AnnaRae Grabstein and economist Andrew Livingston explore the economic impact of cannabis legalization across America and examines the complex regulatory challenges facing both cannabis and hemp businesses in today's market. Through analysis of state markets, policy trends, and business dynamics, Andrew reveals why some markets thrive while others struggle to compete with illicit alternatives.
• Over $24.7 billion in cannabis tax revenue generated since adult-use legalization began
• For cannabis markets to succeed, they need the "three A's": accessibility, affordability, and assortment of products
• Texas attempting modest medical cannabis expansion while simultaneously banning hemp-derived THC products
• The "alcoholization" of hemp beverages would integrate products into alcohol distribution systems but limit direct-to-consumer sales
• Court cases like Canna Provisions vs. Garland may create a judicial path to cannabis reform alongside legislative efforts
• The Farm Bill remains in continuing resolution, creating ongoing regulatory uncertainty for hemp businesses
• Indigenous tribal governments represent an overlooked laboratory of democracy with over 100 cannabis and hemp programs
Look out for Andrew Livingston's forthcoming report on indigenous cannabis programs across the United States. Indigenous communities have significant experience regulating products like tobacco, gaming and alcohol, providing valuable insights for cannabis regulation.
--
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Transcript
Episode Transcript
Available transcripts are automatically generated. Complete accuracy is not guaranteed.
Andrew Livingston (00:00):
It's kind of that field of dreams, right?
Like if you build it, they willcome.
But the dynamic is you have tobuild a system that actually
attracts consumers and providesthem with a set of goods that is
better than what they can getin the illicit market, right?
So this is why and we'll talklater about, like, why places
like Texas haven't reallysucceeded in their medical
(00:20):
program is because the programthere does not provide consumers
with what they want.
AnnaRae Grabstein (00:32):
Hey everybody , welcome to episode 90 of High
Spirits.
I'm Anna Rae Grabstein andtoday we are recording on
Thursday, may 29th 2025, and wehave a great show for you today.
You might notice if you'rewatching on video that my
amazing co-host, ben Larson, isnot with us today, but that
means that I am going to bebringing on our guest early to
(00:54):
do the news roundup with myself,so I'm going to queue up our
guest.
Andrew Livingston is a trustedeconomist and policy, so welcome
, andrew, thank you so much,Anarae.
Andrew Livingston (01:32):
It's really a pleasure to be on the podcast
and looking forward to divinginto news.
Before we dive into more news.
AnnaRae Grabstein (01:39):
Yeah, and even before that, how's your
week going?
What's going on in your world?
Andrew Livingston (01:44):
It's going pretty well.
We're a little bit late becauseof my technical difficulties
associated with a slow computer,so you got a slightly different
angle of me on my phone.
But everything's goingrelatively well.
Had a good Memorial Day weekend, so just very busy tracking
legislative news which sadlymostly has not been good, but
(02:04):
we'll try to keep it bright andcheery, even if we have to talk
about things that aren't.
AnnaRae Grabstein (02:09):
I know Sometimes looking for good news
in cannabis these days can bemore difficult than I would hope
.
Andrew Livingston (02:15):
I just wish that wasn't the case.
At least we have a product thatmakes it a little easier.
AnnaRae Grabstein (02:19):
Good point, very good point.
Well, let's jump into our newsroundup.
I want to start today withtalking about HB 46 in Texas.
Most of the news has beengobbled up by people talking
about the hemp ban, which we'lltalk about later, but for now we
do want to talk about somepotential opening up of some
aspects of the market in Texas.
(02:41):
Texas HB 46 is a bill to expandthe existing medical marijuana
program in Texas, which rightnow is extremely limited.
You want to share a little bitabout what it does do and what
it doesn't do, this HB 46?
.
Andrew Livingston (02:55):
Well, it's important to know that this has
been amended quite a bit overthe last.
You know, 28, 48 hours.
So in its current iteration, ofcourse, by the time I don't
know, this gets posted live,right, so this should still be
the iteration by its posted.
So, depending on when youlisten to this, we're currently
at 12 licenses.
(03:18):
So that's not 12 new licenses,that would be nine new licenses,
given the three existing.
It also three out of those ninenew licenses would be given to
applicants who applied duringthe 2023 round, which was never
scored or acted upon, and Ithink that's hopefully to reduce
(03:40):
some litigation, as it's kindof crazy to put forward.
This is also not the first timethat Texas has has opened up an
application phase and thennever really done anything with
it.
So there's that, the other youknow interesting thing.
It opens up a few morequalifying conditions, which is
(04:00):
really exciting, and it alsoForm factor allows.
AnnaRae Grabstein (04:05):
It allows vape.
Andrew Livingston (04:06):
Exactly, exactly.
AnnaRae Grabstein (04:10):
But some other form factors that are less
popular in the market, likelotions and certain different
types of topicals and tincturesand things.
Andrew Livingston (04:19):
Yeah, I mean, those have been effectively
legal through hemp anyway andwhile while they're going to be
likely going to be prohibited,at least thc topicals you know
for, uh, you know with, with sb3, um, that's, you know, not that
big of a deal.
There's also like nebulizersand stuff like that.
Those don't really exist.
The predominant thing is vapes.
(04:40):
Yeah, if that really opens up,then honestly we will see,
hopefully some expansion.
I mean, beyond that too.
There's also a big thing issatellite locations.
So you know there's sometechnical changes over the last
few rounds of floor amendmentsabout what that's actually going
to be.
Do you get grandfathered intosatellite locations?
(05:02):
If those were, you know,previous pickup locations or not
?
I think that was actuallychanged in some of the floor
amendments.
But part of the big problem nowis you only got three operators
.
Only two are really operationaland they can't open additional
locations because there's noovernight storage.
How do you get cannabis to ElPaso from the facilities in and
(05:24):
around Austin in a day?
It's just, it's not reallyfeasibly possible.
AnnaRae Grabstein (05:29):
The current program in Texas is really messy
.
It's hard for the operators tobe successful, so this does
provide some pathways topotentially making access a
little easier.
A couple of things I'll quicklymention that it doesn't do is
it doesn't allow smokables, itdoesn't automatically qualify
veterans, which was originallyproposed in the first version of
(05:52):
the bill.
This is something, but itcertainly is not a fully open,
accessible adult use marketplaceby any means, and it's not even
a very open medical market.
But it will.
It will have conditions fromwhat they are right now.
Let's move on to the next newsstory, which is Canna Provisions
(06:13):
versus Garland, sometimes alsocalled the Boys Schiller lawsuit
.
This is a really notable lawfirm that has done a lot of work
getting cases to the SupremeCourt, and yesterday there was
another one more step closer,potentially, to getting this
(06:33):
case before the Supreme Court.
What are they trying to do?
Kiana Provisions and BoiesSchiller?
Andrew Livingston (06:39):
So essentially what they're and I'm
not an expert in this specificcase, not involved in the case
Essentially what they're tryingto say is that by the federal
government uh, both implicitlyand to some degree explicitly
not enforcing the controlledsubstances act, whether
interstate or intrastate reallyintrastate with regards to, you
(06:59):
know right, state regulatedcannabis that essentially
they're looking to um andoverturn, amend in certain ways
the Reich case from decades ago.
And so Gonzalez versus Reich.
The Supreme Court reasoned thatbecause Congress intended to
eradicate cannabis frominterstate commerce and because,
essentially, you know, evencultivating cannabis in your own
(07:22):
property for medical use wouldimpact interstate commerce,
because it would affect yourdemand for so it was a very
broad reading of interstatecommerce.
And so you know, I think someof the strategy is is that the
current Supreme Court is likewould likely take a less open
view of the federal government'spower to regulate intrastate
(07:46):
commerce, because it says thatwhat Gonzalez-Friedrich said is
that pretty much any action isin the purview of the federal
government If it affects amarket that could affect things
interstate.
AnnaRae Grabstein (08:00):
I bet on a more conservative-leaning
Supreme Court being more infavor of states' rights and that
being an unlock for the statelevel cannabis regimes.
Yeah, so we'll see what happens.
This is going to take years.
To be honest, it's faster thanI thought it would.
Andrew Livingston (08:19):
Well, it may or may not take years, right?
Because if the Supreme Courtdecides not to hear the case, I
don't know what the dynamics arefor, like, if you don't get
heard in that year, can you getheard in the next year?
I don't think so.
So I mean, it just depends uponwhether or not the Supreme
Court wants to, you know, wantsto overturn precedent associated
(08:40):
with drug enforcement.
Because the other dynamic toois that, like, if the federal
government doesn't have purviewover intrastate commerce as it
pertains to marijuana, thatchanges a lot of other things
that are predicated on thatfederal power.
For instance, let's look at,like you know, state level
psilocybin regulation.
(09:01):
There's that right, Like it's,you know it wouldn't just be
marijuana.
You know, if you're cultivatingpsilocybin regulation, there's
that right, Like it's, you know,wouldn't just be marijuana.
You know, if you're cultivatingpsilocybin and it's state
regulated and it's not impactinginterstate commerce, then do we
have protections there?
How does that change?
Things like 280E and, you know,are you trafficking in a
controlled substance if you areengaged in purely interest state
(09:26):
legal commerce, State?
AnnaRae Grabstein (09:28):
state yeah.
Andrew Livingston (09:30):
So so I think there's there's larger
questions here.
You know this.
Some of this gets into legalanalysis that I am not qualified
for, but as a news watcher onthese sorts of things, I think
it is exciting that cannabiscompanies are pursuing various
different avenues of federalreform.
Let's not forget that a bunchof other countries have
legalized cannabis through thecourt system.
(09:51):
Now some of those have resultedin federal regulatory systems.
Others are slow but may do thatin the future.
So, for instance, like Mexico,our neighbors to the south,
their federal legal cannabisregime, although it hasn't
really been implemented in aregulatory perspective, was
created because of federallawsuits.
Initial medical marijuana inCanada were also a series of
(10:15):
federal lawsuits.
AnnaRae Grabstein (10:17):
You bring up a great point, because we often
are talking about the way thatwe need to change the laws in
the cannabis sector in general,and the path that most people
think of when they think of thatis sort of a two-part path,
which is one like either movingthrough the legislature or the
other doing some sort of ballotinitiative, and there is another
(10:38):
way, which is going through thejudiciary, and that's what this
case is attempting to do.
Great, let's go on Some newsfrom California.
We have covered this a littlebit, but California operators
are rallying together in waysthat they haven't in years to
try to stop a tax increase thatis scheduled for July.
It's moving through thelegislature pretty quickly under
(11:00):
the leadership of a member ofthe state legislature, matt
Haney, who reigns from SanFrancisco, my hometown.
It seems likely, based on itscommittee passages, that it will
move through.
But the question that I thinkis really worth asking is what
will Governor Newsom do?
Is he going to sign a taxrelief bill when he has been
incredibly clear that he is notlooking to remove any revenue
(11:25):
from the state right now becauseof an intense deficit and
budget crunch that the wholestate is faced with, and he's
definitely pushing back onTrump's tariffs as the reason
that he's making these policyproclamations.
So we'll see what Newsom willdo you following this one.
Andrew Livingston (11:45):
Not really in a significant way.
I, you know, wish the best forall of our California businesses
and the California industry.
It is a challenging environment, to say the least, and I think
it really demonstrates that theinitial regulatory structure
that was put under you know,macrsa, and then MACRSA and all
(12:09):
the other acronyms that happenedbetween 2015 to 2016, when,
eventually, you know, adult usewas passed, were not designed in
a way that was sustainable fora industry that had to survive
on thin margins.
