STORIES OF THE YEAR: Delta 8 and Other Hemp-Derived Cannabinoids, California’s War on its Illicit Market, Legislatures Legalizing
NON-STORIES OF THE YEAR: No Progress on Federal Legislation
Golden Nug of the Year: The Rise of Cannabinoids Not Grown from the Plant
Hybrid News/Analysis Extract from 420+ Sources: Featuring all the developments this past week in the cannabis world on the federal level, state legalization/implementation, science/technology, business deals, international scene, social equity, celebrity cameos, and miscellaneous ridiculousness.
DISCLAIMER: All opinions are my own, and not those of my law firm Zuber Lawler. Even though I drop knowledge bombs, the show is NOT legal advice.Advertisement
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WE NOTE THAT THE FOLLOWING TRANSCRIPT WAS CREATED BY A ROBOT THAT MAY NOT HAVE APPRECIATED THE FINE POINTS AND NAMES SPOKEN BY JON, SO PLEASE FORGIVE ANY TYPOS, OR BIAS IN FAVOR OF OUR FUTURE ROBOT OVERLORDS:
All right, folks. Welcome to the December 27th, 2021 episode. The last episode of the year of cannabis last week from global cannabis times. Hybrid news analysis extract from over 420 sources each week. I’m your host, John Pierro. This is actually our 2021 year in review episode. So no highlight stories or golden nugs.
Really there’s one story of note to report this week, the rest we’ll just kind of skip over, maybe cover at the beginning of next week. Now, before we get down to business, I need to make my standard disclaimer. When I’m not fighting crime by night as a mass vigilante, I practice a cannabis and or IP law at the law firm, Zuber Lawler.
So I need to note that any views I express during this podcast are my own and not those of Zuber Lawler. For example, if I was to say the climate change allegory movie, don’t look up on Netflix from Adam McKay was an interesting combination of terrifying, good acting and. Ma then that’d be my own view and not that of Zuber Lawler.
And also I want to note that this podcast is not legal advice, so don’t be a dumb, dumb, and pretend that it is as always, if you have any feedback, shoot me an email to email@example.com. So the operative question for this particular recording session is how many doors and floors do I need between my recording session?Advertisement
And my daughter is wailing the songs from the Disney movie and condo at the top of their lungs to not be able to hear them while recording will the answer be three doors and a floor. Hopefully, so, but only one way to find out. So while there was some movement and some business deals that came up, it was not surprisingly at the end of the holidays and everything, you know, almost the end of the year, a bit of a slow news week.
But one thing definitely of note that I want to mention. Was that in Ohio, the activist group submitted all the signatures that they needed or the petitions for their adult use to bring it to the ballot. And so it’s an interesting little process in Ohio. They need to get approximately 130,000 signatures to take it to the legislature, which then has an opportunity to pass a bill, you know, based off of the, you know, initiative that the activists have.
And if the legislature does not take that opportunity, Then activists need to get a another hundred and 30,000 signatures in order to get something onto the ballot, which would be for 2022. So I’ve been talking a lot about how Ohio is a place to, you know, monitor. And I think that it will ultimately legalize by ballot in 2022.
Which we can discuss in my next week’s episode, which I’m going to say, John plays Toker dominance for 2022 and tries to predict some of the stories, but while there is movement in those legislature, most likely in the state house, it seems the Republican leadership is not down with adult use movement.
So the interesting thing is they actually got over 200,000 signatures rather than 130,000. Which I guess is a, you know, a hedge in case some are ruled invalid, but I always find it interesting to see like what percentage of the population are they getting? And so I guess there must be some confidence that I don’t think that the excess signatures can be counted towards the extra 130,000 they’ll need, if the legislature doesn’t approve of what they’ve brought to the table.
Um, and so perhaps they need to, you know, start from scratch after this, that the legislature doesn’t move forward and get another. You know, 200,000 additional signatures to take it to the ballot, but that was the main news story of the week. So we’re going to recap 20, 21, the stories of the year, and then my golden nug, the, you know, the deep cut, interesting story in the industry.Advertisement
So let’s talk about minor cannabinoids derived from hemp as the first major story of the year. So as those familiar we’ll know, in 2018, the farm bill legalized hemp, which by definition has only 0.3% THC Delta nine by drivers. And so what has happened now we saw with CBD, you know, being derived from hemp, but now we have a bunch of other cannabinoids, most notably Delta eight, and the general idea in terms of the argument for their legalities.
Hemp is legal. And so if you derive anything from hemp that would there for work, make it legal. And how does Delta eight come out a hemp? Typically it’s extracted. So CBD is extracted from hemp. And then by a chemical conversion process, it is turned into Delta eight, which is essentially, I think they say 50% as psychoactive as Delta nine THC.
