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Sean HockingSean HockingNovember 5, 2019

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AUTHOR:  aBIZinaBOX Inc. CPAs – Jordan S. Zoot, CPA

A few days ago, we published a short note that described how a Cannabis Cooperative Association (“CCA”) could be utilized to circumvent the confiscatory nature of Internal Revenue Code (“IRC”) §280E[i]. Several our readers, including some purported experts, advised us that our suggestion would not work for them because the business organization with which they were involved pre-dated the enabling legislation for CCAs.

Read the law! The California Legislature anticipated this problem. The Legislature was aware many collectives and cooperatives were organized based on Proposition 215 long before a glimmer of hope for legalization even existed in fantasies regarding the future. Beginning even before Proposition 215 was passed, collectives and cooperatives were organized under various provisions of California law for the cultivation and underground distribution of marijuana. Many such groups formed a Nonprofit Mutual Benefit Corporation. Most did little else in the way of the creation of formalizing an organizational structure. There were, of course, some significant exceptions in which a group of individuals established formalized organizations.

Regardless of the extent to which an existing cannabis collective or cooperative has an established legal structure and formal documentation, the California Legislature created an avenue for such organizations to become CCAs. The enabling legislation for CCAs is found in Chapter 22, Title 10, of the Business and Professions Code (“B&P”). Articles 1-10 of Chapter 22 provide the substantive legislation for CCAs. The Legislature included Article 11 to specifically address the issue of existing cannabis collectives and cooperatives that would benefit from a conversion into a CCA[ii].


Article 11 provides in relevant part:

“26231. A corporation that is organized or existing pursuant to any law . . . may be brought under the provisions of this chapter by amending its articles of incorporation, in the manner that is prescribed by the general corporation laws, to conform to this chapter. If a corporation amends its articles of incorporation to conform to this chapter, it shall be deemed to be organized and existing pursuant to, and entitled to the benefit of, and subject to this chapter for all purposes and as fully as though it had been originally organized pursuant to this chapter.

“26231.1. Articles of incorporation shall be deemed to conform to this chapter within the meaning of Section 26231 if it clearly appears from the articles of incorporation that the corporation desires to be subject to, and to be organized, exist, and function pursuant to this chapter. [Emphasis added.]

“26231.2. If the amended articles conform, as provided in Section 26231.1, provisions in the articles of incorporation that appeared in the original articles or some previous amended articles, are ineffective if, and to the extent that, they are inapplicable to, or inconsistent with, this chapter.”

It takes far more, of course than an amendment to Articles of Incorporation to convert a collective or cooperative into a duly organized and operating CCA. A CCA that engages in commercial cannabis activity pursuant to the Medical and Adult-Use Cannabis Regulation and Safety Act (“MAUCRSA”) is a special form of corporation expressly created to engage in commercial cannabis activity in California’s cannabis industry through the equivalent of an agricultural cooperative. A CCA is a sophisticated form of an incorporated entity. A CCA is subject to California’s general corporate laws as well as the special provisions of B&P §§26220-26231.2. The combination of these two bodies of law creates operational business advantages for CCAs. The special provisions of law set forth in B&P §§26220-26231.2 trump the general corporate law in the event of a conflict.

A CCA is also subject to special rules for California and federal income tax purposes. A CCA files a return for federal income tax purposes as a cooperative pursuant to Subchapter T[iii]. A CCA files similarly for California income tax purposes. These special filing rules provide income tax advantages for CCAs.

All existing collectives and cooperatives should not be converted into CCAs. Proposition 64 preserved all the rights granted to Californians under Proposition 215. There will be a place in California for unlicensed, unregulated medical collectives for the foreseeable future. The cottage industry of unlicensed, closed-loop collectives is entitled to continue to operate as not-for-profit collectives. Such organizations cannot engage in commercial cannabis activity.

There will also be a place in California for licensed medical collectives and cooperatives for the foreseeable future. Those Proposition 215 collectives and cooperatives that intend to engage in commercial cannabis activity must be licensed. The foundation for a Proposition 215 medical collective is not consistent with commercial cannabis activity. Any such an organization should consider conversion into a CCA. There is no prohibition against a CCA operating as a not-for-profit organization that is engaged in commercial cannabis activity for the benefit of both its cultivator members as well as its consumer members. Any such a collective or cooperative, however it is presently organized, will have a financial advantage over any conventional business structure if the organization properly converts into a CCA.

