บ๐ช๐ฏ๐จ ๐๐ง๐ง๐ฐ๐ณ๐ต๐ด ๐ณ๏ธ: Hear about the intense lobbying on both sides of the hemp vs. cannabis debate and its potential impacts on future legislation.
๐๐ฏ๐ฅ๐ถ๐ด๐ต๐ณ๐บ ๐๐ฏ๐ด๐ช๐จ๐ฉ๐ต๐ด ๐: Gain insights from the perspective of Texasโs largest medical cannabis operator on how these issues affect business operations and patient access.
๐๐ถ๐ต๐ถ๐ณ๐ฆ ๐๐ณ๐ฐ๐ด๐ฑ๐ฆ๐ค๐ต๐ด ๐ฎ: Explore the possible outcomes of this heated debate and what it means for the broader cannabis industry in Texas.
๐ ๐ ๐ฒ๐ฒ๐ ๐ก๐ถ๐ฐ๐ผ ๐ฅ๐ถ๐ฐ๐ต๐ฎ๐ฟ๐ฑ๐๐ผ๐ป:
Nico Richardson is a seasoned leader and advocate in the cannabis industry, with extensive experience navigating the complex regulatory environments of conservative markets. As CEO of Texas Original, Nico has been at the forefront of efforts to expand patient access to medical cannabis while advocating for sensible cannabis reforms in Texas. His deep understanding of the political and business landscapes makes him a pivotal figure in the ongoing discussions about cannabis policy in the state.
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This episode is essential for anyone interested in the intersection of cannabis and hemp, especially in a state as pivotal as Texas. Whether you're a cannabis entrepreneur, policy maker, patient advocate, or curious about the evolving legal landscape, Nicoโs insights offer a valuable perspective on the complexities of operating in a restrictive market.
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Hey everybody, welcome to Episode 52 of High Spirits. It is Thursday, July 25th, 2024. And we have an incredible episode for you today. We're going to dive into Texas and the cannabis versus hemp conversation. Oh, it's going to be a big one, so get your fingers ready to leave some comments. But before we get there, I'm going to check in with Anna Rae. Anna Rae, it's been a little bit of a slow news week, hasn't?
AnnaRae Grabstein:it. Oh yeah, it's been really pretty fun. I think politics is getting fun again.
Ben Larson:We're not forced to vote between two corpses.
AnnaRae Grabstein:Yes, exactly, and yeah, when Biden stepped away on Sunday, I think we injected a little bit of flavor and competition back into the presidential race and I personally have been pretty excited to just see all of the new energy with young people this week and it seems like people are paying attention and and certainly within the cannabis conversation, getting to go back and try to figure out what it. What it was that that Kamala said in her previous campaign about around cannabis policy, thinking about what she could mean for the industry if she gets elected. We haven't seen a lot of hopeful statements coming out of the Republicans and it's, when it comes to cannabis policy, lots of kind of prohibitionist tendencies and not being interested in supporting the legislation at the federal level. So with Kamala in the race, maybe we're going to have a different outcome in the fall. Who knows? It seemed like it was a done deal before she stepped in, so now it's all on the table. I don't know what do you think? Are you excited?
Ben Larson:Am I part of the coconut crew? Maybe I don't know. I think it'll be interesting to see how her former you know DA tendencies interact with what she previously said. Going into the Biden-Kamala campaign last time and then the VP pick, I think it'll be very telling about what we're going to see from a cannabis perspective, but don't want to pontificate on it too much on this episode. We could go forever, but it is exciting. It's got me watching politics again this week.
AnnaRae Grabstein:Yeah, it's just there was, you know, these two old guys before was just felt like it was a boring done deal and there was. There was nothing exciting to watch happen and maybe it will get a little more exciting, but maybe it won't.
Ben Larson:I know our Texas-oriented audience is hoping that we would declare who we're rooting for, but we're both based in California, so you can guess.
AnnaRae Grabstein:Yeah, no declarations here. What I want is some good conversation. I want some good debate about the important issues that are facing the American people and and certainly when it comes to this podcast and this discussion, I want I want movement on cannabis policy in all kinds of ways.
Ben Larson:And there's a lot of. There are a lot of topics out there with potential movement when it comes to cannabis, and so just to I came across my desk this week. I don't know how I didn't hear about this before, but there's a draft, an amendment that Senator Wyden has proposed that would amend the FDCA, the Food and Drugs, food Drugs and Cosmetics Act that the FDA generally has to follow as kind of their rubric. And the biggest thing holding up CBD in the past and other cannabinoids, but primarily CBD why FDA hasn't taken action is that it didn't fit into supplements, it didn't fit into food, and so the FDA was kind of left punting it over to Congress, saying, hey, we need some help here. So this is actually Congress finally taking some action and defining cannabinoids into the FDCA and giving it its own kind of column, and so there's a lot of interesting things.
Ben Larson:There is a lot of I'm going to use a word that I've learned recently because of our previous episode a lot of deference being given to the FDA. But we do see things in there around standardized labeling. I saw the tick symbol in there. Shout out to Pam Epstein Age gating, age 21,. Registering with the FDA, no fees associated with that, but you do have to do it annually. And then there's just kind of elements that looks like it's being punted down and again being left up to the FDA to determine. But that's again labeling, child resistance falling in line with GMP a topic that we talked about on the NCIA panel last week testing, standardized testing, as one might suspect, and then following all food standards. You know a lot of the things that we'll probably actually talk about in today's talk with Nico, and so, yeah, I think this isn't a surprise, but finally, finally, we're seeing some movement, and so I guess we'll see if there's, if there's, traction in the near future.
