Monthly Archives: May 2018

UK missing out on cannabis industry ‘green rush’ worth billions because of outdated policies, say experts

European cannabis industry could be worth €56bn but Britain is missing out as other countries such as Germany move to legalise

The UK is missing out on a cannabis “green rush” worth billions of pounds because of nonsensical prohibition policies that criminalise a legitimate medical industry, hurting thousands of patients with debilitating conditions, experts have warned.

The comments from leading cannabis industry experts come as investors from around the world gather in London on Tuesday for Cannabis Europa, a conference to highlight the growing opportunity presented by medical cannabis in Europe.

Neil Marouka, a managing director at investment firm Cannacord Genuity and a leading cannabis industry analyst, said that the UK was “absolutely missing out on a huge opportunity” for generating tax revenues from the legal cannabis business, while other countries surge ahead.

Demand in his native Canada is “insatiable”, he said. “We don’t have the domestic capacity to grow what we need to satisfy it.”

Cannabis has been legal for medical purposes in Canada since 2002. But it was not until Justin Trudeaucommitted during the 2015 election to legalisingrecreational use that the industry there began to explode, Marouka said.

This accommodating legal framework has allowed Canadian companies to lead the cannabis industry charge. They now see an opportunity in Europe, where several countries are moving towards legalisation of the plant for medical use.

GermanyDenmarkIrelandGreecePoland and others are all at various stages of implementing legalisation in one form or another.

The future size of the European market is not easy to predict with precision, said Stephen Murphy, co-founder of Prohibition Partners, a consultancy firm that gathers intelligence and insights into the Continent’s cannabis industry.

“But there is no other industry like it in the world,” he added.

“There are some wild estimates out there but we think it’s going to go from zero to €56bn (£49bn) in a decade. It’s an incredible opportunity.”

Australia is actively looking to take advantage of changing regulations around the world by becoming a medical cannabis exporter, as are both Jamaica and Colombia, according to Murphy.

Such rapid growth in a sector that is still illegal in most countries has the potential to attract some less scrupulous players. But Murphy is proud of an industry that has rapidly professionalised.

“Companies in the cannabis business put in the same level of professionalism and scientific rigour as you would into any other pharmaceutical product,” he said.

“What we need is informed, positive media attention and political debate that doesn’t just revert to lazy stereotypes.”

Dan Sutton, founder and chief executive of cannabis growth company Tantalus Labs is a prime example of the qualities Murphy refers to.

His company has been dubbed the “Tesla of cannabis” for its high-tech approach and dedication to sustainability. Sutton is a  passionate advocate of the virtues of both medical, and recreational weed. He is also a scholar of the thousands of compounds that make up the cannabis plant.

“We have only scratched the surface in terms of the medical applications have discovered so far,” he said, before reeling off a host of compounds.

He envisages a huge medical market for cannabis alongside a recreational one similar to that which exists for fine wine today, with enlightened, highly informed consumers sampling the finest products from different regions around the globe.

Tantalus has built a futuristic greenhouse encompassing the latest technology to keep conditions such as temperature and humidity to precise levels, delivering a highly consistent product while eradicating mould and other pests without using any pesticides.

He believes the debate around legalisation in the UK has so far been hampered by a “residual social conservatism”  but also said he can see this is changing.

High-profile cases demonstrating the profound effects cannabis can have when used as a medicine have helped to galvanise political support on both the left and right of the political spectrum.

The family of Alfie Dingley, a six-year-old boy with a rare form of epilepsy that causes up to 30 seizures a day, have gained huge support in recent months from politicians, celebrities, and the wider public.

While receiving medical cannabis oil on prescription in the Netherlands he went 27 days without a seizure. But when his family applied for a license for him to use it in the UK, they were rejected by the Home Office.

Cannabis, or compounds derived from the plant, have been shown to have positive benefits to patients with a huge array of conditions including cancer, multiple sclerosis, fibromyalgia and chronic pain.

In addition to the heart-rending individual cases for legalisation in the UK there is an overwhelming economic one, British industry experts say. Wealthy foreign investors are now raising funds in London, destined for legal markets elsewhere.

