October 27, 2023 • 45 mins
Join Emily and Cy as they host Darren Weiss, President of Verano as they discuss the genesis of the historic lawsuit filed against the federal government challenging cannabis prohibition under the Commerce Clause. The lawsuit argues that the federal government's current contradictory stance on cannabis - where it is illegal at the federal level but allowed and regulated in many states - violates the Commerce Clause by interfering with intrastate cannabis commerce.
The lawsuit is spearheaded by law firm Boies Schiller Flexner with support from a coalition of cannabis companies. Verano president Darren Weiss explains how the Commerce Clause was originally intended to regulate commerce between states, not commerce within states. He argues the federal regulation of intrastate cannabis markets contradicts the original intent.
Cy, Emily and Darren discuss how the contradictory federal policy impacts businesses of all sizes, from multi-state operators down to small social equity licensees. The lawsuit aims to open up banking, reduce tax burdens, and create fairness across the industry. While the case will likely take years to reach the Supreme Court, it represents a new front in the ongoing fight for cannabis law reform.
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(00:00):
Welcome back to the high rise, a laid backdata back conversation where we talk all
things cannabis from US MSOs to CanadianLPs, products and markets through the lens
of data.
I'm joined as always by Emily Paxia ofPoseidon.
Hi everyone, welcome to the HiRise.
I'm Cy Scott with Headset and today wehave a very special guest with Darren
Weiss, President of Verano.
(00:21):
Thanks for joining us today Darren.
Thank you so much, Sy, for the invitation.
So glad to be here.
Yeah, it's great to have you here becausewe have some huge news that happened this
week related to the Commerce Clauselitigation.
And I know Verano played a big part inthis.
And you're also a lawyer, so you can speakto it much better than I can, I'm sure.
(00:47):
And of course, Emily, you as well withPoseidon and wrangling this stuff from the
earliest days.
So I thought, you know, withOf course, there's always a lot going on,
but this is such a notable thing, such abig deal I think for our space.
So I really just wanted to dive into itand what does this mean?
How do we get here?
(01:08):
What's the path forward and so on?
And it's a real privilege to have you bothhere because you've been so close to it.
So let's start with just kind of thebackground, the story.
Like how did we get to this week?
I know it didn't just happen yesterday,right?
Yeah, right.
So instead of burying the lead, I'll just,you know, get right to it on.
(01:30):
So everyone knows now that Boy SchillerFlexner with David Boyes as lead counsel
are really representing the industry onthis case.
And I want to talk in very inclusive termsbecause this is really an industry effort.
And we'll get more to that.
But this all actually started in thesummer of twenty two.
(01:50):
And I was when I was.
on the board of ascend and we had a phonecall with them about representing us on a
different matter.
And actually, David Boyce was the one whowas like, I don't know why this industry
hasn't challenged the decision of Gonzalezversus Reiche.
And we started to dig in on this.
And a lot of people have heard about thedormant commerce clause as it pertains to
(02:12):
interstate commerce.
But this was a different angle and it wasabout intrastate commerce, which...
Sometimes when I'm trying to be extremelysimplistic, I try to liken it to the
Rohrbacher-Farr Amendment, but like withreal legal framework around it and an
actual law.
And so, and it really does have to do withindustry running at the state level where
(02:36):
there are legal programs.
And so Darren can speak a lot moreintelligently to that with his background
and wisdom, but this, so that's how itstarted.
So,Abner actually at Ascent, I gotta give him
a ton of credit, he sunk his teeth intothis and we started looking at it and a
group of us got together, Jason Wilde wasaround the horn at that time, I know
Verona was looking at it, everyone waslooking at it, but it seemed as though
maybe this wasn't an effort that we shouldbe leaning in on because SAFE had so much
(03:00):
promise at that time.
And at that time SAFE had a lot of weightto it because it was going to be
monumental if it actually did getintroduced in past.
Fast forward to December 2022, that didnot happen.
And we all know what happened.
It was not a fun time to be in cannabis.
(03:21):
It felt pretty terrible.
And I remember I called up Abner and Isaid, Abner, we gotta get back on this.
And so we got back on the calls withBoies, Schiller, Flexner, Verano was right
there with us.
So we had this great coalition of peopleand we started to talk to them because
with these cases, there's a ton ofinformation sharing that has to go on.
(03:41):
there's a ton of polling people andcoalition support together to support a
law firm who is going to endeavor on apursuit through a constitutional case like
this.
We got on the phone with them and then,actually it was Jason Wilde was like, I
have a list of other firms we should calljust to do a little litmus test on this.
So we talked to a range of firms acrossthe entire spectrum of kind of political
(04:05):
ideology from the most conservative.
to again kind of boy schiller flexor,which tends toward the more progressive
mindset around the issue.
Just to make sure, you know in cannabissometimes I feel like, and you know I love
this concept of inviting strangebedfellows to the table, like test your
hypothesis, don't sit in an echo chamber,try to talk to people who have different
ideologies and see if fundamental aspectsof your perspective make sense whether or
(04:30):
not they have like a religious or anothermoral thought around cannabis is one
thing.
just testing it from this legalstandpoint.
And one of the phone calls that actuallystood out to me the most was the one with
Jones Day, because they are so incrediblyconservative.
And I have to give it to the two lawyersthat I got on the phone with.
They had me on the phone, we had an hourcall scheduled.
(04:51):
They had me on the phone for two hoursspeaking with enthusiasm about how they
could view how this case that wasoriginally heard and then decided upon in
2004, 2005 could.
have a different standing given so manydifferent aspects of it.
And I'll say this, like, I'm not a lawyer,but I'm a curious human.
(05:12):
And sitting on the phone with lawyers andhearing them argue, kind of like develop
arguments about these cases is endlesslyfascinating.
And we had, we spoke with multiple otherfirms and other firms agreed to actually
represent us.
They were pretty excited about it.
And in the end, we decided to selectBoyschiller Flexner for a number of
reasons.
(05:33):
If anyone looks up David Boyce's trackrecord at the Supreme Court, or just in
general, it's monumentally impressive.
And the second thing was that we just feltlike they had originated interest in the
case and having a firm like that take up amantle around cannabis just is really
meaningful to us.
I feel like when I'm on the Hill, I hearkind of pejorative comments about how
(05:56):
seriously or unseriously we're taken as anindustry and.
having these kinds of partners out thereis really meaningful.
So that's how we got to this point andimmediately got great support from groups
like Verona who just immediately kind ofunderstood why we needed to be standing
together holding hands and providingeverything we could to a firm like that to
(06:18):
support a case.
And Darren has some really importantpoints about then what happened in terms
of plaintiffs and everything.
Yeah, thanks Emily and I appreciate theintroduction.
I will say that I think it's important tounderstand for those who are watching this
(06:39):
just the incredible effort that Emily hasput forth in herding the cats, so to
speak.
Our industry is often accused of beingdisjointed, of being unable sometimes to
speak with one voice despite the fact thatwe have so much in common.
big versus small operators, social equityversus non-social equity, ancillary versus
(07:05):
plant touching.
But the truth is, this case, I think, justperfectly encapsulates in many ways the
very foundational and fundamentalquestions of freedom, of choice, and of
democracy.
And that's why I am so excited to reallybe a part of this.
(07:25):
And I am so excited.
so grateful to Emily and some of theseother companies and folks who really
poured their heart and soul into this toget this going.
We joined the case after the failure ofSAFE, or I should say the second most
recent failure of SAFE, right?
It's been an ongoing saga.
(07:47):
Because we came to the conclusion, perhapstoo late, but came to the conclusion
nonetheless.
that the federal government just was notgoing to bail this industry out.
They just don't care in the way that wedo.
And it's deeply upsetting to me.
It's deeply upsetting to my company.
And frankly, I think it should be deeplyupsetting to all Americans who believe in
(08:09):
a system of government that demands thatthe folks that we put into legislatures
and the folks that we send to Capitol Hillare really representing our interests.
Ultimately, we have an issue that has beendecided by 38 states across this country.
(08:32):
The citizens of this country want accessto this plant.
They have put in the time and effortthrough their tax contributions to
building robust regulatory programs togovern access to the plant.
And at the same time, both they and theindustry in general is demonized and
(08:57):
treated as criminals.
And that's deeply upsetting.
So that was certainly part of the reasonthat we joined.
And the other thing that is so excitingabout this case, and I think speaks to
what Emily was hinting at, is just thebroadness of the appeal here.
So this is not an MSO issue.
This is not.
(09:19):
a single state operator issue.
This is an issue for everyone who caresabout this plant and this industry.
This is an issue for everyone who isdemonized, for everyone that has to deal
with onerous tax rules, who can't get abank account, who has their bank accounts
closed or is denied for a mortgage.
This is an issue for essentially freedomloving Americans, cannabis loving
(09:41):
Americans, or even folks who aren'tnecessarily into cannabis, but recognize
the importance of cannabis.
of the change that we as citizens can pushas it relates to issues that are of
importance.