So despite the fact that hemp was made illegal. It is not psychoactive. People are engineering, you know, drugs in the same family that are psychoactive and a Delta date is quite pleasant and, um, certain quantities and certainly has a use. And what we’ve seen is specifically in states that don’t have adult use marijuana containing Delta nine, Delta eight is particularly popular.
And one such state is Texas, which only this past year expanded their medical program a bit. But they’re certainly not at adult use. And so we’ll use Texas as an example state to see what happens. You know, there’s been this debate. Is it legal? Is it not? There’s an argument for it. There are arguments that this was not the legislative intent, certainly in the farm bill.
And so what a number of states have done, they’ve tried to explicitly make it Delta eight and any other cannabinoids derived from hemp through these chemical conversion processes, by saying that they are synthetically derived or. Uh, it just basically explicitly making them illegal, according to state statutes, as they’ve done in certain places, or just in guidelines from certain regulatory bodies and so Texas and kind of a stealthy maneuver, posted something on the relevant regulatory bodies website saying, Hey, if this isn’t actually illegal and the industry revolted.
No look, I mean, the fact of the matter is a lot of enterprising people in the industry, you know, we’re growing hemp and CBD was a good product for them. It’s been thrown in everything. It’s been pitched as a panacea and a cure all, but you know, the market and some of the prices have dropped. And so the next thing that came along that was appealing to people with Delta eight.Advertisement
And so the Texas hemp industry did not take this subtle making Delta eight. Kindly. And so it’s resulted in a chunk of litigation and the state, which is still being fought out and we shall see ultimately how that plays out. So we’ll see, but there are also, at the same time I’ve been reading about, you know, Delta 10, THC and THC.
Oh. And some of these, I covered one of these in the, I think a golden nug story one week, whereas interesting. Like this particular chemical conversion process to create, I believe that one was Delta 10 THC. Can be dangerous and potentially result in explosions and you conjures up images of breaking bad, uh, meth making.
And so it’s really, really interesting to see how this is going to play out. And certainly right now, it is a bit of the regulatory wild, wild west, but just like what’s going on. You know, marijuana proper with Delta nine in different states. Each state is kind of trying to figure out how it’s going to address this issue going forward.
So that certainly is a developing story that we’re going to see, um, continuing into 2022. In my next big, big story of 2021, this one kind of clicked in my head just a couple of days ago. So I had a post on LinkedIn. So, you know, my LinkedIn posts sometimes, you know, feel free to follow me on that to our little previews of my thinking or stories that catch my interest prior to recording the podcast.
So. I had finally clicked in my head that one of the biggest stories in the industry is California’s fight against the illicit market. And here’s why now California has been where the majority of the marijuana that’s been consumed in the illicit market across the country is grown. Um, for decades going back, I’ve met people who are third generation, uh, illicit market growers who grow a tens of thousands of.
Randomly met someone while vacationing, when their kids were playing with my kids. And anyways, so. This is, you know, it was always California’s impacted the entire country in this fashion. And California has had an unbelievable struggle trying to reign in and this illicit market, since they’ve gone full adult use legalization a couple of years ago, and one stat, just to give you the idea.
Of the enormity of the illicit market. There was in 2019, and obviously these are just estimations. The legal market in California was $3 billion and the estimates of the illegal market were $5 billion. So the idea is that it actually dwarfed the legal market. And so reason why this is such a huge story is that that illegal marijuana undermines the California legal.
And then it just, you know, moves eastward across the country and undermines every legal market that there is. Bottom line, right? This is just illicit marijuana. And so every single week I read, when I read my hundreds of news articles, a minimum of say three to five stories about what is happening in California to fight the solicit market.
So just to give you a couple of examples and just to kind of show you where the issues lie in relation to California, So for one thing, you know, California, I saw her, I saw at one point this year put up, I think a hundred million dollars in order to clear bottlenecks and certain jurisdictions where they have not been able to convert provisional licenses to full licenses.
This is holding up the process of illegal market. Getting more mature in these areas too. I always am reading about busts of larger legal grows, but it is a little bit difficult. And I read this crazy story that I made the golden Knuck story of last week, about how Mexican cartels, rather than having to worry about how to transfer their marijuana across the border.
And instead decided to start growing in the Emerald triangle. In Northern California, because it is so expansive and so dense that it actually takes law enforcement up to an hour to get to different places there. And so all of a sudden with these Mexican cartels there, you have people going missing, you have headless bodies popping up.
You have all sorts of apparently really awful fertilizers or other products that they’re using for the environment that are taking out animals. And this is just an absolutely crazy story. It’s just apparently really, really hard to enforce with limited resources. This geographic expanse for a number of reasons.
