Cannabis companies would get access to small-business aid under new legislation introduced in the House last week, but whether the pandemic helps or hurts broader legalization efforts is an open question. Executives and policy experts are debating whether states and countries desperate for tax revenue as a result of the coronavirus will rush to legalize cannabis, or whether it will take a back seat to more pressing public-health and economic issues. “I think the issue is when you’ve got an enormous hole to fill -- and every state will have just a colossal budget deficit -- then filling it with a teaspoon of cannabis tax revenue doesn’t really feel like the most productive thing you can do,” said Roy Bingham, chief executive officer of pot data firm BDS Analytics. However, “every state’s going to need every single dollar they can get,” said Matt Hawkins, founder and managing partner of private equity firm Entourage Effect Capital LLC. “As a result, once we get on the other side of this, you’re going to start seeing a little bit more willingness to discuss, if not pure federal legalization, then quasi-legalization.” Boris Jordan, executive chairman of Curaleaf Holdings Inc., said he sees “an extreme parallel” between the current crisis and the lifting of Prohibition during the Great Depression. “Prohibition was lifted and alcohol sales were taxed because the federal government and the local governments needed the revenue,” Jordan said. “We expect over the next 12 to 18 months that significant changes in regulation will bring cannabis into the mainstream in the U.S. as an industry.” For now, the industry is running up against the same constraints it’s always faced because of its federal illegality. While most states with legal recreational cannabis have declared it an essential service, allowing dispensaries to remain open, companies haven’t been able to access the federal relief loans available to other small businesses during the Covid-19 crisis.
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The Rochester, New York City Council is considering legislation that would eliminate pre-employment cannabis drug testing for city workers except for public safety positions and those requiring a commercial driver’s license, the Democrat & Chronicle reports. Mayor Lovely Warren and City Council President Loretta Scott submitted the legislation last week and, in a letter to the City Council, said that removal of the pre-employment drug testing requirement “avoids unfair discrimination against individuals for an activity conducted during non-work hours that may have no effect on their ability to perform the job for which they are applying.” In an interview with the Democrat & Chronicle, Greater Rochester Chamber of Commerce President and CEO Robert Duffy – a former police chief – noted that THC can remain in the body long after the point of intoxication, while alcohol disappears after a matter of hours and that, “to be fair, those types of things have to be considered.” He added that some chamber members have already stopped testing for THC and there is considerable discussion in human resource circles around the region. On May 10, New York City will ban all employers from drug testing applicants for THC. In Nevada and Maine – both of which have legalized cannabis for adults – it is illegal to deny someone employment because of a positive drug test for THC. The Rochester City Council will consider the bill in committee next month before deciding to bring it to a vote. If approved, the changes would take effect immediately.
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Re “Judge rules Baker was within rights to close pot stores” (Metro, April 17): If Governor Baker’s rationale for his determination that recreational cannabis is nonessential is the risk of those from out of state who might be carrying COVID-19 traveling to the Commonwealth, wouldn’t a simple solution be a Massachusetts identification requirement to purchase it here? Recreational cannabis is a revenue stream that Massachusetts can’t afford to lose. Given that the governor and the attorney general were against legalizing recreational marijuana, it appears that they are using the public health crisis as a disingenuous justification to push their anti-cannabis agenda.
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April 27, 2020
Hemp farmers may now qualify for federal economic relief
Many hemp farmers have not yet been able to access economic relief because funds made available by the CARES Act were not earmarked for agriculture-related businesses. That appears to be changing. Recently Congress passed a series of bills aimed at offsetting the economic impact of the coronavirus including the Families First Coronavirus Response Act (Families First Act), the Coronavirus Aid, Relief, and Economic Security Act (CARES Act) and the Coronavirus Preparedness and Response Supplemental Appropriations Act (CPRSA). These economic benefits would not be available for marijuana businesses due to the continued prohibition of marijuana activities under federal law. This was recently confirmed in a tweet from a representative from the Small Business Administration (SBA) responding to a question about whether cannabis businesses would be eligible for federal Coronavirus relief: This is a significant burden on the marijuana industry but as you can see from the response above, hemp producers are not disqualified from federal relief thanks to the Agriculture Improvement Act of 2018 aka the 2018 Farm Bill. However, many hemp farmers have not yet been able to access economic relief because funds made available by the CARES Act were not earmarked for agriculture-related businesses. That appears to be changing. On Thursday, April 23rd, the US House of Representatives voted to pass a $484 billion economic stimulus package that had previously passed the Senate and now awaits signature from Donald Trump. According to Hemp Industry Daily $321 billion is going to fund the SBA’s Paycheck Protection Program (PPP) including $60 billion for small lenders and community banks. In addition, Economic Injury Disaster Loans (EIDL) will be available for farms with fewer than 500 employees. These EIDLs provide up to $10,000 in advance for small businesses. To be eligible, agricultural businesses will need to show they have been hurt economically by COVID-19.