AnnaRae Grabstein (12:26):
Yeah, let's be real.
Californians legalizationinitiative was created on the
back of drug dealer margins.
They thought that.
They thought that they weregoing to print money in
California.
Andrew Livingston (12:37):
I don't think the businesses thought they
would print money.
I think the legislators thoughtthey would print money.
The legislators, yeah, goodpoint.
AnnaRae Grabstein (12:44):
Well, let's move to some quick good news and
then we'll we'll jump into thein-depth conversation with you
about all the things that youwork on daily and that good news
was hard to find this week butI did make from the BBC, so a
reputable news source that iscovering the news that London
(13:06):
Mayor, sir Sadiq Khan, has comeout in support of a report by
the London Drug Commission which, among other things, calls for
the removal of cannabis from theMisuse of Drug Act and a full
decriminalization path.
And while this is municipallevel news, the mayor of London
is a really important person tostand up for cannabis policy
(13:29):
change in the UK and this makesa cannabis market and
potentially decriminalization inthe UK look a little bit more
likely in the coming seasons atsome point.
It's exciting.
Andrew Livingston (13:43):
Yeah, yeah, it makes me think about
Professor David Nutt, back adecade or so ago, who was a UK
advisor on drugs and he was oneof the individuals who put out
reports saying that cannabis isless harmful than a lot of other
substances.
He was the one who's the famousline about how MDMA is less
harmful than riding a horse,which is it's also because
(14:06):
horseback riding is realdangerous, but it's very true.
And you know his report andactions were not acted upon.
So hopefully things arechanging.
And you know, the more culturalchange we see in the European
in Europe, the better on this.
You know, when speaking withpeople in the UK, it's like you
guys are generally moreprogressive than the United
States on certain drug issues.
Like, why have you not moved oncannabis?
(14:27):
And it's in large part becauseit's like they have less of a
cannabis culture there to thesame extent, also because they
didn't throw people in cages fordecades.
And so there's, you know it'skind of the for every political
force there's a equal andopposite reaction, right?
You know United States drugreform movement that happened in
(14:48):
the you know, 1960s and 70s.
You know it's really.
They started the decriminalmovements in the 70s and then
obviously you know it wasresurgent in into the 90s and
2000s and then, you know, withmedical cannabis and all of that
was caused by the fact that thefederal government was so
illiberal.
When you've got a regime wherepeople aren't going to jail in
the same regards and it's kindof a hear no evil, see no evil,
(15:11):
speak no evil, of course therehas been enforcement you just
generally don't have the sameforward push.
AnnaRae Grabstein (15:16):
Yeah, absolutely Well, hats off UK.
Andrew Livingston (15:19):
Let's see what happens.
AnnaRae Grabstein (15:20):
Okay, let's jump in.
So you have spent your careerreally following both cannabis
policy change but also economicimpact, and I thought it would
be interesting if you could giveus a little bit about your
background while also sharingoverall the economic impact of
cannabis legalization sinceColorado and Washington
(15:41):
legalized and what has happenedin the US economically, yeah,
yeah.
Andrew Livingston (15:47):
So let me tell you a little bit about my
background.
So I became I was going to saylike, infatuated with cannabis
policy that's probably the bestword for it in high school.
So I became obsessed withcannabis policy honestly, like
about the same time I startedusing cannabis.
(16:07):
So it was, you know, 16, 17,started, really, you know, and
my, my like constitutionalstructure and my essence is very
much, at least at that point inmy life, about, you know,
finding things that just didn'tmake sense associated with
federal policy, like you know,ways in which our system of
(16:30):
governance was wrong, right,which is very like oppositional
high school type thing, and youknow this was during the Bush
administration, and you know,opposition to the Iraq war and
all that sort of stuff.
So I became really fascinatedin the drug war and in the harms
that drug war does.
My father is a trauma surgeonand ran the trauma center in
(16:51):
Newark, new Jersey, for 30 plusyears.
So I would hear all thesestories about, you know, growing
up at the dinner table of youknow, essentially taking care of
generations of families whowere involved in drug trade, and
I became really interested inwhy certain drug markets were
violent and some weren't.
I also go to school everymorning, would listen to Kai
(17:12):
Risdahl on Marketplace, andbecame very interested in
economics in high school and soI became kind of fascinated in
this.
One of the things you guysremember Freakonomics the book
back what is it?
20 some odd years ago.
So Stephen Levitt, one of theeconomists there, has actually
written a lot on the economicsof violence and has some really
interesting papers that I lookedat in college and things like
(17:34):
that.
So I was really fascinated onthat realm of things.
When I was in college at ColgateUniversity in upstate New York
I was kind of at the height ofthe Mexican drug war so I spent
a lot of time looking at theeconomics of retributive
violence, so when people killeach other and then other people
kill each other and like allthose sorts of dynamics, but
then really kind of you know why.
(17:55):
There was a period of time whenJuarez was one of the most
dangerous cities in the countryand El Paso was one of the
safest.
So learning about how justicesystems are utilized or not
utilized and that sort of thing.
So I began really interested inthat and I helped to start a
chapter of students for sensibledrug policy on my college
campus back in 2009.
Campus back in 2009.
(18:21):
So that is a national and alittle bit international
organization on college campusesof students advocating to end
the war on drugs and, you know,have a drug policy rooted in,
you know, human rights,compassion and harm reduction.
And so I was really involved inthat organization and came out
in 2012 to Colorado to work onthe Med Mid-64 campaign.
I did voter registrationcoordination when I first moved
(18:42):
here and then just came infull-time at the campaign and
then, after it passed which wasreally crazy to have a height of
achievement when you were 22, Iwent to every single regulatory
meeting and took notes andintegrated myself at the law
firm and kind of joinedsemi-officially at the end of
2012, officially in 2013 as kindof their first
(19:06):
non-administrative, non-attorneyas a policy analyst, and then
worked my way up and been therefor 13 years, which is a while.
AnnaRae Grabstein (19:15):
So you're in your first job out of college?
Yes, actually, which is a while.
So you're in your first job outof college?
Yes, actually, well, congrats,yeah, well, so answer the
question of the economic impactof cannabis.
Andrew Livingston (19:27):
Sorry, sorry, sorry, sorry, yeah.
So a little bit about, butthat's the history.
So you know what.
Okay, so what have we seen?
Right, and I think the mostfascinating thing with what
we've seen in the economics ofcannabis is the way that
consumers are willing totransition their purchasing over
to a legal and regulated marketif it meets their needs.
So cannabis has provided areally fascinating laboratory of
(19:51):
democracy across all of theseorigin histories, right?
So for the first decade or so,from 1996 to about 2008,.
All of these laws that passedalmost all of them were patient
caregiver systems.
These were non-commercial,either implicitly or explicitly
non-commercial laws.
These laws were used so that apatient could either grow their
(20:12):
own or have a patient caregivergrow for them.
In some places these were verypopular.
You know.
Even in states where they wereexplicitly non-commercial, there
weren't really storefronts.
You know, a lot of medicalcannabis patients got access
through these.
Hundreds of thousands, if notmillions, of people got access
through these kind ofnon-commercial systems.
Then we started to see themcommercialize.
(20:34):
This was in the end of the Bushadministration.
Early Obama that's when theyou's when the first Ogden memo
came out said we're not going togo after patient caregivers.
That exploded into a lot ofdifferent stores and we still
saw some enforcement inCalifornia on these sorts of
things, but once we startedhaving storefronts they became
even more popular, right?
So it's kind of that field ofdreams, right, like if you build
(20:56):
it, they will come.
But the dynamic is you have tobuild a system that actually
attracts consumers and providesthem with a set of goods that is
better than what they can getin the illicit market, right?
So this is why and we'll talklater about, like why places
like Texas haven't reallysucceeded in their medical
program is because the programthere does not provide consumers
(21:17):
with what they want, right?
And I always talk about threemain things.
It's the three A's.
You need accessibility,affordability and assortment.
Right, you need to be able toget the cannabis products you
want, which includes flour,concentrates, edibles, all this,
your full assortment.
They need to be affordable, soyour price can't be
(21:38):
significantly higher than theillicit market, right?
If your legal prices are twicewhat your illegal prices are,
people aren't going tonecessarily switch over.
And then, third, they need tobe accessible.
So you need.
You know time is money.
To a certain extent, if youhave to drive half a state away,
you're going to keep going tothe illicit market because they
either deliver to your house orit's from a drug dealer that's
(21:59):
not too far away.
So, with that sort of thing,over the last 10 years a little
more than 10 years MPP actuallyjust put out today a release
that there's been more than$24.7 billion in tax revenue
since legal adult use sales.
$24.7 billion in tax revenueSince legal adult use sales.
(22:24):
$24.7 billion represents many,many billions of dollars that
are going to legal businesses,that are going to taxpaying
businesses that are employingpeople and paying tax revenue
and the ancillary businessesthat are around them.
This is really in many of thesedifferent markets, whether it's
in California, you've got abouta $4 or so billion market.
Colorado has been up and down,but we see about a $2 billion
(22:45):
market.
Michigan is over a $3 billionmarket.
Florida is likely similar overa $3 billion market.
Pennsylvania is close to twothese huge markets across the
country and some of them aremuch smaller.
Some of them are growing.
They're in different stages,but what we've seen through
there is really an opportunityfor cannabis to be regulated in
(23:09):
the way that it should have beenregulated many decades ago and
that is essentially in asomewhat similar way that we
regulate alcohol.
Although we'll talk aboutbeverages, those are actually
going through an alcoholregulate regulatory standpoint,
but from the cannabis standpointstandpoint it's it's really
different regulations at thestate level.
Now, hopefully eventually we'llget federal standards in
(23:31):
production.
But different states are goingto.
You know some will allowdelivery, some, will you know,
have lots.
Know some will allow delivery.
Some, will you know, have lotsof stores.
Some will have a handful ofstores.
Some, even in the future, mayhave state run stores in the way
we have state run alcoholstores, although that bill
failed in Pennsylvania.
But it's really just anopportunity for that laboratory
of democracy to show whatsucceeds.
AnnaRae Grabstein (23:52):
Okay, and so cannabis legalization has been
through many different chaptersreally, and it has had a fast
movement and momentum acrosslots of different states.
But a lot of states didn'tlegalize cannabis for adult use
or for medical, or didn't do soin a way that really hit all
those A's that you just talkedabout, which I love.
But on the back of that camehemp, and hemp through a series
(24:17):
of different farm billiterations, starting in 2014 and
then more in 2018, a door wasopened for the creation of
hemp-derived cannabinoids toenter the market in various ways
, and we've seen some stateschoose to add a regulatory layer
on top of what the farm billkind of created and some states
(24:42):
haven't, and, as a result, we'vehad this growth of a huge hemp
market that is separate butdifferent and similar to the
cannabis market.
Ed has created a bunch ofconfusion, which we've talked
about in various different ways,but also an enormous amount of
opportunity, and within that,you've been really focused on it
(25:03):
, on your work, and I think myguess is that a lot of that has
to do with because that has beenwhere there's business
opportunity and there is shiftshappening within the hemp space,
and I want to talk about someof those policy shifts, both
from the federal perspective andat the state level, and
(25:24):
ultimately get to the discussionabout the alcoholization of
hemp and where you see thatgoing.
So let's talk about some of thestate level news that's been
happening as it relates to hemp,instead of cracking open the
full farm bill discussion atthis point.
Okay, and let's talk aboutalcoholization and really what
(25:45):
that is.