And so that’s another story I see a lot of, and then other things I’ve seen are local jurisdictions like San Francisco dropping taxes in order to help fight some, you know, awful crime waves where apparently a bunch of, you know, legit. Dispensary’s are getting jacked basically because the quality of the marijuana is better than the illegal market.
So they’ll, you know, robbers will come take legal marijuana and then sell it in the illicit market at higher prices than they can in the California market. And so that’s one thing that some people are doing.
There’ve been calls to also eliminate the cultivation tax. So here’s something interesting that the cultivation tax and actually recently our California state lawmaker try to move forward with the bill in this regard is that they pay a certain amount of tax, regardless of how much the farmers, the cultivators ultimately get paid.
So if retail prices go down for whatever reason, then it doesn’t matter. The cultivators are still paying the same tax, which doesn’t exactly seem fair and ends up, you know, increasing prices across the board. And then also. One other thing that I’ve seen is business owners are now just straight up coming to the point of revolting.
They are saying like, we are not going to pay cultivation tax. We are not going to pay different types of taxes in general, because we just can’t compete with the illicit market. I’ll talk a little bit now rather than, you know, playing Toker Domus as to where the potential solutions. And they think that ultimately.
The way that legal markets win is by convenience and by price. Let’s ask ourselves, Hey, how did Amazon become such a tight. Company and the answer is convenience and price. They kill you with convenience. And so one other thing I didn’t allude to is a fact that I think between 60 and 70% of jurisdictions in California, opted not to have dispensaries or different types of marijuana businesses, because there are large swaths of California that are more conservative, certainly in rural areas.
And so. One idea is perhaps if some of these areas were to sell and I don’t really know how you make that happen without incentivizing them economically in some fashion. I mean, one thing is make it more readily available because people can buy, you know, in all these areas. But I actually do think. You know, the cultivation tax hasn’t been, that makes a lot of sense to go after, because if you do that, then you’ll able to drop prices on the legal marijuana, which apparently is better quality according to the stories coming out of these robberies.
And I think that that would be a large step in terms of trying to prop up the legal market there. But ultimately if those billions of dollars of illegal grows are going across the country, Ultimately the only way that you could impact that is by this continued March towards legalization on state levels and ultimately federally, right.
New York and New Jersey coming online with legal markets, if they’re done. Right. And I certainly have my doubts about that, I think will be big, but you know, all these other places need to become legal and do it right to undermine the California illicit market. So that’s definitely one of the stories of the.
Another story that I think is interesting. Now, November, 2020 was a watershed moment. I think in terms of at the ballot and New Jersey voting to legalize was big. Certainly there are nice, I guess, surprises to a certain extent in terms of South Dakota legalizing, but that ended up getting undermined by their governor and in the court system on a technicality that threw out that ballot.
But, you know, they’ll get it back on the ballot activists, um, in 2020. But after that watershed moment, what happened this year? And I haven’t seen anyone really point this out is that this was the year where state legislatures and certain states went for it. When they had say polls that had 70% support for legalization across every state demographic, including Republicans, including.
Older, you know, demographics. And we see that reflected now in nationwide polling from Gallup and other polls reliably outside of that last Hugo poll, which was oddly lower by say, nine percentage points than other polls, but legislatures in certain states took it upon themselves. To move and to actually legalize of their own cord and get the, I guess, political credit for it rather than having voters do it themselves.
And so we had four states this year that legalized between the legislature and the governor signing off on it. And so we had Canadian. We had New Mexico. We had Virginia when it was still democratic control of the governor’s office and the two state houses and my home state of New York. So those are some major, major states and Virginia, we have to take note of, because it was the first, you know, Southern, I think, below the Mason Dixon line state to legalize.
And that’s going to play out in a really interesting way. In terms of the gap between their decriminalization measures kicking in this year and the adult use market, which I think now they’re going to try and open up in 2023 and also the statewide elections that resulted in turning over power to Republicans who are now in their hands, essentially to move forward with this legalization that they wouldn’t necessarily supported otherwise.
But you have legislature stepping up. And so that it gets really, really interesting to see going forward. If it’s not just up to voters, who else is going to be able to take those steps because you certainly see virtually in almost all states some type of progress towards legalization, um, at, in the legislatures.
But you know, sometimes they pull it off and sometimes they. And I think we’re going to wrap up before we get to the golden nugs story of the year. We’re going to go with the non-story of the year and that’s legalization progress on the federal level. So look, I think I speak for everyone in the industry.
When I say that it feels pretty unbelievably frustrating that you had this year. You had a democratic president, you had democratic control of the house in the Senate by the slimmest of margins in the Senate. And you’re like, ah, something’s going to happen. And ultimately nothing really did safe banking act, which we think that you could get enough Republican support to have a filibuster approved majority in the Senate didn’t happen.