So this is extremely exciting.
(10:03):
I think the other, you know, we talked alittle bit about Boy Schiller and their
involvement.
It's been really amazing to work with thembringing this piece of litigation.
Obviously this has been a many yearseffort.
But we also know that it's going to be acouple of years in addition until we
really get this resolved throughlitigation.
(10:26):
This is not something that the lowercourts are going to decide.
This is not something that theintermediate appellate courts are going to
decide.
This is an issue for the Supreme Court ofthe United States.
And that's important.
It's important for folks to realize thatwe do not expect to win this case in
district court or at the intermediateappellate courts.
(10:48):
a very important principle of law calledstare decisis.
It's Latin for the decision stands.
And it's a principle that judges aresupposed to adhere to.
And it basically means that if an issuewas decided in a previous case, you're
bound to that decision.
And so Gonzales V.
Reich is the law of the land.
(11:08):
And the lower courts should adhere to thatdecision.
The Supreme Court also has this principleof stare decisis.
ButOf course, they don't always follow it
because they are the final arbiters ofthese issues.
So we're looking forward to taking thisthrough to the end.
We are certainly prepared to do so andhappy to talk about the discrete legal
(11:32):
issues and arguments as well.
But I'll just echo Cy, your statementsabout how momentous this is, not only
because of who's involved, not onlybecause of the issues involved.
but also because it really is in my mindthe first time that industry is saying,
(11:54):
you know what, we're sick of this.
We're sick of working the back room.
We're sick of trying to use lobbying andother efforts.
We're going to take a stand.
We're going to put our names on a piece ofpaper and we are going to get this in
front of the American people and force thegovernment to stop this insanity.
Yeah, I know it was great to see all thepress pick up when the news hit on
(12:19):
Thursday, the 26th.
And so I think there's a lot of interestout there for all those reasons that you
mentioned, right?
Not just the operators themselves, butjust Americans living in these markets
that have all this uncertainty around thecategory, even just as a consumer.
I think it's tough for many people thataren't really close, as close as we are to
(12:41):
it.
You know, you mentioned it's going to takesome time all the way to the Supreme
Court.
And I think that that's a really goodpoint to make.
I feel like given all the drama aroundsafe, we got to a point on this podcast
where Emily wouldn't even say the word.
It was like Voldemort to her here.
(13:03):
Exactly.
You know, and like the, you know,scheduling situation and we're all so
eager, right.
AndCertainly, I'm one of the more impatient
people out there to see some change.
But I think the message here is we have tobe a little bit patient.
This is a process.
There's a way these things work when thisstuff gets filed.
(13:26):
And if we see losses early on, that's partfor the course, right?
It's not, oh, no, it's all done.
It's over.
I could just see those headlines capturingthe sentiment on
social media, right?
Where, you know, all of a sudden, no, youknow, just like safe.
Oh, but it's actually this is all part ofthe process, just the way this stuff gets
(13:46):
done.
Is there is thereIt's not, and I would say, sorry to
interrupt, it's not only that it's part ofthe process, it's also part of the design.
So typically the Supreme Court does nottake every case that is presented to it.
When a case is, when litigants wanna bringa case to the Supreme Court, they petition
(14:11):
for a writ of certiorari, excuse me,another legal Latin term.
which is basically an application for thecourt to take the case.
And the overwhelming majority of cases areturned down.
The Supreme Court will only take casesthat pose interesting or novel or
important questions or controversies asthey relate to issues of constitutional
(14:36):
law, of issues of federal law, etc.
And so the design of this case, of course,were challenging settled...
precedent here.
I talked about starry decisis.
The design of this case is in fact to loseat the district court.
We fully intend to lose at the lowercourts to create that controversy because
(14:57):
now we've got this disconnect betweenGonzalez-Vireige and these other decisions
and some of the more recent dicta writtenby Justice Thomas, which we could talk
about as well.
And so that's very much part of the plan.
and it's important that folks recognizethis.
Like you said, there's a very much areactionary element to folks who watch
(15:24):
this industry and somewhat understandablyjust given the last couple of years and
how many times we've all been kicked inthe ribs, but it's important for folks to
understand that.
Absolutely and I guess to that To thatpoint you mentioned Thomas and just kind
of the courts are a little bit different2005 was a long time ago and when you
(15:45):
think about cannabis in those days I mean,I didn't get involved in this space till
2010 and it was still pretty I don't evenknow if you could call it an industry,
right?
It was like there was a medical structurein you know, certain markets like
California prettypretty loose, but a very different world
than what we see today.
(16:09):
So like in that, I'm sure that came up indiscussions with, yeah, with Boy Schiller,
with the groups that are, you know,supporting this.
So what has changed, you know, what arekind of some of the things that make this
interesting to a group like Boy Schiller?
Cause I can also imagine, just like theSupreme Court doesn't hear every case, I'm
(16:30):
sure Boy Schiller is probably picky on thetypes of things that they wanna
Mm-hmm.
um you know uh litigate so yeah what uh idon't know what are those items that are
you know so different today than they wereback at gonzalez versus reich
Yeah, I'll just jump in on a couple ofquick things and then I'll pass it to
Darren.
(16:50):
I feel like, so I also had the absolutehonor to talk with Randy Barnett who
argued Gonzalez versus Rach and when wewere doing diligence on this case.
And he's a professor at Georgetown,unbelievable guy.
And he also, by the way, worked on theObamacare case, which has similar aspects
to it as this case.
(17:11):
There's multiple things you can look atthat have changed over the years since
that case was argued.
But one of which is that you're absolutelyright.
I mean, when this case came about, itoriginated obviously before it was even
heard before the Supreme Court, so it wasearly, early days.
And it was basically just caregivernetworks in California.
I think there were fewer than 10 technicalmedical markets and you're absolutely
(17:34):
right, I don't think one of them had afor-profit business structure in it.
In fact, if you think about it, Californiadidn't have that until we converted to,
what's it called, Proposition 60.
for.
And so these things have changeddrastically with obviously the opening of
the Colorado market.
And to Darren's exact point, we now livein a country where over half of the
(17:56):
population lives in a legal market at somelevel where cannabis is exchanged and
people are paying taxes which we can talkabout.
I mean, there's a lot of things that pointto that this is actually now a business
whereas in 0405 it really wasn't.
And to your point about, you know,the different aspects of the business.
Now there's actual frameworks that thestates have established around it, like
(18:18):
testing it, track and trace systems, bothgovernment systems and also the platforms
that the operators use at their point ofsale and all the way through to their
cultivation.
So there's a lot of infrastructure that'sbeen built around this that did not exist.
It just, it wasn't even, I don't eventhink a concept in 2004 at that point.
And now we have a more complex.
(18:39):
track and trace system than most of ourfood that we consume in the United States,
which is concerning on some levels.
But I would never want the burden of whatwe go through in this industry to be
applied across the board because I don'tthink we could afford to eat.
But you know, these are just things thathave changed drastically.
And I heard this as an echo, like I said,not just from Boies Schiller Flexner, but
(18:59):
also from Randy Barnett.
I heard it from Jones Day.
I heard it from Paul Weiss.
I heard it from these other firms abouthow the entire landscape has shifted.
And then there have been also otherprecedent cases set by the Supreme Court
over the years that have pointed in thedirection of observing, and you could even
look at a big example of this is whathappened with the sport betting industry
(19:22):
not too long ago, and David Boyce wasinvolved with that too.
And if you just look at the trajectory ofthose cases, a little bit of a different
angle on it, but the point remains, it's adiscussion about how business is regulated
once it becomes so.
big and important in terms of contributingto the GDP or the economic impact of our
country.
(19:45):
Yeah, so Emily, you're absolutely right.
We've had some monumental shifts in theway that cannabis is produced and consumed
across the country.
Just in terms of the regulatory rigor thatis applied to the industry, and that's
(20:06):
everything from rules and regulationsaround labeling and packaging all the way
to, as Emily pointed out,to fail and tracking.
But I think it's also important to providesome context just on the Commerce Clause
itself and the way in which CommerceClause jurisprudence had developed.
(20:27):
I'm a very foundational guy.
I like to sort of understand context whenI think about issues because I think it
helps color the way that I am able to wrapmy head around where we see societal
changes.
You know, the Commerce Clause, for thosewho don't know, was, is a provision of the
Constitution that was very much a part ofthe bargain that Americans entered into,
(20:53):
or the pre-Americans, the colonists, afterindependence.
And this was done at a time when the vastmajority of regulatory power and
government power rested with the states,in fact, all of it.
There was no federal government.
And there was a lot of concern at the timethat giving the certain powers to this
(21:15):
as-yet-unknown federal entity would end upresulting in a monarchy or a system of
government that wouldn't be representativeof the people.
And so the folks who drafted and ratifiedthe Constitution were very circumspect
about the rights that they wanted to giveto the federal government.
(21:38):
They realized, however, that in order tohave a functioning nation, we needed to
have a system of commerce that was notprotectionist.
