Legal Archives - Page 2 of 6 - Green Market Report

Sean HockingSean HockingMay 10, 2019


AUTHOR:  “Jordan Zoot.  “aBIZinaBOX Inc., CPA’s


Illinois Cannabis Legislation – titled Illinois Cannabis Regulation and Tax Act introduced, and in classic Illinois fashion Governor Pritzker is already crowing about the bill making Illinois a leader, even though nine states have already legalized adult use.

Sen. Mike Madigan is already threatening that it will “be difficult to get the votes”,  translated he wants more $$ for his slush funds.

It is reassuring to note that the Senate Bill is 532 pages long while the enabling legislation in California SB 94 was only around 220 pages.

The provisions of the bill are nothing to be overly pleased with:

Possession limits for residents of one ounce and half of that for non-residents.

The bill gives those applicants access to funding from a newly-created $20 million low-interest state loan program, according to Pritzker’s release, and allows for reduced licensing fees in certain circumstances.

“There are some very controversial aspects to the proposal. No. 1 would be the proposal for the expungement of criminal records,” Madigan said. “The key on that issue is how far do you go in terms of expungement? If we’re talking about some teenager who was doing drugs and found guilty of possession, that’s one thing. If you’re talking about people who were actually in the business, dealers, and you want to expunge those records, that’s a different case.”

Convictions for possessing, growing, manufacturing and delivering cannabis were all included as eligible for expungement in a document released by Pritzker’s office, which said the expungement provision would only apply to standalone offenses not accompanied with other convictions. Madigan said he wasn’t speaking to the bill’s specific expungement language, but to the idea in general. “I’m not sure how they treat that in the proposed language, but that will be very important in terms of finding 60 people in the House to vote for the bill,” he said.

The General Assembly has just 21 days of legislative debate on the calendar to pass the critical piece of Pritzker’s first-term agenda before legislators adjourn. The governor budgeted for $170 million in new revenues next fiscal year from licensing fees associated with legalization. The first of those fees would come from the state’s existing 17 cultivation and 55 dispensary facilities.

Currently-licensed cultivators would be eligible to purchase a recreational license for $100,000 and up to $500,000 paid to the Cannabis Business Development Fund, which would help fund the low-interest loans and other equity-promoting measures.

Retailers, on the other hand, would be allowed to purchase up to two licenses, each costing $30,000, with up to $100,000 paid to the CBD fund for the first license and up to $200,000 for the second.

The bill’s sweeping criminal and social justice considerations include plans to use an automated system to expunge roughly 800,000 marijuana convictions and allow those with pot convictions to work in the legal cannabis industry. The measure would also create a designation for “social equity applicants” hoping to obtain licenses and provide minority-owned businesses support by offering technical assistance, access to capital and loans and relief from fees that have posed a barrier to entry for those looking to crack into the state’s pot industry — which is currently dominated by a handful of predominantly-white medical marijuana companies.

The measure is sponsored by state Rep. Kelly Cassidy and state Sen. Heather Steans, Chicago Democrats who previously introduced similar legislation in 2017 that failed to gain traction under former Gov. Bruce Rauner. During the news conference, Steans said she and her colleagues are also pushing for “revenue that, instead of going to the illicit market, comes and benefits the people in Illinois.”

Under the bill, 25% of that revenue would go to areas that have been disproportionately affected by the war on drugs and another 20% would fund programs focused on treating mental health and substance abuse issues. Pot products with less than 35% of THC – the chemical compound that gets users high – would be taxed at 10%, while products with more THC would be taxed at 25%. Cannabis-infused products would carry a 20% tax.

Despite polls showing support from a majority of Illinois voters, pro-legalization lawmakers are opposed by legislators and special interest groups who have highlighted the perceived dangers of a legal weed market. The current bill would allow Illinoisans to grow up to five plants in a secure place inside their homes, something that has faced stiff resistance from opponents who fear that pot could wind up on the black market.

To sum up, the Illinois approach to adult-use cannabis is all about TAX REVENUE and GRAFT.

If you really want to, you read the complete text of the bill here.


Sean HockingSean HockingMay 10, 2019

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True to his word on the campaign trail, new Illinois Gov. J.B. Pritzker announced on May 4, 2019 the specifics of adult use legislation he would like to see pass the Illinois legislature this year. And it is loaded with a lot more than just 21+ and personal possession (up to 30 grams).


Some of the highlights include:

  • Adults may grow up to five plants at home in a locked room, away from public view and with the landowner’s knowledge and permission (if living in an apartment or other rental situation – litigation is currently pending in the state regarding condominium and homeowners’ associations);
  • Expungement of misdemeanor and Class IV felony marijuana convictions (estimated to result in 800,000 expungements);
  • No new large-scale commercial growers (look to small craft growers with a focus on inclusion for people of color becoming business owners in the industry);
  • A statewide program funded with $20 million for low interest loans to help support “social equity” in business ownership in the newly created market.