Right. And so, you know, what did, here’s the thing it’s, uh, where we say it’s legalization by a million micro hits or a mini hits. And so I think that we have to be. Happy certainly that we had some major progress in the extent that, you know, we, the first bill out of the Senate that was pushing for legalization coming from Chuck Schumer, a very, very comprehensive bill, but at the same time, it essentially everyone knew it.
As soon as it came out, it just had zero chance of passing or there was no way that they could get necessarily even all the democratic support. You know, some of the people that jumped out, he was being potential issues based on quotes they had where John tester. Out of Montana and Jeanne Shaheen out of New Hampshire there, who knows when push came to shove and I talked to industry insiders that said tester would be more supportive than you would think.
And his quote was out of context. So Schumer proposes this. It ultimately, you know, is not going to go anywhere. And the incremental stuff like safe banking was interesting in the sense that there a different vehicle, the language for it was put in the NDA, the national defense authorization act, but ultimately.
It got stripped out when it came time to get to the Senate. And so the impediment there is, you know, Cory Booker’s position structure, and his position is we’re not going to go incremental. We’re going to go big. We’re going to go home, which means you’re going to go home, possibly Democrats in general in 2022.
And they will have missed their. But, you know, Cory Booker’s position completely, you know, understandably where it comes from. And I think it’s, you know, certainly noble is the idea that, you know, why move forward with banking progress when you’re not having that hand in hand with social equity to be fair.
And it’s interesting how, for example, like the U S cannabis council had this event that was widely publicized, became a talking point where minority business owners in the industry say. Safe banking. Isn’t just for the big MSOE. It’s also for us, right? We are paying large fees to have bank accounts and the few banks that service us and if safe banking passed, it would help.
Right. It would help us, you know, obviously people point to the whole idea of these being all cash businesses and crime, you know, in the bud tender, who I believe was shot and killed in Washington. Um, which certainly isn’t, you know, a good thing. But safe banking language got taken out of NDA. And so there is no progress in that regard, either on the federal level.
And of course the other big story on the federal level, which won’t necessarily go anything either is for the first time we had Nancy mace, a Republican person from the house of reps from South Carolina, propose a federal decriminalization bill in relation to marijuana. That had the support of the Koch brothers who are now openly lobbying for it, or with their libertarian leanings, which I learned reading an article, apparently they had actually been consistent about going back, say 30 years in terms of their position.
But I guess they kind of put their money where their mouth was this year in terms of lobbying, just like Amazon did and Sue moving on to the golden nug story of the year. I think that people really need to pay attention to. And I was certainly tempted to go with the, you know, the story about the hop latent viroids and that this company found was, you know, it’s this viroids that infects Canada’s plants and creates dieters that don’t produce flour and some large capacities and possibly.
Projected it all out. This cost the industry, hundreds of millions of dollars that they could, you know, cut this viral right out. And plus I just liked the fact that it sounds like an STD, but I’m not going to make that the golden luck story of the year, the golden looks story of the year. Is it going to be the rise of cannabinoids created by yeast or by a biomass?
Like a recent story? I read about an Israeli Canadian company. And other means that will undermine the actual growing of the plant. And so let’s look at the benefits of these alternate means of, you know, uh, producing cannabinoids one. They can mass produce minor cannabinoids, like CBG CBNs of the world, which will be good.
I think for biotech and for medical research, if you need quantities of these to treat specific types of cancer or other elements, uniforms, You know, there’s already an issue in terms of, you know, you know, different THC content. You could grow the same strain in two different states and have very, very different results.
Genetically, if you grow it in these manners, you produce these cannabinoids. There’s no worry about mold or contamination. And presumably. You know, there’s less energy consumption or certainly environmental impact, which is also getting a lot more recognition than the industry is potentially an issue with all of these Titanic grows across the country.
But you know, the interesting thing about this and some of those stories are well, Kronos group seems to be certainly, you know, the big Canadian. Is very active. In this regard, they released a product I’d say probably two months ago for the first time had a cannabinoid completely produced in the lab. I think it was produced out of yeast and it was CBG and they recently made another deal with, um, another Canadian company to acquire certain technology or to license the use of technology to continue that process.
And then you have that other company that produced bio-mass, uh, with cannabinoids that I mentioned earlier. And so. Know, it seems that only wealthy or very technologically advanced companies to get in on this game. But I think that we’re going to see this more and more often, and it’s going to continue to have an increasing impact on the industry.
So my golden nugget story of the year. Production of cannabinoids by means other than growing the plant, please, you know, tune in next week. When I play Toker Domus for 2022, and I’m going to sign off the last episode of the year as usual by saying, stay grassy my buds. And I will see you next year.
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