California couldn't say, you know, youcan't import apples from Washington,
right, because that wouldn't allow for thefree movement of commerce across the
country.
And so what they did was they put thisclause into the Constitution that said
(22:00):
that Congress has this exclusive power toregulate commerce among the states,
meaning between the statesand the Indian tribes as well.
And for a very long time, it wasinterpreted just in that way, that the
government's power was really aboutcommerce between the states, not things
that were wholly intrastate.
(22:22):
Around the World War II period, in betweenWorld War I and World War II, the Supreme
Court started taking a more expansive viewof the Commerce Clause, and there's a
famous case in the 30s.
about a man who was growing wheat on hisfarm.
And the wheat was really for his ownpurposes.
(22:42):
He was gonna use it to feed his animals.
He was gonna use it to make bread for hisfamily.
At the time, the government was trying tocontrol the supply and price of wheat.
And they made up laws as to how much wheatsomeone could grow.
And this guy grew more wheat than he wassupposed to.
and the government came in and they seizedhis wheat and they fined him.
(23:07):
And he argued that this wasn't fair.
This was wheat that was not intended tomove into commerce.
And the Supreme Court said, well, youknow, you can't tell wheat that you're
growing on your own farm apart from wheatthat comes from a neighboring farm or a
farm across state lines.
And they said, no, this commerce clause isso important.
(23:27):
We are actually going to...
interpret it such that the federalgovernment has the power to regulate, even
something that may not have been intendedfor interstate commerce.
And that was really the point in time whenwe saw a high watermark in Commerce Clause
jurisprudence, and it's been sort of thatway ever since.
(23:48):
Because of these changes on the SupremeCourt, however, we've started to see a
softening of that mentality of the way ofinterpreting the Commerce Clause.
and recognition that there are things thatshould be left up to the states.
It's more true to the original intent ofthe framers.
Cannabis is one such thing.
(24:08):
Cannabis is the way that we regulatecannabis right now is it's wholly
intrastate.
By definition, our products can't crossstate lines.
We have, as Emily said, these seed to saletracking systems that we did not have in
2005.
So that not only do we have a robustregulatory program, but unlike the wheat,
that we couldn't tell its provenance ininterstate commerce, we know when we look
(24:32):
at a package of cannabis based on the seedto sale tracking where it comes from.
California cannabis is not the same asIllinois cannabis or Massachusetts
cannabis.
And so that's important.
And in 2005, even though we had cannabis,we didn't have seed to sale tracking.
The way cannabis was bought and sold wasgenerally in bulk form.
(24:53):
And so that fungibility argument was muchmore prominent than it is today.
So this is an extremely importantcomponent of this case.
The other piece to this that's reallyimportant is just the way in which the
federal government has dealt withcannabis.
(25:14):
In 2005, there hadn't been major changesto federal law or policy.
related to the implementation of theControlled Substances Act.
The government was very concerned aboutlimiting cannabis and cannabis use and
cultivation in the United States.
(25:35):
They enforced the CSA with gusto.
If you fast forward to today, we've hadyears and years and years of riders to
appropriationstate-regulated medical cannabis programs.
We've had years and years and years of apolicy, in some cases written, in some
(26:01):
cases unwritten, as to the use ofprosecutorial discretion related to
cannabis programs.
And the government has taken thishands-off approach, other than, of course,
taking our tax dollars, which issignificant, right?
Justice Thomas wrote in an importantopinion.
often referred to as the Standing Akimbocase, Standing Akimbo versus the United
(26:25):
States.
He said, you know, the governmentbasically is trying to have this half out,
half in, half out regime.
They're tolerating cannabis.
It's hands up, you know, nothing we can doabout it, but at the same time they're
trying to take the stand that cannabis isstill completely illegal.
It makes no sense, right?
You have a substance that...
in one case is highly regulated, has theimprimatur, the okay of all the regulatory
(26:51):
authorities, but at the very same time theexact same product is completely verboten
and it's asinine, honestly.
There's nothing really else like it.
And so this change is super important justin terms of the way in which Americans can
and experience cannabis.
(27:12):
And as Emily said, it's a majority ofAmericans, an overwhelming majority of
Americans right now who have access tothis plant.
Amazing and it's amazing the history ofthe commerce clause and yeah, certainly
how it's been used in the United Statesfor many things The it's kind of funny
going from wheat to weed here But but Imean it's probably something most
(27:38):
Americans don't think about you know thatfact We just kind of take it for granted
You know all this stuff and the way itworks between states and within states,
butIt is a really interesting point on that
story.
It's just like doing, growing it forhimself or whatever and gets shut down and
a lot of parallels to what we're seeinghere.
(28:03):
When, I guess, they, as you guys did thework on this, where do you see some
challenges, some risks?
And is it?
Is there pretty smooth sailing through orthere are a couple of things that might be
like a bit challenging for everyone tokind of watch out for.
(28:25):
Yeah, I mean, this is a case that willrequire patience and attention to detail.
And that is something that I think, youknow, it's interesting, we've had this arc
of wanting for change and it hasn'thappened, hasn't happened, hasn't
happened.
I think with this, we're just going tohave to be very patient and watch how this
unfolds and let the good work get done.
(28:48):
But I do think we'll anticipate that therewill be some challenges.
But one important thing is,to make sure that the general populace
understands the intention behind this caseand what it's really about.
And Darren's been doing an excellent jobof articulating that.
But we have been trying to build morecoalition outside of the industry around
this because this issue does pull so wellacross both sides of the aisle.
(29:12):
So this is not a polarizing issue actuallywhen you look at how the constituents rank
in on it.
But we do need to have conversationsacross the spectrum of political ideology
to help people to understand what we'retrying to achieve here.
We're not trying to go crazy and ask forthe entire world to change.
We're just trying to achieve being treatedequally by our government and being
(29:37):
respected within the legal regulationsthat we operate under and within these
states.
Because I think the states have done, Imean, there are a few exceptions, as
anyone who listens to the podcast knowshow I feel about some of the states, but
many of the states have done a pretty goodjob of trying to establish legal
frameworks for this to operate.
And you know, just especially when wespoke with the plaintiffs that are named
(30:00):
in the case and very important to thiscase, because they really, the aspects of
them doing business within the state ofMassachusetts and then dealing with...
and navigating the reach of the federalgovernment into interfering with their
businesses and the way that it explodestheir cost of doing business.
If they can, I mean, there's like the costof doing business explodes and then
(30:22):
there's the barriers to doing businessthat exists because of this.
And it comes in every form and fashion,just including everything from the banking
issues, we all know about the fees, if youcan get the banking, the rates you pay on
interest, if you can get a loan,insurance.
anything from even leasing vehicles, whichyou can hear from, Gaussi talk about at
(30:44):
Trevett.
I mean, these things are extraordinary.
And if, if you could do business withoutall of those aspects, you could actually
have really nice businesses.
We know businesses have failed or havefailed to launch because of this,
especially in the state of Massachusetts,because it's a pretty, it's a pretty,
competitive market out there.
But I think that.
(31:05):
But we do anticipate there could bechallenges and we're trying to get ahead
of it by being very clear and intentionalabout what we're all trying to do here as
an industry from small businesses all theway through to the quote unquote larger
businesses, which we always kind of laughabout because these companies are doing a
great job of generating revenue and movingto free cash flow.
But when you look at their market caps,it's just not we're not in like quote
(31:29):
unquote big business.
We're not Amazon yet.
I mean, even just that.
The limitation around the up listingpotential for the public companies I think
a lot of people overlook the importance ofthe flow through that has on small
business because the distortion ofvaluations that exist make it very hard
for small businesses to raise moneybecause they get relative valuations
(31:51):
comparable valuations to the publiccompanies and if you're trying to raise
money and you have limitations about howmuch equity you can Give up.
It's it's quite a limiting factor and whenyou don't have small business financing
All of these things are impacting thesebusinesses, but I do anticipate that there
will be challenges, but one of them is tomake sure we're very clear about the
optics of what this case is really tryingto achieve.
(32:12):
And it's not just...
Go ahead Darren.
I'm sorry, go ahead.
I was just gonna follow up on that thread.
I think you raised such an important pointthat bears emphasis here.
I mentioned earlier about how this caseisn't about MSOs or small businesses or
social equity versus non-social equity, etcetera.
(32:32):
One of the beauties of this case and oneof the things that got me so excited
initially and certainly keeps myexcitement going.
is the fact that the issues that theinterpretation of the commerce clause,
essentially, which is where this all boilsdown to, the impacts of that are felt in
(32:55):
so many different ways and by so manydifferent businesses and verticals.
And frankly, they're felt a lot moreacutely by the small businesses.
You know as it relates to some of theissues that Emily said around Getting
loans about getting you know affordableinsurance about Being able to maintain
(33:20):
bank accounts having access to realvendors and third parties.
You know, we generally can't use You knowlarge payroll companies or certain ERP
systems You know things that are just sobasic and fundamental to doing business in
a sophisticated way.