AnnaRae Grabstein:Yeah, this is a really important step in terms of unlocking pathways to creating consumer safety and clarity for a lot of businesses. At the same time, I'm I'm not that optimistic, in that nobody's talking about this and it sounds like it's been introduced in the senate. But who knows what the path is and we know how hard it is to get anything done in dc. But at least we've got um. We've got people in the senate that realize that this type of work needs to happen in order to to take these processes and regulatory agencies to the next step with their ability to take action in the cannabis space.
Ben Larson:I birdie did tell me that there's a counter amendment that will be dropping in the next month or so, but regardless, having more than one is actually a good thing, because it starts a more fervent conversation and it makes it feel a little bit more like a reality. So so we'll see. We'll stay tuned. Maybe we'll have an expert on to talk about that.
AnnaRae Grabstein:Yeah, and, and the reason why it's so important for the FDA to have more clarity around these things is oh yeah, like you said, this is this is happening at the state level with hemp programs versus cannabis programs. There is just there's nowhere to turn to for the, for the federal level consumer safety and so all the states are figuring it out on their own, and some are being more thorough than others, and it is not easy to be an operator navigating.
Ben Larson:Yeah, yeah, and, and just put everyone at ease, I do think there's a clause in here that talks about federal preemption and, you know, trying to stay away from it. So again, we'll see. I'm not an expert, I'm just reading the news.
AnnaRae Grabstein:Well, so let's start to queue up this conversation today.
AnnaRae Grabstein:You know, Ben, you and I, when we talk about the conversations we want to have on this podcast, we really we think about impact and we think about impact to the industry overall and what are the levers that really have the opportunity to change the trajectory of what's happening in cannabis?
AnnaRae Grabstein:And we've looked at that through many lenses and one of the ways that we have looked at different state markets is just by how big the state is and where it fits in the grand scheme of the overall US population. And somehow we've made it as far as we have over a year into this podcast and we have not focused on the state of Texas. That has been an oversight. It has been something that just it's time because Texas is a massive contributor to the overall US population. There's 30 million people that live in Texas. There is a massive amount of culture that is created in Texas that is so emblematic of what America is all about. There's just so much pride in texas that what is happening in texas matters and is significant. This conversation, um, but has been like very different overall of a cannabis market than the way the other states have been. Have you been watching it?
Ben Larson:I mean, yes, I've been watching it there's there's a large beverage conversation down there. It kind of snuck up on me, truthfully, though, because it's a hyper conservative state, and I knew about the medical program, the CUP, and that we were trying to push for more qualifying conditions, and it was just going really slow. We talked about 30 million people, but there only being 8000 patients, or something ridiculous. And also, the next thing I hear is that there's a huge hemp market and we see all these products being created, and I think it got just a lot bigger than I ever imagined. It would much faster, and so I think you know we'll be easy on ourselves for being a little bit behind the eight ball on this one, but I'm excited to talk about it and where it's all heading.
AnnaRae Grabstein:Yeah, it's. There's a crossroads, unquestionably, and it seems like what's happened in Texas. I guess we should back up and say that that Texas does have a medical marijuana program on its books, but there are only three businesses that have received licenses to operate in that space, and so for 30 million people to only have three businesses is pretty wild, and, at the same time as the 2018 Farm Bill and the ensuing kind of boom in the hemp space has been occurring over the last couple years, texans have appeared to really enjoy and get excited about widespread access to cannabinoid products.
Ben Larson:yeah, turns out conservative texans like to get high yeah, turns out everybody does that's.
AnnaRae Grabstein:That's something that that that seems undeniable at this point. So I think that we should queue up our guest and bring him on, because he's going to have a ton of insights for us. Sound good.
Ben Larson:Absolutely.
AnnaRae Grabstein:All right Well, so I want to welcome Nico Richardson to our show today. Nico is the CEO of Texas Original, one of those three medical marijuana businesses that's licensed in the state of Texas. Nico is also the co-founder and managing director of AFI Capital Partners, which is how I originally met Nico, and AFI has been investing in a number of different cannabis companies and participating in the market level for a while.
AnnaRae Grabstein:AFI is an investor in Vertosa. We will disclose. But so yeah, Nico is really boots on the ground in this space. There is a ton that he is going to be sharing with us today about what it's like to be operating in Texas, and I just feel so grateful to have your voice added to this conversation. So welcome, Nico.
Nico Richardson:Well, anna Rae and Ben, thank you for having me Excited to be on this. So you mentioned earlier that you guys had had a little bit of oversight, not looking at Texas. You're not alone. I mean, every single year we were looking at the MJBiz book that they put out and cannabis, and Texas was still gray when it came to, you know, medical or recreational cannabis, for you know, basically since inception, whereas the CUP has been in existence and operating now since 2017. But it's so little known, not just outside of Texas, but in Texas, and you mentioned that we had something like 8,000 patients. It's probably closer to 10 or 12,000 active patients, meaning they order on a monthly basis, but the DPS reports are regulator reports that we've had about 85,000 cumulative patients since inception. So that's how many lives the CVs touch Still incredibly small compared to your next open medical state, if you think about Florida with 20 million people. I don't know how big their market is now, but last time we were tracking somewhere around 800,000 patients were in Florida and climbing.