These provisions and others are consistent with the State’s goal of giving back to the communities that were most negatively impacted by the federal “War on Drugs.”


In describing the program, Gov. Pritzker stated that he wants Illinois “to have the most equity-centric law in the nation.” State Rep. Kelly Cassidy of Chicago, one of the plan’s legislative sponsors, is working to create a program that avoids “a small group of people getting very rich.”


For now, the proposed permit fees are $100,000 for cultivators and $30,000 for dispensaries. The State will also charge a “business development fee” equal to the lesser of five percent (5%) of total sales or $500,000 for cultivators and $200,000 for dispensaries. All such fees will also include lower options for residents from minority War on Drugs casualty neighborhoods.


Proposed taxes include a seven percent (7%) gross sales tax on cultivator sales to dispensaries. Consumers can expect to see sales taxes of ten percent (10%) on products with THC levels less than 35%; twenty percent (20%) for all cannabis infused products; and twenty five percent (25%) on products with THC levels greater than 35% (oil, wax, shatter and other types of extracts). The proposal also allows municipalities to add an extra three percent (3%) sales tax and counties to levy sales taxes of 0.5% (incorporated areas) and 3.5% (unincorporated areas).


Perhaps these “local” revenue streams will be enough to discourage municipalities from banning retail stores within their boundaries which they will be allowed to do for the first year of the program. After the first year, such a ban may only be imposed through a voter referendum.


The proposal is already getting push-back from a number of anti-adult use groups on religious, addiction, access to minors and other grounds. It’s also coming from a number of communities throughout the state that did not like the idea of medical marijuana and like adult use even less. In response to those concerns, Gov. Pritzker’s proposal prohibits all advertising near schools, playgrounds, public transit and public property. Also banned is any advertising that might appeal to minors and especially young children.


This is also true for packaging and labeling that must carry specific warnings about marijuana’s potential negative effects, including impaired cognition and that it may be habit forming. The packaging must be child resistant. While many of these rules and precautions are carryovers from the state’s medical program, they take on a new emphasis and importance with the sale of marijuana and THC products which is expected to significantly increase in an adult use market.


In terms of timing, a bill still needs to come out of the state legislature for Gov. Pritzker to sign. Then the various Illinois agencies will have to go through the state’s process for making new rules and regulations that will apply to the adult-use program followed by public comment periods, amendments, more comments, committee vote and finally consideration by the state House and Senate. While many of the steps can and will be expedited, the current consensus has the program becoming operational, at the earliest, sometime next summer.


The challenge for the state will be to see if it can roll out the program sooner than that and more efficiently than its handling of the application process for medical cultivation and dispensary licenses. Either way, after a long wait, Illinois’s cannabis market is finally headed in the right direction.


Larry Mishkin

Larry Mishkin is Counsel to Hoban Law Group and has nearly 30 years of experience that includes representing groups seeking marijuana dispensary and cultivation licenses in Illinois, as well as business interests ancillary to the medical marijuana market. Larry regularly consults with and counsels persons and groups looking for entry into the medical cannabis industry.  

This article has been prepared for informational and general guidance purposes only; it does not constitute legal or professional advice. You should not act upon the information contained herein without obtaining specific professional advice. No representation or warranty (express or implied) is made to the accuracy or completeness of the information contained in this publication. Hoban Law Group, its members, employees, and agents accept no liability, and disclaim all responsibility, for the consequences of you or anyone else acting, or refraining to act, in reliance on the information contained in this publication or for any decision based thereupon.


Sean HockingSean HockingMay 10, 2019


The states,  Alaska, Arizona, Arkansas, California, Connecticut, Colorado, Delaware, the District of Columbia, Guam, Hawaii, Illinois, Iowa, Kentucky, Maine, Maryland, Massachusetts, Michigan, Minnesota, Mississippi, Nevada, New Jersey, New Mexico, New York, North Dakota, the Northern Mariana Islands, Ohio, Oklahoma, Oregon, Pennsylvania, Puerto Rico, Rhode Island, the U.S. Virgin Islands, Utah, Vermont, Virginia, Washington, West Virginia, and Wisconsin.


The letter, scroll down to see each signatory…


Sean HockingSean HockingMay 7, 2019


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AUTHOR: Glenn Johnson


I’d like to take the opportunity to continue with the Marketing/Branding points brought up in my previous column in the Brand Identity Infographic and focus on a few points related to the look/feel and mission/vision of building your brand for scale.


Defining your brand is paramount. Define who you are, what you stand for and who you are not. Provide a relevant point of view to the market you serve and develop your brand message & voice to match it. This can begin simply by either looking at the work you’ve done to date in developing your brand to ensure it all aligns with a relevant point of view, or, from the nascent stages of developing your brand by defining a mission statement. This can be done in your own vernacular, from be a kickass cannabis brand that provides unique strains” to “providing quality craft cannabis to a connoisseur seeking an experience.”


