Legalized Cannabis Part 1: Financial, legal and business considerations
Legalized Cannabis Shalon Part 1: Business/Finance Recap
Across the United States (and the world,) cannabis use and sales are becoming more mainstream. While it’s not federally sanctioned at this time, state governments (and their constituents) from coast to coast have legalized cannabis for medicinal and recreational purposes. Legalization has resulted in increased utilization, new product innovation, tax revenue and many questions about how business owners can and should operate in this evolving space.
The Shalon community gathered with three experts on June 10, 2021 to discuss the legal, business and financial considerations of the cannabis industry (in US states where it has been or will soon be legalized.)
Over the course of the evening, we explored several topics, during which participants were able to ask questions, share experiences and receive advice.
We started with the question: What's the biggest change since things became legal?
While there are so many ways in which things have changed in the locals where cannabis is legally available, here are a few that were top of mind during the conversation:
The stigma around selling, buying and using becomes removed to a certain extent.
Large, well-known companies are becoming more interested because of the opportunity to make money once it becomes "untainted".
There is increased focus on the wellness aspect from a larger extent because there is so much more research (and local regulation.)
Branding is more focused and professional – reaching new audiences who have untapped needs.
Different products are available and R&D is a major focus for businesses as they grow.
Some newer products include topical treatments, tonics and tinctures, shorter lasting tablets, and more
Next, the group talked about the reason people choose to go into the cannabis industry: What do people expect when joining the cannabis industry and how can businesses be evaluated as entrepreneurs and investors explore options?
People are interested in getting involved to make money – not necessarily because they are users
The cannabis industry is a good place to build a network as the world changes
It’s not necessary to have expertise in the cannabis space; right now, the businesses that are focused on the financial aspect and the business plan/goals are seeing the most success
Unfortunately, small businesses are getting knocked out by MSO (multi state operators) so there is value in growing and partnerships
Additionally, financing is intended to be short term and is at a very high rate (currently around 36%)
Regional considerations include moving product across state lines, quality control and
There is concern that if cannabis becomes a federally legalized and regulated substance, small businesses will be pushed out by private equity and hedge funds who can afford to buy and consolidate local, specialized organizations.
Lastly the group discussed the possibilities of federalization: The industry is currently state focused from a legal and financial perspective, what challenges and opportunities come up when it comes to the federal level?
One of the first comments out of our experts’ mouths was that even if/when the industry is managed federally, “it will continue to be a risky business.”
A few more things that came up quickly included taxation issues, allocation of resources across state lines and how the supply chain currently works and could be impacted (or improved…)
Taxation: businesses can't write off all the things that a ""normal"" business can so prices have to stay higher.
Participants discussed some of the differences between the US and Canada where it is federally regulated and legal. There is a lot to learn when it comes to how businesses/individuals write down assets, move product, bank and more…
Supply chain and quality control concerns: There is a need to legitimize and make consistent across states for quality and process optimization (for example: Oklahoma rarely tests and tests for much less, California tests for more and more often.) Federal regulation could be helpful in this area.
Resources:
One big potential benefit is that interstate commerce could grow.
Federalization could create a need for regional hubs which would help manage and focus on quality control and give local industry access to resources.
To truly have impact, industry leaders must continue to work to get involved in writing regulations since politicians don't actually know what is important
A big focus is on “Deschedule not Reschedule.” Right now, cannabis is listed as Schedule 1 (similar to heroine, not considered to have medicinal properties.) If a substance/plant is on a schedule, there are regulations, which is why industry leaders and experts want to deschedule instead of moving to another level of the schedule.
In just 90 minutes, our group addressed many issues and opportunities when it comes to legalized cannabis. However, our conversation only scratched the surface. There is so much more to learn and discuss and everyone is encouraged to check out resources shared on our event page as well as to reach out to our experts for deeper discussion. You can also share other relevant information and insight in the comments.
Expert Insight
Thank you to our speakers for sharing the experiences and wisdom and helping drive truly meaningful discussion thought the evening. If you’d like to follow up with any or all of our experts, they’ve generously shared their contact information:
Brittney Lifsey, VP of Finance, Bespoke Financial
Darshak Dholakia, Partner, Dechert LLP
Liz Rogan, Liz Rogan & Associates Cannabis Consulting Firm
Next Steps
We’re excited to continue the conversation about legalized cannabis, focused on social considerations (including equity/social justice, education and measurable benefits to a community) on June 24, 2021. Please plan to join the Shalon community (and invite your network as well) for this very important part of the discussion. Click here to register. The event is free, but registration is required. See you soon!