Nico Richardson:So we're? We're very small compared to what we should be.
Ben Larson:So so, for those of us in our, in our audience that are new to the Texas conversation or just don't have the history, what has happened since 2017 on the regulated side in Texas? Original, as the name might suggest, was one of the early movers on this. Is that right? Yeah, that's correct.
Nico Richardson:So law passed in 2015. The first license to be up and running was Texas Original. There's three companies operating in Texas. One is Good Blend, which is a subsidiary of Parallel. One is Fluent, which you know from Florida, and then Texas Original. Texas Original was the first license to be up and running in 2017. We served the first patient in the system. The system started. The CUP really is a high CBD to THC ratio of tinctures, primarily for intractable epilepsy in children, and then every two years we would expand the program to serve new patients and change the product mix to serve these new conditions.
Nico Richardson:And so it went from just intractable epilepsy moving towards, you know, incurable neurodegenerative diseases, terminal cancer. Then, 2021, ptsd was added to the condition set, as well as all forms of cancer and a host of other incurable neurodegenerative diseases, and then separately a little bit of a weird twist in our market we have two, what are really symptoms, listed as separate conditions, which are muscle spasticity and peripheral neuropathy. All in all, with a state our size, 30 million people. You know that potential patient set is, you know, somewhere in the vicinity of three to 5 million people. So it's not a small grouping of patients, especially when you include PTSD. The big outlier that's missing from our program is chronic pain. So it's not a small grouping of patients, especially when you include PTSD.
Nico Richardson:The big outlier that's missing from our program is chronic pain and that's what you see in sleep and sleep and anxiety, but chronic pain is really the primary one. You know we serve a lot of veterans, for instance because of the PTSD condition. That's allowed, but it's a little bit interesting to us that you could be a veteran suffering from PTSD and get a prescription for medical cannabis in Texas.
Nico Richardson:But if you're a veteran that doesn't have PTSD but is suffering from a combat related wound that's causing them chronic pain. You can't be served in Texas under the CEP, so we still need to expand our condition set to serve a host of other conditions, primarily chronic pain, and primarily chronic pain, in lieu of an opioid prescription to try and help combat that epidemic here that we have.
AnnaRae Grabstein:And so you've got these very specific conditions that really box out a lot of people from participating. Can you explain also how the access works? If you are someone that qualifies and you have qualified you are now a patient. How does someone actually buy cannabis from you?
Nico Richardson:So you have to get a prescription from a qualified doctor. So there's registered doctors on the DPS website that you can go to and then, once you get that prescription, you can go to our website and order. Once you get the prescription, you will already be put in the state system, which is called the CURT, and so we can reference you there and pull your prescription from there. Then you order from us online and then either we deliver, reference you there and pull your prescription from there, then you order from us online, and then either we deliver to you or we have pickup locations that will lease but we can't carry any inventory there. It all has to stay at our home base in Austin, in South Austin.
Nico Richardson:And so you know, for instance, we have full-time pickup sites which people call dispensaries. They're not dispensaries, they're just a pickup site for your prescription In Houston, in San Antonio, up in Hearst and Plano and the Dallas-Fort Worth region, and so every morning, or the days that they're open.
Nico Richardson:Most of them are open every day, or five, five or six days a week. Every morning we'll have to drive all the prescriptions that are due for pickup that day from our Austin facility to that pickup location and then, whatever patient doesn't pick up, we have to drive back and put back in secure storage in our primary location in Austin, in our primary location in Austin, and that was the cost of doing business for the first, basically four or five years of operation at.
Nico Richardson:Texas Original and we'll talk about this huge issue with hemp in the state. Now it's looking to be really observed that rule, because, for instance, if we do a delivery in El Paso and we have to bring that medicine back from El Paso rather than having a full time, you know, dispensing site in El Paso, we probably pass 500 hemp dispensaries on the way back that are carrying potentially more potent, untested, basically unregulated products under state law.
Ben Larson:I was just going to say. The absurdity of this is, like it's absurd. I just looked it up Texas has 261,000 square miles to be served by three licensees with a central location. Who came up with these?
Nico Richardson:rules. It actually goes beyond that because in the statute, in the law itself, we're required to provide reasonable access to patients across the state of Texas.
Ben Larson:It's a requirement.
Nico Richardson:Requirement. It's a requirement.
AnnaRae Grabstein:That's how we have to build our system. But we can't store. We'll start the hemp conversation in a second. But I do want to. I do want to get your insight because you have been an active participant in in markets around the country, um, through your investments and your board roles and things like that. And there tends to be this pattern of a state putting in place of a medical program and then after a couple years the stigma starts to kind of decrease or maybe they make the program less restrictive and then everyone decides that it's basically like come in, no matter what, it's a done deal. Adult use is on the way and from conversations that I've had with you, that isn't how you're looking at what's happening in Texas. After nine years, is Texas ready for adult?
Nico Richardson:use. Texas first needs to move to open medical and then go into adult use. I'd say I think the Texas population is probably there, based on what's happened with the hemp industry, but the regulatory bodies and the legislature are so far behind in this conversation that to jump from one to the other would be too much from a regulated standpoint.