Former London police officer turned medical cannabis entrepreneur Michael Abbott said the success of Canadian medical cannabis firms, demonstrates the economic benefits of a regulated and legal medical cannabis industry.

“While the UK has some of the top medical researchers in the world working to advance the industry, our legislation is not yet up to the same speed,” he added.

“We need to continue to push the conversation around the use and regulation of medical cannabis if we want to keep pace with other nations who are already taking action.”

Meanwhile, George McBride, a partner at Hanway Associates, which is organising Tuesday’s Cannabis Europa event said the rapidly advancing wave of cannabis reforms around the world meant “it is only a matter of time before the UK joins Germany, Italy, Canada, Australia and the dozens of other countries in permitting medical cannabis access.”

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NJ marijuana legalization: Want to start a legal weed business? So do investors

This story is part of the HIGH HOPES series from the USA TODAY NETWORK New Jersey, which sent journalists to Colorado & California to see how legal weed could impact the Garden State

COMMERCE, Calif. — Sturges Karban peppers his speech with investment buzzwords: “highly acquisitive,” “omnichannel model,” “aspirational markets.” The cufflinked 40-year-old Harvard University graduate speaks frequently of “the space,” the bulls-eye where, he says, he’s invested nearly $10 million of his own money.

He’s talking about marijuana.

He’s referring to a substance that’s still illegal under federal law, which means that large, federally insured banks don’t handle marijuana transactions. Even while touting a potential $75 billion investment opportunity in a research note to investors, the New York bank Cowen Inc. warned that marijuana businesses “may be at risk of federal and/or state criminal prosecution.”

In other words, marijuana investment is not for the weak of heart, or the sensitive of wallets. But for thrill-seekers and pioneers like Karban, Rafael de la Cruz and Arnaldo “AJ” Peralta, it is the space to be in.

“It’s a gold rush,” said de la Cruz, a former beverage marketing executive who started a marijuana investment group in 2016. “The gold rush is going to yield a lot of fool’s gold and a couple of treasures. Not everyone is going to win.”

Investors eye NJ legal weed, national prospects

The administration of New Jersey Gov. Phil Murphy, who has championed legal marijuana, estimates that the market could reach $1.2 billion— out of a total state economy of about $592 billion. At a conference in Philadelphia in early May, lobbyists for legal weed in New Jersey urged investors to commit their money to real estate and ancillary industries like greenhouses that would serve the marijuana industry.

Karban, the chief executive of MJIC, short for marijuana investment company, is retooling his business from investing mainly in marijuana startups to controlling a big piece of the distribution network that gets the plant from greenhouses to store shelves.

“I think we can all agree that the benefit is disproportionate,” he said. “Our ambitions are national. We expect this to go state by state by state.”

Karban’s company has the look of a tech startup: all sleek glass lines, concrete floors and minimalistic wall art of extreme closeups of marijuana plants, buds and oils. The suburban Los Angeles offices are mostly empty, which Karban attributed to renting in anticipation of adding to his 52-employee workforce. While admitting that the “irrational exuberance” that once gripped investors in early internet startups now pervades marijuana, Karban said the biggest rewards await those at the front of the herd.

“The impulse right now is to move as fast as you can and I think that’s smart,” Karban said. “Look at California now even versus Jan. 1— you see billboards all over advertising marijuana stores.”

Karban’s optimism is well-founded, according to Cowen Inc. The bank revised its projection for legal marijuana sales by 2030 to $75 billion a year, from an earlier projection of $50 billion by 2026, as marijuana replaces alcohol as a “social lubricant” for many. Currently, alcohol sales total $210 billion a year, Cowen said.

Marijuana business is largely cash-only

Analysts’ rosy projections haven’t always met reality. Californians purchased about $339 million in marijuana products in the first two months of this year, as sales became legal to anyone 21 and older, which is 13 percent lower than state projections, according to BDS Analytics of Colorado. The state hasn’t released sales or tax figures yet.

New Jersey Gov. Phil Murphy is projecting $300 million in tax revenue from marijuana a year, which assumes $1.2 billion in sales at a 25 percent tax rate. A Roseland law firm, Brach Eichler, projected as much as $1 billion a year in tax revenue to New Jersey from legal sales— which would be well ahead of the combined tax windfalls to Colorado and Washington, the first two states to allow adult use of marijuana.