Communicate the values and mission of your company. Be clear on what sets you apart, and define the audiences with whom you want to do business. Simply placing product on shelves isn’t enough if you want to play the long game here. Building a brand is important now more than ever as larger investments are infusing money into the market that is quickly eclipsing some of the smaller players.


We as an industry can learn a lot from the work alcohol of brands who’ve faced regulations and constrictions on doing business over the years post-prohibition and which continue to struggle for awareness and consumption in a crowded market. There are innumerable similarities to what makes these brands different, unique or special, taste, of course is paramount, as well as consistency, quality of ingredients and origin story are all important across every vertical.


The larger portfolio companies that control the most ubiquitous brands in alcohol have spent millions to garner their share of the market. These behemoth producers have also adapted to the younger consumers who are seeking “experiences.” Pernod Ricard CEO Alexandre Ricard has made a shift away from category-to-category competition (our vodka vs. their vodka) to what he likes to call the “five key moments of conviviality” it’s portfolio of brands are targeting, including “Let Loose, High-End Drinks, Hanging Out, Out to Impress, and Sharing a Drink.”


Consumers of alcohol have also adapted for years as brands identify themselves as an experience, as part of the consumers life, that unlocks something special for them. It’s been said that in the last 25 years we’ve gone from a label culture (which Absolut did an amazing job in the 80’s/90’s of establishing) to a craft culture of terroir and small batch distillations.


Listen to your customer wants, needs and requests and deliver upon them. What experience are you providing your customers? Vendor days are an important opportunity to engage with consumers and LISTEN to what they’re saying to you about how, when and why the purchase product. Empower your sales team to listen, and capture insights so that you can learn more about the markets in which you’re doing business, and build marketing and messaging to adapt and adopt these as appropriate for your brand.

Create experiences for your customers that are memorable and positive, and shareable.

More and more, alcoholic beverage brands, as well as many/any CPG product brands are turning the spotlight on their customers themselves, mining content and insights from social platforms in order to uncover trends, preferences, and lifestyles.


Content can be used to create loyalty and drive better customer relationships.


Create a content strategy. Apply your Mission Statement, who you are, to what you say and what you show on your social media, you can’t be everything to everyone so it’s important to maintain your integrity and post meaningful content, don’t oversell your brand, be real, be informative, optimistic and friendly. Listen to which posts resonate most with your audiences and track this to emulate in future postings.


For example from a recent Greenentrepreneur post: We can teach the importance of knowing your farmer, your source and the process by which your chosen product was made. We in the cannabis business can help consumers understand their power to support the artisans and stories that resonate with their heart — not just their pocket book. Educate your consumers on the power of their voice.


About Glenn Johnson

I am a Marketing, Branding and Communications Consultant w/ experience in high-touch luxury consumer marketing in the travel/hospitality, wine/spirits, fashion/beauty/grooming and Cannabis categories. My talents include Branding & Brand development, Business Building, Strategy and Brand Storytelling. I excel in working with Founders, funders, start-ups, and small brands.

CONTACT ME via email at:

Connect with me on  LINKEDIN:

Previously I was co-founder & moderator for the Creative Mind Salon series hosted at Soho House NY w/ industry innovators, creatives & decision makers from fashion, film, photography, music and digital industries which provided IRL intelligent discourse amongst highly-curated leading edge creatives.

Sean HockingSean HockingMay 7, 2019

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AUTHOR:  “Jordan Zoot.  “aBIZinaBOX Inc., CPA’s


We were prompted to write this article by Joe Kukura’s article “Pot Growers Nipped in the Bud by Bureaucratic Bungle.” We agree with the article. CalCannabis created a gigantic debacle with its licensing of cultivators. However, a more accurate statement is, “CalCannabis is a gigantic blunder.”

Joe Kukura

“Biggest” depends on your perspective and audience. For those growers who are facing a loss of livelihood for trying to be good citizens of California and comply with the law, the errors made by CalCannabis in its regulation of cannabis cultivation have created a life-changing disaster. For some such growers, CalCannabis’ blundering regulation of cannabis cultivation will produce the most significant crisis of a lifetime, but “biggest” is not the right adjective. Historically, putting small growers out of business for no good reason has started revolutions. However, in the instance of California cannabis growers, the actions of CalCannabis will likely to only further sour contempt for government regulation.


The screw-up of the roll-out of the regulation of cannabis cultivation by CalCannabis was inexcusable. However, we must be realistic. CalCannabis does not appear to have made the worst blunders of cannabis regulation. What about the hundreds of millions of dollars of missing cannabis tax revenue? What about the thriving underground cannabis market? What about the booming “semi-underground” market? What about the cities and counties that sold licenses for the fees the sales would generate while imposing taxes that render the operation of cannabis businesses in the same cities and counties not competitive? What about the counties that sold cultivation licenses and then decided to prohibit cannabis cultivation?