The special treatment of CCAs for income tax purposes makes these special corporations financially more efficient than conventional business structures for the conduct of cannabis business in California. A CCA also has operational advantages over conventional business structures in connection with the conduct of commercial cannabis activity. The conduct of commercial cannabis activity through a CCA requires experienced legal counsel. Of even greater importance, accounting and tax-reporting advice from a CPA firm are essential to the successful conduct of commercial cannabis activity through a CCA.

A CCA that does nothing more than act as a cooperative marketing representative provides a valuable service for its member growers. In this regard, an organization that acts as a broker must be licensed as a distributor. Marketing representation and sales representation are not the same things, although they are frequently conflated. Licensing is required for representation in connection with sales. The use of a CCA solely for marketing merely scratches the surface of the benefits such an organization can provide with respect to commercial cannabis activity. As we pointed out in the article referenced above, even for a modest cannabis business operation the tax savings that can be secured using a CCA can exceed $1.0M per year.

A CCA that engages in cannabis business activities beyond acting as a cooperative marketing representative, for example operating a wholly-owned cannabis distributor, requires a capable business organization. Such a business operation necessarily requires sophisticated operational and financial record-keeping systems and procedures in order to comply with the regulatory requirements of the California Dept. of Tax and Fee Administration [“CDTFA”] Bureau of Cannabis Control [“BCC”] and other cannabis regulatory agencies as well as the multiple tax filing requirements for California cannabis businesses.

A CCA that operates a wholly-owned cannabis distributor should establish an accrual method of accounting for federal income tax purposes. A number of additional record-keeping benefits, as well as significant tax-saving benefits, will flow from the use of an accrual method of accounting for a CCA engaged in commercial cannabis activity. The establishment of an accrual basis system of accounting for a distributor engaged in business in California’s cannabis industry requires the services of an experienced CPA.

For the gamblers among our readers, the use of a CCA for the conduct of business in California’s cannabis industry is the equivalent of playing with “house” money. For the investors among our readers, the use of a CCA for the conduct of business in California’s cannabis industry is the equivalent of an “all up-side, no down-side” financial arrangement.

Sources & Footnotes

[i] See IRC Sec 280E – Escrows

[ii] See CCA’s Good or Better, California Cannabis Collective the Sky Is Falling and Dead – Alive – Comatose

[iii] IRC Secs. 1381-1383

Sean HockingSean HockingNovember 5, 2019

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AUTHOR:  aBIZinaBOX Inc. CPAs – Jordan S. Zoot, CPA

Corporate Transparency Update. The focus of this website has been on the legal cannabis industry in California. However, many of our clients and regular readers are aware that our practice also focuses on:

  • Taxation and Transactional Consulting for pass-thru entities, [limited liability companies [“LLC’s], partnerships and S Corporations
  • Alternative Asset and Debt Hedge Funds and Private Equity
  • US Title 31 – anti-money laundering [“AML”] provisions and virtual currency
  • US Title 26 [“IRC”] – IRS practices and procedures relating to civil and criminal tax controversies

We have written about FinCEN’s Cannabis Industry Policy[1], AML anti-structuring policy[2], and the FDIC’s initial efforts at beneficial ownership, transparency for LLC’s acquiring residential property in major markets[3] and the application to the California cannabis industry[4].

HR 2513 – Corporate Transparency Act

On October 23, 2019, the House passed H.R. 2513. H.R. 2513 is a two-part Bill. Division A is the Corporate Transparency Act, or CTA[5]. If enacted, the CTA would require certain, defined U.S. companies to report identifying information regarding their beneficial owners to the Treasury Department – so that such information would be available to both the government and financial institutions carrying out their own AML duties.

The CTA:

  • Requires certain, defined corporations and limited liability companies (see below) to disclose their Beneficial Owners [“BOs”] to FinCEN at the time the company is formed.
  • Establishes minimum BO disclosure requirements, including the BOs’ name, date of birth, current address, and driver’s license or non-expired passport number.
  • Requires covered companies to file annually with FinCEN a list of its current BOs, and a list of any changes in BOs that occurred during the previous year.
  • Imposes civil and criminal penalties for persons who willfully submit false or fraudulent BO information, or who knowingly fail to provide complete or updated BO information.
  • The key provision of the CTA is its definition of a “BO.” With certain exceptions, noted below, the CTA broadly defines a “beneficial owner” as a “natural person who, directly or indirectly, through any contract, arrangement, understanding, relationship, or otherwise –”
  • exercises substantial control over a corporation or limited liability company;
  • owns 25 percent or more of the equity interests of a corporation or limited liability company; or
  • receives substantial economic benefits[6] from the assets of a corporation or limited liability company.