That is a word that doesn'texist if you look it up, but I
think a lot of us don't knowwhat it means, so why don't you?
use some recent legislation anddefine alcoholization for us.
Andrew Livingston (25:58):
Yeah, so you know, I think we could look at
Kentucky, we could look atTennessee in some degree.
In other States you know thingsto be considered in Ohio or
others.
So I would consider thealcoholization of hemp it's
really hemp beverages to be aregulatory policy that seeks to
(26:20):
integrate hemp beverages eitherdirectly or indirectly through
traditional alcohol supplychains.
So that is things like you know, only alcohol licensees and
marijuana licensees couldproduce the product.
Or things like you need to havea three-tier system and there's
(26:43):
a distribution tier and alcoholdistributors are the only ones
that can distribute hempbeverages.
Or things like you can't have across-ownership between
production and distribution andretail unless you, you know,
qualify as the equivalent of amicrobrewery, you know, that
(27:04):
produces itself.
AnnaRae Grabstein (27:05):
So, on the one hand, alcohol benefits from
pretty broad accessibility,affordability, assortment, all
of those things that you talkedabout, which are key for
cannabis markets to besuccessful, and so at first this
sounds pretty compelling, butthis is coming after a lot of
(27:25):
hemp products have launched intothese various markets, and it
means that there could besignificant shifts for the
businesses that are currently inmarket in places that are
moving towards alcoholization asa regulatory pathway.
Why don't you explain how itcould change existing market
environments for businesses thatare in markets that are all of
(27:49):
a sudden going to go from maybeno regulations at the state
level to an alcohol regulatorysystem?
Andrew Livingston (27:56):
Yeah, so the most significant impact on
business would likely be eithera restriction or elimination on
direct-to-consumer sales.
Yeah, direct-to-consumer salesare huge, right, A lot of these
small businesses do a lot oftheir sales through online
internet marketing anddirect-to-consumer shipping.
(28:16):
You know there's probablybillions of dollars of hemp
beverage sales that occurthrough these channels.
And you know, historically,alcohol direct-to-consumer sales
are not permitted.
Right, there are somepermissions for wine.
You know you can go and visit awinery and then have them
direct ship you certain alcohol,so there's kind of that in that
(28:40):
system.
But in most instances,direct-to-consumer sales are not
permitted because the setup ofthe three-tier system for
alcohol was designed to reducethe ability for producers of
alcohol to directly interactwith consumers and even, to some
degree, directly push orpersuade alcohol retailers, as
(29:04):
there's a lot of different lawsabout what they can do with
advertising.
You know, essentially, betweenthose two tiers the
manufacturers and the retailers.
With regard to, you know,incentive programs, advertising,
things like that Some of thosediffer state by state, so that's
going to be one of the majorthings.
In other places, you won't beable to have delivery.
Alcohol delivery has becomemore popular, particularly since
(29:24):
COVID, but even in some stateswhere alcohol delivery is
permissible, hemp beveragedelivery may not be.
So that gets into the largerquestion of are you doing full
alcohol or just partial?
AnnaRae Grabstein (29:34):
Well, and I think what's interesting is
you're bringing up delivery anddirect to consumer and sometimes
from a consumer perspective itdoesn't feel that different.
Both outcomes are a productgetting delivered to your house,
but from an alcohol perspective, the difference between alcohol
delivery that's still comingfrom brick and mortar retail and
that means that it issupporting the ingrained status
(29:58):
quo of distribution and brickand mortar retail as the
backbone of alcohol distributionchannels for consumers and
that's what the old schoolplayers want to maintain.
Partner with a group like TotalWine and a consumer like one of
us can go onto DoorDash andorder a hemp beverage from Total
(30:24):
Wine and a DoorDash driver willbring it to our house, as
opposed to that consumer goingdirect to that brand's website
and then getting that product afew days later through the mail.
And we talk a lot about who hasthe power and policy and there
has been a openness and aexcitement about alcohol coming
(30:48):
out in support of THC because itis perceived that alcohol has
power and has lobbying resourcesand things.
And now it has happened andalcohol lobbies are coming out
in support of THC.
Andrew Livingston (31:03):
But it isn't necessarily all unicorns and
rainbows because it will meansome shifts for existing
businesses and I think somebusinesses are more open to it
than others is that as acannabis industry or as a hemp
industry, you know, delving intoalcohol, there's a lot of
(31:24):
tension and animosity as well askind of issues amongst the
different sectors in that market, right you know.
So everything's not hunky-dorybetween big alcohol and little
alcohol and distributors andretailers and manufacturers,
right, like you're stepping intoa little bit of an industry
quackmire that has, you know, acentury of its own skeletons and
(31:46):
its own issues.
And it's important when you dothat that you kind of understand
some of those intra-sectordynamics and power dynamics.
Who actually has the power?
Because I've always thought,actually it's like cannabis
companies that are coming in ourinterests probably a lot more
(32:07):
aligned with small beercompanies and small breweries
and small retailers than thedistributors and things like
that, and so there's obviously alot of choke points with
alcohol of the distributors andthings like that, and so there's
obviously a lot of choke pointswith alcohol, and what
companies are able to succeed ornot may not necessarily be
based upon what consumers demand, but based upon who can get on
(32:28):
store shelves, and that's kindof sad.
AnnaRae Grabstein (32:31):
Yeah, absolutely.
Let's pivot a little bit moreas we're talking about hemp and
talk about what is happening inTexas.
And as an economist youunderstand the domino effect of
these policy changes in a prettyfinancial, through a financial
lens and I'd love it if youcould explain kind of what from
(32:54):
your estimation, what amount ofthe hemp market the Texas ban
could eliminate.
Andrew Livingston (33:03):
So I don't really know this for sure.
You know I can open up in alittle bit Beau Whitney's
analysis report on what heestimated for the size of the
Texas market.
For the total, I would not besurprised if we're looking at
20% or more of the federalmarket in Texas Is Texas.
Yeah, and SB3, if it getssigned by the governor would
(33:27):
eliminate 99% of that market.
It still allows for CBD and CBGproducts, but by and large most
of the hemp products productsthat are being consumed are THC
products.
People would like to have aregulated cannabis accessibility
(33:48):
program in Texas and there justisn't one, and the hemp
industry was the one that wasable to provide that in the most
significant ways through whatis essentially hundreds of small
storefronts.
So what will we see in Texas?
We'll see thousands, maybe tensof thousands, of jobs lost.
We will see significantincrease in the illicit market.
(34:12):
It's not like people are goingto suddenly stop demanding these
products.
What we're going to see aresome retailers I mean not
retailers some manufacturers aregoing to see are some retailers
I mean not retailers somemanufacturers are going to
illegally direct ship to Texasand we'll see busts there.
We'll see probably some peopleget arrested for violating Texas
and whether or not Texas isable to prosecute them from
(34:36):
another state.
We'll see.
We'll see.
I mean sales on the border inOklahoma will probably do a
little bit better, but we'll see, essentially, a huge illicit
market continue in Texas.
Now some Texas legislators wouldsay the entire market was
always illegal because we neverintended this.
But it's also just going to beless safe.
(34:57):
Right, you're going to see moreof those BS, copycat products.
Right, you're going to see moreof those BS, copycat products,
more things that are mislabeled,more money going to you know,
truly organized crime and lessmoney going to legal and
regulated businesses that paypayroll taxes.
Yeah, it's really sad, but Ithink it's also important for us
(35:29):
to understand that, like, texasnever voted to have an
intoxicating hemp program, andso the reason that conservative
legislators in the state are upin arms is because they feel
like something was brought intotheir house they didn't approve
of, and so I think it's veryimportant to think about it from
a conservative mindset of beingthe master of your home, and I
think that's why it pissed offLieutenant Governor Patrick.
(35:53):
So much is that he felt likethese were a criminal invasion
of poisonous products into hishome and he has to protect his
home, which is Texas.
AnnaRae Grabstein (36:05):
Yeah, I think that perspective doesn't
deserve much platforming, but I,I, I understand that that is
how we got here.
I think that that that, broadly,texas is a bellwether for a lot
of conservative states.
It is the largest by populationand I think that there could be
(36:27):
a ripple effect to this actionin other states as well.
Ways here is that, as we'rewatching legal cannabis states
like New York make progress intheir adult use programs to
finally turn on their track andtrace programs, which could
(36:49):
potentially create a newchallenge for product that was
being illegally inverted intothe New York market, actions
like this in Texas are creatingnew outlets for that product
that might have been going toNew York before now, is going to
have some regulatory challengesto do so, and is creating a new
market opportunity for peopleto pivot their illegal supply
(37:10):
chains directly into Texas.
So the folks that benefit fromthis ban are certainly not the
good operators that arecompliance focused, but I think
it's going to be the groups thatare willing to fill the
consumer demand, no matter therepercussions from a criminal
(37:31):
perspective, becauseunfortunately this does create
new criminal penalties thatdidn't exist before as well.
So it's more dangerous than itwas to take these risks.
Andrew Livingston (37:40):
And I was just looking at Beau Whitney's
2023 report.
So he estimated that Texas wasabout $2 billion market and the
total market was $28 billion.
I think the total market's alittle less than $28 billion,
but that would have it at alittle less than 10% of the
total market.
I think, personally, it'sprobably higher than that as a
percentage of that market, butit's going to be kind of
(38:01):
interesting to see out at the.
AnnaRae Grabstein (38:03):
There was a press, really a big press
conference, and the lieutenantgovernor made a lot of reefer
madness like statements, but healso pinned the market at seven
billion in texas himself that'sfar too high.
Andrew Livingston (38:16):
Yeah, it's far too high.
AnnaRae Grabstein (38:18):
But it is kind of what what he said, and
it is also back to other hemprelated trade trade association
groups in Texas who are allsaying that this is just a
massive market.
If that is actually true, itwould be the largest cannabinoid
state-level market in the US,which is pretty crazy by far,
and what it shows is that thereis a massive demand for
(38:42):
cannabinoids in Texas.
Andrew Livingston (38:45):
The other thing that I think is really
interesting is that it's ademand for regulated products.
Consumers in Texas are chompingat the bit to get better
regulated products that they canpurchase from storefronts that
they can purchase fromstorefronts, right Like.
We all know that, ifwell-designed, a commercial
adult use cannabis market inTexas would do awesome, but that
(39:07):
just might require differentlegislators.
AnnaRae Grabstein (39:09):
Yeah Well, so a lot of this.
As we're talking about thealcoholization and what's
happening in Texas.
The question is for lots of thepeople that listen to this
podcast, who own businesses orstarting businesses or operators
in hemp and cannabis, is that,what does this podcast?
Who own businesses or startingbusinesses or operators in hemp
and cannabis is that.
What does this all mean?
How do you look ahead?
How do you decisions aboutwhere to launch, how to launch,
(39:33):
what to launch into?
As you're working with yourclients, how are you helping
them find the right path?
Andrew Livingston (39:38):
Yeah.
So what I do a lot is helppeople navigate the intricate
patchwork of state laws.
You know, understanding marketopportunities really requires
understanding what you can andcan't do in certain markets.
But not only that how the whatyou can and can't do affects the
actual business opportunity.
(39:59):
And with hemp it's reallyimportant because, while there
are a lot of cannabis businessesthat are multi-state operators,
essentially all hemp businessesare multi-state operators
because of their ability to sellinto these different markets
and their ability to Commerce.