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By Onofrio Castiglia in Charlottesville and Nate Trela in Denver, with data reporting by Philip Segal in New York. As the coronavirus pandemic ravages the U.S. economy, the M&A market for hemp and cannabis has continued to decline drastically with bankruptcies accelerating, numerous sector experts say. “There’s been a precipitous decline in the number of deals,” Scott Greiper, president of Viridian Capital Partners (VCA), said of the M&A market throughout the last year. In Q1 2019, there were 94 M&A deals as tracked by VCA, Greiper said. In Q1 2020, there were 19. In March of 2019 there were 25 deals as tracked by VCA. By March 2020, there were 5. That tracks with Mergermarket data, which shows there were 73 transactions in the second half of 2019, down from 110 in 1H19. To date in 2020, there have been 27 deals announced in the US. In 2019, total deal value in the space was more than USD 9.2bn. To date in 2020, total deal value has fallen to USD 325m. COVID-19 has further damaged the valuations of companies in the space, which were already trending downward because of heavy licensing requirements by state governments and overplanting by farmers – resulting in a cannabidiol (CBD) price crash. Cannabidiol, or CBD, is a compound that can be extracted from marijuana or hemp. It’s used as a relaxant applied topically, or as an additive for food and beverage. The decline in the market valuations has reduced the ability to raise capital. This is particularly problematic in the case of public companies, which account for 90% of all capital raising in the space, Greiper said. Still, it’s almost exclusively public companies that are buying now, he said. The year-on-year increase in the percentage of transactions in which the acquirer was a public company increased from 62% in March 2019 to 95% in March 2020. The coronavirus has intensified the impact of the CBD price crash, Marty Clemons, director of the North Carolina Industrial Hemp Coalition, said. According to several experts, a kilo of processed CBD oil in 2014 could fetch $70,000. That same quantity today is being sold for as little as $750. Asset value in industrial hemp has been so devalued that Kentucky’s GenCanna Global, which had been planning an IPO, filed for Chapter 11 bankruptcy in February. Joe Hickey, founder of the Kentucky Hemp Growers Cooperative and Halcyon Holdings brand holding company said many companies who were edging toward selling before the virus have been spooked into trying to get out while they can.
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April 25, 2020
Lawmakers Introduce House Bill to Extend Federal Aid to Cannabis Industry, Stay-at-Home Orders Keep 4/20 Sales Down: Week in Review
This week, Reps. Earl Blumenauer and Ed Perlmutter introduced the Emergency Cannabis Small Business Health and Safety Act to extend federal COVID-19 relief efforts to cannabis businesses. Elsewhere, the industry’s biggest sales day of the year saw a dip in sales due to states’ stay-at-home orders. Here, we’ve rounded up the 10 headlines you need to know before this week is over. Federal: The SAFE Banking Act may be back on the table in the coming weeks as members of Congress look to include a revised version of the proposal in the next COVID-19 stimulus bill. U.S. Rep. Ed Perlmutter, the SAFE Banking Act’s primary sponsor, is leading the charge to include its provisions in a forthcoming stimulus package. While dispensaries certainly saw a relative spike in purchases this past Monday for 4/20, the effects of the coronavirus outbreak and many states’ stay-at-home orders flattened the industry’s own demand curve a bit. According to Headset data, it appears that customers spread out their purchases across the entire week leading up to April 20. U.S. Reps. Earl Blumenauer and Ed Perlmutter have introduced the Emergency Cannabis Small Business Health and Safety Act, legislation that would extend federal COVID-19 relief efforts to the cannabis industry. The bill would grant state-legal cannabis businesses access to the resources offered through federal COVID-19 emergency response packages, and would prohibit additional federal relief funding provided through the Small Business Administration (SBA) from excluding both cannabis businesses and businesses that provide services to the industry.
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The Virginia legislature has rejected two governor-proposed amendments to a bill to decriminalize marijuana possession in the state. Meanwhile, they approved his suggested changes to the definition of medical cannabis products that can be legally accessed under a separate measure. Following the passage of the decriminalization legislation last month, Gov. Ralph Northam (D) said he wanted it enacted, but suggested that lawmakers take up a series of revisions when they met for a reconvened session on Wednesday. One of those amendments called for a delay in the due date of a study on broader cannabis legalization mandated by the bill. The governor, who seemed to try to take credit for the original study language that lawmakers approved in the bill, was actually requesting that its report deadline be moved back a full year, from November 30, 2020 to November 30, 2021.