The present state of the regulation of cannabis cultivation by CalCannabis is no more than a pronounced symptom of the debacle of California’s roll-out of cannabis regulation. Do not misapprehend our comments.

The disaster of that expiring temporary cultivation licenses reflect is gigantic! Heads should roll!

However, this particular screw-up by CalCannabis is just a symptom of a much more severe problem. Those who are interested in California’s cannabis industry for any reason – whether to tax it, or to earn a living in it, or to build a successful business in it, or to secure medicine from it – need to focus on determining why California’s roll-out of regulation is a debacle.


To determine what can be done to right the ship, one must first determine why the ship went belly-up.


There are a myriad of reasons the roll-out of cannabis regulation in California has proved a debacle. We have addressed some of the reasons in other articles. See [[. We have primarily focused on issues relating to financial record-keeping and tax reporting for the business entities involved in moving cannabis from a cultivator to a consumer. Financial record-keeping and tax reporting are our areas of expertise. We stick to our area of expertise.


It is unlikely we could successfully grow cannabis even though it is a weed. We fully understand we have limited knowledge of cultivation, processing, extraction, and testing. Thousands know more about these aspects of the cannabis industry than we do. We can, however, make any cannabis business more profitable for its owners through more effective business practices and financial record-keeping. Our ability to make cannabis businesses more profitable is, of course, to one major exception. We cannot make more profitable those cannabis businesses that, in whole or in part, succeed through unreported transactions.


We need to return to the reason we decided to write this article. The regulation of cannabis presents several difficult and complex problems. If these problems are going to be successfully addressed, the causes of the problems must be understood. If one is going to determine the cause of a problem, one has to understand the problem entirely.


Let’s look a little more carefully at the numbers in Joe Kukara’s article.


If Joe Kukura’s article is read carefully, the article minimizes the travesty of the licensing of growers by CalCannabis. If 1,000 growers have 235 acres of canopy, the average licensed grower has 10,000 square feet of canopy. If California needs four times the canopy it has at present through licensed growers to satisfy market demands, California does not need half of the growers with expiring temporary licenses. Why should anyone care that CalCannabis is not issuing licenses to growers that the market does not need?


Let’s look at the numbers from a different perspective. At the end of 2017, Humboldt County estimated it had 10,000 cannabis growers. Many have now left for better climates, but a substantial number remain. Only a few Humboldt County farmed 10,000 square feet of canopy. If Humboldt County still has 6,000 growers, and each has 5,000 square feet of canopy, an Executive Order granting cultivation licenses to all Humboldt County cultivators would solve California’s retail market shortage with a single signature.


Consider the political and regulatory benefits for California from the preceding. All California cannabis would come from Humboldt County except for those licenses already issued in other counties. Other counties would not face political battles over whether or not to allow cultivation. Humboldt County has a Track and Trace Program. All Californians would have access to Humboldt County cannabis. Humboldt County would be restored to its historical prominence as the source of the best.


The preceding, of course, is facetious. The preceding is also outrageous. There are substantial enclaves of small cannabis cultivators all over California. Small cannabis growers throughout California are entitled to slices of the cannabis pie. We decided to be outrageous to focus our readers on how California is destroying its cannabis industry under the guise of regulation.


We need to look at another aspect of the numbers in Joe Kukura’s article before we move on to solutions. The article does not go behind the gross amounts of canopy. All square feet of canopy are not equal. While traditional outdoor cultivation may yield only a single crop each year, light-deprivation greenhouse grows can yield multiple crops. Indoor grows can generate a new crop every six weeks. Two thousand square feet of the indoor canopy can produce as much cannabis as 20,000 square feet of outdoor canopy.


If the data that Joe Kukara used for his article is examined, it will be immediately apparent a very substantial portion of those who have already successfully navigated the CalCannabis licensing process are well-financed, well-advised growers, including many newcomers to the industry. The “green wave” has been replaced by a wave of corporate carpetbaggers. CalCannabis has thoughtlessly created a cannabis cultivation licensing system that caters to the corporate carpetbaggers who are taking over California’s cannabis industry. We are confident the 400 growers a day that Joe Kukura described as losing the right to participate in California’s commercial cannabis industry are primarily small growers.


The preceding describes symptoms. We are looking for the causes of the problem in order to find a cure, or at least some relief, from the pains of California’s cannabis regulation debacle. We believe there are four principal reasons the licensing of growers by CalCannabis is a debacle:

(1) The Legislature did not provide California’s regulatory agencies with an adequate mandate.

(2) The Bureau of Cannabis Control (“BCC”) failed to provide adequate guidance, coordination, and oversight.

(3) CalCannabis failed to secure a sufficient knowledge and understanding of the industry before it started making decisions regarding regulation.