Basically, exactly yeah, Iwanted to say federally, legally
(40:21):
, but of course that all dependsupon you know, your view of the
farm bill and all of that sortof stuff, and I'm not going to
say things are legal or aren'tlegal, but the vast majority of,
if not all, hemp manufacturers,you know, sell across state
lines, and so, okay, can yousuddenly not do this in, you
know, alabama, based upon thepassage of House Bill 445?
(40:45):
Or might you be able to do thisin Massachusetts, based upon
House Bill 160?
And so there's a lot oflegislative tracking right now,
what you can do and where.
But let's just talk about whatthis means in terms of yeah.
AnnaRae Grabstein (40:57):
I wanted to jump in there and say so, what
you can do and where, and also alittle bit of predicting the
future.
And I think that, as we'refocusing on hemp and trying to
predict the future which isimpossible and no one has a
crystal ball states and the waythat the legislation is changing
, and one of those specifically,I think, has to do with
(41:28):
smokable products and, in someways, inhalable products, which
would be smokable plus vape, andif there's a future there and
I'd like for you to talk aboutthat.
Andrew Livingston (41:33):
I want to go even further, because I think
that you know and this is goingto be a little more
controversial, but I think thatthe future of hemp consumable
products, from a regulatorystandpoint, is almost entirely
in just beverages.
AnnaRae Grabstein (41:48):
Not even ever .
Andrew Livingston (41:50):
No, I think that there is a future in
edibles, but that is going to bewithin the regulatory system of
cannabis, of cannabis.
So I would be and this is againjust me prognosticating I would
not be surprised if more andmore regulated cannabis
companies become hemp companies,with edible products being sold
(42:12):
through cannabis stores andthen beverage manufacturers
existing through an alcoholsupply chain.
But I mean in terms of thelegality of THCA, flour and
smokable and concentrate forms.
I do not think there will bemany states left in three years
(42:32):
where that is permitted underthe hemp system.
AnnaRae Grabstein (42:35):
And why three ?
What's three years all about?
Andrew Livingston (42:37):
Two to three years.
I'm also saying that because ofhow long it might possibly take
to get a new farm bill passed,so may that be longer.
I just wanted to give ashort-term time horizon Because
you know, it's not just thisyear, but it's a few legislative
sessions.
That's what I mean.
AnnaRae Grabstein (42:53):
So if you're a business that's currently
selling inhalable hemp products,the time horizon is not really
more than three years in yourpredictions.
Andrew Livingston (43:03):
I would be surprised if there are many
markets, you can do that legally, but I think a lot of some of
the companies that are sellingin THCA flour, I mean, that's
essentially a design to makemoney where you can, when you
can, which is awesome.
This is, like you know, theethos of of cannabis businesses
(43:24):
that have kept cannabisconsumers happy and supplied for
decades.
Right, Like I got nothing wrongwith people who existed in the
illicit market.
Right, you know, you just gotto do it ethically.
You got to try to createproducts that are safe and good
for consumers.
You got to be a big, goodbusiness operator.
Right, but we all knew plentyof great drug dealers, and so if
(43:47):
we want to look at it from thestandpoint of where those
businesses are, if you want tostay legal, it's about okay.
Well, what can I do within theseregulated systems?
But I personally think that ifyou want to try to analyze where
cannabis will be accessible, Ithink you need to look at what
(44:08):
makes sense for policymakers interms of a regulatory apparatus,
and I think they look at it intwo different ways.
They say either cannabis isgoing to be regulated through a
cannabis supply chain, through acannabis supply chain, which is
typically state licensed andstate compliant businesses that
produce and sell cannabisproducts and manufacture those
(44:32):
cannabis products through thatcannabis-only supply chain or
through alcohol, which areaccessible not just at liquor
stores but also at grocerystores and corner stores and
things like that.
Whether or not we see onsiteconsumption, I think, is a whole
nother question.
We really haven't seen as muchonsite consumption and we can
talk about that in terms of afull alcoholization model.
AnnaRae Grabstein (44:54):
Yeah, more on premise.
Andrew Livingston (44:55):
But if we look at like, how do we divide
the products?
I think absolutely flowersmokables are going to be
through that cannabis supplychain.
I think clearly, beverageswhich never really succeeded
because of the way they wereformed factor and we could talk
about that why are going to bein the hemp beverage alcohol
supply chain?
And what do we see with edibles?
(45:15):
Right, and stop me, anna Rae,if you want to jump in too but
there is really no difference ina potency perspective between a
five milligram gummy producedfrom hemp and a five milligram
gummy produced from higher thanyou know 0.3% THC cannabis.
AnnaRae Grabstein (45:35):
Yeah, you're right, there is no difference
from a consumer experienceperspective.
I will say that, like whatyou're bringing up, I think is
this broader point.
That we actually talk about alot on this podcast is
regulatory convergence, whichreally the point of regulatory
convergence is, likeunderstanding that cannabis and
cannabinoids are an ingredientand that when we're talking
(45:58):
about creating products like,ultimately the best outcome is
to be able to use the mostefficient input to make the
product, and use of hemp tocreate a five or 10 milligram
edible is a much less efficientinput, if you're truly using
efficient biologically, but notlegally.
(46:19):
Yes, yes, absolutely Good point.
From a manufacturingperspective, yes, sure, much
more efficient.
Andrew Livingston (46:27):
Well, I mean because it's about the cost of
production, right?
So what is the cost ofproduction of, essentially, a
pound or a kilogram of pure THC?
It is much more expensive to doit in a cannabis regulatory
system than it is to grow agiant field of hemp, even if you
need far more hemp to harvestand then extract it.
AnnaRae Grabstein (46:49):
It's a good point.
It's a very interesting pointreally, because I don't think
that was the point of cannabis.
Compliance was to make it soexpensive that the actual, more
potent and efficient ingredientfrom an ingredient perspective
became more expensive than theless efficient input of a field
of hemp.
But we are diverging.
(47:11):
I think that we're getting.
Oh, you're good, this is allpart of the fun.
I think that we shouldn't endthe episode without talking a
little bit about the farm billand what's next, because I know
this is something you pay a lotof attention to and we're
halfway through 2025.
We still don't have a new farmbill.
What do you think is coming?
Andrew Livingston (47:32):
I don't know.
I mean, the Republicans aremore interested in utilizing the
farm bill to literally takefood out of children's mouths,
to provide tax breaks forbillionaires while also blowing
up our deficit.
And so they're interested inthe Farm Bill because they want
to eliminate SNAP, because theyfeel that you shouldn't get
(47:54):
healthy food, or even food,unless you meet certain
requirements.
I think that's abhorrent.
Certain requirements I thinkthat's abhorrent.
I think it's unlikely we'regoing to get a you know, a full
new farm bill that touches on ahemp in a way that is productive
, soon.
I think we're probably going tocontinue to see continuing
(48:16):
resolutions, and I think itreally just also depends upon
are we able to get anythingpassed before the midterms?
If we're not able to getanything passed before the
midterms, I think it's more thanlikely the Democrats take the
House and if that happens, thenall we're going to see is
continuing resolutions.
So I personally would bet onthe continuation.
AnnaRae Grabstein (48:38):
For people that don't understand what the
impact of a continuingresolution is for the Farm Bill.
Can you explain kind of thebroader picture?
Andrew Livingston (48:45):
Yeah, so a continuing resolution on the
Farm Bill would pretty much justkeep in place the provisions
from the 2018 Farm Bill.
So a continuing resolution isessentially just you extend the
deadline by which a bill wouldnormally expire.
So we see this often withbudget bills.
It's you know, sometimes thereare little tweaks here and there
(49:06):
, but it's essentially we'rejust extending the budget at its
current rates and currentallocations for you know,
another period of time.
So you know, typically the farmbill gets done every four years
or so.
Last one was 2018.
That's what is that Seven yearsago now.
And one was 2018.
That's what is that seven yearsago now.
And so I think this isrepresentative of Congress's
(49:28):
inability to pass effectivelegislation.
I personally put this onRepublicans, but that's also
because I find what they'redoing to be abhorrent.
But they currently controleverything.
They could pass a farm bill.
They just don't want toprioritize it.
I think it's also, to somedegree, is because the president
looks down upon Congress, evenRepublican Congress, and he
(49:51):
would rather just do things byfiat.
AnnaRae Grabstein (49:54):
Amazing, you know.
I think that, on the one hand,focusing on continuing
resolutions as an ongoing statusquo is what a lot of people
want and, at the same time, itcreates endless uncertainty over
what might happen next year.
(50:15):
What might happen, and it'slike I would love to be able to
get to a place where I couldstop talking about the farm bill
for another four or five yearsand just know that we have one
in place and that it becomesmanageable.
I think that what thecontinuing resolutions are doing
is putting regulations into thehands of the state, and that is
(50:36):
creating what is starting to bea complex patchwork for hemp
that is almost starting to lookmore like the way cannabis is,
so different from market andit's really in a lot of ways and
that's not just congress'sinability to pass a new farm
bill that is the fda's desire to, or lack of desire to, regulate
(50:57):
finished products.
Yeah, and if they, if they gotin it, then there would be
something for the states to justsupport and to say, okay, we're
To anchor upon With what theyeah, so you have this patchwork
of different.
Andrew Livingston (51:08):
I mean, it's not just like what are the
different milligrams, but it'slike do you need to have a DEA
license to be tested for testing?
Pretty much all states havesaid no, you don't, even though,
because the DE, you know, aretrying to waive that process,
but Georgia still does, right.
So it's like, what needs to betested, how products need to be
produced, when all of thesethings are different.
(51:29):
Right, like you know, we try tocreate a universal label, but,
like every state has differentlabeling requirements, right,
that's not the case for alcohol.
And so, because we don't reallyhave any good finished product
regulations from the FDA or youknow, guidelines, there, you
have this complex patchwork andit's, you know, again, it's more
similar to cannabis, but it'scannabis that you can move
(51:52):
between state lines.
AnnaRae Grabstein (51:53):
Yeah, but you still need to make new
packaging for every state, allright, well, I think that we've
probably taken this as far as wecould go.
We could talk all day aboutthis stuff, but, andrew, I think
it's time for our last call,and that is when we give you the
mic for a final message to ourlisteners, advice, call to
action or a closing thought.
So, andrew Livingston, what isyour last call?
Andrew Livingston (52:14):
So my last call, when we think about
laboratories of democracy, is toremember that there's not just
states, there are also sovereigntribal governments.
There is indigenous communitiesaround the United States, and
I've been doing some reallyinteresting work with the ICIA,
the Indigenous Cannabis IndustryAssociation to map out and
(52:35):
study indigenous cannabisprograms and, essentially,
sovereign regulatory regimes,and so I think that this is
interesting for a few things.
One, indigenous communities inthe United States have a lot of
experience with regulatedproducts, with tobacco and
gaming and how they also need to.
You know how they regulatealcohol, and so this provides a
(52:57):
cool opportunity for them tofigure out how to regulate
cannabis in a way that I thinkcould be more efficient than
what some states do.
It could be less efficientdepending on how they're
required here or there, butthere's over a hundred
indigenous cannabis and hempprograms across the United
States, and let's not forgetabout the people who were here
(53:18):
first and their experience withcannabis and how, you know, we
can assist and learn from theindigenous community in the
United States.
So look out for a you know,forthcoming report on that.
There's been.
I have a cool map that I didwith ICIA, and so, yeah, excited
.
AnnaRae Grabstein (53:36):
Awesome, Thanks for that.
That was a whole whole new,whole new topic.
Yeah Well, thanks for joiningus today.
It was a really greatconversation and thanks for all
your work.
Andrew Livingston (53:47):
Thank you, Anna.
I really appreciate you and thepodcast and Ben.