All of that money is flowing into an industry that, due to federal banking laws, still largely uses cash. Banks that are chartered by the federal government can’t handle money from marijuana businesses, and the businesses themselves operate mostly with cash payments. California Treasurer John Chiang has proposed a state-run bank that could serve the marijuana industry; Murphy supports the idea in New Jersey.

Investors in California, the largest legal marijuana market in the world with 40 million residents, are blazing a trail for counterparts in other states, said Peralta, 51, a native Angeleno who has invested in marijuana businesses for a decade. What happens in California will largely determine whether marijuana becomes a mainstream product, like alcohol, or is relegated to the margins of the economy, he said.

“If you can make it here, you can make it anywhere,” said Peralta, who heads the holding company Dogtown Brands.

Until marijuana has access to banks, its appeal to mainstream investors is limited, said de la Cruz, 48, a native New Yorker who said he has tens of thousands of dollars of his own money invested in marijuana businesses. De la Cruz, who cuts a hipster figure with a graying goatee, coke-bottle sunglasses and a brown tophat, said the marijuana industry was largely a “clown show” populated by “rebels” who were more interested in promoting an edgy and illegal product than making sustainable returns.

That’s changing rapidly, he said.

“The most incredible thing I’ve seen as an investor is how many dollars per square feet I see generated by dispensaries,” de la Cruz said. “For the investor, this is the only crop that makes this much dollar per pound.”

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Canadian Researchers Are Using Government Grants to Make Weed-Infused Beer

With legalization looming, Province Brands is using university research and government grants to try and suss out the perfect formula for a non-alcoholic beer that will still get you stoned.

If all goes as planned, we’ll be drinking green beer by next St. Patrick’s Day without the aid of any extracurricular food coloring.

As Canada prepares to welcome a nationwide marketplace for legal cannabis, ganjapreneurs across the Great White North are already getting down to business, making sure their grow houses, extraction facilities, and specialty products are ready for the end of prohibition. In Ontario, one Canadian cannabis company is bringing together weed industry expertise, university scientists, and government grants, all in the pursuit of a commercially-viable product that tastes like beer but gets you stoned like ganja.

According to CBC News, Toronto-based Province Brands is leading the charge for Canada’s own infused brew, carving a barley-free path to liquid prosperity. Province, which specializes in alcohol-free infused beers and spirits, has now teamed up with researchers and students at Loyalist College’s Applied Research Centre for Natural Products and Medical Cannabis and secured financial grants from the Ontario government to try their hand at creating a non-alcoholic beer that replaces barley with bud.

“They’re working through the recipe development right now. They’ve done a lot of work ahead of time looking specifically at the details of the process through design of experiment,” Loyalist professor Kari Kramp told CBC Radio. “It’s unique because there are some challenges that are different when you’re working with hemp and marijuana than if you’re working with traditional grains like barley.”

Stateside, America’s slow-churning (and piecemeal) push towards cannabis legalization is having a similar effect on the nation’s multi-billion dollar alcohol industry, with a who’s who of hooch companies and booze bigwigs either investing millions of dollars in legal weed or ditching alcohol altogether for the green rush.

In Colorado, Keith Villa, the brewmaster behind Blue Moon, is already working on producing a booze-free beer that uses traditional techniques, before adding water-soluble cannabis concentrates and removing any trace of alcohol. And in a move that will potentially challenge Province Brands for Canada’s bud-beer market share, alcohol conglomerate Constellation Brands, the parent company of Modelo beer and Svedka vodka, invested nearly $200 million in Canadian cannabis company Canopy Growth with plans to produce its very own line of infused beverages.

But while weed beer is quickly turning into the cannabis industry’s latest obsession for deep-pocketed players, at least one U.S. state is already on its way to completely outlawing the hybridized beverage.

According to Detroit News, the Michigan State Senate voted late last week to ban what they defined as “marijuana-infused beer.” Like Canada, Colorado, and most other places with some form of legalization, Michigan’s current medical and proposed recreational cannabis regulations prohibit alcohol and cannabis from being sold as part of the same product (thus why many of these new beverages are alcohol-free). Though Michigan won’t vote on recreational legalization until November, Great Lake State legislators have already put the kibosh on stoned suds.