At this point, our regular readers should ask why we are writing about federal legislation that is perhaps indirectly related to individuals and entities involved in California’s cannabis industry. The CTA provides for a number of exemptions from the BO disclosure requirements which will be discussed in a separate article.

The CTA will have little direct impact on the owners of “plant touching” cannabis businesses. However, it will have significant application to the owners and purchasers of residential and commercial real estate that may be acquired as an investment of the earning of cannabis industry businesses, which will certainly be exacerbated if the proceeds of cannabis activity originate in the “black market”.

It is also quite possible that the “cash-out” of certain cannabis investments could wind up being invested in real estate or operating businesses that are subject to the CTA.

H.R. 2513 contains another section – “Division B” – entitled the “Counter Act of 2019.” The acronym “COUNTER” stands for “Coordinating Oversight, Upgrading and Innovating Technology, and Examiner Reform.” Division B stretches for 63 pages. It is almost twice as long as the CTA. The COUNTER Act of 2019 represents a grab-bag of detailed provisions relating to BSA/AML reforms which previously had been set forth in a proposed and inelegantly-named bill, “To make reforms to the Federal Bank Secrecy Act and anti-money laundering laws, and for other purposes” (on which we previously blogged, here). The COUNTER Act of 2019 has 35 different sections, including a whistleblower provision; a provision including “dealers in antiquities” in the definition of a “financial institution” covered by the BSA; and many other provisions pertaining to information sharing, resource sharing, and technological innovation.


FATF – Best Practices for Beneficial Ownership

The Financial Action Task Force (“FATF”), an international and intergovernmental AML watchdog group, has issued a document entitled “Best Practices on Beneficial Ownership for Legal Persons,” (“Best Practices Guidance”) on November 5, 2019[7] which urges countries to use multiple methods to identify accurately and timely the beneficial owners of legal entities. This document also describes some thoughtful recommendations.


The FAFT Best Practices Guidance represents an evaluation of the approaches of the member countries to the collection and maintenance of beneficial ownership information, including specific recommendations. The FATF Guidance identifies six challenges to tracking beneficial ownership[8]


Sources Footnotes

[1]See FIN-2014-G001

[2]See Structuring Transactions to Evade and 31 USC 5324,

[3] Much of the initiative in this area was inspired by a series of articles in the New York Times – Anonymous Owner, L.L.C.: Why It Has Become So Easy to Hide in the Housing Market. The issue was discussed extensively in an article in the June 20, 2019 edition of Ballard Spahr LLP’s Money Laundering Watch newsletter – Lawmakers Renew Effort to Overhaul AML Laws, Including Greater Beneficial Ownership Transparency and in Congressional discussion draft of The Improving Laundering Laws and Increasing Comprehensive Information Tracking of Criminal Activity in Shell Holdings [“Illicit Cash”] Act.

[4] Transactions Involving Changes in Ownership, Financial Interests and Entities

[5] The purpose of the CTA is described as,“To ensure that persons who form corporations or limited liability companies in the United States disclose the beneficial owners of those corporations or limited liability companies, in order to prevent wrongdoers from exploiting United States corporations and limited liability companies for criminal gain, to assist law enforcement in detecting, preventing, and punishing terrorism, money laundering, and other misconduct involving United States corporations and limited liability companies, and for other purposes”.

[6] The “substantial economic benefits” prong under the CTA’s definition of a “beneficial owner” represents an expansion of the definition of “beneficial owner” imposed by FinCEN’s existing BO regulation, which contains only the two “control” and “ownership” provisions. How these competing definitions of the same key term can be reconciled is not clear.  It is also not clear is how financial institutions will address checking the beneficial ownership information that they have collected from their customers under the BO regulation against a database that presumably will include different and more expansive information.

[7] FATF previously released its Guidance on Transparency and Beneficial Ownership in October 2014. The earlier FATF Guidance described steps countries should take to prevent the misuse of legal persons for ML/TF. The FATF did not specify the mechanisms that countries should utilize for the collection of beneficial ownership information. Rather FATF described three options for facilitating the cooperation of companies with the competent authorities and ensuring the availability of beneficial ownership information on companies. The three options are:

“Registry Approach – this approach requires company registries to obtain and hold up-to-date information on the companies’ beneficial ownership. This information is made publicly available and would facilitate access by financial institutions, designated non-financial businesses and professions (DNFBPs) and other competent authorities.