AnnaRae Grabstein (53:50):
Awesome, thanks.
Have a great day, andrew.
Thank you, yeah Well, so thereyou have it, everybody.
That's our episode.
Thank you so much for beingwith us today and if you liked
the episode, if you found itvaluable, please drop us a
review on Apple Podcasts,spotify, youtube or wherever you
tune in, subscribe, engage, getin touch with us, let us know
(54:12):
what kind of topics you want tohear us talk about, and thank
you to our teams at Wolfmeyerand Vertosa and to our producer,
eric Rossetti, who make all ofthis possible.
And, as always, folks staycurious, stay informed and, most
importantly, keep your spiritshigh.
Have a good one.
That's the show.
It's kind of that field of dreams, right?
Like if you build it, they willcome.
But the dynamic is you have tobuild a system that actually
attracts consumers and providesthem with a set of goods that is
better than what they can getin the illicit market, right?
So this is why and we'll talklater about, like, why places
like Texas haven't reallysucceeded in their medical
(00:20):
program is because the programthere does not provide consumers
with what they want.
AnnaRae Grabstein (00:32):
Hey everybody , welcome to episode 90 of High
Spirits.
I'm Anna Rae Grabstein andtoday we are recording on
Thursday, may 29th 2025, and wehave a great show for you today.
You might notice if you'rewatching on video that my
amazing co-host, ben Larson, isnot with us today, but that
means that I am going to bebringing on our guest early to
(00:54):
do the news roundup with myself,so I'm going to queue up our
guest.
Andrew Livingston is a trustedeconomist and policy, so welcome
, andrew, thank you so much,Anarae.
Andrew Livingston (01:32):
It's really a pleasure to be on the podcast
and looking forward to divinginto news.
Before we dive into more news.
AnnaRae Grabstein (01:39):
Yeah, and even before that, how's your
week going?
What's going on in your world?
Andrew Livingston (01:44):
It's going pretty well.
We're a little bit late becauseof my technical difficulties
associated with a slow computer,so you got a slightly different
angle of me on my phone.
But everything's goingrelatively well.
Had a good Memorial Day weekend, so just very busy tracking
legislative news which sadlymostly has not been good, but
(02:04):
we'll try to keep it bright andcheery, even if we have to talk
about things that aren't.
AnnaRae Grabstein (02:09):
I know Sometimes looking for good news
in cannabis these days can bemore difficult than I would hope
.
Andrew Livingston (02:15):
I just wish that wasn't the case.
At least we have a product thatmakes it a little easier.
AnnaRae Grabstein (02:19):
Good point, very good point.
Well, let's jump into our newsroundup.
I want to start today withtalking about HB 46 in Texas.
Most of the news has beengobbled up by people talking
about the hemp ban, which we'lltalk about later, but for now we
do want to talk about somepotential opening up of some
aspects of the market in Texas.
(02:41):
Texas HB 46 is a bill to expandthe existing medical marijuana
program in Texas, which rightnow is extremely limited.
You want to share a little bitabout what it does do and what
it doesn't do, this HB 46?
.
Andrew Livingston (02:55):
Well, it's important to know that this has
been amended quite a bit overthe last.
You know, 28, 48 hours.
So in its current iteration, ofcourse, by the time I don't
know, this gets posted live,right, so this should still be
the iteration by its posted.
So, depending on when youlisten to this, we're currently
at 12 licenses.
(03:18):
So that's not 12 new licenses,that would be nine new licenses,
given the three existing.
It also three out of those ninenew licenses would be given to
applicants who applied duringthe 2023 round, which was never
scored or acted upon, and Ithink that's hopefully to reduce
(03:40):
some litigation, as it's kindof crazy to put forward.
This is also not the first timethat Texas has has opened up an
application phase and thennever really done anything with
it.
So there's that, the other youknow interesting thing.
It opens up a few morequalifying conditions, which is
(04:00):
really exciting, and it alsoForm factor allows.
AnnaRae Grabstein (04:05):
It allows vape.
Andrew Livingston (04:06):
Exactly, exactly.
AnnaRae Grabstein (04:10):
But some other form factors that are less
popular in the market, likelotions and certain different
types of topicals and tincturesand things.
Andrew Livingston (04:19):
Yeah, I mean, those have been effectively
legal through hemp anyway andwhile while they're going to be
likely going to be prohibited,at least thc topicals you know
for, uh, you know with, with sb3, um, that's, you know, not that
big of a deal.
There's also like nebulizersand stuff like that.
Those don't really exist.
The predominant thing is vapes.
(04:40):
Yeah, if that really opens up,then honestly we will see,
hopefully some expansion.
I mean, beyond that too.
There's also a big thing issatellite locations.
So you know there's sometechnical changes over the last
few rounds of floor amendmentsabout what that's actually going
to be.
Do you get grandfathered intosatellite locations?
(05:02):
If those were, you know,previous pickup locations or not
?
I think that was actuallychanged in some of the floor
amendments.
But part of the big problem nowis you only got three operators
.
Only two are really operationaland they can't open additional
locations because there's noovernight storage.
How do you get cannabis to ElPaso from the facilities in and
(05:24):
around Austin in a day?
It's just, it's not reallyfeasibly possible.
AnnaRae Grabstein (05:29):
The current program in Texas is really messy
.
It's hard for the operators tobe successful, so this does
provide some pathways topotentially making access a
little easier.
A couple of things I'll quicklymention that it doesn't do is
it doesn't allow smokables, itdoesn't automatically qualify
veterans, which was originallyproposed in the first version of
(05:52):
the bill.
This is something, but itcertainly is not a fully open,
accessible adult use marketplaceby any means, and it's not even
a very open medical market.
But it will.
It will have conditions fromwhat they are right now.
Let's move on to the next newsstory, which is Canna Provisions
(06:13):
versus Garland, sometimes alsocalled the Boys Schiller lawsuit
.
This is a really notable lawfirm that has done a lot of work
getting cases to the SupremeCourt, and yesterday there was
another one more step closer,potentially, to getting this
(06:33):
case before the Supreme Court.
What are they trying to do?
Kiana Provisions and BoiesSchiller?
Andrew Livingston (06:39):
So essentially what they're and I'm
not an expert in this specificcase, not involved in the case
Essentially what they're tryingto say is that by the federal
government uh, both implicitlyand to some degree explicitly
not enforcing the controlledsubstances act, whether
interstate or intrastate reallyintrastate with regards to, you
(06:59):
know right, state regulatedcannabis that essentially
they're looking to um andoverturn, amend in certain ways
the Reich case from decades ago.
And so Gonzalez versus Reich.
The Supreme Court reasoned thatbecause Congress intended to
eradicate cannabis frominterstate commerce and because,
essentially, you know, evencultivating cannabis in your own
(07:22):
property for medical use wouldimpact interstate commerce,
because it would affect yourdemand for so it was a very
broad reading of interstatecommerce.
And so you know, I think someof the strategy is is that the
current Supreme Court is likewould likely take a less open
view of the federal government'spower to regulate intrastate
(07:46):
commerce, because it says thatwhat Gonzalez-Friedrich said is
that pretty much any action isin the purview of the federal
government If it affects amarket that could affect things
interstate.
AnnaRae Grabstein (08:00):
I bet on a more conservative-leaning
Supreme Court being more infavor of states' rights and that
being an unlock for the statelevel cannabis regimes.
Yeah, so we'll see what happens.
This is going to take years.
To be honest, it's faster thanI thought it would.
Andrew Livingston (08:19):
Well, it may or may not take years, right?
Because if the Supreme Courtdecides not to hear the case, I
don't know what the dynamics arefor, like, if you don't get
heard in that year, can you getheard in the next year?
I don't think so.
So I mean, it just depends uponwhether or not the Supreme
Court wants to, you know, wantsto overturn precedent associated
(08:40):
with drug enforcement.
Because the other dynamic toois that, like, if the federal
government doesn't have purviewover intrastate commerce as it
pertains to marijuana, thatchanges a lot of other things
that are predicated on thatfederal power.
For instance, let's look at,like you know, state level
psilocybin regulation.
(09:01):
There's that right, Like it's,you know it wouldn't just be
marijuana.
You know, if you're cultivatingpsilocybin regulation, there's
that right, Like it's, you know,wouldn't just be marijuana.
You know, if you're cultivatingpsilocybin and it's state
regulated and it's not impactinginterstate commerce, then do we
have protections there?
How does that change?
Things like 280E and, you know,are you trafficking in a
controlled substance if you areengaged in purely interest state
(09:26):
legal commerce, State?
AnnaRae Grabstein (09:28):
state yeah.
Andrew Livingston (09:30):
So so I think there's there's larger
questions here.
You know this.
Some of this gets into legalanalysis that I am not qualified
for, but as a news watcher onthese sorts of things, I think
it is exciting that cannabiscompanies are pursuing various
different avenues of federalreform.
Let's not forget that a bunchof other countries have
legalized cannabis through thecourt system.
(09:51):
Now some of those have resultedin federal regulatory systems.
Others are slow but may do thatin the future.
So, for instance, like Mexico,our neighbors to the south,
their federal legal cannabisregime, although it hasn't
really been implemented in aregulatory perspective, was
created because of federallawsuits.
Initial medical marijuana inCanada were also a series of
(10:15):
federal lawsuits.
AnnaRae Grabstein (10:17):
You bring up a great point, because we often
are talking about the way thatwe need to change the laws in
the cannabis sector in general,and the path that most people
think of when they think of thatis sort of a two-part path,
which is one like either movingthrough the legislature or the
other doing some sort of ballotinitiative, and there is another
(10:38):
way, which is going through thejudiciary, and that's what this
case is attempting to do.
Great, let's go on Some newsfrom California.
We have covered this a littlebit, but California operators
are rallying together in waysthat they haven't in years to
try to stop a tax increase thatis scheduled for July.
It's moving through thelegislature pretty quickly under
(11:00):
the leadership of a member ofthe state legislature, matt
Haney, who reigns from SanFrancisco, my hometown.
It seems likely, based on itscommittee passages, that it will
move through.
But the question that I thinkis really worth asking is what
will Governor Newsom do?
Is he going to sign a taxrelief bill when he has been
incredibly clear that he is notlooking to remove any revenue
(11:25):
from the state right now becauseof an intense deficit and
budget crunch that the wholestate is faced with, and he's
definitely pushing back onTrump's tariffs as the reason
that he's making these policyproclamations.
So we'll see what Newsom willdo you following this one.
Andrew Livingston (11:45):
Not really in a significant way.
I, you know, wish the best forall of our California businesses
and the California industry.
It is a challenging environment, to say the least, and I think
it really demonstrates that theinitial regulatory structure
that was put under you know,macrsa, and then MACRSA and all
(12:09):
the other acronyms that happenedbetween 2015 to 2016, when,
eventually, you know, adult usewas passed, were not designed in
a way that was sustainable fora industry that had to survive
on thin margins.
AnnaRae Grabstein (12:26):
Yeah, let's be real.
Californians legalizationinitiative was created on the
back of drug dealer margins.
They thought that.
They thought that they weregoing to print money in
California.
Andrew Livingston (12:37):
I don't think the businesses thought they
would print money.
I think the legislators thoughtthey would print money.
The legislators, yeah, goodpoint.
AnnaRae Grabstein (12:44):
Well, let's move to some quick good news and
then we'll we'll jump into thein-depth conversation with you
about all the things that youwork on daily and that good news
was hard to find this week butI did make from the BBC, so a
reputable news source that iscovering the news that London
(13:06):
Mayor, sir Sadiq Khan, has comeout in support of a report by
the London Drug Commission which, among other things, calls for
the removal of cannabis from theMisuse of Drug Act and a full
decriminalization path.