And frankly, you know, the big guys, theycan figure it out.
(33:43):
They have the resources to developcapacities internally.
The small companies don't.
And they're suffering.
They're dying as a result.
At the same time, you know, as we havethis very significant and important social
equity angle, right?
Because we've seen the failures of thesesocial equity programs.
(34:04):
which is very much based upon the factthat these businesses can't be treated
like any other business.
There's also impacts to the largebusinesses.
Emily mentioned uplisting.
There are issues with respect to access tomeaningful debt markets.
(34:24):
There are issues, of course, withinefficiencies and inconsistencies as it
relates toyou know, regulation and impact.
And so there really are, you know, I liketo think of this as like there's something
for everyone in this case.
It doesn't matter if you're left, right,pro-cannabis, anti-cannabis.
(34:45):
This really isn't even about cannabis inso many ways.
It's about freedom, it's about choice,it's about democracy, and it's about
fairness.
And the fact that businesses who areinterested and wanna get involved in this
space should be treated fairly.
Yeah, great, great points.
And I think it's also good to think about,it's not just the business owners or the
(35:09):
shareholders that are impacted by thefederal position.
It does impact the employees, right?
And there's close to half a millionemployees out there in this space that
struggle with things like, losing a bankaccount, just for being an employee of a
company, I've seen that.
(35:29):
you know, happen at companies that I'vebeen at, you know, not getting approved
for home loans, right, because of theiremployer.
There's all sorts of challenges that justexist that go beyond just the companies
themselves.
And it does impact, you know, a lot of thejust people somewhat, you know, involved
(35:50):
and then those that aren't like as aconsumer.
You know, there's challenges withbeing eligible for jobs, like jobs in the
government.
And there's like legislation that's tryingto come around to fix that, but I have my
doubts given how the federal governmenthas done anything towards this stuff, but
it's all kind of impacted just by thefederal position, this kind of half in,
(36:15):
half out, as you mentioned that they seemto be in.
And you're absolutely right on the smallbusiness.
We've made that case quite a bit.
We've had guests on the podcast.
you know, that are smaller organizations,kind of social equity groups that struggle
disproportionately, I think, to get, um,you know, banking just in general, and
(36:35):
then you combine that with cannabis,right?
And, and I know when, when safe was comingaround and people talk about it and like
the argument, um, that some people hadagainst it was, well, you know, there's
plenty of banks and cannabis, there'splenty of credit unions that support, you
know, cannabis operators.
And, um, one, I don't think that there's,there are plenty, but I do think that at
thisproportionately supports larger operators
that, you know, can find those resources abit better than the smaller businesses
(37:01):
that just don't have the same optionality,right?
So it is, it kind of gets lost in the washwhen people just say, no, there is
banking, you know, it's like, no, yeah,technically, that may be true.
But I think it's, you know, papering overwhat the reality is for a smaller operator
out there.
So, yeah, all of this stuff.
(37:22):
it's great to make that extra clear thatthis isn't just about the larger
organizations being involved.
There are smaller organizations involved.
This will support consumers.
This will support employees when we havesome of this change.
So I think it's very important.
And I think very interesting to see thiskind of come to light.
(37:47):
I don't know.
It's like we've all beenHopefully something happens beforehand and
maybe this accelerates things.
I think in some ways it's not a great lookfor the parties and government that have
always been supportive and have said thatthey're going to change things and then
haven't continued to campaign on thosethings.
(38:09):
This is the world we're in and I think itlooks great for them.
So maybe that it will accelerate somechange hopefully or they say, okay, well,
this is a problem.
We talk about...
you know, legalizing and you know,federally and making some change, but we
just haven't so much that now we'regetting sued.
So I got to hope that it opened some eyesout there.
(38:32):
Um, any, I mean, how do you guys feelabout it?
Are you guys excited?
Was the news, was it like, uh, kind ofgreat to see?
I know you guys both have been working onthis for, for some time.
Um, a lot of cooks in the kitchen, I'msure a lot of conversations, uh, a lot of.
You know, herding cats, as you mentioned,Darren, you guys, does it feel great that
(38:53):
it's out there?
Is it sense of relief?
Maybe not really fun.
mean look, Emily can probably speak tothis better than I can just because she's
been really doing the yeoman's work ofherding those cats, certainly more than I
have.
But yeah, I mean, we were very excited toget this filed.
(39:18):
This is, as you say, something that's beenin the works for quite some time and a
story that needs to be told and anargument that needs to be made.
And I'm excited that it's...
getting picked up.
You know, the timing is also, I think,just works out quite well in that we, you
(39:39):
know, at the end of August got the newsthat HHS is recommending a reschedule.
And so what this means is that with thiscase, we now have all three branches of
government, at least on this issue, right,we've got the executive branch for the
rescheduling, the legislative branch.
through SAFE or SAFER and the States Actand some of these other pieces of
(40:03):
legislation.
And now we've got the judicial branch aswell.
And, you know, I'm no military historian,but I'll tell you that my guess is that
being able to wage a war on multiplefronts is probably the way to go, right?
So I think that's important.
Yeah, I mean, I think for me, this hasbeen, first of all, I can't say enough
about the folks who have stepped up earlyand believed in this and that we've worked
(40:27):
so well together.
I mean, in an industry where for 10 years,I've seen people kind of work sometimes
against each other or create friction insituations, this has been one of the most
refreshing experiences ever to see thegroups from big to small coming together.
hearing the plaintiff's stories about whatit's like to operate in this industry.
(40:47):
I mean, it reminds me of early days ofwhen I got into this and I had a lot of
people kind of saying like, oh, you'retrying to get weed legalized.
It's going to hurt all these people.
And then I would hear amazing storiesabout people who had medical benefits of
cannabis or that their kids stopped havingseizure because they have access to
cannabis.
This is like breathing new life into theway I feel about this industry because I
(41:10):
get to hear the stories of.
operators at every level and think abouthow their businesses are affected and how
they could potentially change.
I know, Cy, you know I was on the board ofMarijuana Policy Project.
Morgan and I personally contributed toconsultants and state levels and federal
levels for 10 years.
And when you see a lot of change in someinstances, it's really inspiring.
(41:35):
I remember in the election when we gotseven of the eight adult youths.
programs passed when I was on the Board ofMarijuana Policy Project.
That was an immensely exciting time and itfelt like we were seeing great change
happening within the industry.
And then on the federal level it feelslike we've just been kind of treading
water slash a little bit backsliding withthings being removed like the coal memo
(41:57):
and you know we have been waiting for theGarland memo for a while now and I don't
understand how much more support a memocould get because it really is just a memo
and there's so much support Ias we've talked about, Rob Nichols from
the ABA is such an immense supporter ofbanking reform.
There's so much support for a new memo andwe'd love to see it and I hope we get
(42:17):
there.
But I think that, you know, Darren's pointis the right point is like, we've leaned
in on the legislative branch for a long,long time and now it's time to take a
different avenue through our one of theother branches of government.
It's one of the amazing things about beingan American is that we have the checks and
balances.
We have...
the executive branch, which we are seeingsome of the things happening around the
(42:40):
HHS and Biden stepping up last fall, asyou and I remember, to make comments about
that.
And then the subsequent move by HHS, andnow we're waiting to see what the DEA is
going to do.
And then we know what's been going on inthe legislative branch for a long time.
And I don't even think it's so much aboutcannabis as it is about what's going on in
the legislative branch.
(43:01):
And then we have the judicial branch.
I think as Americans, it is our job tothink about how we can work through every
branch of our government to get the bestoutcome for the citizens of this country
and for the people who run businesses.
I mean, I can't wow, I'm becomingincredibly patriotic maybe because it's
Friday, but I can't get I mean, maybebecause I come from a small business
(43:21):
family, like to me, Main Street to me,small business is what is the defining
characteristic of America.
And thenwhat you can do together with resources of
larger companies and driving innovationand driving change, this is when America
works best.
No matter what is happening at the federallevel, it is coming from the grassroots.
And I get really excited when I thinkabout this.
(43:42):
And I think our industry, like what theGDP numbers just came out and I feel like
cannabis is not even like reflected inwhat is happening in this country.
And it has so much immense potential.
So I'm just.
you can tell I'm really excited by this.
And maybe it is that I get to sit in theroom with the lawyers and the great minds
like Darren and Lynn and Jason and Brettand Abner and all these people who have
(44:04):
these great visions.
And then also hearing the constitutionallawyers who've had success in the halls of
our government.
And it gives me a great hope that we'reonto something here.
It won't be an easy path and it won't beovernight, but it's a good effort.
So I'm excited.
Okay.
Exactly.
(44:25):
Well, um, I just want to, you know, thankyou both again, uh, for all the work, uh,
that's gone into this and all the workthat I think will continue to go into
this, I'm sure there'll be plenty of phonecalls and conversations over the years
ahead related, um, to, to this stuff.