“If we don’t ban it, we’re going to have it, and it is a recipe for disaster,” Republican Senator Rick Jones said. “If you want it, go to Colorado or Canada. We don’t need it here.”

Across the northern border in Ontario, we’re guessing that the research and development team behind Province Brands’ infused brew will welcome those additional customers with open arms. So far, there’s no timetable for when the new Canadian beverage will hit pot shops in Toronto and Vancouver, but researchers say the final product will have a nutty flavor. We’ll drink to that — as long as it gets us stoned, of course.

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Marijuana growers stepping up to professional business management

Lawyers, accountants and insurance agents were on hand to pitch their services at a meeting for one of the largest and now legal industries in the county growing and selling marijuana. On May 9 at the Freight Building at Depot Park, the county’s premier cannabis industry trade association, Green Trade of Santa Cruz, hosted a meeting for their members to network with the business support professionals needed to be successful.

Since county ordinances regulating the industry have finally been adopted, taking effect June 8, many growers and retailers, operating under temporary licenses’ in lieu of final regulations, need as much professional help as they can get to stay legal and thrive in the new industry.

“There’s a lot of challenges to the industry, but also a lot of resources available to meet those challenges,” said Pat Malo, executive director of Green Trade. “We didn’t have to pay any of those business service providers to show up at our meeting…they wanted to be there.”

With the legalization of marijuana, challenges face the industry.

“We’re in something of unchartered territory-  we need discover what we don’t know, and what hurdles need to be overcome- for this brand new industry,” said Naseem Nangoli, a principal in Accountabl, a tax, accounting, and business advisory services firm in Scotts Valley.

Transforming one of the largest, virtually unregulated “gray and black market” industries in the county, growing medical marijuana through cooperatives and retailing it through dispensaries, into a fully regulated, environmentally reviewed, licensed, and taxed commercial sector of the local economy has been no small task, and not without real disruption and loss of livelihood for many in the process.

Due in part because Santa Cruz County was relatively slow adopting its cultivation and retail ordinances, 18 out California’s 58 counties had already done so, including Monterey County.

“There is currently a massive, massive overproduction of marijuana statewide, causing wholesale prices to absolutely crash,” Malo explained.

Similar to Oregon, California allowed far more cultivation than could be handled by the limited number of retail outlets, formerly medical marijuana dispensaries, resulting in selling excess product at a loss for as low as $50 a pound in Oregon, according to Mayo. Massive overproduction of marijuana throughout California followed the adoption of Proposition 16 in November of last year, coupled with “a certain urgency” due to the uncertainty of how local jurisdictions would regulate the industry, according to Malo.

“Now former medical marijuana growers are facing a huge glut, and expensive, new costs for compliance… The wholesale price has crashed, and next year it’s going to get worse,” Malo said.

Malo explains he has navigated the perceived “green rush” of marijuana investors in several phone calls with self-described millionaires looking to invest, and while trying not to sound “altogether negative”, he has ended up advising against investment at this time.

“We’re never going to compete with Monterey or the Central Valley counties for mass production,” Malo said. “What we’re trying to create, through Green Trade, is an equivalent to the reputation of Santa Cruz county producing good, clean, organically grown, farm-to-table produce- in the marijuana market. That is, a relatively high-end, organic, worker friendly, ethical brand,” Malo said.

Malo laments the disruption legalization has brought to many small scale, more or less legal and “more democratically spread-out” small growers and cottage industries that made a modest living in the medical marijuana economy, but does not discount the environmental damage and criminal behavior that came along with it.

“I appreciate that the community is terrified of unregulated marijuana grows, almost as much as it is afraid of regulated cannabis cultivation,” Malo said at a public hearing in Felton back in February. “It’s hard for even hippies to feel sorry for environmentally abusive drug dealers,” Malo said.

Malo explains that maybe 25 percent of the “mountain growers” in the San Lorenzo Valley that supplied medical marijuana dispensaries and other “grey-to-black” market customers “saw the writing on the wall,” according to Malo, that they probably would be unable to get a license under the new regulations, and simply left for greener pastures, so to speak.