And while this is municipallevel news, the mayor of London
is a really important person tostand up for cannabis policy
(13:29):
change in the UK and this makesa cannabis market and
potentially decriminalization inthe UK look a little bit more
likely in the coming seasons atsome point.
It's exciting.
Andrew Livingston (13:43):
Yeah, yeah, it makes me think about
Professor David Nutt, back adecade or so ago, who was a UK
advisor on drugs and he was oneof the individuals who put out
reports saying that cannabis isless harmful than a lot of other
substances.
He was the one who's the famousline about how MDMA is less
harmful than riding a horse,which is it's also because
(14:06):
horseback riding is realdangerous, but it's very true.
And you know his report andactions were not acted upon.
So hopefully things arechanging.
And you know, the more culturalchange we see in the European
in Europe, the better on this.
You know, when speaking withpeople in the UK, it's like you
guys are generally moreprogressive than the United
States on certain drug issues.
Like, why have you not moved oncannabis?
(14:27):
And it's in large part becauseit's like they have less of a
cannabis culture there to thesame extent, also because they
didn't throw people in cages fordecades.
And so there's, you know it'skind of the for every political
force there's a equal andopposite reaction, right?
You know United States drugreform movement that happened in
(14:48):
the you know, 1960s and 70s.
You know it's really.
They started the decriminalmovements in the 70s and then
obviously you know it wasresurgent in into the 90s and
2000s and then, you know, withmedical cannabis and all of that
was caused by the fact that thefederal government was so
illiberal.
When you've got a regime wherepeople aren't going to jail in
the same regards and it's kindof a hear no evil, see no evil,
(15:11):
speak no evil, of course therehas been enforcement you just
generally don't have the sameforward push.
AnnaRae Grabstein (15:16):
Yeah, absolutely Well, hats off UK.
Andrew Livingston (15:19):
Let's see what happens.
AnnaRae Grabstein (15:20):
Okay, let's jump in.
So you have spent your careerreally following both cannabis
policy change but also economicimpact, and I thought it would
be interesting if you could giveus a little bit about your
background while also sharingoverall the economic impact of
cannabis legalization sinceColorado and Washington
(15:41):
legalized and what has happenedin the US economically, yeah,
yeah.
Andrew Livingston (15:47):
So let me tell you a little bit about my
background.
So I became I was going to saylike, infatuated with cannabis
policy that's probably the bestword for it in high school.
So I became obsessed withcannabis policy honestly, like
about the same time I startedusing cannabis.
(16:07):
So it was, you know, 16, 17,started, really, you know, and
my, my like constitutionalstructure and my essence is very
much, at least at that point inmy life, about, you know,
finding things that just didn'tmake sense associated with
federal policy, like you know,ways in which our system of
(16:30):
governance was wrong, right,which is very like oppositional
high school type thing, and youknow this was during the Bush
administration, and you know,opposition to the Iraq war and
all that sort of stuff.
So I became really fascinatedin the drug war and in the harms
that drug war does.
My father is a trauma surgeonand ran the trauma center in
(16:51):
Newark, new Jersey, for 30 plusyears.
So I would hear all thesestories about, you know, growing
up at the dinner table of youknow, essentially taking care of
generations of families whowere involved in drug trade, and
I became really interested inwhy certain drug markets were
violent and some weren't.
I also go to school everymorning, would listen to Kai
(17:12):
Risdahl on Marketplace, andbecame very interested in
economics in high school and soI became kind of fascinated in
this.
One of the things you guysremember Freakonomics the book
back what is it?
20 some odd years ago.
So Stephen Levitt, one of theeconomists there, has actually
written a lot on the economicsof violence and has some really
interesting papers that I lookedat in college and things like
(17:34):
that.
So I was really fascinated onthat realm of things.
When I was in college at ColgateUniversity in upstate New York
I was kind of at the height ofthe Mexican drug war so I spent
a lot of time looking at theeconomics of retributive
violence, so when people killeach other and then other people
kill each other and like allthose sorts of dynamics, but
then really kind of you know why.
(17:55):
There was a period of time whenJuarez was one of the most
dangerous cities in the countryand El Paso was one of the
safest.
So learning about how justicesystems are utilized or not
utilized and that sort of thing.
So I began really interested inthat and I helped to start a
chapter of students for sensibledrug policy on my college
campus back in 2009.
Campus back in 2009.
(18:21):
So that is a national and alittle bit international
organization on college campusesof students advocating to end
the war on drugs and, you know,have a drug policy rooted in,
you know, human rights,compassion and harm reduction.
And so I was really involved inthat organization and came out
in 2012 to Colorado to work onthe Med Mid-64 campaign.
I did voter registrationcoordination when I first moved
(18:42):
here and then just came infull-time at the campaign and
then, after it passed which wasreally crazy to have a height of
achievement when you were 22, Iwent to every single regulatory
meeting and took notes andintegrated myself at the law
firm and kind of joinedsemi-officially at the end of
2012, officially in 2013 as kindof their first
(19:06):
non-administrative, non-attorneyas a policy analyst, and then
worked my way up and been therefor 13 years, which is a while.
AnnaRae Grabstein (19:15):
So you're in your first job out of college?
Yes, actually, which is a while.
So you're in your first job outof college?
Yes, actually, well, congrats,yeah, well, so answer the
question of the economic impactof cannabis.
Andrew Livingston (19:27):
Sorry, sorry, sorry, sorry, yeah.
So a little bit about, butthat's the history.
So you know what.
Okay, so what have we seen?
Right, and I think the mostfascinating thing with what
we've seen in the economics ofcannabis is the way that
consumers are willing totransition their purchasing over
to a legal and regulated marketif it meets their needs.
So cannabis has provided areally fascinating laboratory of
(19:51):
democracy across all of theseorigin histories, right?
So for the first decade or so,from 1996 to about 2008,.
All of these laws that passedalmost all of them were patient
caregiver systems.
These were non-commercial,either implicitly or explicitly
non-commercial laws.
These laws were used so that apatient could either grow their
(20:12):
own or have a patient caregivergrow for them.
In some places these were verypopular.
You know.
Even in states where they wereexplicitly non-commercial, there
weren't really storefronts.
You know, a lot of medicalcannabis patients got access
through these.
Hundreds of thousands, if notmillions, of people got access
through these kind ofnon-commercial systems.
Then we started to see themcommercialize.
(20:34):
This was in the end of the Bushadministration.
Early Obama that's when theyou's when the first Ogden memo
came out said we're not going togo after patient caregivers.
That exploded into a lot ofdifferent stores and we still
saw some enforcement inCalifornia on these sorts of
things, but once we startedhaving storefronts they became
even more popular, right?
So it's kind of that field ofdreams, right, like if you build
(20:56):
it, they will come.
But the dynamic is you have tobuild a system that actually
attracts consumers and providesthem with a set of goods that is
better than what they can getin the illicit market, right?
So this is why and we'll talklater about, like why places
like Texas haven't reallysucceeded in their medical
program is because the programthere does not provide consumers
(21:17):
with what they want, right?
And I always talk about threemain things.
It's the three A's.
You need accessibility,affordability and assortment.
Right, you need to be able toget the cannabis products you
want, which includes flour,concentrates, edibles, all this,
your full assortment.
They need to be affordable, soyour price can't be
(21:38):
significantly higher than theillicit market, right?
If your legal prices are twicewhat your illegal prices are,
people aren't going tonecessarily switch over.
And then, third, they need tobe accessible.
So you need.
You know time is money.
To a certain extent, if youhave to drive half a state away,
you're going to keep going tothe illicit market because they
either deliver to your house orit's from a drug dealer that's
(21:59):
not too far away.
So, with that sort of thing,over the last 10 years a little
more than 10 years MPP actuallyjust put out today a release
that there's been more than$24.7 billion in tax revenue
since legal adult use sales.
$24.7 billion in tax revenueSince legal adult use sales.
(22:24):
$24.7 billion represents many,many billions of dollars that
are going to legal businesses,that are going to taxpaying
businesses that are employingpeople and paying tax revenue
and the ancillary businessesthat are around them.
This is really in many of thesedifferent markets, whether it's
in California, you've got abouta $4 or so billion market.
Colorado has been up and down,but we see about a $2 billion
(22:45):
market.
Michigan is over a $3 billionmarket.
Florida is likely similar overa $3 billion market.
Pennsylvania is close to twothese huge markets across the
country and some of them aremuch smaller.
Some of them are growing.
They're in different stages,but what we've seen through
there is really an opportunityfor cannabis to be regulated in
(23:09):
the way that it should have beenregulated many decades ago and
that is essentially in asomewhat similar way that we
regulate alcohol.
Although we'll talk aboutbeverages, those are actually
going through an alcoholregulate regulatory standpoint,
but from the cannabis standpointstandpoint it's it's really
different regulations at thestate level.
Now, hopefully eventually we'llget federal standards in
(23:31):
production.
But different states are goingto.
You know some will allowdelivery, some, will you know,
have lots.
Know some will allow delivery.
Some, will you know, have lotsof stores.
Some will have a handful ofstores.
Some, even in the future, mayhave state run stores in the way
we have state run alcoholstores, although that bill
failed in Pennsylvania.
But it's really just anopportunity for that laboratory
of democracy to show whatsucceeds.
AnnaRae Grabstein (23:52):
Okay, and so cannabis legalization has been
through many different chaptersreally, and it has had a fast
movement and momentum acrosslots of different states.
But a lot of states didn'tlegalize cannabis for adult use
or for medical, or didn't do soin a way that really hit all
those A's that you just talkedabout, which I love.
But on the back of that camehemp, and hemp through a series
(24:17):
of different farm billiterations, starting in 2014 and
then more in 2018, a door wasopened for the creation of
hemp-derived cannabinoids toenter the market in various ways
, and we've seen some stateschoose to add a regulatory layer
on top of what the farm billkind of created and some states
(24:42):
haven't, and, as a result, we'vehad this growth of a huge hemp
market that is separate butdifferent and similar to the
cannabis market.
Ed has created a bunch ofconfusion, which we've talked
about in various different ways,but also an enormous amount of
opportunity, and within that,you've been really focused on it
(25:03):
, on your work, and I think myguess is that a lot of that has
to do with because that has beenwhere there's business
opportunity and there is shiftshappening within the hemp space,
and I want to talk about someof those policy shifts, both
from the federal perspective andat the state level, and
(25:24):
ultimately get to the discussionabout the alcoholization of
hemp and where you see thatgoing.
So let's talk about some of thestate level news that's been
happening as it relates to hemp,instead of cracking open the
full farm bill discussion atthis point.
Okay, and let's talk aboutalcoholization and really what
(25:45):
that is.
That is a word that doesn'texist if you look it up, but I
think a lot of us don't knowwhat it means, so why don't you?
use some recent legislation anddefine alcoholization for us.
Andrew Livingston (25:58):
Yeah, so you know, I think we could look at
Kentucky, we could look atTennessee in some degree.
In other States you know thingsto be considered in Ohio or
others.
So I would consider thealcoholization of hemp it's
really hemp beverages to be aregulatory policy that seeks to
(26:20):
integrate hemp beverages eitherdirectly or indirectly through
traditional alcohol supplychains.
So that is things like you know, only alcohol licensees and
marijuana licensees couldproduce the product.
Or things like you need to havea three-tier system and there's
(26:43):
a distribution tier and alcoholdistributors are the only ones
that can distribute hempbeverages.