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Reps. Earl Blumenauer (D-Ore.) and Ed Perlmutter (D-Colo.) have introduced a bill to make legal cannabis businesses eligible for federal coronavirus relief aid meant for small businesses. The legislation would grant the businesses eligibility for the Paycheck Protection Program (PPP), Economic Injury Disaster Loans and other aid. A $483 billion interim coronavirus aid package, which will replenish the small-business lending program, is set to pass the House on Thursday, but it excludes marijuana companies from receiving aid. “As Congress seeks to provide relief to small businesses across America, chief among those being left out are state-legal cannabis businesses that are essential to communities and have met the demands of this crisis,” Blumenauer said in a statement. “We should include state-legal cannabis in federal COVID-19 response efforts. Without providing these businesses the relief needed to carry out the recommended public health and worker-focused measures, we are putting these hard-working people — and ourselves — at risk.” Cannabis lobbying groups have been pushing for eligibility for the aid since Congress passed the Coronavirus Aid, Relief and Economic Security (CARES) Act in March, which also excluded marijuana companies. Congress is looking ahead to the next coronavirus-related bill, which is expected to be another massive package, but timing for it is up in the air. Senate Majority Leader Mitch McConnell (R-Ky.) said it will not be negotiated until the Senate is able to return in full and debate. The National Association of Cannabis Businesses said in a statement on Thursday that the group would continue advocating for financial relief for the industry. “We are extremely disappointed that Congress again excluded legal cannabis businesses and thousands of their hardworking employees from the benefits of this legislation,” CEO Gina Kranwinkel said. The anti-marijuana lobby is pushing back on pot businesses seeking relief, noting that marijuana sales have been up during the coronavirus pandemic in states that have allowed businesses to stay open. “This bill should be a complete nonstarter in Congress. Record levels of Americans are finding themselves unemployed as businesses nationwide have been forced to close their doors in an effort to prevent the spread of the novel coronavirus COVID-19," Kevin Sabet, president of Smart Approaches to Marijuana, said in a statement on Thursday. "One notable exception to business closures has been the marijuana industry, which has quite publicly strong-armed leaders into reversing course on closures and even common sense limits on operations," Sabet added. Blumenauer and Perlmutter led a letter last week, signed by dozens of members of Congress, asking House leadership to include these businesses in the interim coronavirus package. “As you draft the next COVID-19 relief bill, we write to ask that you address one of the shortcomings of the CARES Act — the exclusion of state-legal cannabis businesses and their employees,” the letter read.
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There are significantly more Americans who believe that cannabis legalization reforms have been a success than those who think the policies have failed. An April 20 YouGov poll found 45 percent of respondents believed that recreational cannabis legislation has been “more of a success than a failure” or “success only,” with 19 percent saying that it was “more of a failure than success” or “failure only.” Another 26 percent said they didn’t know. Nearly one in four Democrats polled called adult-use cannabis legislation a success, while 43 percent said it was “more success than a failure.” Just 10 percent of the bloc believed legalization legislation was a failure. Among Republicans, 41 percent said the reforms had some success, compared to 34 percent who believed they were a failure. The majority of independents – 54 percent – agreed that cannabis legalization laws were a success, compared to 27 percent who said they were a failure. 23 percent of respondents 18 to 24-years-old called cannabis legalization laws a “success only” along with 28 percent of those 25-34, 24 percent of respondents 35-44, 17 percent of those 45 to 54, and 13 percent of those surveyed who are 55-plus. At least 32 percent of all age demographics called the reforms “more success than failure.” Not more than 8 percent of each age group believed cannabis legalization legislation has been “a failure only,” while 17 percent of those 55-and-older believed the laws are “more failure” than success – the age group had the largest share. Twelve percent of polled 18 to 24-year-olds said it was more of a failure, along with 10 percent of those 25 to 34, 9 percent of 35-44-year-olds, and 12 percent of people 45 to 54. By gender, 22 percent of men and 17 percent of women called the laws a “success only” along with 35 percent of both and women who said they were more success than failure. Another 15 percent of men and 12 percent of women said the reforms were more failure than success.
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A majority of registered voters in New Jersey are in favor of a proposal to legalize marijuana for adult use that will appear on the state’s November ballot, according to a poll released Thursday. Monmouth University’s survey asked respondents to weigh in on the cannabis legalization referendum question that lawmakers placed on ballot and to give their opinions on the potential risks and benefits of the policy change. Sixty-one percent of respondents said they would vote in support of the proposal, while 34 percent said they’d vote against it. That means the issue is more popular, and stands to receive more votes, than President Trump, presumptive Democratic presidential nominee Joe Biden and Sen. Cory Booker (D-NJ)—all of whom will appear on the same ballot as the marijuana question. Asked how they would vote if the election were today, 38 percent said they’d vote for Trump, 54 percent would go with Biden and, for the Senate race, 58 percent would vote Booker. Crosstabs of the survey show that support for the measure is highest among Democratic respondents (74 percent). Sixty-four percent of independents and 40 percent of Republicans said they’d vote in favor of the referendum. As has historically been the case, the issue is most popular among young people 18-34. Seventy-eight percent of that demographic backs the legalization question, while 62 percent of those 35-54 and 48 percent of those 55 and older support the policy. The survey also generally asked about allowing individuals 21 and older to possess small amounts of cannabis, and 64 percent said they did, compared to 32 percent who said they oppose it. Interestingly, only a 48 percent plurality of New Jersey residents said in response to a separate question that it’s a good idea in to let adults purchase marijuana from a licensed retailer—which is what the referendum would accomplish. Thirty percent said it was a bad idea and 22 percent said they didn’t have an opinion.
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