The West Coast has pioneered the national cannabis industry, with California, Oregon, and Washington leading the way in decriminalization and legalization efforts, and that trailblazing reputation has contributed to the impression that market concentration may be skewed toward the Pacific Ocean. However, it’s companies that have been established in the more restrictive, under-the-radar medical cannabis markets of states like Massachusetts, New York, Pennsylvania, New Hampshire, and Ohio, that may have the best long-term positioning and highest valuations.
The reason for this might be counter-intuitive: West Coast states have been much more liberal in issuing licenses to operate cannabis businesses, which has created a market saturated with retail, cultivation, and processing licenses, which, in turn, has created more competition for increasingly smaller market shares. States on the East Coast typically have stricter rules, and companies there must jump through a number of hoops before being granted a license to operate. So while markets in these states is, therefore, limited, given the relatively few licenses granted and high barriers to entry, there is also less competition than out west. The more highly competitive application process also creates an environment that has resulted in eastern companies being some of the best capitalized … Keep reading
Not all cannabis-related companies are created equal. In fact, in the eyes of state and federal regulators, they differ significantly, depending on whether they “touch” the cannabis plant—and they’re treated accordingly.
The most common types of companies that do touch the plant are the “operators” that are cultivating, processing, or dispensing cannabis or cannabis products. “No-touch” companies generally provide a product or service pertaining to the industry, but avoid direct involvement with the plant itself. Examples include suppliers of cultivation-related products (e.g., fertilizer) and packaging, as well as providers of real estate, consulting, and legal services (like Burns).
The complexity of the regulations that apply to “touch” companies, as well as the rigor with which those regulations are enforced, also serves as a point of differentiation. Each state that has legalized cannabis, whether medicinal or adult-use, has enacted an enormous set of rules that govern its cultivation, processing, and sale. While there is no federal standard, cannabis operators generally need to ensure compliance with stringent guidelines regarding security, waste removal, advertising and branding, and packaging, as examples.
Generally, and unsurprisingly, “touch” companies are viewed by both observers of and players in the space as inherently riskier than their … Keep reading
While trademarks for cannabis products and many accessories are ineligible for federal trademark protection (because such goods are still unlawful at the federal level), the savvy cannabusiness operator should nevertheless approach their branding strategy thoughtfully and engage in some investigation into potential trademark conflicts before adopting a new brand or business name.
Importantly, trademark conflicts are not restricted to simply using the identical mark of a competitor. Instead, they generally turn on whether use of the mark is “likely to cause confusion” in the marketplace. In other words, if it is likely that consumers will assume a relationship between you and the senior trademark owner.
Earlier this year, for example, Woodstock Ventures LC filed suit against Woodstock Roots, LLC on the basis of trademark infringement. Since 1969, Woodstock Ventures has produced the annual WOODSTOCK®-branded music festival in New York. In the intervening years, the company has expanded its offering to include audio records, movies, clothing, and other promotional merchandise, all offered under the WOODSTOCK brand. It holds federal trademark registrations for these goods and services, all of which, on their face, have no obvious relationship to cannabis goods. However, and as Woodstock Ventures readily concedes and, in fact, boasts … Keep reading
This year is primed to be the cannabis industry’s biggest yet. Almost $3 billion of capital was raised in the first quarter of 2018, more than four times the amount raised in the first quarter of 2017. With the increase in capital investment comes an increase in the sophistication of investors, including institutional ones like venture capital and private equity sponsors.
As more institutional money pours into the cannabis industry, entrepreneurs are being held to higher standards of professionalism, and are now expected to understand basic venture finance and equity structures. Part of this understanding includes preferred equity, which is a general term used to describe any class of securities (e.g., stock, limited liability company [LLC] units, limited partnership [LP] interests, etc.) that has higher priority for distributions of a company’s cash flows or profits than common equity.
In its simplest form, the “preferred” component of the equity represents additional rights and privileges investors receive in return for their investment beyond owning a percentage of the company. In most instances, when a company takes on outside investors, it will have at least two classes of securities: common equity and preferred equity. The common equity will be that owned by … Keep reading
Last week’s presidential support of states’ rights to regulate cannabis was a welcome development for many in the legalized marijuana space. It shouldn’t have necessarily come as a surprise, though—after all, on the campaign trail, then-candidate Trump often espoused his view that the issue should be “up to the states.”
And it seems that many in Washington are beginning to come around to the President’s thinking on the matter, second-guessing long-held beliefs that have influenced federal policy for decades. In just the past week, two of the nation’s foremost media drivers of political thought/coverage have run articles that categorize the march toward legalization as having a cadence unmatched by any in history.