Ben Larson:What's interesting is that hemp has now jumped all the way from one side to the other and they're entirely unregulated and have basically, you know, gone viral across the state now. So so, as an outsider, yeah, I'm thinking, and you know I have a fair amount of friends on the hemp side, so it's like I. If that's the case, how did they let it go so long and achieve, like this eight billion billion marketplace without doing anything about it?
Nico Richardson:I you know well. The first problem is that the Texas legislature meets every other year and the second problem is that when the hemp law was set up in 2021 in Texas, obviously this was not the intended consequence. They were not trying to legalize an intoxicating cannabinoid platform with no regulations.
Nico Richardson:The idea was that they were going to manufacture CBD products and full spectrum products, sell those across the state and support Texas farmers. And they specifically set up rules and said you can't sell smokable flour, right, you have to sell. They've used the farm bill language because they didn't know any better. And they said you know, basically 0.3% THC because we want non-intoxicating products and they think of it as light beer or something, right, Not alcoholic beer. That's clearly not how pharmaceuticals work. You have to work with a volumetric cap, which is what now states are catching on to. Now the federal government is likely catching on to it that 0.3% doesn't mean anything. So part of it was poor law that was written and then having a two-year gap. The problem was the two-year gap got into 2023. The hemp industry was actually pretty restrained up until 2023 in texas so people were starting to sell full spectrum thc products that were slightly higher.
Nico Richardson:They were.
Nico Richardson:They had already pushed a lawsuit for being able to sell delta eight um because the dishes uh, which is the regulatory body department of health and human, tried to ban Delta 8 after this happened. After the hemp company started selling it. Specifically, Hometown Heroes I forget the year, I think it was 2020 or 2021, maybe Tried to ban it. Hometown Heroes won in court, saying that Delta 8 was not explicitly listed in the hemp bill. 2021 legislative session sorry, 2023 legislative session, so skip ahead two years everyone assumed that the legislature was going to close the loopholes for the hemp industry and so really leading up into that point, hemp was somewhat reserved in Texas.
Nico Richardson:We had maybe 2,000 or 2,500 licenses that were issued. I don't know how many were operational. No one tracks that, crazy as it sounds, but something like 2,200, 2,300, 2,500 licenses were listed. Something like 2200, 2300, 2500 licenses were listed. The legislature got into a little bit of an inter-party civil war in Texas over an unrelated issue, which was school vouchers, and the Senate and the House essentially started shooting hostages when it came to bills that were lined up. So one of those bills was HB 1805. That would have been a CUP expansion. It passed the House 127 to 19. It failed to make it on the floor in the Senate what was in that expansion?
Nico Richardson:So it would have eliminated the THC cap, that 1% by weight THC turned it into volumetric dosing. It would have increased the condition list to include chronic pain in lieu of an opioid prescription Two main things there. So I mean those would have done a lot to help a lot of people in Texas and there was overwhelming support in the GOP-controlled House. Senate refused to push it through, along with a whole host of other bills, and vice versa in the House. Part of that was one of the things that had been in discussions within the Senate was to control hemp regulations and hemp expansion, and that failed to move forward in any way in 2023.
Nico Richardson:Post 2023 legislative session. The number of hemp licenses doubled in six months and continued to escalate and all of a sudden, you started having a massive escalation of THCA high potency delta eight, high potency delta nine across the state, so it exploded in a very short period of time thereafter.
Ben Larson:So just timekeeping really quick 2023,. That means everything's looking at next year, 2025 legislative session 2025.
Nico Richardson:legislative session 2025. Okay, so it was a problem leading up in 2023. This original question was okay. Well, you know what happened. How did we get here? It sort of took off like wildfire post 2023. And now it's okay. Can we put the cap back in the bag? I don't know if that's possible, but it's certainly the discussion that's happening in the Senate and the House right now and the governor's office Nobody's happy about where hemp regulations stand and how the hemp industry has acted to date.
AnnaRae Grabstein:So, to bring forward some of the hemp industry's talking points into this conversation, the Texas Hemp Business Council has a campaign that they're running that they're calling Don't Mess With Hemp, and they've put out these 10 points as part of this key campaign, and so I want to just highlight a couple of them. But they say that sales of hemp-derived cannabinoids in Texas generate more than $8 billion of retail sales every year. One thing that's really stark about that is that there isn't a single legal cannabis market state in the entire US that has reached that level of retail sales.
Nico Richardson:Can I ask you a question before we go through all 10? Yeah, do you think that's a good thing?
AnnaRae Grabstein:I'm not going to say if I think it's a good thing or not. What I think is that it's a big number and that it shows. Do you think that's a?
Nico Richardson:responsible level of growth for what should be a controlled substance, which is clearly an intoxicating substance.
AnnaRae Grabstein:I think that what it says is that there is interest in cannabinoids in Texas. We know that.
Nico Richardson:I mean, of course there's interest in cannabinoids in Texas. Of course there's interest in cannabinoids. The question is, how do you? This has been our investment thesis from day one, from AFI right. This has been how do you create a responsible pathway to legalization of this country?
Ben Larson:I think we all want to get to that end point. The question is how do you QR codes to COAs, company registration, random inspections, and so I guess the question is is this true and does this create? You know, for me my barometer is safe access for patients.
Nico Richardson:Okay, do you know what that relates to? Now in action in Texas, with 7,000 licenses, they have to show a C of A. If asked who's doing the C of A and who's doing the testing, are the retailers selling the product here in Texas? No, so the testing is being done by labs outside of the state and we've looked at these labs. You've seen these labs, Ben. You know what this is. Half of these are fraudulent, if not 80% of these are fraudulent C of A's. We test the product. It doesn't come back. The problem is there's six people working at dishes right now, which is the regulatory body that sits above the hemp industry.