(4) CalCannabis engaged in bureaucratic empire-building.


The last two items are summary statements of the principal reasons CalCannabis has turned cultivation licensing into a debacle. These reasons are solely on the doorstep of CalCannabis. CalCannabis is responsible for correcting its screw-up. The screw-ups of CalCannabis relating to the licensing of cultivators, however, were produced by the failure of the Legislature to provide California’s regulatory agencies with an adequate mandate as well as by the failure of BCC to provide adequate guidance, coordination and oversight to the various portions of the agencies that became involved in the regulation of cannabis in California.


CalCannabis can rectify its errors, although it is incredibly tricky for a bureaucratic agency to correct its mistakes. This flows from the very nature of a bureaucratic agency. Regulations and the related processes and procedures are extensively vetted even though the vetting process frequently consists of many individuals buying into the same error. As a consequence, bureaucratic momentum is challenging to alter let alone reverse. A change in the direction in which a bureaucracy is moving generally can be accomplished solely through direction from above.


We doubt CalCannabis can rectify its errors. BCC could have prevented these errors from occurring if it had provided adequate guidance, coordination, and oversight to CalCannabis, but it did not do so. BCC is handicapped at this point by the same bureaucratic momentum that handicaps CalCannabis. The Legislature, of course, only enacts the laws. On many occasions, the Legislature explains why it is enacting laws and what it wants to accomplish. The Legislature can undoubtedly explain how its mandate is not being carried out, or clarify and amplify its mandate, but administrative agencies generally heed a legislature only if funding is threatened.


The last and best hope for California’s cannabis industry may well be Governor Gavin Newsom. As we have pointed out on other occasions, many of the problems that have developed in California’s roll-out of cannabis regulation were foretold in the Report of the Blue Ribbon Commission. Governor Newsom was a leader of the Commission. Decisive action by the Office of the Governor could swiftly rectify several problems that have arisen in California’s roll-out of cannabis regulation.

AvatarMark TaylorMay 6, 2019


White smoke emanating from Germany’s medical agency signals the wait is over to find out which firms have been awarded medicinal cannabis tenders for Europe’s top market.

Two Canadian firms, Aphria, and Aurora Cannabis and Germany’s Demecan have won out, it has emerged.

The three companies will split a four-year tender to grow 10,400kg between them. Aphria won five of the 13 lots, with Aurora Cannabis and Demecan handed five and three lots respectively.

The tendering process has been dogged with delays and several court cases as frustrated German firms sued the Federal Institute for Drugs and Medical Devices (BfArM), the regulatory authority responsible for oversight, over its handling of the licensing.

Germany’s 83m population and standing as the top European market makes it a key jurisdiction for firms looking to become the number one global cannabis company.

BfArM has not yet made an announcement, which some industry watchers claim is linked to the 10-day window for losing firms and other parties to legally contest the decision.

The three companies were selected from a field of 79 entrants, at the second attempt by the German government. They were graded on domestic cultivation, based on a points system focused on infrastructure, quality standard, security plans, and price.

It is no surprise to see two Canadian firms selected, as the country’s experienced and wealthy marijuana growers has spent several years partnering with German firms or buying them outright in anticipation of the massive marker opening.

Demecan is a joint venture partner of Canadian firm Wayland Group. Trading of Wayland’s stock was halted on the Canadian Securities Exchange pending the news.

The result “is a very important footstep toward our twofold strategy of establishing high-quality, in-country cultivation in Germany and importing additional flowers and oil from Canada and Denmark to provide the German market with complete cannabis medicine offering,” said Hendrik Knopp, managing director of Aphria Deutschland.

Aurora is yet to comment.

The three firms will split an annual grow of 2,400kg to meet the total over four years, which German experts say is nowhere near large enough to meet the demand from patients.

Germany legalized medical marijuana in 2017, but a reluctance from insurers to cover the cost of the drugs and an unenthusiastic government combined to temper demand.

A handful of Canadian and Netherlands companies ship product to pharmacies in Germany, which has relied on imports of the drug due to the lack of domestic growers.

AvatarMark TaylorMay 5, 2019


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AUTHOR: Mark Taylor

Belgium has laid out plans to increase medicinal cannabis production, promising more money for research and domestic cultivation.

The Belgian government has announced plans to launch a dedicated ‘Belgian Cannabisbureau’ to oversee the local production of cannabis. 

The Cannabisbureau will operate as a wing inside the Belgian Federal Agency for Medicine and Health Products (Federaal Agentschap voor Geneesmiddelen en Gezondheidsproducten / Agence fédérale des medicaments et produits de santé).

It will authorise private companies to produce cannabis and will also be responsible for the import and export of medical cannabis.

The government will also soon issue a tender to grow certain amounts of cannabis, and the Cannabisbureau will purchase cannabis from those companies directly with a view to distributing the cannabis for research purposes. 

