April 23 2021,



Most observers believe federal cannabis legalization is inevitable, but legalization opponents might have better luck in the brewing fights over potency caps and taxes.

The AP reports:  "Virginia’s new legalization law gives its future Cannabis Control Authority the power to set THC limits, and a proposal to cap THC in medical marijuana has gotten some attention in Florida’s Legislature. Nationally, the U.S. Senate’s bipartisan Caucus on International Narcotics Control suggested last month that federal health agencies study whether pot potency should be limited."

Most advocates for potency caps say they don't support a return to prohibition but want to protect consumers, while many businesses consider it an attack on the industry. Amber Littlejohn, executive director of the Minority Cannabis Business Association, told the AP she worries small businesses will "lose out if THC taxes drive customers to underground dealers or to big, multistate firms that may be able to trim prices."

For neo-prohibitionists who've struggled to gain traction in recent years, calls for potency caps might attract more supporters.

  • New York's new REC law taxes products based on THC content.
  • For states, potency taxes may be a more reliable revenue sources than sales taxes. 
  • The only state potency limit I'm aware of is in Vermont which imposes a not so stringent 30% THC for flower and 60% for concentrates.

Some of the industry's optimism after Democrats took the Senate has faded, but a few interesting recent posts by cannabis VCs help explain their (overall) bullishness:

Emily Paxhia, Managing Director, Poseidon Asset Management:

"Here we are in mid April with US cannabis stocks mostly going nowhere since early January. Though stock prices may not be going up, there is plenty going on under the hood that give insight into future returns." 

Patrick Rea, Managing Director, Poseidon Asset Management (Former CEO of Canopy Boulder): 

"Though investments in MSOs can provide risk-averse institutional investors 2–3x returns, those seeking outsized returns and true cannabis alpha must target the early stages. Post seed, when a company is pre-Series A but experiencing early traction and product-market fit, provides a natural point for alpha-chasing investors to engage and mitigate risk."

The Bengal Bite, Bengal Capital

"Not many people would have predicted that over a year into a pandemic cannabis sales would be up 30-60%. Maybe that’s because people are focused on looking at what’s new and different about cannabis (and there’s a lot) instead of first looking at how much cannabis behaves like products we know well, we budget for, and buy regularly - consumer staples.

Alcohol, long acknowledged as a consumer staple, saw a very similar pattern to cannabis sales during the pandemic."

Read Cannabis as a consumer staple, part II


I wrote a story for MJBrand Insights about the complex maneuvers companies still need to go through to enter new state markets:

[The partnership] option requires a company to entrust a partner with its intellectual property, reputation, and other assets. While no one tracks how many companies have made these arrangements or how they typically perform, lawsuits attest to how they can go very wrong.

Brands have accused their partners of failing to make required payments, stealing their intellectual property and using it to develop competing products, and underselling their partners. For a company trying to establish itself in a new market, these issues can stain its reputation and drain its coffers. 

Read the whole thing.

MJBrand also asked a bunch of industry luminaries what 4/20 means to them.

IN THE NEWS — 4/24/21

What's happening: