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The Butterfly Effect, Friday State Spotlight: Colorado
This is a financial newsletter, so we have to start with Secretary Yellen’s comments yesterday:
At Thursday’s Senate Finance Committee hearing, Colorado Senator Michael Bennet (D) asked Treasury Secretary Janet Yellen about the ongoing lack of banking and financial services available to the cannabis industry. Bennet aptly referred to cannabis as more stable than cryptocurrency, which contributed to the closing of New York’s Signature Bank last Sunday. He noted the contradiction that marijuana is still federally illegal.
Yellen responded that “It’s something the regulators have been looking for solutions to…as you pointed out, in the case of marijuana, it is against federal law, and that’s a barrier, unfortunately, to appropriate banking services for the industry,” reported Reuters.
Proponents of cannabis banking have been hurt before, and these comments don’t appear to change all that much. But wouldn’t it be interesting if the collapse of Silicon Valley Bank was the straw that broke the camel’s back for federal legalization? At least that pizza delivery startup will have (indirectly) contributed to meaningful societal change.
At the end of the day — as Yellen notes — federal prohibition is the the real blocker for cannabis banking (and everything else). Last fall, President Biden issued a directive to review the scheduling of cannabis under federal law. How’s that going?
State Spotlight: Colorado
The Governor of Colorado, the Centennial State, is demanding answers:
The governor of Colorado has the same question as many marijuana reform advocates: When will the federal government complete its review into cannabis scheduling that President Joe Biden directed last year?
In a video message played at a National Cannabis Industry Association (NCIA) Colorado Cannabis Caucus event on Wednesday, Gov. Jared Polis (D) talked about his state’s historic vote to legalize adult-use marijuana more than 10 years ago, emphasizing that work still needs to be done.
“Over the years, we’ve laid that foundation and continued honing the process to make sure our industry is the very best in the world,” Polis said. “We continue this work. Just because Colorado was the first doesn’t mean we’re content to rest on our laurels. We need to continue pursuing new boundaries and work to ensure we remain competitive with every other market following in our footsteps.”
Notably, the governor also said that continuing to push for federal legalization is key, and that his administration has reached out to U.S. Department of Health and Human Services Secretary Xavier Becerra to inquire about the timeline for the agency’s review into federal marijuana scheduling.
“At every step, states—alongside industry—have been leading the way on this. We all know that federal action must be taken to create a far more effective successful landscape for the industry,” he said. “I’ve been outspoken about my support for federal legalization in conversations with the White House, the [Food and Drug Administration] and members of Congress about the importance and the urgency of this.”
What especially hurts Colorado is that these sales declines come immediately after massive investments in new grow operations. When sales spiked during the height of the pandemic, cannabis operators — like the tech industry — assumed that the “highs” would last forever. But when lockdowns eased, it turned out that people wanted to spend less time rotating between Zoom and bong hits. Businesses made the mistake of projecting sales — and necessary capital investment — based on those unsustainable growth rates and an inflated y-intercept.
That’s why Colorado really needs the feds to give the all-clear on weed: they have way too much weed and nowhere to sell it. Federal legalization would allow interstate commerce; Colorado assumes they would be a leader in the new national market — they were one of the first two states to legalize adult-use back in 2012, and companies have had a lot of time to figure this stuff out.
There’s no guarantee that interstate commerce would solve the woes of the industry anytime soon, though. We know that cannabis is pandemic-proof, but is it recession-proof?
You know what’s proven not to be pandemic-proof? Organized religion. It’s telling that Americans turned to joints more than Jesus when the world went to shit a few years ago.
Although, in Denver, there’s a different kind of church stirring up controversy. Here’s Fox News maybe defending weed interests because of religious freedom:
The city of Denver is demanding the Church of Cannabis remove a statue that its co-founder says represents religious freedom and is used by its weed-smoking congregants for meditation.
"I hope the city of Denver recognizes our right to exist and our right to have this religious effigy, this representation of the freedom of religion that all Americans should have," International Church of Cannabis co-founder Steve Berke told Fox News. "Yet the city of Denver is really encapsulating the perfect example of big government passing unnecessary laws that don't protect anyone and infringing on our First Amendment rights."
This newsletter is particularly interested in the potential tax-exempt status of a wed church. Cannabis companies might not be able to deduct operating expenses, but can a weed church gift the “sacrament,” pass around a collection box, and not pay a cent to Uncle Sam? Hallelujah!
Chris also runs a great brand in Colorado, and has timely tweets on realistic sales projections! Have a nice weekend.