Company Approach – under this approach, companies are required to obtain and hold up-to-date information on the companies’ beneficial ownership or companies to take reasonable measures to obtain and hold up-to-date information on the companies’ beneficial ownership.

Existing Information Approach – under this approach, existing BO information is gathered from existing sources, including: (i) information obtained by FIs and/or DNFBPs; (ii) information held by other competent authorities on the legal and BO of companies; (iii) information held by the company as required; and (iv) available information on companies listed on a stock exchange, where disclosure requirements ensure adequate transparency of beneficial ownership.”

[8] The challenges identified were

“Lack of adequate risk assessment concerning the possible misuse of legal persons. Specifically, the mutual evaluation revealed that not all types of legal persons were covered in the risk assessment, relevant risk assessment was not consistent with the results of national risk assessments, and only domestic threats and vulnerabilities associated with legal persons were considered. Finally, FATF concluded that registries, companies, FIs and DNFBPs and competent authorities did not demonstrate a good understanding of the risks involved in using legal persons.

Adequacy, accuracy and timelines of information on beneficial ownership. The evaluation revealed that beneficial ownership information collected was not accurate and there were no systems in place to actively verify, test or monitor the information. Nor were there requirements of legal persons to update their beneficial ownership information or inform the registry that there were changes to beneficial ownership. Countries did not coordinate among different sources of information to cross-check information for accuracy. Moreover, the parties responsible for updating the information lacked rigorous customer due diligence (“CDD”) measures and were unable to identify beneficial ownership information when complex structures or foreign ownership was involved. Finally, there were no record retention requirements.

Access by competent authorities. The evaluation found that there was inadequate mechanism to ensure that competent authorities had timely access to beneficial ownership information. This was so because of the obstacles to information sharing caused by data protection and privacy laws. Moreover, FATF found that competent authorities did not share information and had no procedures to seek information from parties obligated to provide information. The lack of registration and licenses mechanisms caused competent authorities’ difficulty in identifying the source of information. Finally, competent authorities lacked sufficient resources to carry out investigations

Bearer share and nominee shareholder arrangements.  The evaluation determined that countries did not place risk mitigating measures in place to address money laundering concerns, particularly because ownership of the bearer shares and share warrants were not sufficiently accessible or transparent. FATF found that the use of nominee shareholders obscured the ultimate control and ownership of the companies.

Fine and sanctions. The evaluation found that there was generally a lack of effective, proportionate, and dissuasive sanctions directed at companies that failed to provide accurate and up-to-date information on beneficial ownership and reporting entities which failed to apply specific CDD measures required for legal persons. As we previously blogged, many countries in the EU have failed to prosecute people for money laundering offenses and has in general lagged behind the US on enforcement actions against money launderers.

International Cooperation. The evaluation found that there were inadequate mechanisms for monitoring the quality of assistance received from other countries. Specifically requests for information often took a long time to fulfill when they involved multiple international agents and complex legal issues. This concern was amplified by the fact that not all countries keep beneficial ownership information.”


Debra BorchardtDebra BorchardtOctober 27, 2019


On the October 27 episode CBS news program exposed the California cannabis illegal grow problem. The show highlighted that more supply is grown than is sold within the state and that most of the surplus is being shipped east to states where marijuana is still illegal and can be sold at a higher price.

The program interviewed one farmer, who was trying to grow his cannabis legally, but because of onerous taxes and numerous fees, he can’t make a profit. Mikey Steinmetz, Co-founder of Flow Kana walked the CBS reporter through the company’s clean, shiny and very expensive factory to show what a legal operation looks like. He, too, bemoaned the state’s inability to control the illicit market.

Todd Kleparis, the CEO of cannabis security and distribution company Hardcar wrote, “Last month, it was announced that there had been a significant license contraction for cultivators, manufacturers, and retailers in the state. There was a 48% drop in active cultivation permits and a 29% drop in licensed manufacturers, according to statistics offered by Marijuana Business Daily. This loss in licenses for cannabis was because those who had been approved for temporary licenses for cannabis-related operations (that expired earlier this year) couldn’t meet the regulatory requirements for obtaining provisional and annual permits.”

He went on to add, “More importantly, there is a significant barrier to entry, both financially, and in terms of compliance, to the legal cannabis market in the state that once held such promise for cannabis. Those who once had a hope of moving from grey to legal are left to consider going back into the shadows, rigorously pursuing the investors needed to build capital for licensing, or give up altogether.”