Malo, a life-time resident of Santa Cruz County, has first-hand experience in the 20-year history of the local medical marijuana industry, first legalized in 1996 via Proposition 215, to full-scale commercial legalization in 2016. Malo used to treat his father with cancer with medical marijuana back before 1996, Malo said, and has been with the industry, “in one form or another” ever since.

“We all miss the small business model of growing for the medical dispensaries, with growers focused on their patients,” Malo said. “I’m glad we’re taking steps away from the drug war and mass incarceration with legalization, but no one shed a tear for the loss of livelihood for many small growers who couldn’t afford going legal.”

Currently, now that the final regulations are in place, the Santa Cruz County Cannabis Licensing Office and Planning Department face a huge task of reviewing each site and the operational compliance of each applicant, estimated to be at least about 250 growers, now working under temporary permits, for their permanent license, which are renewed annually.

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Are Cannabis Clubs the Future of Weed?

Now that legal marijuana has established itself in multiple states, it’s on to the next battle for pot enthusiasts: getting somewhere to legally smoke it. All state laws specify that marijuana is only to be consumed in the privacy of your own home (tough luck if you’re a renter), and that’s incredibly inconvenient for both residents and tourists. Cannabis clubs, where no alcohol is allowed, are a simple solution to this problem, but they face some large obstacles from a legal standpoint. Even so, a few cannabis lounges exist, and are setting the stage for others to open as well.

Meet the Coffee Joint

The Coffee Joint, located in Denver, Colorado, is the first state-licensed cannabis club in the country. Colorado law doesn’t actually say anything about pot clubs, and there are many speakeasy-style clubs in the state. But co-owners Kirill Merkulov and Rita Tsalyuk wanted to go through legal channels to create a place for marijuana lovers to socialize and use cannabis without judgment or interference, and the Coffee Joint is the result. They were granted their license in February, 2018, and opened soon after.

The place is meant to be a local hub for those who want to chill out and toke up. The biggest catch, however, is that you can’t actually smoke inside That’s explicitly prohibited by the Colorado Clean Air Act, but dabbing, vaping, and consuming edibles are all welcome activities. There are still caveats, like the fact that you have to bring your own rig and use the enails provided by the cafe.

The Coffee Joint also hosts frequent events with vendors and educators, making it a great spot for curious consumers to gather. While it’s a great start, this destination has a lot to live up to.

Northwest Cannabis Club

Northwest Cannabis Club is currently the gold standard of pot lounges. Its less-than-flashy exterior is home to a 50-foot dab bar, a smallish stage, a basement rec room, and a covered deck for outdoor smoking.

There are dab rigs and enails available for use (thanks to copious alcohol wipes), and a healthy selection of Volcanoes and other vape devices to choose from. They host educational events, although the stage allows for musical guests as well. The one thing that NW Cannabis Club doesn’t have? A license.

When a local paper asked how the club is allowed to operate and with what kind of permit, the owner responded with a tight-lipped: “No comment.”

Fair enough. Will more states follow Colorado’s lead and allow businesses like NW Cannabis Club to operate legally by issuing licenses?

Making the Case to California

If Californian cannabis advocates have anything to say about it, they’ll have the next crack at legitimizing cannabis clubs. West Hollywood is the epicenter of this development, with the City Council having approved a revolutionary new measure. The ordinance allows businesses in the city to apply for pot lounge permits, starting in May, 2018. There are two tiers of permit: one for lounges where edibles, vaping, and smoking are permitted, and one where only edibles are allowed. The city will grant eight of each license type.

Of course, many anti-pot parties are wringing their hands with worry over the effects cannabis clubs might have on society. Many cite DUI fears, demonstrating a fundamental misunderstanding of how cannabis impairment works. One City Councilman even said, “You can go to a bar and have a drink or two and be OK. Marijuana, the effects last and I think it can be disastrous on the road.”

On the other side of the fence, there’s the argument that legal cannabis makes no sense when there’s nowhere you can legally consume it outside your own home. Allowing for safe public consumption in the form of cannabis clubs would also allow weed tourism to flourish without stoned, wild-eyed strangers trying to toke up in streets, alleys, or hotel rooms. Since educational events are a common theme among cannabis clubs, you could even argue that licensing them would lead to a more informed, responsible range of consumers.