Or things like you can't have across-ownership between
production and distribution andretail unless you, you know,
qualify as the equivalent of amicrobrewery, you know, that
(27:04):
produces itself.
AnnaRae Grabstein (27:05):
So, on the one hand, alcohol benefits from
pretty broad accessibility,affordability, assortment, all
of those things that you talkedabout, which are key for
cannabis markets to besuccessful, and so at first this
sounds pretty compelling, butthis is coming after a lot of
(27:25):
hemp products have launched intothese various markets, and it
means that there could besignificant shifts for the
businesses that are currently inmarket in places that are
moving towards alcoholization asa regulatory pathway.
Why don't you explain how itcould change existing market
environments for businesses thatare in markets that are all of
(27:49):
a sudden going to go from maybeno regulations at the state
level to an alcohol regulatorysystem?
Andrew Livingston (27:56):
Yeah, so the most significant impact on
business would likely be eithera restriction or elimination on
direct-to-consumer sales.
Yeah, direct-to-consumer salesare huge, right, A lot of these
small businesses do a lot oftheir sales through online
internet marketing anddirect-to-consumer shipping.
(28:16):
You know there's probablybillions of dollars of hemp
beverage sales that occurthrough these channels.
And you know, historically,alcohol direct-to-consumer sales
are not permitted.
Right, there are somepermissions for wine.
You know you can go and visit awinery and then have them
direct ship you certain alcohol,so there's kind of that in that
(28:40):
system.
But in most instances,direct-to-consumer sales are not
permitted because the setup ofthe three-tier system for
alcohol was designed to reducethe ability for producers of
alcohol to directly interactwith consumers and even, to some
degree, directly push orpersuade alcohol retailers, as
(29:04):
there's a lot of different lawsabout what they can do with
advertising.
You know, essentially, betweenthose two tiers the
manufacturers and the retailers.
With regard to, you know,incentive programs, advertising,
things like that Some of thosediffer state by state, so that's
going to be one of the majorthings.
In other places, you won't beable to have delivery.
Alcohol delivery has becomemore popular, particularly since
(29:24):
COVID, but even in some stateswhere alcohol delivery is
permissible, hemp beveragedelivery may not be.
So that gets into the largerquestion of are you doing full
alcohol or just partial?
AnnaRae Grabstein (29:34):
Well, and I think what's interesting is
you're bringing up delivery anddirect to consumer and sometimes
from a consumer perspective itdoesn't feel that different.
Both outcomes are a productgetting delivered to your house,
but from an alcohol perspective, the difference between alcohol
delivery that's still comingfrom brick and mortar retail and
that means that it issupporting the ingrained status
(29:58):
quo of distribution and brickand mortar retail as the
backbone of alcohol distributionchannels for consumers and
that's what the old schoolplayers want to maintain.
Partner with a group like TotalWine and a consumer like one of
us can go onto DoorDash andorder a hemp beverage from Total
(30:24):
Wine and a DoorDash driver willbring it to our house, as
opposed to that consumer goingdirect to that brand's website
and then getting that product afew days later through the mail.
And we talk a lot about who hasthe power and policy and there
has been a openness and aexcitement about alcohol coming
(30:48):
out in support of THC because itis perceived that alcohol has
power and has lobbying resourcesand things.
And now it has happened andalcohol lobbies are coming out
in support of THC.
Andrew Livingston (31:03):
But it isn't necessarily all unicorns and
rainbows because it will meansome shifts for existing
businesses and I think somebusinesses are more open to it
than others is that as acannabis industry or as a hemp
industry, you know, delving intoalcohol, there's a lot of
(31:24):
tension and animosity as well askind of issues amongst the
different sectors in that market, right you know.
So everything's not hunky-dorybetween big alcohol and little
alcohol and distributors andretailers and manufacturers,
right, like you're stepping intoa little bit of an industry
quackmire that has, you know, acentury of its own skeletons and
(31:46):
its own issues.
And it's important when you dothat that you kind of understand
some of those intra-sectordynamics and power dynamics.
Who actually has the power?
Because I've always thought,actually it's like cannabis
companies that are coming in ourinterests probably a lot more
(32:07):
aligned with small beercompanies and small breweries
and small retailers than thedistributors and things like
that, and so there's obviously alot of choke points with
alcohol of the distributors andthings like that, and so there's
obviously a lot of choke pointswith alcohol, and what
companies are able to succeed ornot may not necessarily be
based upon what consumers demand, but based upon who can get on
(32:28):
store shelves, and that's kindof sad.
AnnaRae Grabstein (32:31):
Yeah, absolutely.
Let's pivot a little bit moreas we're talking about hemp and
talk about what is happening inTexas.
And as an economist youunderstand the domino effect of
these policy changes in a prettyfinancial, through a financial
lens and I'd love it if youcould explain kind of what from
(32:54):
your estimation, what amount ofthe hemp market the Texas ban
could eliminate.
Andrew Livingston (33:03):
So I don't really know this for sure.
You know I can open up in alittle bit Beau Whitney's
analysis report on what heestimated for the size of the
Texas market.
For the total, I would not besurprised if we're looking at
20% or more of the federalmarket in Texas Is Texas.
Yeah, and SB3, if it getssigned by the governor would
(33:27):
eliminate 99% of that market.
It still allows for CBD and CBGproducts, but by and large most
of the hemp products productsthat are being consumed are THC
products.
People would like to have aregulated cannabis accessibility
(33:48):
program in Texas and there justisn't one, and the hemp
industry was the one that wasable to provide that in the most
significant ways through whatis essentially hundreds of small
storefronts.
So what will we see in Texas?
We'll see thousands, maybe tensof thousands, of jobs lost.
We will see significantincrease in the illicit market.
(34:12):
It's not like people are goingto suddenly stop demanding these
products.
What we're going to see aresome retailers I mean not
retailers some manufacturers aregoing to see are some retailers
I mean not retailers somemanufacturers are going to
illegally direct ship to Texasand we'll see busts there.
We'll see probably some peopleget arrested for violating Texas
and whether or not Texas isable to prosecute them from
(34:36):
another state.
We'll see.
We'll see.
I mean sales on the border inOklahoma will probably do a
little bit better, but we'll see, essentially, a huge illicit
market continue in Texas.
Now some Texas legislators wouldsay the entire market was
always illegal because we neverintended this.
But it's also just going to beless safe.
(34:57):
Right, you're going to see moreof those BS, copycat products.
Right, you're going to see moreof those BS, copycat products,
more things that are mislabeled,more money going to you know,
truly organized crime and lessmoney going to legal and
regulated businesses that paypayroll taxes.
Yeah, it's really sad, but Ithink it's also important for us
(35:29):
to understand that, like, texasnever voted to have an
intoxicating hemp program, andso the reason that conservative
legislators in the state are upin arms is because they feel
like something was brought intotheir house they didn't approve
of, and so I think it's veryimportant to think about it from
a conservative mindset of beingthe master of your home, and I
think that's why it pissed offLieutenant Governor Patrick.
(35:53):
So much is that he felt likethese were a criminal invasion
of poisonous products into hishome and he has to protect his
home, which is Texas.
AnnaRae Grabstein (36:05):
Yeah, I think that perspective doesn't
deserve much platforming, but I,I, I understand that that is
how we got here.
I think that that that, broadly,texas is a bellwether for a lot
of conservative states.
It is the largest by populationand I think that there could be
(36:27):
a ripple effect to this actionin other states as well.
Ways here is that, as we'rewatching legal cannabis states
like New York make progress intheir adult use programs to
finally turn on their track andtrace programs, which could
(36:49):
potentially create a newchallenge for product that was
being illegally inverted intothe New York market, actions
like this in Texas are creatingnew outlets for that product
that might have been going toNew York before now, is going to
have some regulatory challengesto do so, and is creating a new
market opportunity for peopleto pivot their illegal supply
(37:10):
chains directly into Texas.
So the folks that benefit fromthis ban are certainly not the
good operators that arecompliance focused, but I think
it's going to be the groups thatare willing to fill the
consumer demand, no matter therepercussions from a criminal
(37:31):
perspective, becauseunfortunately this does create
new criminal penalties thatdidn't exist before as well.
So it's more dangerous than itwas to take these risks.
Andrew Livingston (37:40):
And I was just looking at Beau Whitney's
2023 report.
So he estimated that Texas wasabout $2 billion market and the
total market was $28 billion.
I think the total market's alittle less than $28 billion,
but that would have it at alittle less than 10% of the
total market.
I think, personally, it'sprobably higher than that as a
percentage of that market, butit's going to be kind of
(38:01):
interesting to see out at the.
AnnaRae Grabstein (38:03):
There was a press, really a big press
conference, and the lieutenantgovernor made a lot of reefer
madness like statements, but healso pinned the market at seven
billion in texas himself that'sfar too high.
Andrew Livingston (38:16):
Yeah, it's far too high.
AnnaRae Grabstein (38:18):
But it is kind of what what he said, and
it is also back to other hemprelated trade trade association
groups in Texas who are allsaying that this is just a
massive market.
If that is actually true, itwould be the largest cannabinoid
state-level market in the US,which is pretty crazy by far,
and what it shows is that thereis a massive demand for
(38:42):
cannabinoids in Texas.
Andrew Livingston (38:45):
The other thing that I think is really
interesting is that it's ademand for regulated products.
Consumers in Texas are chompingat the bit to get better
regulated products that they canpurchase from storefronts that
they can purchase fromstorefronts, right Like.
We all know that, ifwell-designed, a commercial
adult use cannabis market inTexas would do awesome, but that
(39:07):
just might require differentlegislators.
AnnaRae Grabstein (39:09):
Yeah Well, so a lot of this.
As we're talking about thealcoholization and what's
happening in Texas.
The question is for lots of thepeople that listen to this
podcast, who own businesses orstarting businesses or operators
in hemp and cannabis, is that,what does this podcast?
Who own businesses or startingbusinesses or operators in hemp
and cannabis is that.
What does this all mean?
How do you look ahead?
How do you decisions aboutwhere to launch, how to launch,
(39:33):
what to launch into?
As you're working with yourclients, how are you helping
them find the right path?
Andrew Livingston (39:38):
Yeah.
So what I do a lot is helppeople navigate the intricate
patchwork of state laws.
You know, understanding marketopportunities really requires
understanding what you can andcan't do in certain markets.
But not only that how the whatyou can and can't do affects the
actual business opportunity.
(39:59):
And with hemp it's reallyimportant because, while there
are a lot of cannabis businessesthat are multi-state operators,
essentially all hemp businessesare multi-state operators
because of their ability to sellinto these different markets
and their ability to Commerce.
Basically, exactly yeah, Iwanted to say federally, legally
(40:21):
, but of course that all dependsupon you know, your view of the
farm bill and all of that sortof stuff, and I'm not going to
say things are legal or aren'tlegal, but the vast majority of,
if not all, hemp manufacturers,you know, sell across state
lines, and so, okay, can yousuddenly not do this in, you
know, alabama, based upon thepassage of House Bill 445?
(40:45):
Or might you be able to do thisin Massachusetts, based upon
House Bill 160?
And so there's a lot oflegislative tracking right now,
what you can do and where.
But let's just talk about whatthis means in terms of yeah.
AnnaRae Grabstein (40:57):
I wanted to jump in there and say so, what
you can do and where, and also alittle bit of predicting the
future.