So, so thank you so much.
And Darren, thanks for taking the time.
Um, you know, on such short notice, giventhe news just came out and, uh, I know
(44:48):
you're, you'rebusy traveling, but to jump in and kind of
help explain this issue to the audience ofthe high rise.
I'm sure it's well received.
So thank you so much.
And yeah, let's do it again as thisprogresses and we learn more and as we
(45:08):
hopefully get this thing to the finishline here.
But thanks again and looking forward toseeing where this goes.
Thank you.
Absolutely.
Thanks so much.
Welcome back to the high rise, a laid backdata back conversation where we talk all
things cannabis from US MSOs to CanadianLPs, products and markets through the lens
of data.
I'm joined as always by Emily Paxia ofPoseidon.
Hi everyone, welcome to the HiRise.
I'm Cy Scott with Headset and today wehave a very special guest with Darren
Weiss, President of Verano.
(00:21):
Thanks for joining us today Darren.
Thank you so much, Sy, for the invitation.
So glad to be here.
Yeah, it's great to have you here becausewe have some huge news that happened this
week related to the Commerce Clauselitigation.
And I know Verano played a big part inthis.
And you're also a lawyer, so you can speakto it much better than I can, I'm sure.
(00:47):
And of course, Emily, you as well withPoseidon and wrangling this stuff from the
earliest days.
So I thought, you know, withOf course, there's always a lot going on,
but this is such a notable thing, such abig deal I think for our space.
So I really just wanted to dive into itand what does this mean?
How do we get here?
(01:08):
What's the path forward and so on?
And it's a real privilege to have you bothhere because you've been so close to it.
So let's start with just kind of thebackground, the story.
Like how did we get to this week?
I know it didn't just happen yesterday,right?
Yeah, right.
So instead of burying the lead, I'll just,you know, get right to it on.
(01:30):
So everyone knows now that Boy SchillerFlexner with David Boyes as lead counsel
are really representing the industry onthis case.
And I want to talk in very inclusive termsbecause this is really an industry effort.
And we'll get more to that.
But this all actually started in thesummer of twenty two.
(01:50):
And I was when I was.
on the board of ascend and we had a phonecall with them about representing us on a
different matter.
And actually, David Boyce was the one whowas like, I don't know why this industry
hasn't challenged the decision of Gonzalezversus Reiche.
And we started to dig in on this.
And a lot of people have heard about thedormant commerce clause as it pertains to
(02:12):
interstate commerce.
But this was a different angle and it wasabout intrastate commerce, which...
Sometimes when I'm trying to be extremelysimplistic, I try to liken it to the
Rohrbacher-Farr Amendment, but like withreal legal framework around it and an
actual law.
And so, and it really does have to do withindustry running at the state level where
(02:36):
there are legal programs.
And so Darren can speak a lot moreintelligently to that with his background
and wisdom, but this, so that's how itstarted.
So,Abner actually at Ascent, I gotta give him
a ton of credit, he sunk his teeth intothis and we started looking at it and a
group of us got together, Jason Wilde wasaround the horn at that time, I know
Verona was looking at it, everyone waslooking at it, but it seemed as though
maybe this wasn't an effort that we shouldbe leaning in on because SAFE had so much
(03:00):
promise at that time.
And at that time SAFE had a lot of weightto it because it was going to be
monumental if it actually did getintroduced in past.
Fast forward to December 2022, that didnot happen.
And we all know what happened.
It was not a fun time to be in cannabis.
(03:21):
It felt pretty terrible.
And I remember I called up Abner and Isaid, Abner, we gotta get back on this.
And so we got back on the calls withBoies, Schiller, Flexner, Verano was right
there with us.
So we had this great coalition of peopleand we started to talk to them because
with these cases, there's a ton ofinformation sharing that has to go on.
(03:41):
there's a ton of polling people andcoalition support together to support a
law firm who is going to endeavor on apursuit through a constitutional case like
this.
We got on the phone with them and then,actually it was Jason Wilde was like, I
have a list of other firms we should calljust to do a little litmus test on this.
So we talked to a range of firms acrossthe entire spectrum of kind of political
(04:05):
ideology from the most conservative.
to again kind of boy schiller flexor,which tends toward the more progressive
mindset around the issue.
Just to make sure, you know in cannabissometimes I feel like, and you know I love
this concept of inviting strangebedfellows to the table, like test your
hypothesis, don't sit in an echo chamber,try to talk to people who have different
ideologies and see if fundamental aspectsof your perspective make sense whether or
(04:30):
not they have like a religious or anothermoral thought around cannabis is one
thing.
just testing it from this legalstandpoint.
And one of the phone calls that actuallystood out to me the most was the one with
Jones Day, because they are so incrediblyconservative.
And I have to give it to the two lawyersthat I got on the phone with.
They had me on the phone, we had an hourcall scheduled.
(04:51):
They had me on the phone for two hoursspeaking with enthusiasm about how they
could view how this case that wasoriginally heard and then decided upon in
2004, 2005 could.
have a different standing given so manydifferent aspects of it.
And I'll say this, like, I'm not a lawyer,but I'm a curious human.
(05:12):
And sitting on the phone with lawyers andhearing them argue, kind of like develop
arguments about these cases is endlesslyfascinating.
And we had, we spoke with multiple otherfirms and other firms agreed to actually
represent us.
They were pretty excited about it.
And in the end, we decided to selectBoyschiller Flexner for a number of
reasons.
(05:33):
If anyone looks up David Boyce's trackrecord at the Supreme Court, or just in
general, it's monumentally impressive.
And the second thing was that we just feltlike they had originated interest in the
case and having a firm like that take up amantle around cannabis just is really
meaningful to us.
I feel like when I'm on the Hill, I hearkind of pejorative comments about how
(05:56):
seriously or unseriously we're taken as anindustry and.
having these kinds of partners out thereis really meaningful.
So that's how we got to this point andimmediately got great support from groups
like Verona who just immediately kind ofunderstood why we needed to be standing
together holding hands and providingeverything we could to a firm like that to
(06:18):
support a case.
And Darren has some really importantpoints about then what happened in terms
of plaintiffs and everything.
Yeah, thanks Emily and I appreciate theintroduction.
I will say that I think it's important tounderstand for those who are watching this
(06:39):
just the incredible effort that Emily hasput forth in herding the cats, so to
speak.
Our industry is often accused of beingdisjointed, of being unable sometimes to
speak with one voice despite the fact thatwe have so much in common.
big versus small operators, social equityversus non-social equity, ancillary versus
(07:05):
plant touching.
But the truth is, this case, I think, justperfectly encapsulates in many ways the
very foundational and fundamentalquestions of freedom, of choice, and of
democracy.
And that's why I am so excited to reallybe a part of this.
(07:25):
And I am so excited.
so grateful to Emily and some of theseother companies and folks who really
poured their heart and soul into this toget this going.
We joined the case after the failure ofSAFE, or I should say the second most
recent failure of SAFE, right?
It's been an ongoing saga.
(07:47):
Because we came to the conclusion, perhapstoo late, but came to the conclusion
nonetheless.
that the federal government just was notgoing to bail this industry out.
They just don't care in the way that wedo.
And it's deeply upsetting to me.
It's deeply upsetting to my company.
And frankly, I think it should be deeplyupsetting to all Americans who believe in
(08:09):
a system of government that demands thatthe folks that we put into legislatures
and the folks that we send to Capitol Hillare really representing our interests.
Ultimately, we have an issue that has beendecided by 38 states across this country.
(08:32):
The citizens of this country want accessto this plant.
They have put in the time and effortthrough their tax contributions to
building robust regulatory programs togovern access to the plant.
And at the same time, both they and theindustry in general is demonized and
(08:57):
treated as criminals.
And that's deeply upsetting.
So that was certainly part of the reasonthat we joined.
And the other thing that is so excitingabout this case, and I think speaks to
what Emily was hinting at, is just thebroadness of the appeal here.
So this is not an MSO issue.
This is not.
(09:19):
a single state operator issue.
This is an issue for everyone who caresabout this plant and this industry.
This is an issue for everyone who isdemonized, for everyone that has to deal
with onerous tax rules, who can't get abank account, who has their bank accounts
closed or is denied for a mortgage.
This is an issue for essentially freedomloving Americans, cannabis loving
(09:41):
Americans, or even folks who aren'tnecessarily into cannabis, but recognize
the importance of cannabis.
of the change that we as citizens can pushas it relates to issues that are of
importance.
So this is extremely exciting.
(10:03):
I think the other, you know, we talked alittle bit about Boy Schiller and their
involvement.
It's been really amazing to work with thembringing this piece of litigation.
Obviously this has been a many yearseffort.
But we also know that it's going to be acouple of years in addition until we
really get this resolved throughlitigation.
(10:26):
This is not something that the lowercourts are going to decide.
This is not something that theintermediate appellate courts are going to
decide.
This is an issue for the Supreme Court ofthe United States.
And that's important.