Nico Richardson:They've said in the hearing that I testified on. They've said it will take them five years if they wanted to test every single. If you get in line, for instance, to get your products tested as a surprise inspection, it will take them five years to get to that testing. So no one is being tested.
AnnaRae Grabstein:No one's being tested.
Nico Richardson:And when we look at C, of A's that these people are pulling. You can go to the websites. Go to the top, the top hemp players in Texas. Go to their websites and pull their C of A's of the stuff they're selling today. You will be shocked. Why? Look at the year on the C of A's. Just look at it 2020, 2021, 2022.
AnnaRae Grabstein:So let's dive into this then. So we've identified with this market data that there is a tremendous appetite for cannabinoid products. You're saying that the way that the hemp industry is regulated does not support the consumer safety that you believe. That is the intent of the lawmakers and the overseers in Texas. It is effectively unregulated Okay. Effectively unregulated.
Nico Richardson:You know Texas Monthly had a great story about it.
AnnaRae Grabstein:So what's the solution? What do?
Nico Richardson:you see, first of all, you can't let people submit a C of A for testing, it has to be done by an in-state lab.
Nico Richardson:If you want to have a recreational market, which is what this is in Texas now the hemp industry. You have to have a recreational testing industry set up, like every other state has done, right. You don't just let them submit a C of A. You have to have a licensed lab in Texas that is regulated by dishes and the licenses have to pay to have their product tested Every batch. Everything that goes out the door. That's just standard guys like that. We do that in every single market and it's it's good, uh regulation and it's safe that that is how you ensure safety. Why? Because, if you don't do that, microbials, heavy metals, pesticides, aspergillus I say this, this is not hypothetical. This is what we're seeing in Texas. This is what we've seen in Texas. When we test this stuff, people are don't know what they're selling. They have no idea what they're selling out of these stores.
Ben Larson:It's can we double click on safety a little bit? Just because when I was at the camera conference and speaking with uh, with Norm at the FDA, he was kind of enlightening me on me on some of the adverse events that were starting to pile up at the federal level and that it was becoming problematic, and that you know his words. You know we were one bad adverse event away from Congress taking immediate action and shutting everything down. Does that resonate from what you know in the Texas market?
Nico Richardson:We know the adverse events are piling up in Texas and I'm not doing reefer madness here, it's state data. We have it. We have Texas school drug-related offenses are up we talked about this earlier are up 80% from their baseline in 2018. We have the data going back to 2007, 2008 year, 15 years, 16 years of data. It varies between 18,000 students and 25,000 students until you get to 2023, which is when hemp licenses went exponential, and now it's at 45,000. That's the only thing that explains a doubling in school related drug offenses and we see it across the state right now.
Nico Richardson:In every major market you have every single major market. Texas Poison Control Center calls related specifically to hemp, or. But they don't call hemp, they call it cannabis derived or uh, cbd derived cannabinoids, uh up 100 over the baseline from the last 10 years. And then when you look at what age groups are being hit by that, 58 of those calls are from people between the ages of 0 to 19. So the two biggest spikes are zero to five and 13 to 19. It's just you would not see this in California, oregon, colorado, any state that had recreational marijuana. First, because their regulator and their legislature understood how to regulate these products, because this is just the same thing as recreational marijuana.
AnnaRae Grabstein:So I'd like to get your perspective on how change happens in all of this, and there's there's a few dynamics at play here.
AnnaRae Grabstein:So in in the statute for the medical marijuana businesses, there is a legal allowance for there to be more than three of you I think is the number 12. Allowance for there to be more than three of you, I think is the number 12? Is that what it is? 12 total and the state's only issued three licenses. About a year ago, a bunch more licenses I think 200-ish licenses were accepted by the state to bring more operators into the medical marijuana program, which theoretically means that there might be more stakeholders on the regulated side if they were to bring folks in. And then you've got these 5,000 to 7,000 hemp businesses on the other side that are fighting for their own existence. But it seems that that number and that market size of 8 billion, compared to what we're thinking and estimating on the cannabis side, is more like $20 million a year with three businesses, is just a hard fight and I want to understand how you're going about working on getting your policy agenda actualized, and is there a coalition that you're working with Honestly?
Nico Richardson:it's just education. That's. All we're doing is education, like I'm not trying to to have some dirty fight or whatever. All I'm trying to do is explain what the products are that are being sold in the hemp industry, what the products are that are being sold in the medical industry and the associated regulations around both. And trying to explain that to the legislature has gotten me a lot of heat from people like Cynthia and the hemp industry. They're livid about it because they don't want people to understand what the actual problems are here and what the actual products are that they're selling, and that's just no way to go about operating an industry.
AnnaRae Grabstein:Do you think that bringing more operators into the medical program would create rising tide, would broaden?
Nico Richardson:I'm not against issuing more licenses in the medical program. I think it absolutely needs to happen. Obviously, we need to fix some things in the medical program first, and so you know we're.