Jordan Zoot pointed this out in a previous piece on Green Market Report saying, “California’s underground economy generates between $60 to $140 billion in unreported revenue annually, according to a University of California at Los Angeles Labor Center report, depriving the state of $8.5 billion in corporate, personal, and sales and use taxes each year.

A pilot program has allowed a team of agencies in Sacramento and Los Angeles to work together to investigate and prosecute the most outrageous felony-level multijurisdictional underground economic crimes in California. AB 1296 builds on the success of a state pilot program by permanently establishing law enforcement teams in Sacramento and Los Angeles and authorizing additional teams in the three other major metropolitan regions of the state: San Diego, the Bay Area, and Fresno.

Investigative teams have identified $482 million in unreported gross receipts and $60 million in an associated tax loss to the state. Additionally, through its criminal enforcement actions, the pilot program has recovered over $25 million in lost tax revenue, victim restitution, and investigation costs.

The legislation strengthens the program by ensuring multi-agency collaboration between several governmental entities, including the Department of Justice, the Department of Tax and Fee Administration, the Franchise Tax Board, and the Employment Development Department. Together these agencies combat wage theft, tax evasion and other crimes in the underground economy.

Zoot also determined that “The taxes that California should be collecting are approximately 31% of the gross receipts of cannabis businesses, or $960K for each “black market” cannabis entity, and $1.1MM per legal cannabis entity. The annual total for cannabis taxes for the “black market” and legal business should be $3.66B. It is our recollection CDTFA recently announced the cannabis taxes collected for the second quarter of 2019 were $144.2MM[3] vs. $915MM California should be collecting.”


StaffStaffOctober 18, 2019


Guest opinion piece by Todd Kleperis, CEO of Hardcar. 

Protecting What’s Left of the California Cannabis Industry

Many people within the cannabis industry operate on the assumption that it’s safe to move cannabis products and cash within states; after all, peace and love are all that the plant is about, right? 

As an established cannabis security professional who has been operating in California since before legalization with my cannabis security company, HARDCAR, I can confidently confirm that when it comes to participating in the legal market, many are willing to trade in the peace and love of the plant for criminal activity and potentially life-threatening situations. 

I hate to say it, but the California cannabis industry is slowly killing itself and has the potential to literally endanger lives as a result of this loss of a promised regulated system that intended to keep cannabis clean of criminal activities. 

Pushing Cannabis Back into the Shadows

With a recent contraction of hundreds of cannabis licenses, California could be getting itself into is a situation that threatens the security and safety of those moving cannabis, and cannabis cash, across the state. 

Last month, it was announced that there had been a significant license contraction for cultivators, manufacturers, and retailers in the state. There was a 48% drop in active cultivation permits and a 29% drop in licensed manufacturers, according to statistics offered by Marijuana Business Daily. This loss in licenses for cannabis was because those who had been approved for temporary licenses for cannabis-related operations (that expired earlier this year) couldn’t meet the regulatory requirements for obtaining provisional and annual permits. 

More importantly, there is a significant barrier to entry, both financially, and in terms of compliance, to the legal cannabis market in the state that once held such promise for cannabis. Those who once had a hope of moving from grey to legal are left to consider going back into the shadows, rigorously pursuing the investors needed to build capital for licensing, or give up altogether. 

The Bureau of Cannabis Control has done what it can to regulate a ferociously growing market, yet the job just proved to be too tremendous to regulate cannabis on such a large scale. No matter who is at fault for where we’re finding ourselves now, the State of California has deprived good human beings of the ability to provide reliable and convenient products to their established clients with these barriers for entry that make participating in the legal market a no-go. 

Is Cannabis in California Safe at All?

Those who operate in the grey market of cannabis are forced to do business within the shadows, but unfortunately many aren’t taking the necessary precautions to protect their safety while moving cannabis and cannabis cash. We’ve heard of, and even seen, cars with cannabis leaves peaking out of the trunk in an effort to transport the crop. People are transporting thousands of dollars of cannabis cash across cities, even the state, with no protection or precautions to protect the employee against being robbed. 