It's important for folks to realize thatwe do not expect to win this case in
district court or at the intermediateappellate courts.
(10:48):
a very important principle of law calledstare decisis.
It's Latin for the decision stands.
And it's a principle that judges aresupposed to adhere to.
And it basically means that if an issuewas decided in a previous case, you're
bound to that decision.
And so Gonzales V.
Reich is the law of the land.
(11:08):
And the lower courts should adhere to thatdecision.
The Supreme Court also has this principleof stare decisis.
ButOf course, they don't always follow it
because they are the final arbiters ofthese issues.
So we're looking forward to taking thisthrough to the end.
We are certainly prepared to do so andhappy to talk about the discrete legal
(11:32):
issues and arguments as well.
But I'll just echo Cy, your statementsabout how momentous this is, not only
because of who's involved, not onlybecause of the issues involved.
but also because it really is in my mindthe first time that industry is saying,
(11:54):
you know what, we're sick of this.
We're sick of working the back room.
We're sick of trying to use lobbying andother efforts.
We're going to take a stand.
We're going to put our names on a piece ofpaper and we are going to get this in
front of the American people and force thegovernment to stop this insanity.
Yeah, I know it was great to see all thepress pick up when the news hit on
(12:19):
Thursday, the 26th.
And so I think there's a lot of interestout there for all those reasons that you
mentioned, right?
Not just the operators themselves, butjust Americans living in these markets
that have all this uncertainty around thecategory, even just as a consumer.
I think it's tough for many people thataren't really close, as close as we are to
(12:41):
it.
You know, you mentioned it's going to takesome time all the way to the Supreme
Court.
And I think that that's a really goodpoint to make.
I feel like given all the drama aroundsafe, we got to a point on this podcast
where Emily wouldn't even say the word.
It was like Voldemort to her here.
(13:03):
Exactly.
You know, and like the, you know,scheduling situation and we're all so
eager, right.
AndCertainly, I'm one of the more impatient
people out there to see some change.
But I think the message here is we have tobe a little bit patient.
This is a process.
There's a way these things work when thisstuff gets filed.
(13:26):
And if we see losses early on, that's partfor the course, right?
It's not, oh, no, it's all done.
It's over.
I could just see those headlines capturingthe sentiment on
social media, right?
Where, you know, all of a sudden, no, youknow, just like safe.
Oh, but it's actually this is all part ofthe process, just the way this stuff gets
(13:46):
done.
Is there is thereIt's not, and I would say, sorry to
interrupt, it's not only that it's part ofthe process, it's also part of the design.
So typically the Supreme Court does nottake every case that is presented to it.
When a case is, when litigants wanna bringa case to the Supreme Court, they petition
(14:11):
for a writ of certiorari, excuse me,another legal Latin term.
which is basically an application for thecourt to take the case.
And the overwhelming majority of cases areturned down.
The Supreme Court will only take casesthat pose interesting or novel or
important questions or controversies asthey relate to issues of constitutional
(14:36):
law, of issues of federal law, etc.
And so the design of this case, of course,were challenging settled...
precedent here.
I talked about starry decisis.
The design of this case is in fact to loseat the district court.
We fully intend to lose at the lowercourts to create that controversy because
(14:57):
now we've got this disconnect betweenGonzalez-Vireige and these other decisions
and some of the more recent dicta writtenby Justice Thomas, which we could talk
about as well.
And so that's very much part of the plan.
and it's important that folks recognizethis.
Like you said, there's a very much areactionary element to folks who watch
(15:24):
this industry and somewhat understandablyjust given the last couple of years and
how many times we've all been kicked inthe ribs, but it's important for folks to
understand that.
Absolutely and I guess to that To thatpoint you mentioned Thomas and just kind
of the courts are a little bit different2005 was a long time ago and when you
(15:45):
think about cannabis in those days I mean,I didn't get involved in this space till
2010 and it was still pretty I don't evenknow if you could call it an industry,
right?
It was like there was a medical structurein you know, certain markets like
California prettypretty loose, but a very different world
than what we see today.
(16:09):
So like in that, I'm sure that came up indiscussions with, yeah, with Boy Schiller,
with the groups that are, you know,supporting this.
So what has changed, you know, what arekind of some of the things that make this
interesting to a group like Boy Schiller?
Cause I can also imagine, just like theSupreme Court doesn't hear every case, I'm
(16:30):
sure Boy Schiller is probably picky on thetypes of things that they wanna
Mm-hmm.
um you know uh litigate so yeah what uh idon't know what are those items that are
you know so different today than they wereback at gonzalez versus reich
Yeah, I'll just jump in on a couple ofquick things and then I'll pass it to
Darren.
(16:50):
I feel like, so I also had the absolutehonor to talk with Randy Barnett who
argued Gonzalez versus Rach and when wewere doing diligence on this case.
And he's a professor at Georgetown,unbelievable guy.
And he also, by the way, worked on theObamacare case, which has similar aspects
to it as this case.
(17:11):
There's multiple things you can look atthat have changed over the years since
that case was argued.
But one of which is that you're absolutelyright.
I mean, when this case came about, itoriginated obviously before it was even
heard before the Supreme Court, so it wasearly, early days.
And it was basically just caregivernetworks in California.
I think there were fewer than 10 technicalmedical markets and you're absolutely
(17:34):
right, I don't think one of them had afor-profit business structure in it.
In fact, if you think about it, Californiadidn't have that until we converted to,
what's it called, Proposition 60.
for.
And so these things have changeddrastically with obviously the opening of
the Colorado market.
And to Darren's exact point, we now livein a country where over half of the
(17:56):
population lives in a legal market at somelevel where cannabis is exchanged and
people are paying taxes which we can talkabout.
I mean, there's a lot of things that pointto that this is actually now a business
whereas in 0405 it really wasn't.
And to your point about, you know,the different aspects of the business.
Now there's actual frameworks that thestates have established around it, like
(18:18):
testing it, track and trace systems, bothgovernment systems and also the platforms
that the operators use at their point ofsale and all the way through to their
cultivation.
So there's a lot of infrastructure that'sbeen built around this that did not exist.
It just, it wasn't even, I don't eventhink a concept in 2004 at that point.
And now we have a more complex.
(18:39):
track and trace system than most of ourfood that we consume in the United States,
which is concerning on some levels.
But I would never want the burden of whatwe go through in this industry to be
applied across the board because I don'tthink we could afford to eat.
But you know, these are just things thathave changed drastically.
And I heard this as an echo, like I said,not just from Boies Schiller Flexner, but
(18:59):
also from Randy Barnett.
I heard it from Jones Day.
I heard it from Paul Weiss.
I heard it from these other firms abouthow the entire landscape has shifted.
And then there have been also otherprecedent cases set by the Supreme Court
over the years that have pointed in thedirection of observing, and you could even
look at a big example of this is whathappened with the sport betting industry
(19:22):
not too long ago, and David Boyce wasinvolved with that too.
And if you just look at the trajectory ofthose cases, a little bit of a different
angle on it, but the point remains, it's adiscussion about how business is regulated
once it becomes so.
big and important in terms of contributingto the GDP or the economic impact of our
country.
(19:45):
Yeah, so Emily, you're absolutely right.
We've had some monumental shifts in theway that cannabis is produced and consumed
across the country.
Just in terms of the regulatory rigor thatis applied to the industry, and that's
(20:06):
everything from rules and regulationsaround labeling and packaging all the way
to, as Emily pointed out,to fail and tracking.
But I think it's also important to providesome context just on the Commerce Clause
itself and the way in which CommerceClause jurisprudence had developed.
(20:27):
I'm a very foundational guy.
I like to sort of understand context whenI think about issues because I think it
helps color the way that I am able to wrapmy head around where we see societal
changes.
You know, the Commerce Clause, for thosewho don't know, was, is a provision of the
Constitution that was very much a part ofthe bargain that Americans entered into,
(20:53):
or the pre-Americans, the colonists, afterindependence.
And this was done at a time when the vastmajority of regulatory power and
government power rested with the states,in fact, all of it.
There was no federal government.
And there was a lot of concern at the timethat giving the certain powers to this
(21:15):
as-yet-unknown federal entity would end upresulting in a monarchy or a system of
government that wouldn't be representativeof the people.
And so the folks who drafted and ratifiedthe Constitution were very circumspect
about the rights that they wanted to giveto the federal government.
(21:38):
They realized, however, that in order tohave a functioning nation, we needed to
have a system of commerce that was notprotectionist.
California couldn't say, you know, youcan't import apples from Washington,
right, because that wouldn't allow for thefree movement of commerce across the
country.
And so what they did was they put thisclause into the Constitution that said
(22:00):
that Congress has this exclusive power toregulate commerce among the states,
meaning between the statesand the Indian tribes as well.
And for a very long time, it wasinterpreted just in that way, that the
government's power was really aboutcommerce between the states, not things
that were wholly intrastate.
