DEA rescheduling and SAFER Banking top of mind for prospective investors
While far from a windfall, early-stage capital in the forms of equity and debt is returning to an industry pirouetting to the whims of regulators and elected officials.
The confluence of the potential reclassification of cannabis from a Schedule One to a Schedule 3 substance combined with signals that the U.S. Senate will pass SAFER Banking is bringing canna-curious investors back to the space.
Stocks for publicly traded U.S. cannabis corporations are coming back to life. Venture money is available for startups with the right assets, capabilities and realistic read of market valuations. Investors are understanding now is a good time to buy back into the sector.
“Smarter family offices and hedge funds are taking another look to do distressed roll up plays,” said Jordan Youklis of Key Investment Partners during a panel conversation at MJ Unpacked in Detroit earlier this week. “They are recognizing that sectorially things are undervalued. If the DEA confirms Schedule Three, that is when the money will start flowing.”
With the U.S. Congress getting through its own systemic issues – making it difficult to forecast when SAFER Banking will ultimately be put up for a vote – most of the attention among industry investors and observers is focused on rescheduling. On August 30, the Biden Administration’s Department of Health & Human Services wrote a letter to the Drug Enforcement Agency recommending the Schedule Three designation, which recognizes some medicinal benefits of cannabis.
While rescheduling would not give federally-insured financial institutions the green light to bank state licensed cannabis operators (a key provision of SAFER Banking), putting THC on the level Tylenol will mainstream marijuana in ways not experienced in any of our lifetimes.
The timeline for an answer is unclear. Panel moderator Kris Krane (a longtime industry advocate, executive and investor) said that while Biden’s political operatives are pushing for Schedule Three, he feared that longtime DEA professionals who devoted much of their careers to prosecuting the War on Drugs will provide significant resistance. Ultimately, Krane along with much of the industry observers Grown In spoke to believe cannabis will be rescheduled (or very much wishes that to be the case…!).
From a communication and marketing perspective, cannabis rescheduling, says Cannabis Advertising Bureau Founding board member Angela Disney, will open up some (but not all) channels.
“Marketing and advertising in general will still be prohibited at the federal level from a legal perspective,” she said. “Consequences might be lower, so you might see brands at the lower level invest in the sector.”
Unpacked organizer George Jage opined from the audience that rescheduling to Schedule Three may provide the ultimate win for today’s industry operators.
Enough money will come into the sector, the theory goes, that companies who today are sucking wind and unable to expand will find the necessary capital to grow.
At the time, behemoths from the pharmaceutical and spirits industries will wait until the water is just right to dive in.
In the meantime, now just might be the window to double down or make an entrance into this thoroughly fascinating industry.
Cannabis Innovation Lab returns to 1871:
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Check out what everybody is talking about on November 16.
Grown In is proud to continue our collaboration with global innovation hub 1871 as we build the 2024 version of the Cannabis Innovation Lab. Stay tuned for information about how to apply for the 2024 Cannabis Innovation Lab cohort, and more details about next year’s public programming.
In the meantime, we invite any and all organizations or individuals learning more about the Cannabis Innovation Lab to join on the 12th Floor of the historic Merchandise Mart on November 16.
In addition to serving as an Open House of sorts to the incredible space at 1871, attendees will participate in facilitated networking conversations focused on industry economic development, a panel conversation about bringing more funding into the Illinois cannabis program, and much much more.
Want to get involved and reserve your place? Click here to sign up or contact Brad Spirrison (firstname.lastname@example.org) for the 411 on this historic 420 affair.