A handful of Belgian startups have announced that they would grow up to five tonnes of medical cannabis per year. 

In December, legislative proposals were announced that if adopted would allow the federal government to invest in research into the use and potential benefits of medicinal cannabis and cannabis oil. 

The proposals would formally ask the federal government to acknowledge medicinal cannabis and cannabis oil as medical products under applicable Belgian law. 

It would also further expand the list of medical conditions for which persons are allowed to be prescribed cannabis oil. 

In its current draft, the proposal would include various illnesses characterised by spasm symptoms such as ALS, epilepsy and, in general, any illness leading to serious neurological pain and/or spasms.

The proposal would also allow a general authorisation to all ALS patients to use a mouth spray produced on the basis of cannabis oil. 

Anyone who has spent time in Brussels or amongst Belgians will be familiar with the smell of weed, such is the relaxed tolerance for recreational use. 

CBD shops have sprung up across the capital, and a mobile app Cannabis Social Club Brussels allows users to place orders for flowers and oils which will be delivered around the city to members by a courier on an electric bike.

Growers in the European Union are also allowed to cultivate industrial hemp if it contains less than 0.2 percent THC, but entrepreneurs have exploited a grey area where EU regulations nor Belgium’s national laws do not address hemp-derived products being marketed as CBD.

Sellers can skirt the rules by avoiding the trap of claiming their products have health benefits, as CBD is not within the remit of the federal medicines agency. The Federal Agency for the Safety of the Food Chain, responsible for food stuffs sold in Belgium, does not have oversight of CBD oils, which can be added to food and drinks, if they are explicitly labeled as not for consuming.

Caroline CahillCaroline CahillApril 26, 2019


A Massachusetts cannabis investment scheme has resulted in charges for an investment adviser who allegedly swindled more than $8 million from investors.

On April 17, 2019, Massachusetts Sec. of State William F. Galvin announced charges against Frederick V. McDonald, Jr., CEO of US Advisory Group Inc. McDonald is accused of misleading more than 100 investors in a Massachusetts cannabis investment scheme, with one 78-year-old investor losing more than $3 million.

McDonald’s house of cards was built with three main ventures—US Advisory Group, Commonwealth Pain Management Connections LLC, and Kettle Black of MA LLC. Through these vehicles, McDonald used clients’ funds in a failed attempt to gain medical cannabis dispensary licenses in Massachusetts and violated state securities laws in the process.

According to the filing, McDonald acting as an investment advisor made recommendations to a high net worth client directing him to invest in marijuana projects without disclosing McDonald’s controlling interest in the investment vehicle or the fees he would receive in connection with the projects.

He originally met the investor at the World Presidents’ Organization Retreat in 2007 and got him to sign an advisory agreement. He got him to invest $1 million into Prime Wellness of MA. Instead of going after the medical marijuana license, McDonald took $200,000 and invested it in Dixie Highway Partners, a different entity owned by McDonald.

He never got a license for Prime Wellness and started a new investment vehicle called KBMA in which he raised $8 million. Ultimately, the venture never obtained a license and had a falling out with the property owner for the proposed dispensary. The whole deal fell through and the investors lost all their money. The original investor ended up losing $3 million and the other investors lost the $8 million for KBMA.

As documented by the state’s 35-page administrative complaint, “McDonald’s free-wheeling practices included cutting corners at every opportunity and lying to his own business partners and investors to cover his own mistakes.”

The complaint details McDonald’s failure to uphold his fiduciary duty, and how “[he] further failed to educate himself regarding the unique and complex licensing process in Massachusetts, which resulted in the distribution of offering documents that failed to adequately disclose to investors the risks or difficulties the investment could face.”

The Massachusetts Securities Division wants to bar McDonald from practicing as an investment adviser and require him to pay a fine to the state and restitution to investors, among other requested enforcement actions.

While McDonald has been accused of misusing investment funds, making material omissions, and other unethical conduct and practices, a representative from US Advisory Group has denied the state’s allegations.

“We have always acted with the highest level of ethics and in the best interests of our clients,” stated the USAG representative, as reported by the Boston Herald. “News reports do not accurately reflect US Advisory Group’s core, history and legacy of providing exceptional financial planning and advice.”

Debra BorchardtDebra BorchardtApril 12, 2019


By Jeff Remsburg, Contributing Editor Apr 8, 2019, 7:13 pm EDT

Where we stand with federal marijuana reform initiatives, and what that means for your marijuana investments today

With last Friday’s “landmark” bill, Congress is closer than ever to long-awaited reform measures that would, in effect, legalize marijuana.

“Landmark” is how Rep. Earl Blumenauer (D-OR) described the legislation introduced this past Friday. If passed, it would end the federal prohibition on marijuana.