Nico Richardson:We're focused on that primarily. Once those are fixed, the program needs to expand, and primarily because people need to have a regulated, safe access to medical cannabis for their medical needs. You know, on the hemp side, if they want to sell recreational products, I think there is a separate set of laws and regulations that need to be put in place to make sure it's safe, make sure there are appropriate volumetric caps on these so that they're not wildly potent products that are out there, which is what there is today, and make sure that there's restrictions or bans around selling adulterated products, especially things like Delta 8. But they've gone hog wild with that here in Texas and it's a travesty and a danger, I think I think the disparity here is is the most glaring thing, right, like we have a completely untenable medical use program.
Ben Larson:I mean you could add more, more licenses, but if there's not more qualifying conditions and if there's, if there's still this requirement to serve the whole damn state, like that's not going to make a viable business. We know California has a regulated system I wouldn't say it's perfect and then it needs to be dialed in a bit. I presume that there's something in the middle that can create safe access for consumers, can create safe access for consumers. How do we get there? Like, is there a mechanism by which we can get this all done in the next legislative session? Because you know, take Florida, for instance, another conservative state like it's really hard to get these multi-pronged legislation done because it's unconstitutional. Is there a conversation, a live conversation, about drastically expanding the CUP while dialing in the hemp industry? Where do we go from here?
Nico Richardson:I mean, look, this is the conversation for the next legislative cycle, which is we need to expand conditions. We need to start regulating cannabis and cannabinoids like pharmaceuticals, which is with a volumetric cap, not with percentage by weight. That doesn't mean anything. Volumetric cap, not with percentage by weight that doesn't mean anything. I think the federal government really botched that situation.
Nico Richardson:Clearly and I don't mean to go on multiple sides clearly, the 2018 Farm Bill, when they specifically said 0.3% by dry weight, was indicating a system for classifying hemp as a plant.
Nico Richardson:You don't dry. There's no such thing as dry weight for a beverage or dry weight for a gummy, or dry weight for anything but flour, for a hung flour, and that makes a lot of sense for keeping something non-intoxicating, which was the point of that language. Clearly that you know what we have now is a bastardization of of of that law and loopholes that have been kicked open as a result of it. So the federal government needs to figure that out how they want to regulate cannabinoids, how they want to write law that actually makes sense, and states should follow suit. Unfortunately, that's taken a long time. So you know we're going to push the conversation here at the state level and I think you know, our legislature has their eyes opened after what this industry has done and how fast it's taken off, and the complete and utter lack of regulations that have been built up, I guess in the form of my own question.
Ben Larson:Has Texas Original thought about taking a note out of Cure Relief or any of these MSO's books that are jumping onto the hemp bandwagon and launching your own hemp effort?
Nico Richardson:Not in its current form. You know, if we go through the next legislative cycle in Texas here and the legislature says no, no, this is exactly what we meant. Here are the appropriate regulations age gating, proper third party testing, volumetric caps. This is what hemp should look like for selling as a recreational product in our state. We'll consider it, but today people are clearly operating well outside the intent of the law. Despite what Cynthia says, it's very clear. You can speak to the actual sponsors of the farm bill that she's referencing, senator Perry.
Nico Richardson:He'll tell you the hemp industry has gone hog wild with this and he warned them that if they try to turn it into a massively intoxicating industry here in Texas, that they'd have to shut the entire thing down. I don't know if it's politically feasible to shut the entire thing down at this point, but they certainly need to create common sense regulations to protect citizens of Texas and more importantly, protect kids, protect citizens of Texas and, more importantly, protect kids.
AnnaRae Grabstein:Like this this stuff is just too.
Nico Richardson:You cannot have high potency products out there where you're doing a hundred plus milligrams of gummy and have no age restrictions for who walks in that dispensary. I mean, it's just that that is the definition of insanity.
AnnaRae Grabstein:One of the things that I get hung up on when I think about the market and the data that we've been talking about is just that, with so many restrictions in the medical program and all of these consumers buying hemp products in Texas right now and that don't have the same form factor restrictions they're buying vapes, they're buying pre-rolls, they're buying flour. Whatever the safety is on those products or not, there's clearly a demand for them, and if the rules are to change, as you are hoping that they do, my concern is that that consumer demand doesn't go away. People still want to smoke flour. Where are they going to get it now? If they can't get it from these hemp dispensaries and they can't get it from the medical program? They should be able to get it from the medical program.
AnnaRae Grabstein:So you think that, and at least have an inhalable.
Nico Richardson:They should at least have inhalable options in the medical program, and they don't yet. Yeah, because we're operating in the intent of the law. It's not because we don't want to serve these products to patients. Obviously, the inhalable pathway is one that provides immediate relief instead of having to wait for decarboxylation to happen in the liver metabolizing delta-9. So clearly, it's something we've been pushing for for a long time, but our regulator and the legislature have said we're not there yet.
Nico Richardson:No, no, you can't. So you're telling me that the hemp law that was passed, the legislature was saying, yes, you can explicitly go for it, but on our side they're saying no, of course. That's not the intent of the law. The intent of the law is to have the more regulated more restricted more tested you know cleaner medical program be the program that's providing intoxicating medicine, necessarily.
Nico Richardson:You know potentially, you know it, just it does not. You know potentially, you know it, just it does not. It is so very clear where the intent of both sides of this law should be in Texas, and that one side is is frankly operating way outside the intent and saying that they're operating within the intent, and that's exactly what the law meant. That's their interpretation of it.