Licensed growers, manufacturers, distributors, and retailers are even putting themselves at risk with a lack of security on cash, product, and people. Despite the ideals that cannabis-related crime would begin to fall with the legalization of cannabis, people are still facing gun-related violence in California over cannabis. “People are getting shot over this plant,” said Ben Filippini, a deputy sheriff in Humboldt County said to The Atlantic, “All legalization did here was to create a safe haven for criminals.” In Humboldt County, the largest cannabis-producing region of the United States, 717 per 1 million people go missing each year. 

Across the state, delivery drivers, who can carry up to $10,000 in cash, are being robbed by criminals eager to take what the legal market has. To carry cannabis and cash without protection is just sheer lunacy. Shame on anyone involved in cannabis who will willingly put their people in harm’s way for a profit.  

Despite efforts to keep gangs and drug cartels out of the legal markets, it is speculated that those involved in organized crime are heading from prohibitionist states in the east to west to use California’s legal cannabis to feed illicit markets. 

While the headlines may feed us contradictory statements on the connection between cannabis and crime rates, we can’t deny that crime within cannabis still exists and persists. People want what licensed cannabis can provide and produce, and are willing to go to any lengths to get it. 

Simply put, the California cannabis industry is killing itself and endangering what’s left of it by its own lack of foresight towards its own regulations towards safety and security right after they got out of the gates.

Whether they like it or not cannabis will continue to be bought and sold in the Golden State and regulators will just lose their hold on a large portion of what could have been a tremendously large regulated market. 

Protecting What We Have Together

The regulated cannabis market in California has come too far to endanger what we’ve built. 

HARDCAR was built from the ground up to protect the cash, product, and most importantly the people of cannabis to ensure the safety of California’s legal cannabis while setting a standard for the state to strive to as far as enforced safety and security compliance. 

Our efforts have come from recognizing that cannabis can be dangerous and will continue to be if we don’t get the safety of cannabis under check now before more lives are unnecessarily lost. 

California and other states can work to develop the intelligence to recognize cannabis crime and put in the security measures to ensure it no longer persists. Just recently, we have uncovered one firm out of Colorado that carries up to half a million dollars in cash at a time, without any protection, and as expected, they have a target on their head. As a community around cannabis, we need to work together to intervene in these criminal activities before they have a chance of coming to fruition. 

Catching the cannabis industry before it becomes victim to crime starts with lessening the barriers to entry to receiving a cannabis license to allow people to operate legally, while also taking the proper security measures to ensure that cannabis product, cash, and people are safe. 


Debra BorchardtDebra BorchardtOctober 16, 2019


Green Market Report reported news last week that Trump associates who had been arrested for campaign finance violations had applied for marijuana licenses in Nevada. It also seems one of the gentlemen tried to pursue licenses in California as well.

The San Francisco Chronicle reported that Andrey Kukushkin had attempting to build a cannabis business in the Bay Area. The paper said that Kukushkin had some control in a variety of cannabis companies named Oasis Venture, Legacy Botanical Co., and Venture Rebel Inc. It was reported that Kukushin first entered the space in 2015 as his Rebel Venture Inc. company was contracted by the medical marijuana dispensary MediThrive to manage its Mission Street location.

This information came about as Kukushkin sued his partners in 2018 claiming they cost him $1 million by running the company into the ground. Venture claims it gave MediThrive a million dollars to renovate a storefront and purchase inventory. The case alleges that the inventory got diverted to another business and the investment was squandered.

It looks as if this case is continuing as the latest filing is dated 9/3/2019. Cannabis law firm Greenspoon Marder seems to be representing Kukushkin in this case and Green Market Report is in the process of confirming whether this is still the case.

More recently, his Oasis Venture company planned to turn a large ranch in Livermore into a cannabis farm. It seems the neighbors weren’t so keen on the idea. Oasis Venture originally applied for a cultivation permit in 2017 but was denied. The paper reported that a business partner by the name of Chuk Campos wrote a letter to the Alameda County saying Oasis was going to use the cannabis to advance cancer research. The article says Campos is now distancing himself from Kukushkin.

According to CannaBiz Media, Andrey Kukushkin appeared on 11 cultivation and manufacturing licenses in California relating to Trava Group LLC., which wasn’t mentioned in the Chronicle story. Trava Group is based in California. CannaBiz said that the licenses appear to have expired, yet a story in the Mojave Desert News says a license was awarded to Trava Group for delivery only.

The Sacramento Bee is reporting that the FBI is investigating whether cannabis business people have tried to bribe California politicians. The Bee is suggesting that it could be Kukushkin that is being investigated, which is a logical conclusion since the group also tried to bribe politicians in Nevada in order to get licenses approved.