The legislation is called the STATES Act (Strengthening the Tenth Amendment Through Entrusting States). In practical terms, it would allow each state or territory to decide its own policy on marijuana, without federal intervention.

(You can follow all the proposed legislation here)

It will still be a while before the bill gets a full House vote. Regardless, the momentum and growing support from an increasing number of politicians are what’s important for now. It’s part of a new wave of legalization that has already created massive stock winners. At this point, it’s undeniable — legal marijuana is one of the biggest investment opportunities of this generation.

So, given this federal milestone, in today’s Digest, let’s review federal marijuana reform efforts that have taken place over the last few months. Then, in light of where we stand today, let’s discuss which investments are likely to thrive in this environment.

***Major federal reform began with the passing of the 2018 Farm Bill this past December

The Farm Bill was major news for marijuana investors. To understand why, I’m going to turn to our resident marijuana expert, Matt McCall. Matt is one of the most respected, and successful, marijuana analysts in the business.

The bill legalized hemp — a cannabis derivative — for the first time in nearly a century, opening up what could be a $20+ billion industry in a relatively short amount of time. As hemp-derived cannabidiol (CBD) oil hits the mainstream, we’re looking at an industry with the potential to be 55 times larger in just five years … it has game-changing ramifications on the hemp industry …

Prior to that, hemp was classified as a Schedule 1 drug according to the Drug Enforcement Administration (DEA), and federal laws prohibited growing or selling it. A previous Farm Bill from 2014 allowed a few states to give out limited permits to grow hemp for specific uses, but it mostly remained illegal.

The DEA’s classification made no sense. Schedule 1 drugs are the most addictive and dangerous in the world and have zero medical benefits. We know that isn’t true with hemp. Can you believe that the DEA viewed hemp as more dangerous than cocaine, which is a Schedule 2 drug?

Given this hemp legalization, we’re now seeing CBD-infused products being sold in traditional outlets including Walgreens and CVS. Beyond that, CBD has already become so popular it’s making its way into products you may never have suspected — for instance, CBD dog treats.

This CBD-popularity dovetails into the second area of federal reform — the FDA.

***While the conversation is evolving, real reform from the FDA appears slow … but moving

While CBD made from hemp is now legal thanks to the 2018 Farm Bill, CBD made from marijuana is still illegal. That’s because marijuana remains a controlled substance.

The lack of formal guidance from the FDA has led to lots of confusion as to which CBD products are legal versus illegal, as well as marketing claims and general advertising. This has slowed CBD’s growth (even though its current growth is staggering despite these challenges).

During one of his last days as FDA commissioner, Scott Gottlieb appeared before a House appropriations subcommittee and explained the challenge. In essence, regulating CBD will require a unique model that may take years to complete.

“That’s the conundrum here,” he said. “We don’t have a really modern proxy for where this has happened.”

That’s why Gottlieb suggested that congressional action on CBD could lead to a faster resolution than paths through the FDA.

But in an effort to push the ball forward, the FDA will hold its first public hearings on whether to allow CBD to be legally used as a food-and-drink ingredient on May 31.

If you want to be a part of this conversation, the agency is asking for public comment. If you’d like to learn more and have your voice heard, click here for more information.

***Another key piece of federal reform is happening with the SAFE Banking Act

On March 28th, a congressional committee approved the Secure and Fair Enforcement (SAFE) Banking Act. The legislation is intended to increase marijuana businesses’ access to banks.

This is big because with marijuana still illegal under federal law, getting banks to accept deposits from marijuana-related companies is extremely difficult. That’s because any bank that does business with marijuana companies could be charged with “aiding and abetting” — which is a federal crime.

In order for the marijuana industry to make its next quantum leap, banks need to be in on the game. And last Thursday’s vote from the House Financial Services Committee is evidence that’s happening.

The vote is also significant since it was approved despite some resistance from Republicans. You see, when Republicans held the House majority, they blocked marijuana amendments from even being considered.

Even last week, top Republicans on the Financial Services Committee requested to delay the vote, given some unanswered questions. The vote went ahead and was passed despite this request, which is a reflection of the chamber’s new Democratic majority.

When the legislation will reach the floor is unclear. But if passed, federal banking regulators will not be able to punish financial institutions just because they service marijuana businesses that enjoy legal status under state or local law. That will be a watershed moment for the legalized marijuana industry.

***Coming full circle, given the status of these various federal reform efforts, where do we see the most impact on investments?

Marijuana is still illegal on the federal level. So, as you would expect, the investments seeing the biggest gains are those that have less risk of federal prosecution. CBD falls into this area, despite the current murkiness surrounding its FDA approval. Given this, many CBD stocks are exploding.

Matt’s own Elixinol is one example. Elixinol makes and distributes CBD supplements and skincare products. At the time of this writing, Matt’s subscribers are up over 175% since December.

So, CBD companies should be on your radar if you’re looking to begin a portfolio of marijuana investments.