(22:22):
Around the World War II period, in betweenWorld War I and World War II, the Supreme
Court started taking a more expansive viewof the Commerce Clause, and there's a
famous case in the 30s.
about a man who was growing wheat on hisfarm.
And the wheat was really for his ownpurposes.
(22:42):
He was gonna use it to feed his animals.
He was gonna use it to make bread for hisfamily.
At the time, the government was trying tocontrol the supply and price of wheat.
And they made up laws as to how much wheatsomeone could grow.
And this guy grew more wheat than he wassupposed to.
and the government came in and they seizedhis wheat and they fined him.
(23:07):
And he argued that this wasn't fair.
This was wheat that was not intended tomove into commerce.
And the Supreme Court said, well, youknow, you can't tell wheat that you're
growing on your own farm apart from wheatthat comes from a neighboring farm or a
farm across state lines.
And they said, no, this commerce clause isso important.
(23:27):
We are actually going to...
interpret it such that the federalgovernment has the power to regulate, even
something that may not have been intendedfor interstate commerce.
And that was really the point in time whenwe saw a high watermark in Commerce Clause
jurisprudence, and it's been sort of thatway ever since.
(23:48):
Because of these changes on the SupremeCourt, however, we've started to see a
softening of that mentality of the way ofinterpreting the Commerce Clause.
and recognition that there are things thatshould be left up to the states.
It's more true to the original intent ofthe framers.
Cannabis is one such thing.
(24:08):
Cannabis is the way that we regulatecannabis right now is it's wholly
intrastate.
By definition, our products can't crossstate lines.
We have, as Emily said, these seed to saletracking systems that we did not have in
2005.
So that not only do we have a robustregulatory program, but unlike the wheat,
that we couldn't tell its provenance ininterstate commerce, we know when we look
(24:32):
at a package of cannabis based on the seedto sale tracking where it comes from.
California cannabis is not the same asIllinois cannabis or Massachusetts
cannabis.
And so that's important.
And in 2005, even though we had cannabis,we didn't have seed to sale tracking.
The way cannabis was bought and sold wasgenerally in bulk form.
(24:53):
And so that fungibility argument was muchmore prominent than it is today.
So this is an extremely importantcomponent of this case.
The other piece to this that's reallyimportant is just the way in which the
federal government has dealt withcannabis.
(25:14):
In 2005, there hadn't been major changesto federal law or policy.
related to the implementation of theControlled Substances Act.
The government was very concerned aboutlimiting cannabis and cannabis use and
cultivation in the United States.
(25:35):
They enforced the CSA with gusto.
If you fast forward to today, we've hadyears and years and years of riders to
appropriationstate-regulated medical cannabis programs.
We've had years and years and years of apolicy, in some cases written, in some
(26:01):
cases unwritten, as to the use ofprosecutorial discretion related to
cannabis programs.
And the government has taken thishands-off approach, other than, of course,
taking our tax dollars, which issignificant, right?
Justice Thomas wrote in an importantopinion.
often referred to as the Standing Akimbocase, Standing Akimbo versus the United
(26:25):
States.
He said, you know, the governmentbasically is trying to have this half out,
half in, half out regime.
They're tolerating cannabis.
It's hands up, you know, nothing we can doabout it, but at the same time they're
trying to take the stand that cannabis isstill completely illegal.
It makes no sense, right?
You have a substance that...
in one case is highly regulated, has theimprimatur, the okay of all the regulatory
(26:51):
authorities, but at the very same time theexact same product is completely verboten
and it's asinine, honestly.
There's nothing really else like it.
And so this change is super important justin terms of the way in which Americans can
and experience cannabis.
(27:12):
And as Emily said, it's a majority ofAmericans, an overwhelming majority of
Americans right now who have access tothis plant.
Amazing and it's amazing the history ofthe commerce clause and yeah, certainly
how it's been used in the United Statesfor many things The it's kind of funny
going from wheat to weed here But but Imean it's probably something most
(27:38):
Americans don't think about you know thatfact We just kind of take it for granted
You know all this stuff and the way itworks between states and within states,
butIt is a really interesting point on that
story.
It's just like doing, growing it forhimself or whatever and gets shut down and
a lot of parallels to what we're seeinghere.
(28:03):
When, I guess, they, as you guys did thework on this, where do you see some
challenges, some risks?
And is it?
Is there pretty smooth sailing through orthere are a couple of things that might be
like a bit challenging for everyone tokind of watch out for.
(28:25):
Yeah, I mean, this is a case that willrequire patience and attention to detail.
And that is something that I think, youknow, it's interesting, we've had this arc
of wanting for change and it hasn'thappened, hasn't happened, hasn't
happened.
I think with this, we're just going tohave to be very patient and watch how this
unfolds and let the good work get done.
(28:48):
But I do think we'll anticipate that therewill be some challenges.
But one important thing is,to make sure that the general populace
understands the intention behind this caseand what it's really about.
And Darren's been doing an excellent jobof articulating that.
But we have been trying to build morecoalition outside of the industry around
this because this issue does pull so wellacross both sides of the aisle.
(29:12):
So this is not a polarizing issue actuallywhen you look at how the constituents rank
in on it.
But we do need to have conversationsacross the spectrum of political ideology
to help people to understand what we'retrying to achieve here.
We're not trying to go crazy and ask forthe entire world to change.
We're just trying to achieve being treatedequally by our government and being
(29:37):
respected within the legal regulationsthat we operate under and within these
states.
Because I think the states have done, Imean, there are a few exceptions, as
anyone who listens to the podcast knowshow I feel about some of the states, but
many of the states have done a pretty goodjob of trying to establish legal
frameworks for this to operate.
And you know, just especially when wespoke with the plaintiffs that are named
(30:00):
in the case and very important to thiscase, because they really, the aspects of
them doing business within the state ofMassachusetts and then dealing with...
and navigating the reach of the federalgovernment into interfering with their
businesses and the way that it explodestheir cost of doing business.
If they can, I mean, there's like the costof doing business explodes and then
(30:22):
there's the barriers to doing businessthat exists because of this.
And it comes in every form and fashion,just including everything from the banking
issues, we all know about the fees, if youcan get the banking, the rates you pay on
interest, if you can get a loan,insurance.
anything from even leasing vehicles, whichyou can hear from, Gaussi talk about at
(30:44):
Trevett.
I mean, these things are extraordinary.
And if, if you could do business withoutall of those aspects, you could actually
have really nice businesses.
We know businesses have failed or havefailed to launch because of this,
especially in the state of Massachusetts,because it's a pretty, it's a pretty,
competitive market out there.
But I think that.
(31:05):
But we do anticipate there could bechallenges and we're trying to get ahead
of it by being very clear and intentionalabout what we're all trying to do here as
an industry from small businesses all theway through to the quote unquote larger
businesses, which we always kind of laughabout because these companies are doing a
great job of generating revenue and movingto free cash flow.
But when you look at their market caps,it's just not we're not in like quote
(31:29):
unquote big business.
We're not Amazon yet.
I mean, even just that.
The limitation around the up listingpotential for the public companies I think
a lot of people overlook the importance ofthe flow through that has on small
business because the distortion ofvaluations that exist make it very hard
for small businesses to raise moneybecause they get relative valuations
(31:51):
comparable valuations to the publiccompanies and if you're trying to raise
money and you have limitations about howmuch equity you can Give up.
It's it's quite a limiting factor and whenyou don't have small business financing
All of these things are impacting thesebusinesses, but I do anticipate that there
will be challenges, but one of them is tomake sure we're very clear about the
optics of what this case is really tryingto achieve.
(32:12):
And it's not just...
Go ahead Darren.
I'm sorry, go ahead.
I was just gonna follow up on that thread.
I think you raised such an important pointthat bears emphasis here.
I mentioned earlier about how this caseisn't about MSOs or small businesses or
social equity versus non-social equity, etcetera.
(32:32):
One of the beauties of this case and oneof the things that got me so excited
initially and certainly keeps myexcitement going.
is the fact that the issues that theinterpretation of the commerce clause,
essentially, which is where this all boilsdown to, the impacts of that are felt in
(32:55):
so many different ways and by so manydifferent businesses and verticals.
And frankly, they're felt a lot moreacutely by the small businesses.
You know as it relates to some of theissues that Emily said around Getting
loans about getting you know affordableinsurance about Being able to maintain
(33:20):
bank accounts having access to realvendors and third parties.
You know, we generally can't use You knowlarge payroll companies or certain ERP
systems You know things that are just sobasic and fundamental to doing business in
a sophisticated way.
And frankly, you know, the big guys, theycan figure it out.
(33:43):
They have the resources to developcapacities internally.
The small companies don't.
And they're suffering.
They're dying as a result.
At the same time, you know, as we havethis very significant and important social
equity angle, right?
Because we've seen the failures of thesesocial equity programs.
(34:04):
which is very much based upon the factthat these businesses can't be treated
like any other business.
There's also impacts to the largebusinesses.
Emily mentioned uplisting.