The Sacramento Business Journal reported that “Kukushkin’s business dealings extend to Sacramento’s legal cannabis industry, where he is a business partner of Garib Karapetyan, the CEO of Capitol Compliance Management, which is the group behind nearly one-third of Sacramento’s cannabis dispensaries.”

The Kolas dispensary brand is owned by Capitol Compliance and is up to nine of the 30 dispensaries licensed by the city of Sacramento. “Karapetyan has permits for eight dispensaries in Sacramento, according to The Sacramento Bee, making him the single largest permit holder for dispensaries in the city.”

The Bee had this statement: “If this story is true, then our cannabis licensing process, which was designed to protect consumers and reward local law-abiding businesses, is being improperly exploited,” said the mayor’s spokeswoman, Mary Lynne Vellinga, in a statement provided to the Business Journal. “The mayor is calling for an immediate investigation and will lead an effort to add additional safeguards to licensing process.”



Video StaffVideo StaffDecember 13, 2018


Humboldt County in California has seen its fair share of boom and bust cycles. From gold mining to logging, this county continues to reinvent itself. Now it’s cannabis that is fueling the county and specifically the town of Eureka’s latest boom. Rob Holmlund, the Director of Community Development in Eureka California tells the Green Market Report how the area has been transformed by the cannabis industry that has brought meaningful jobs to the residents.

William SumnerWilliam SumnerDecember 12, 2018


Earlier this week, the cannabis technology platform LeafLink released its 2018 Wholesale Cannabis Pricing Guide and the company learned that Alaska and Maryland are the two most expensive states to buy legal cannabis, followed by Nevada and California.

Examining the wholesale landscape of some of the most mature cannabis markets in the United States, the guide looks at the average wholesale price of cannabis in eight states: Alaska, Arizona, California, Colorado, Maryland, Nevada, Oregon, and Washington. The product types covered by the report include concentrates, cartridges, edibles, flower, and pre-rolls.

Although the report does not dive into the specifics of why one state is more expensive than another, the authors speculate that the Alaska and Maryland’s high prices are due to the states having a low number of cannabis cultivators. In the two states where cannabis is cheapest, Washington and Oregon, there is currently a glut of cannabis cultivators; leading to low prices and oversupply.

“As the standard wholesale marketplace for the industry’s leading brands, we are able to provide crucial market information to cannabis retailers and brands, which will help inform their plans for 2019,” said LeafLink Co-Founder and CEO Ryan G. Smith in a statement. “As more states like Massachusetts, Connecticut, Pennsylvania, and Michigan continue to establish wholesale operations, we will be able to provide a larger scope of market activity to further empower the LeafLink community, as well as the industry at large.”

Nationwide, the average price for a pound of cannabis flower is $2,124 per pound, while a gram of pre-rolls costs around $5.66 per gram. The average price for cannabis concentrates costs approximately $26.07 per gram and cartridges are priced at around $39.55 per gram. Edible cannabis products, on average, cost around $0.20 per milligram.

When taken on a state-by-state level, cannabis prices start to vary. With regards to cannabis consumer preferences, the report found that consumers prefer products in the lowest 25% price range. The exception to this was pre-rolls. On average, consumers preferred pre-roll products in the 25%-49.99% price range.

The report also examined the relationship between pricing and discounted sales. On average, approximately 16% of the products sold through LeafLink’s platform have a discounted price. Across all eight states examined, discounted products generated 3% more sales than regularly priced products.

The discount effect is magnified when combined with larger sales campaigns. During the last year, LeafLink ran two sales promotions, one in the month leading up to 4/20 (dubbed 3/20) and one in July called 7/10; which is a considered an industry-wide “holiday” for concentrates.

When combined with those larger sales campaigns, discounted products generated 37% more sales on 3/20 and 38% more sales on 7/10. This seems to suggest that cannabis retailers stand to significantly boost their sales numbers by combining sales promotions with discounted cannabis products.

Debra BorchardtDebra BorchardtAugust 20, 2018


The state of California released its tax data for Q2 cannabis sales last week.  Tax revenue from the cannabis industry totaled $74,240,257.00 million from April 1, 2018, through June 30, 2018, which includes state cultivation, excise, and sales taxes. It does not include tax revenue collected by each jurisdiction.