Nico Richardson:I mean that's just go talk to the politicians. It's not what they're supposed to be. Talk to the lawmakers it's not what they're supposed to be. Talk to the lawmakers, it's not what they're supposed to be after. So that's why we don't operate in that industry. If the legislature comes back and says no, this is exactly how we want you to operate, and you know this is how you can obtain a license in this area.
AnnaRae Grabstein:This is what third party testing licenses are going to look like.
Ben Larson:This is what HKD is going to look like, et cetera. I can totally empathize with desire to kind of take things slow and methodically in this particular aspect, because here in California, on a much smaller scale, we're going through a similar conversation. But as a licensed company both in cannabis and hemp in California, you know it's like I have to preserve my political will. You know there's a lot of conversations that I want to engage myself in to kind of push the envelope a little bit. But it's challenging because if it does go the other way and the will of the legislature is leaning a certain direction, like you want to be on the right, the right side, coming out the other end, on the right, the right side, uh, coming out the other end, just saying I, I, I understand the predicament here um versus an mso, because you're a single state operator, right, um versus an mso.
AnnaRae Grabstein:That's kind of playing multi-markets and and just adding hemp as a as another one of the markets and it occurs to me, as we're talking about this, that the hemp industry has positioned you as sort of a corporate Goliath character. It's a policy battle, but actually, as we're talking about the market size and the number of medical marijuana businesses compared to hemp businesses, it actually seems like that's maybe upside down Ent're entirely upside down.
Nico Richardson:So our entire program did about $20 million last year in revenue. All three licenses combined, hometown Hero, which Cynthia is talking about here on the chat here their estimated at least our estimates of what they did last year was over $150 million. One player in the state, so you add the rest of them together, it's an $8 billion industry. It is a David versus Goliath situation, or maybe it's not. It's an ant versus Goliath and we're the ant. But we built up enough goodwill for operating well within the intent and the letter of the law for nine years seven to nine years now that we probably have an outsized voice based on that, because we've been operating within the intent of the law.
AnnaRae Grabstein:Do you believe that the Texas medical marijuana market is worth the $8 billion that is the hemp space today?
Nico Richardson:I don't know how to justify that in the future I mean, you can look at states like Florida we obviously have to have a lot of changes to the program in terms of number of licenses, in terms of availability of inhalable products and conditions. That needs to increase dramatically in order to even consider that. So, no, it's probably not that wide.
Ben Larson:When do these decisions usually come to a head?
Nico Richardson:The conversation has already started. I mean so every so. Like I said, the Texas legislature meets every other year. In the in-between years, so the even years they have something called interim charges that happen in the Senate and the House and those are basically investigations into very specific issues. I forget how many the Senate had they might have had nine or 10 or something like that but banning hemp-derived Delta 8 and Delta 9 was one of those interim charges, and so there is a it's the State Affairs Committee. There's a committee that is basically tasked with understanding what's happening and then writing good legislation that they think will pass.
Ben Larson:And one of the things that we often lament in the cannabis industry is how low on the priority list we typically are. Cannabis and hemp, and you could say this about the farm bill, rescheduling, safe banking, whatever. Where do you believe this sits on the priority of all the conversations to be had in Texas? Because they only meet every two years. I'm assuming that they have a laundry list of issues.
Nico Richardson:Oh yeah, it's always been incredibly low, which is our problem. For CUP expansion it always been incredibly low, which is our problem, for.
Nico Richardson:CUP expansion. It's been incredibly low. To make it on the list of interim charges is very high by comparison. So, just to you know, you were saying earlier what's the difference? Now, again, the hemp industry went so wild between 2023 and 2025 with their expansion across the state and you guys see it $8 billion, 7,000 licenses. You know shipping in Delta, thca flour from Tennessee. You know North Carolina, oklahoma, et cetera. That they, you know, basically raised the flag themselves, really has nothing to do with the CUP. At this point, from us pushing this argument, the legislature is pretty adamant. They need to do something to correct the mistake they made.
AnnaRae Grabstein:Nico, I want to ask you a little bit of a different question that has more to do with the way that you spend your day as a CEO, and one thing that we often talk about is in cannabis. There, I believe, there's an outsized need for leaders to understand policy, laws and regulation kind of beyond many other more mature spaces that aren't in such a dynamic time for constant change and hearing you talk about what you're facing with your business. These are not traditional supply chain optimization questions. We haven't been talking about product innovation. How much of your time as CEO is spent focused on policy as compared to actually being inside the business, focused on the optimization of the team and your product and and your financials and things like that. Like what does, what does that look like to you and how do you reconcile it for yourself?
Nico Richardson:A lot more of my time now is focused on policy, a lot more because, frankly, it's an existential risk to the cup in general. Right, we will go away if the hemp industry is not properly regulated and we are over regulated and we shouldn't exist economically at that point, and that's terrible because, you know, doctors rely on us, terminal patients rely on us. Uh, you know, pediatric patients rely on us. Pediatric patients rely on us and we are one of the few reliable sources of clean medicine clean cannabis medicine in this state, and that's a real problem. So that needs to change. This is not.
Nico Richardson:I'm not asking for crazy things here. When I'm, I'm pushing policy, when I'm trying to get policy changes made. Really, everything we're asking for is incredibly common sense and most of it, the hemp industry should be on board with. But the resistance has been pretty, pretty amazing. So a lot of my time is focused on that.