And I think that, as we'refocusing on hemp and trying to
predict the future which isimpossible and no one has a
crystal ball states and the waythat the legislation is changing
, and one of those specifically,I think, has to do with
(41:28):
smokable products and, in someways, inhalable products, which
would be smokable plus vape, andif there's a future there and
I'd like for you to talk aboutthat.
Andrew Livingston (41:33):
I want to go even further, because I think
that you know and this is goingto be a little more
controversial, but I think thatthe future of hemp consumable
products, from a regulatorystandpoint, is almost entirely
in just beverages.
AnnaRae Grabstein (41:48):
Not even ever .
Andrew Livingston (41:50):
No, I think that there is a future in
edibles, but that is going to bewithin the regulatory system of
cannabis, of cannabis.
So I would be and this is againjust me prognosticating I would
not be surprised if more andmore regulated cannabis
companies become hemp companies,with edible products being sold
(42:12):
through cannabis stores andthen beverage manufacturers
existing through an alcoholsupply chain.
But I mean in terms of thelegality of THCA, flour and
smokable and concentrate forms.
I do not think there will bemany states left in three years
(42:32):
where that is permitted underthe hemp system.
AnnaRae Grabstein (42:35):
And why three ?
What's three years all about?
Andrew Livingston (42:37):
Two to three years.
I'm also saying that because ofhow long it might possibly take
to get a new farm bill passed,so may that be longer.
I just wanted to give ashort-term time horizon Because
you know, it's not just thisyear, but it's a few legislative
sessions.
That's what I mean.
AnnaRae Grabstein (42:53):
So if you're a business that's currently
selling inhalable hemp products,the time horizon is not really
more than three years in yourpredictions.
Andrew Livingston (43:03):
I would be surprised if there are many
markets, you can do that legally, but I think a lot of some of
the companies that are sellingin THCA flour, I mean, that's
essentially a design to makemoney where you can, when you
can, which is awesome.
This is, like you know, theethos of of cannabis businesses
(43:24):
that have kept cannabisconsumers happy and supplied for
decades.
Right, Like I got nothing wrongwith people who existed in the
illicit market.
Right, you know, you just gotto do it ethically.
You got to try to createproducts that are safe and good
for consumers.
You got to be a big, goodbusiness operator.
Right, but we all knew plentyof great drug dealers, and so if
(43:47):
we want to look at it from thestandpoint of where those
businesses are, if you want tostay legal, it's about okay.
Well, what can I do within theseregulated systems?
But I personally think that ifyou want to try to analyze where
cannabis will be accessible, Ithink you need to look at what
(44:08):
makes sense for policymakers interms of a regulatory apparatus,
and I think they look at it intwo different ways.
They say either cannabis isgoing to be regulated through a
cannabis supply chain, through acannabis supply chain, which is
typically state licensed andstate compliant businesses that
produce and sell cannabisproducts and manufacture those
(44:32):
cannabis products through thatcannabis-only supply chain or
through alcohol, which areaccessible not just at liquor
stores but also at grocerystores and corner stores and
things like that.
Whether or not we see onsiteconsumption, I think, is a whole
nother question.
We really haven't seen as muchonsite consumption and we can
talk about that in terms of afull alcoholization model.
AnnaRae Grabstein (44:54):
Yeah, more on premise.
Andrew Livingston (44:55):
But if we look at like, how do we divide
the products?
I think absolutely flowersmokables are going to be
through that cannabis supplychain.
I think clearly, beverageswhich never really succeeded
because of the way they wereformed factor and we could talk
about that why are going to bein the hemp beverage alcohol
supply chain?
And what do we see with edibles?
(45:15):
Right, and stop me, anna Rae,if you want to jump in too but
there is really no difference ina potency perspective between a
five milligram gummy producedfrom hemp and a five milligram
gummy produced from higher thanyou know 0.3% THC cannabis.
AnnaRae Grabstein (45:35):
Yeah, you're right, there is no difference
from a consumer experienceperspective.
I will say that, like whatyou're bringing up, I think is
this broader point.
That we actually talk about alot on this podcast is
regulatory convergence, whichreally the point of regulatory
convergence is, likeunderstanding that cannabis and
cannabinoids are an ingredientand that when we're talking
(45:58):
about creating products like,ultimately the best outcome is
to be able to use the mostefficient input to make the
product, and use of hemp tocreate a five or 10 milligram
edible is a much less efficientinput, if you're truly using
efficient biologically, but notlegally.
(46:19):
Yes, yes, absolutely Good point.
From a manufacturingperspective, yes, sure, much
more efficient.
Andrew Livingston (46:27):
Well, I mean because it's about the cost of
production, right?
So what is the cost ofproduction of, essentially, a
pound or a kilogram of pure THC?
It is much more expensive to doit in a cannabis regulatory
system than it is to grow agiant field of hemp, even if you
need far more hemp to harvestand then extract it.
AnnaRae Grabstein (46:49):
It's a good point.
It's a very interesting pointreally, because I don't think
that was the point of cannabis.
Compliance was to make it soexpensive that the actual, more
potent and efficient ingredientfrom an ingredient perspective
became more expensive than theless efficient input of a field
of hemp.
But we are diverging.
(47:11):
I think that we're getting.
Oh, you're good, this is allpart of the fun.
I think that we shouldn't endthe episode without talking a
little bit about the farm billand what's next, because I know
this is something you pay a lotof attention to and we're
halfway through 2025.
We still don't have a new farmbill.
What do you think is coming?
Andrew Livingston (47:32):
I don't know.
I mean, the Republicans aremore interested in utilizing the
farm bill to literally takefood out of children's mouths,
to provide tax breaks forbillionaires while also blowing
up our deficit.
And so they're interested inthe Farm Bill because they want
to eliminate SNAP, because theyfeel that you shouldn't get
(47:54):
healthy food, or even food,unless you meet certain
requirements.
I think that's abhorrent.
Certain requirements I thinkthat's abhorrent.
I think it's unlikely we'regoing to get a you know, a full
new farm bill that touches on ahemp in a way that is productive
, soon.
I think we're probably going tocontinue to see continuing
(48:16):
resolutions, and I think itreally just also depends upon
are we able to get anythingpassed before the midterms?
If we're not able to getanything passed before the
midterms, I think it's more thanlikely the Democrats take the
House and if that happens, thenall we're going to see is
continuing resolutions.
So I personally would bet onthe continuation.
AnnaRae Grabstein (48:38):
For people that don't understand what the
impact of a continuingresolution is for the Farm Bill.
Can you explain kind of thebroader picture?
Andrew Livingston (48:45):
Yeah, so a continuing resolution on the
Farm Bill would pretty much justkeep in place the provisions
from the 2018 Farm Bill.
So a continuing resolution isessentially just you extend the
deadline by which a bill wouldnormally expire.
So we see this often withbudget bills.
It's you know, sometimes thereare little tweaks here and there
(49:06):
, but it's essentially we'rejust extending the budget at its
current rates and currentallocations for you know,
another period of time.
So you know, typically the farmbill gets done every four years
or so.
Last one was 2018.
That's what is that Seven yearsago now.
And one was 2018.
That's what is that seven yearsago now.
And so I think this isrepresentative of Congress's
(49:28):
inability to pass effectivelegislation.
I personally put this onRepublicans, but that's also
because I find what they'redoing to be abhorrent.
But they currently controleverything.
They could pass a farm bill.
They just don't want toprioritize it.
I think it's also, to somedegree, is because the president
looks down upon Congress, evenRepublican Congress, and he
(49:51):
would rather just do things byfiat.
AnnaRae Grabstein (49:54):
Amazing, you know.
I think that, on the one hand,focusing on continuing
resolutions as an ongoing statusquo is what a lot of people
want and, at the same time, itcreates endless uncertainty over
what might happen next year.
(50:15):
What might happen, and it'slike I would love to be able to
get to a place where I couldstop talking about the farm bill
for another four or five yearsand just know that we have one
in place and that it becomesmanageable.
I think that what thecontinuing resolutions are doing
is putting regulations into thehands of the state, and that is
(50:36):
creating what is starting to bea complex patchwork for hemp
that is almost starting to lookmore like the way cannabis is,
so different from market andit's really in a lot of ways and
that's not just congress'sinability to pass a new farm
bill that is the fda's desire to, or lack of desire to, regulate
(50:57):
finished products.
Yeah, and if they, if they gotin it, then there would be
something for the states to justsupport and to say, okay, we're
To anchor upon With what theyeah, so you have this patchwork
of different.
Andrew Livingston (51:08):
I mean, it's not just like what are the
different milligrams, but it'slike do you need to have a DEA
license to be tested for testing?
Pretty much all states havesaid no, you don't, even though,
because the DE, you know, aretrying to waive that process,
but Georgia still does, right.
So it's like, what needs to betested, how products need to be
produced, when all of thesethings are different.
(51:29):
Right, like you know, we try tocreate a universal label, but,
like every state has differentlabeling requirements, right,
that's not the case for alcohol.
And so, because we don't reallyhave any good finished product
regulations from the FDA or youknow, guidelines, there, you
have this complex patchwork andit's, you know, again, it's more
similar to cannabis, but it'scannabis that you can move
(51:52):
between state lines.
AnnaRae Grabstein (51:53):
Yeah, but you still need to make new
packaging for every state, allright, well, I think that we've
probably taken this as far as wecould go.
We could talk all day aboutthis stuff, but, andrew, I think
it's time for our last call,and that is when we give you the
mic for a final message to ourlisteners, advice, call to
action or a closing thought.
So, andrew Livingston, what isyour last call?
Andrew Livingston (52:14):
So my last call, when we think about
laboratories of democracy, is toremember that there's not just
states, there are also sovereigntribal governments.
There is indigenous communitiesaround the United States, and
I've been doing some reallyinteresting work with the ICIA,
the Indigenous Cannabis IndustryAssociation to map out and
(52:35):
study indigenous cannabisprograms and, essentially,
sovereign regulatory regimes,and so I think that this is
interesting for a few things.
One, indigenous communities inthe United States have a lot of
experience with regulatedproducts, with tobacco and
gaming and how they also need to.
You know how they regulatealcohol, and so this provides a
(52:57):
cool opportunity for them tofigure out how to regulate
cannabis in a way that I thinkcould be more efficient than
what some states do.
It could be less efficientdepending on how they're
required here or there, butthere's over a hundred
indigenous cannabis and hempprograms across the United
States, and let's not forgetabout the people who were here
(53:18):
first and their experience withcannabis and how, you know, we
can assist and learn from theindigenous community in the
United States.
So look out for a you know,forthcoming report on that.
There's been.
I have a cool map that I didwith ICIA, and so, yeah, excited
.
AnnaRae Grabstein (53:36):
Awesome, Thanks for that.
That was a whole whole new,whole new topic.
Yeah Well, thanks for joiningus today.
It was a really greatconversation and thanks for all
your work.
Andrew Livingston (53:47):
Thank you, Anna.
I really appreciate you and thepodcast and Ben.
AnnaRae Grabstein (53:50):
Awesome, thanks.
Have a great day, andrew.
Thank you, yeah Well, so thereyou have it, everybody.
That's our episode.
Thank you so much for beingwith us today and if you liked
the episode, if you found itvaluable, please drop us a
review on Apple Podcasts,spotify, youtube or wherever you
tune in, subscribe, engage, getin touch with us, let us know
(54:12):
what kind of topics you want tohear us talk about, and thank
you to our teams at Wolfmeyerand Vertosa and to our producer,
eric Rossetti, who make all ofthis possible.
And, as always, folks staycurious, stay informed and, most
importantly, keep your spiritshigh.
Have a good one.
That's the show.
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