A second marijuana investment area that has some insulation from federal repercussions is found in “picks and shovels” companies — in other words, companies that provide services to the marijuana industry, but don’t directly participate. For instance, a company that provides fertilizer and production equipment to a grower.

The example from Matt’s portfolio is Innovative Industrial Properties (IIPR). It’s a REIT which buys properties from medical marijuana growers, then leases the buildings back to the growers. At the time of this writing, Matt’s subscribers are up over 150% since August.

As to pure-play marijuana companies, such as those that sell marijuana directly to consumers, we expect they’ll thrive in the coming years after full federal legalization. But until that happens, we anticipate outperformance from these “safer” marijuana plays.

That said, if you’re looking for huge investment returns, the time to invest is usually before the crowd piles in. That means an investment in more direct marijuana companies today could pay off huge tomorrow.

If you’re looking for help identifying marijuana investments, Matt will be hosting his first-ever Cannabis Stock Summit where he will explain the area he’s most excited about right now. It’s based on a strategy that targets a specific type of marijuana company positioned to benefit from a unique market event. Click here to learn more.

In the meantime, we’ll continue to keep you up to speed as to the status of federal reform as 2019 unfolds.


Debra BorchardtDebra BorchardtApril 9, 2019


New York State’s Department of Health that oversees the medical marijuana program has yet to approve three outstanding proposed acquisitions. The three deals include the MedMen Enterprises Inc. (MMNFF) acquisition of Pharmacann, The Green Thumbs Industries (GTI) acquisition of Fiorello Pharmaceuticals and the Cresco Labs Inc.(CRLBF) deal with Valley Agriceuticals.

It had looked like New York was fast-tracking full legalization this year, but then at the last minute, cannabis funding was not included in the Governor’s budget. It looked like adult use marijuana was pushed off to another year. Then Governor Cuomo said that wasn’t the case and that in fact, negotiations were continuing. As all the back and forth continues, these companies have to wait patiently for the state to figure out its next moves.

The Department would only say in response to questions, “The New York State Department of Health is currently reviewing MedMen’s formal merger request with PharmaCann, which they submitted in January. The Department initially denied requests from Valley Agriceuticals/Cresco and Fiorello/GTI. Both have recently resubmitted their requests, which are currently under review.”

A GTI spokesperson said, “The transaction is still in regulatory review and we expect an answer in the near future.” MedMen and Cresco have preferred to stay mum on the situation. Although it seems the Pharmacann acquisition has been approved in all the other states, leaving just New York to green light the deal.

MedMen had announced its deal back on October 11, 2018, and said at that time that the resulting pro-forma company was anticipated to have a portfolio of cannabis licenses across the U.S. that would permit the combined company to operate 76 retail stores and 16 cultivation and production facilities.  MedMen is expected to add licenses in Illinois, New York, Pennsylvania, Maryland, Massachusetts, Ohio, Virginia, and Michigan as a result of the deal.

Cresco had stated in a filing that on October 24, 2018, it had entered into a definitive agreement to merge a subsidiary with and into Gloucester Street Capital, LLC, the parent entity of Valley Agriceuticals. Valley Ag is one of
the ten holders of a vertically integrated license from the New York State Department of Health. To date, the only material asset of Valley Ag is the vertically integrated license from the NYSDOH. Cresco said it had expected the closing to occur in the fourth quarter of 2018 or the first quarter of 2019.

Fiorello Pharmaceuticals, also known as FP Wellness, is licensed in New York state only. It is privately owned. The company lists its partners as The Clinic, Plant Consulting Group and LIU Pharmacy on its website. A report in the Daily Gazette said Fiorello Pharmaceuticals is building a medical marijuana production facility in Glenville and plans to open other dispensaries in Monroe, Nassau and New York counties. Green Thumb Industries or GTI (CSE: GTII) (OTC: (GTBIF) ) has plans to acquire FP Wellness, according to a company spokesperson.

The Buffalo News reported that there are two issues holding up the adult use legislation. The first is that Assembly Majority Leader Crystal Peoples-Stokes, who introduced the Marijuana Regulation and Taxation Act in 2013, “has insisted that half of the tax revenue should go toward reinvesting in communities that have borne the brunt of the war on drugs.” It seems the Governor is on board with this, but the tax revenue is estimated to be $300 million and he has also said he’d like to use some of that money for infrastructure projects like fixing the transit maintenance issues.

The paper said that the other issue was regarding the licenses and how to award them. The original five licensees have not made any profits and then the program was expanded to ten licenses. This group wants first dibs on recreational licenses in order to recoup their investments. The state, however, seems to be eyeing substantial license bidding fees that could potentially cause the only female-owned medical marijuana Etain to go out of business.

The state has been facing criticism that the program is heavily tilted towards corporate cannabis with no diversity except for Etain. This could be why the acquisition approvals have been stalled.


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