There are issues with respect to access tomeaningful debt markets.
(34:24):
There are issues, of course, withinefficiencies and inconsistencies as it
relates toyou know, regulation and impact.
And so there really are, you know, I liketo think of this as like there's something
for everyone in this case.
It doesn't matter if you're left, right,pro-cannabis, anti-cannabis.
(34:45):
This really isn't even about cannabis inso many ways.
It's about freedom, it's about choice,it's about democracy, and it's about
fairness.
And the fact that businesses who areinterested and wanna get involved in this
space should be treated fairly.
Yeah, great, great points.
And I think it's also good to think about,it's not just the business owners or the
(35:09):
shareholders that are impacted by thefederal position.
It does impact the employees, right?
And there's close to half a millionemployees out there in this space that
struggle with things like, losing a bankaccount, just for being an employee of a
company, I've seen that.
(35:29):
you know, happen at companies that I'vebeen at, you know, not getting approved
for home loans, right, because of theiremployer.
There's all sorts of challenges that justexist that go beyond just the companies
themselves.
And it does impact, you know, a lot of thejust people somewhat, you know, involved
(35:50):
and then those that aren't like as aconsumer.
You know, there's challenges withbeing eligible for jobs, like jobs in the
government.
And there's like legislation that's tryingto come around to fix that, but I have my
doubts given how the federal governmenthas done anything towards this stuff, but
it's all kind of impacted just by thefederal position, this kind of half in,
(36:15):
half out, as you mentioned that they seemto be in.
And you're absolutely right on the smallbusiness.
We've made that case quite a bit.
We've had guests on the podcast.
you know, that are smaller organizations,kind of social equity groups that struggle
disproportionately, I think, to get, um,you know, banking just in general, and
(36:35):
then you combine that with cannabis,right?
And, and I know when, when safe was comingaround and people talk about it and like
the argument, um, that some people hadagainst it was, well, you know, there's
plenty of banks and cannabis, there'splenty of credit unions that support, you
know, cannabis operators.
And, um, one, I don't think that there's,there are plenty, but I do think that at
thisproportionately supports larger operators
that, you know, can find those resources abit better than the smaller businesses
(37:01):
that just don't have the same optionality,right?
So it is, it kind of gets lost in the washwhen people just say, no, there is
banking, you know, it's like, no, yeah,technically, that may be true.
But I think it's, you know, papering overwhat the reality is for a smaller operator
out there.
So, yeah, all of this stuff.
(37:22):
it's great to make that extra clear thatthis isn't just about the larger
organizations being involved.
There are smaller organizations involved.
This will support consumers.
This will support employees when we havesome of this change.
So I think it's very important.
And I think very interesting to see thiskind of come to light.
(37:47):
I don't know.
It's like we've all beenHopefully something happens beforehand and
maybe this accelerates things.
I think in some ways it's not a great lookfor the parties and government that have
always been supportive and have said thatthey're going to change things and then
haven't continued to campaign on thosethings.
(38:09):
This is the world we're in and I think itlooks great for them.
So maybe that it will accelerate somechange hopefully or they say, okay, well,
this is a problem.
We talk about...
you know, legalizing and you know,federally and making some change, but we
just haven't so much that now we'regetting sued.
So I got to hope that it opened some eyesout there.
(38:32):
Um, any, I mean, how do you guys feelabout it?
Are you guys excited?
Was the news, was it like, uh, kind ofgreat to see?
I know you guys both have been working onthis for, for some time.
Um, a lot of cooks in the kitchen, I'msure a lot of conversations, uh, a lot of.
You know, herding cats, as you mentioned,Darren, you guys, does it feel great that
(38:53):
it's out there?
Is it sense of relief?
Maybe not really fun.
mean look, Emily can probably speak tothis better than I can just because she's
been really doing the yeoman's work ofherding those cats, certainly more than I
have.
But yeah, I mean, we were very excited toget this filed.
(39:18):
This is, as you say, something that's beenin the works for quite some time and a
story that needs to be told and anargument that needs to be made.
And I'm excited that it's...
getting picked up.
You know, the timing is also, I think,just works out quite well in that we, you
(39:39):
know, at the end of August got the newsthat HHS is recommending a reschedule.
And so what this means is that with thiscase, we now have all three branches of
government, at least on this issue, right,we've got the executive branch for the
rescheduling, the legislative branch.
through SAFE or SAFER and the States Actand some of these other pieces of
(40:03):
legislation.
And now we've got the judicial branch aswell.
And, you know, I'm no military historian,but I'll tell you that my guess is that
being able to wage a war on multiplefronts is probably the way to go, right?
So I think that's important.
Yeah, I mean, I think for me, this hasbeen, first of all, I can't say enough
about the folks who have stepped up earlyand believed in this and that we've worked
(40:27):
so well together.
I mean, in an industry where for 10 years,I've seen people kind of work sometimes
against each other or create friction insituations, this has been one of the most
refreshing experiences ever to see thegroups from big to small coming together.
hearing the plaintiff's stories about whatit's like to operate in this industry.
(40:47):
I mean, it reminds me of early days ofwhen I got into this and I had a lot of
people kind of saying like, oh, you'retrying to get weed legalized.
It's going to hurt all these people.
And then I would hear amazing storiesabout people who had medical benefits of
cannabis or that their kids stopped havingseizure because they have access to
cannabis.
This is like breathing new life into theway I feel about this industry because I
(41:10):
get to hear the stories of.
operators at every level and think abouthow their businesses are affected and how
they could potentially change.
I know, Cy, you know I was on the board ofMarijuana Policy Project.
Morgan and I personally contributed toconsultants and state levels and federal
levels for 10 years.
And when you see a lot of change in someinstances, it's really inspiring.
(41:35):
I remember in the election when we gotseven of the eight adult youths.
programs passed when I was on the Board ofMarijuana Policy Project.
That was an immensely exciting time and itfelt like we were seeing great change
happening within the industry.
And then on the federal level it feelslike we've just been kind of treading
water slash a little bit backsliding withthings being removed like the coal memo
(41:57):
and you know we have been waiting for theGarland memo for a while now and I don't
understand how much more support a memocould get because it really is just a memo
and there's so much support Ias we've talked about, Rob Nichols from
the ABA is such an immense supporter ofbanking reform.
There's so much support for a new memo andwe'd love to see it and I hope we get
(42:17):
there.
But I think that, you know, Darren's pointis the right point is like, we've leaned
in on the legislative branch for a long,long time and now it's time to take a
different avenue through our one of theother branches of government.
It's one of the amazing things about beingan American is that we have the checks and
balances.
We have...
the executive branch, which we are seeingsome of the things happening around the
(42:40):
HHS and Biden stepping up last fall, asyou and I remember, to make comments about
that.
And then the subsequent move by HHS, andnow we're waiting to see what the DEA is
going to do.
And then we know what's been going on inthe legislative branch for a long time.
And I don't even think it's so much aboutcannabis as it is about what's going on in
the legislative branch.
(43:01):
And then we have the judicial branch.
I think as Americans, it is our job tothink about how we can work through every
branch of our government to get the bestoutcome for the citizens of this country
and for the people who run businesses.
I mean, I can't wow, I'm becomingincredibly patriotic maybe because it's
Friday, but I can't get I mean, maybebecause I come from a small business
(43:21):
family, like to me, Main Street to me,small business is what is the defining
characteristic of America.
And thenwhat you can do together with resources of
larger companies and driving innovationand driving change, this is when America
works best.
No matter what is happening at the federallevel, it is coming from the grassroots.
And I get really excited when I thinkabout this.
(43:42):
And I think our industry, like what theGDP numbers just came out and I feel like
cannabis is not even like reflected inwhat is happening in this country.
And it has so much immense potential.
So I'm just.
you can tell I'm really excited by this.
And maybe it is that I get to sit in theroom with the lawyers and the great minds
like Darren and Lynn and Jason and Brettand Abner and all these people who have
(44:04):
these great visions.
And then also hearing the constitutionallawyers who've had success in the halls of
our government.
And it gives me a great hope that we'reonto something here.
It won't be an easy path and it won't beovernight, but it's a good effort.
So I'm excited.
Okay.
Exactly.
(44:25):
Well, um, I just want to, you know, thankyou both again, uh, for all the work, uh,
that's gone into this and all the workthat I think will continue to go into
this, I'm sure there'll be plenty of phonecalls and conversations over the years
ahead related, um, to, to this stuff.
So, so thank you so much.
And Darren, thanks for taking the time.
Um, you know, on such short notice, giventhe news just came out and, uh, I know
(44:48):
you're, you'rebusy traveling, but to jump in and kind of
help explain this issue to the audience ofthe high rise.
I'm sure it's well received.
So thank you so much.
And yeah, let's do it again as thisprogresses and we learn more and as we
(45:08):
hopefully get this thing to the finishline here.
But thanks again and looking forward toseeing where this goes.
Thank you.
Absolutely.
Thanks so much.
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