High Hopes

It’s safe to say that most cannabis users love the concept of marijuana lounges. After all, it’s everything that’s great about a bar—but without all the drama and drunken hijinks. Hopefully cannabis clubs gain more traction in the near future!

Spencer Grey is a staff writer at Smoking Outlet, where you’ll always get The Best Prices on the Best Pieces.

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Everything You Need to Know About CBD and Its Benefits

With the green rush in full effect, more and more people are becoming interested in cannabis and its many medicinal benefits. While going full flower might still seem intimidating for some, CBD may be a friendlier gateway for those who are just looking to get their feet wet. For starters, it’s not mind-altering like its psychoactive sibling THC. Though it’s commonly known as the nonpsychoactive cannabinoid, it is important to note that that holds true as long as you stay within recommended doses. Smoke or consume enough, and it’s very much possible to experience adverse effects like paranoia and anxiety — the opposite of what you’re likely trying to achieve with CBD. Let’s dive into the basics of this cannabinoid and how it can help you.

What Is CBD?

CBD, short for cannabidiol, is an all-natural and legal (except in the state of Indiana) compound found in the cannabis plant. It will not get you high (in recommended doses) and it will not show up on a drug test. Much, if not all, of marijuana’s medicinal benefits are thanks to CBD.

What Forms Does It Come In?

CBD oil is one of the more popular methods of consumption, but it’s also available as a vape pen, topical, or edible. These forms can all be found free of THC. However, when it comes to straight-up weed, every strain of marijuana contains different ratios of THC to CBD, and even the most CBD-dominant weed will still contain small traces of THC.

What Are Its Benefits?

The list goes on. Other areas of study include CBD’s role in the treatment of Alzheimer’s disease, multiple sclerosis, Parkinson’s disease, and cancer. More research is needed in order to support these other claims, which is why the legalization of cannabis is critical to unlocking CBD’s medicinal potential.

What we do know, however, is that CBD seems to counteract the adverse effects of THC. In fact, it wasn’t until this active compound was introduced and administered with THC that we began to enjoy the pleasant high we know today. Once strains began to include CBD, it balanced out the effects of THC and made the high more enjoyable. The two complement one another, which is why a 1:1 (THC to CBD) ratio or a CBD-dominant strain is recommended for beginners who’d prefer to smoke flower over other consumption methods.

Long-term use of high amounts of THC may promote plaque development around the heart, according to Dr. Kaplan. However, keep in mind that these tests used synthetic versions of THC, which are often much stronger than that found in cannabis. CBD may act as a protective agent against THC.

“The antioxidant and anti-inflammatory properties of CBD likely leads to pro-heart health effects,” Dr. Kaplan told POPSUGAR.

Additionally, CBD may also mitigate the risk of THC tolerance.

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Canopy Growth Applies To Be First Cannabis Cultivator On The NYSE

Canopy Growth could be the first Canadian cannabis cultivator to list on the NYSE.

So far there have been no cannabis cultivation companies listed on the New York Stock Exchange. The closest thing to it is Scotts Miracle-Gro which has been acquiring various businesses that sell products to marijuana growers. One of Canada’s largest pot producers is looking to make history by entering the NYSE. Canopy Growth applied to be the first cannabis cultivator on the NYSE and they expect shares to be trading under the symbol CGC by the end of May. The company is already listed on the Toronto Stock Exchange under the ticker symbol WEED.

Canadian Cannabis Enters U.S. Stock Markets

Another Canadian cannabis company called Cronos Group Inc. has already listed in the U.S. on the Nasdaq this February. Originally, Canopy’s Chief Executive Officer Bruce Linton was a step away from filing to list on the Nasdaq Stock Market when he decided to shift focus to a deal with Constellation Brands Inc., a large producer and marketer of alcohol. He told Bloomberg why he ended up applying to the NYSE instead.

“Ultimately one of them is on Wall Street and has a bit more history and cache, and the neighbors on it are pretty substantive companies,” Linton said in a phone interview.

Despite not having any operations south of the Canadian border, Linton hopes listing on the NYSE will make the company more appealing to U.S. institutional investors.