According to GreenWave Advisors, that means that the implied recreational retail revenues increased 36% to ~$290M from $213M in Q1.  In addition to the retail revenues, the implied wholesale revenues would have reached roughly $29.9M vs $10.7M quarter-over-quarter.  “We note while these results fall below expectations, it does not include medical marijuana sales in which sales and excise taxes are excluded,” said Matt Karnes, the founder of GreenWave Advisors.

The California Department of Tax and Fee Administration also noted the excise tax on cannabis generated $43,490,668.00 million in revenue during the second quarter of the calendar year 2018. The cultivation tax generated $4,482,119.00 million, and the sales tax generated $26,267,470.00 million in revenue.

California cannabis retailer MedMen (MMNFF) said on Monday that its stores accounted for roughly six percent of all legal retail sales of cannabis and cannabis products in the second quarter for the state. MedMen said in a statement that its eight stores represent about two percent of all retailers, meaning on average MedMen stores outperform non-MedMen stores by a factor of three.

“The strong growth in tax revenue in the second quarter of the year shows that the legal cannabis industry is delivering on its promise of economic activity and greater public resources to the people of California,” said Adam Bierman, MedMen chief executive officer, and co-founder.

While MedMen is clearly happy with its results, the actual tax receipts are far lower than what the state had projected in the budget proposals. Governor Jerry Brown had estimated that the state would pull in $175 million in the first six months and instead the number was $135.1 million.

GreenWave went on to add that approximately 100,000 medical marijuana cards have been issued by the state since 2004 so Karnes believes that total retail sales are likely considerably much higher with med marijuana included and he estimates that its near $700M  for the first half of the year.

“As the regulated market in CA continues to evolve, it will likely experience ongoing sales pressure in the near term.  However, we remain optimistic that these “growing pains” will ultimately be resolved to achieve a $7B retail market over the next 5 years,” said Karnes. He went on to add that the average revenue per dispensary for the first half of the year is roughly $300,000 per month.

At the end of June, there were approximately 64 medical only licenses representing 15% of the market and 331 licenses for outlets selling both medical and recreational. At that time there were only 21 recreational only licenses representing 5% of the market.

Jack SmithJack SmithAugust 8, 2018


Despite the overwhelming majority of Californians being happy with the legal cannabis market, there is still a significant percentage of residents who buy marijuana illegally, due in large part to high taxes on the substance.

A new report from Eaze Insights shows that 84 percent of Californians are “satisfied” with the legal marijuana market, but approximately 20 percent have purchased illegal or illicit marijuana in the past three months. Concerning to regulators and the state’s finances is that 84 percent of that segment of the population is “highly likely to repeat that behavior in the future due to the illicit market having cheaper products and no tax.”

Part of the concern is that although consumers would like to purchase marijuana legally if, given the option, the taxes are a major concern for many consumers. According to the California Department of Tax and Fee Administration, marijuana has a 15 percent excise tax, though recent reports have suggested the state is looking at cutting taxes as a way of driving legal means of consumption.

Approximately 85 percent of Californians have purchased cannabis from “unlicensed sources,” but most of them cited factors such as lower prices and a lack of taxes for the reasons those purchases were made.

Other consumers say they have purchased from illegal marijuana vendors because it’s “hard and time-consuming” to find legal businesses. Approximately 1 in 7 respondents said it was “not easy to identify licensed cannabis businesses.”

Although the picture has been painted with some negative brushes, there are changes that can be made that will positively affect California’s burgeoning weed economy.

If taxes were decreased by 5 percent, that could drive much of the illegal market into the legal market, Eaze notes. The town of Berkley took that initiative early on when it lowered its city tax on cannabis from 10% to 5%.

“A 5% decrease in the overall tax rate in CA could bring twice as many CA consumers to only purchase cannabis from licensed businesses (from 16% to 32%),” Eaze wrote in an email obtained by Green Market Report. “Conversely, a 5% increase in the overall tax rate in CA would drive twice as many CA consumers to only purchase from unlicensed businesses (12% to 23%).”

Use cases in the state include wellness (treating or coping with illnesses such as cancer) and consumers are increasingly becoming more sophisticated in the types of cannabis they consume.

“They care the most about consistent product quality,  fair pricing, packaging, safe access and a great customer experience, the same way they care about those things for more traditional consumer products,” the email obtained by GMR said.

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The Green Market Report focuses on the financial news of the rapidly growing cannabis industry. Our target approach filters out the daily noise and does a deep dive into the financial, business and economic side of the cannabis industry. Our team is cultivating the industry’s critical news into one source and providing open source insights and data analysis


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