Nico Richardson:I've also been really fortunate to have a solid team here, so we're now about 80 employees at Texas Original. I have a stellar production team. We are focused every day on optimization. It's the only way we can exist, frankly, because while we shouldn't be competing directly with hemp, we have to make sure our pricing comes in as low as humanly possible, obviously, to compete with an industry that has no effective regulation and no regulatory burden and can store inventory wherever they want and can ship THC in from places where it's much cheaper to grow than in Texas. You try competing with that pricing. It's almost impossible and we've done a phenomenal job. I mean, our prices have come down like 30% in a year and a half, 35% in a year and a half from when I took over, and so we've maintained competition from that, that perspective in an industry we should never be competing with.
Nico Richardson:I mean, it's just not. It's not even. It was not even fathomable three years ago that we'd be doing this, but we are so long story short. I've been fortunate enough, where I can, because my team's so awesome I've been able to pull more and more away from the backend of the business and focus more and more on the policy side.
Ben Larson:Yeah, Well, the only thing I can say is I appreciate you coming on and sitting in the hot seat a little bit here and, having known you for as long as I have and it goes back to the privateer days Wow, yeah, it's been a journey. I know how much you care and kind of stepping in as the CEO of a portfolio company, just finding yourself in a really tough situation. I think just about everyone that we talk to and bring on the show we all care about creating more access to the plant and seeing it legalized, and sometimes our journeys take us into weird corners of the industry. As a CEO, I empathize with just the challenge of being on social media and taking a lot of these bullets. So, if for anything, good job keeping your chin up and still engaging with folks like us.
Nico Richardson:Well, right back at you, Ben, and you A Ray, but everything you've done with Vertosa up there.
Ben Larson:I'm a big fan, so keep chugging. Thanks, man.
AnnaRae Grabstein:Yeah, it's brave to be the voice of a small group. And just to go to what Ben said, we really wanted to have this conversation and we were glad that you were willing to open up what are you talking about?
Nico Richardson:I'm the 500 pound gorilla in Texas.
Ben Larson:The five ounce gorilla Monopolistic prohibitionist Right.
AnnaRae Grabstein:One thing that's clear is that this story is like in the first chapter, and there's there's a lot ahead for Texas.
Nico Richardson:Well, what's interesting to me more and more is that you know we talked about the MJ Biz book and how Texas was always gray and no one talks about Texas For this specific issue. Texas is going to be the bellwether state for the country and we're hearing that more and more from MSOs that are calling us, from, you know, just operators, tech companies, everything that's touching this industry, are basically saying you know, yeah, we're seeing this everywhere, but Texas is worse than any other state because it was an open playing field for hemp to just go try whatever they wanted, to just go try whatever they wanted. Now we got to fix it and see how we can both coexist and hopefully can have a reasonable outcome here.
AnnaRae Grabstein:All right. Well, I think that that's a good place to close up our episode and to turn over the mic to you for our last call. There's a lot of the story here that has yet to be told, but we'd like to give you a chance to leave a lasting impression today with the last call. So what do you got for us?
Nico Richardson:Well, thank you both so much. Look, I'm a strong believer in the importance of medical cannabis and everything that it can do. Obviously, we have driven this industry forward here in Texas over the last seven years. So sort of a two part, last call One. If you do have a medical condition, I want you to understand that there is a medical market here, as it is so incredibly little known at this point. So please go to Texas Original dot com or go to the DPS website and check out what the Compassionate Use Program, the, the CUP, is actually doing here in Texas.
Nico Richardson:And the other part is, if you are a consumer in Texas of non-medical cannabis, just make sure you are educated on what you're doing, and I think there are good providers out there and there's probably bad providers out there, but just understand what you are consuming. I my, my first piece of advice would be don't consume Delta eight. I think you know. At least stick with what comes out of the plant and then make sure you're finding good providers, but you know the state and regulations are not helping you right now. Do that. So be an informed consumer All right.
Ben Larson:There you have it, folks, nico. Thank you so much. We'll talk to you soon. Take care, guys. That was a. I appreciate the, the passion and intention in that conversation it's. It's a really, really tough, tough position to be in. You know, removing the hemp and cannabis conversation. Being an operator in a space, we know how hard it is to operate a business with a shifting landscape. But this is completely unforeseen, right.
AnnaRae Grabstein:Yeah, we're seeing it already that there is becoming a more public tension between hemp and cannabis businesses at the state level, at the federal level, as different legislation is unfolding, and it's it's. It's a complicated place to navigate because ultimately, most of us started as people that were no longer in favor of any type of cannabis prohibition and and so walking the line between regulation and prohibition and access is confusing, and I think Nico's right that Texas is going to be a bellwether for how we're going to solve this in many other markets state level and federal and I'm going to keep paying attention.
Ben Larson:Yeah, yeah Well, I hope our to keep paying attention. Yeah, yeah, well, and I hope our audience keeps paying attention. I really appreciate, even if you didn't like what you were hearing. But, cynthia Louis, brian Lucas, thank you for engaging and leaving your comments and questions. Seems like you might already know, nico, but thank you everyone for always just supporting us, engaging, really appreciate it, just really thrilled with this episode and looking forward to more tough conversations in the future. Thank you to our teams, virtosa and Wolfmeyer, for allowing this to happen every week. Almost. Don't forget to share, like, subscribe, do all the things we're on YouTube, spotify, apple, itunes, anywhere you might want to hear our voices. Remember folks, stay curious, stay informed and, most importantly, keep your spirits high Until next time, that's the show.