“One of the primary drivers of this listing is, as we are expanding globally, having U.S. institutional investors helps,” he said. “I think the investment community has to drop the pot jokes and talk about the investment grade opportunity.”

The company will still need to file a Form 40-F Registration Statement with the Securities and Exchange Commission for approval the NYSE and its regulators before they can be listed.

Canopy Growth/Facebook

Canopy isn’t the only Canadian cannabis company looking to expand globally. One of their largest competitors, Aurora Cannabis currently has the biggest cannabis deal ever in the works. They’ve been acquiring assets to improve and expand their global distribution network. While Aurora is the largest deal maker, Canopy remains on top when it comes to revenue and market value with stocks more than tripling in the last year.

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FBI Raids California Mayor’s Home For Involvement in Legal Marijuana Industry

In a still-murky scenario of rare federal enforcement against municipal corruption, FBI agents last week raided the home of the mayor of Adelanto in Southern California’s San Bernardino county. In the same operation, a local cannabis dispensary was also searched. Economically troubled Adelanto has aggressively sought investment in its local cannabis industry, but paranoia in the wake of the federal raids could have a chilling effect.

The town of Adelanto, on the western edge of the Mojave Desert, has struggled to make budgetary ends meet since the closure of George Air Force Base in 1992, and was looking to cannabis legalization in the Golden State as the solution to its financial difficulties. But federal raids on the mayor’s home and a dispensary may give investors the jitters.

FBI agents on May 8 raided both Adelanto’s City Hall and the home of Mayor Rich Kerr, in what the San Bernardino Sun called “a widening corruption probe into the High Desert town’s dealings with marijuana businesses.” Agents also served search warrants at the Jet Room, an Adelanto cannabis dispensary, and the San Bernardino offices of the Professional Lawyers Group, where the office of the Jet Room’s attorney, Philip E. Rios, is located.

Kerr, who was handcuffed and briefly detained by agents during the raid on his home, told a City Council meeting the following day: “For the record, before we move forward this evening, the events yesterday were indeed daunting. It was literally a very disturbing and frightening experience for my family and myself.”

The warrants were sealed by a federal court, and FBI spokeswoman Laura Eimiller told The Sun she could not comment on the case other than to say they did involve “an investigation into criminal activity.” No arrest warrants were issued. The investigation is also said to involve the Internal Revenue Service and the San Bernardino County District Attorney and sheriff’s department.

In a written statement, a city spokesperson said that Adelanto was unaware of the nature of the case but is “prepared to cooperate with any investigation being conducted.”

The first developments in the case broke in November, with the arrest by federal agents of then-Councilman Jermaine Wright. Later indicted in Riverside federal court, Wright is accused of taking a $10,000 cash bribe from an undercover FBI agent in exchange for his help rezoning an area of the city for a cannabis transportation business. (Of course, the business did not actually exist.)

Wright is also accused of paying another undercover FBI agent $1,500 to burn down his barbeque restaurant, Fat Boyz Grill, in an insurance scam. Wright pleaded not guilty and awaits trial on the charges, which is scheduled for August.

Since 2015, under Kerr’s leadership, Adelanto has worked hard to attract the cannabis industry. His efforts have drawn national attention to the once-sleepy town and led to what the Los Angeles Times called a “cannabis land rush” as investors and entrepreneurs sought to exploit Adelanto’s open-door disposition. The LA Times headlined that Adelanto aspired to become the “Silicon Valley of medical marijuana.”

The town seems to be well on its way. A 30-acre industrial park in Adelanto has been divided into 21 units slated to be sold to cannabis cultivators at $7.5 million each. Across the city’s 360-acre cultivation zone, former warehouses and factories have been sold to cannabis concerns and are being retrofitted. Adelanto has so far approved only large-scale medical marijuana cultivation, as California is not set to issue permits for large-scale “recreational” cultivation until 2023 — though some growers have circumvented this delay by amassing an unlimited amount of permits for small grows.

As legal processes unfold in the coming months, we shall get a clearer idea of whether Adelanto officials overshot their own ambitions by skirting the law, or if federal prosecutors have singled the town out as a means of putting a chill on California’s burgeoning legal cannabis economy.

TELL US, do you think there’s corruption in the California legal cannabis industry?

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