Evolution on the marijuana issue is proceeding at warp speed in political terms. [Former House Speaker John] Boehner is just the latest in a string of noteworthy newcomers to the legalization movement that has been barreling through state houses for the past decade. Just in the past several weeks, Mitch McConnell fast-tracked a Senate bill to legalize low-THC hemp. Chuck Schumer announced that he would introduce a bill to deschedule marijuana entirely … The Food and Drug Administration opened a comment period on the
… Keep reading
The CannaBusiness Advisory is pleased to spotlight some of the Burns & Levinson clients that are pushing the cannabis industry forward, in Massachusetts and beyond. First up is TaShonda Vincent-Lee, co-founder and director of community outreach at ELEVATE New England, a networking firm “created to support the New England cannabis industry’s need for workforce and community education.”
What made you decide to start ELEVATE New England?
My co-founders and I couldn’t ignore the undeniable need for cannabis education in New England, both for the diverse people wanting to work in and own businesses in the newly legalized marijuana industry and, perhaps more importantly, for the communities in which cannabis businesses sought to operate. Despite passage of Question 4 by a significant margin in 2016, municipalities across the state are discussing and implementing bans and moratoria, and this is because of ignorance and fear about the plant. We created ELEVATE to connect the cannabis workforce with training and opportunity, and to provide proactive outreach to a variety of communities and demographics, so that more jobs can be created by thriving businesses. To that end, we provide professional networking opportunities, coordinate community education efforts, and generally promote a more diverse … Keep reading
The following quotes have been excerpted from an article, written by Omar Sacirbey, that originally appeared on the website of Marijuana Business Daily on March 22, 2018.
“If you’re able to get open [in Massachusetts], you’re going to see a more protected environment,” said Scott Moskol. “We’re not going to see the downward pricing pressures as quickly,” he added.
Moskol [further] noted, there will be “plenty of room for brands in Massachusetts to establish themselves and gain a following.”
Read the full article here.
Scott Moskol will present twice at this weekend’s 4th Annual New England Cannabis Conference (NECANN). Tickets are available at this link.… Keep reading
Massachusetts’ Cannabis Control Commission landed firmly in the middle of the road when it voted on February 26, 2018, to postpone granting licenses to marijuana home-delivery services and “social consumption” operations. In justifying the delay, the CCC claimed that it needs additional time to craft rules that address public health and safety concerns, such as impaired driving and underage sales. Despite the postponement, it’s important to note that these limitations in no way impact retail marijuana dispensaries and their suppliers, which remain scheduled to open for business in July 2018.
While the decision is a setback for those in favor of an immediate roll-out, the CCC did agree to initially grant delivery and social consumption licenses to individuals affected by the War on Drugs, meaning that they will not be boxed out of the market when those licenses become available in 2019. This policy is meant to preserve a place in the market for lower-cost marijuana businesses, like delivery services.
While Governor Baker applauded the CCC’s action as part of establishing a “safe and responsible retail” market, others may view it as an opportunity that will appeal to entrepreneurs lacking investment capital, as the types of businesses affected will … Keep reading
As we’ve blogged before, we don’t believe that Attorney General Sessions’ revocation of the Cole Memorandum will have much impact on the regulated, licensed marijuana industry. As of this post, we’ve neither heard nor read of any U.S. Attorney seeking to prosecute a licensed, compliant marijuana operation. Beyond statements by key political players, certain data points can give the industry comfort. Below are some that we believe illustrate that the attorney general’s actions and statements will not meaningfully reverse the progress that the industry has realized over the past few years.
- Per an October 2017 Gallup poll, 64% of Americans support marijuana legalization, including 51% of polled Republicans. Per a July 2017 Quinnipiac University poll, 75% of Americans, including 59% of Republicans, oppose the enforcement of federal marijuana laws in states that have legalized cannabis.
- The legal cannabis industry (not including cannabis-adjacent businesses) employs an estimated 165,000 to 230,000 workers. This is two to three times more workers employed by the coal-mining industry.
- Although estimates of actual revenues from legal cannabis enterprises vary, The Arcview Group states that, in 2016, the industry generated at least $6.7 billion—that figure is projected to increase to $21 billion by 2021.
- The cannabis
… Keep reading
This past year has been a memorable one for so many different reasons. For Burns, it saw the growth and expansion of our Cannabis Business Advisory Group, the launch and development of this blog, and the successful execution of our first-ever cannabis conference.
In winding down 2017, Scott Moskol and Mike Andreasen weigh in with their “wishes” for all things cannabis related in the coming year.
I’d like to see…
- The end of the new development of private lawsuits being brought by neighbors of cannabis cultivation and/or dispensary facilities against such entities under the auspices of the RICO (Racketeer Influenced and Corrupt Organizations) Act. These complaints generally seek damages, in addition to injunctive relief, that, if granted, would curtail the power of the states to issue valid licenses. Accordingly, to those defendants that are still parties to such lawsuits, we wish for speedy dismissals.
- Congress amend the Tax Code, such that 280E would no longer apply to a valid, state-licensed, compliant cannabis business. This way, marijuana businesses would not be subject to such an extra, and oftentimes onerous, taxation burden.
- Whatever new spending bill that is ultimately passed contain a version of the Rohrabacher-Blumenauer Amendment (formerly, the
… Keep reading