💸 The Tape

New Mexico Is Still Under Seige From The Feds

Well, it seems the green rush is hitting a red light at the border. A group of eight licensed cannabis companies in New Mexico have decided they've had enough of what they call federal overreach and are taking the Biden Administration to court. The lawsuit, filed on October 22 in the U.S. District Court for the District of New Mexico, alleges that U.S. Customs and Border Protection (CBP) agents have been acting like unwelcome gatekeepers, seizing hundreds of thousands of dollars' worth of state-legal cannabis products since February. Apparently, "hands off" doesn't apply when your hands are full of hemp.

The plaintiffs argue that their Fifth Amendment rights are being trampled, citing at least a dozen instances where their goods—and sometimes even their personal vehicles—were confiscated without due process. They estimate damages have already surpassed the $1 million mark. Interestingly, New Mexico seems to be the only border state where such aggressive enforcement is happening, despite neighbors like Arizona and California also hosting bustling recreational cannabis markets. Perhaps CBP missed the memo—or maybe they just really like New Mexico chile and are looking for any excuse to visit.

The suit goes on to accuse CBP agents of detaining employees, taking fingerprints and mugshots, and adding them to federal smuggling and drug trafficking lists—only to release them without charges when federal prosecutors decline to pursue the cases. It's like being invited to a party you never wanted to attend, only to be shown the door before the music starts.

The lawsuit warns that CBP's actions could have a "rippling effect," potentially undermining New Mexico's entire regulatory framework for cannabis. The plaintiffs claim that CBP agents have become "increasingly aggressive" throughout 2024, seizing personal vehicles like Fords and Audis during routine stops. It's worth noting that the Department of Homeland Security, which oversees CBP, is also named as a defendant in the suit.

The companies involved aren't exactly small potatoes in the New Mexico cannabis scene. Alongside Royal Cannabis, the plaintiffs include Mesilla Valley Extracts, Super Farm, Impact Farms, Chadcor Holdings NM, Mylars LLC, Rollin Love, and Desert Peak Farms. Collectively, they're signaling that they're not willing to let federal authorities harsh their mellow—or their bottom line.

From an investor's perspective, this lawsuit highlights the ongoing tension between state-level cannabis legalization and federal prohibition. While the Obama administration adopted a more laissez-faire approach, allowing states to experiment with legalization, the current situation suggests that federal agencies haven't fully embraced this hands-off policy. For businesses operating in the cannabis sector, especially those near federal borders or checkpoints, this adds another layer of risk that could impact profitability and operational efficiency.

In the grand scheme, the lawsuit could serve as a catalyst for clearer federal guidelines—or at least a much-needed conversation about the discord between state and federal laws. Until then, cannabis companies in New Mexico might feel like they're in a game of Red Light, Green Light, where the rules change mid-turn. Investors should keep an eye on how this legal battle unfolds, as it may set precedents affecting the entire industry. After all, in the world of cannabis, the only thing higher than the growth potential might just be the regulatory hurdles.

📈 Dog Walkers

South Dakota Is On Shaky Footing

Well, it appears South Dakota's marijuana legalization initiative might be going up in smoke. According to a new Emerson College/KELOLAND/The Hill poll, 50% of likely voters are opposed to the cannabis measure, while 45% support it, and 5% are still undecided—perhaps waiting for a sign from a higher power or just another poll. Notably, 65% of voters backing Vice President Kamala Harris are in favor, compared to a mere 31% of those supporting former President Donald Trump. The youth are blazing trails with 68% under 30 supporting legalization, but seniors over 70 are pumping the brakes at 64% opposition. With the GOP and two Catholic dioceses urging a "just say no" approach, and previous initiatives snuffed out by legal challenges, the campaign has its work cut out. Time's ticking, and the outlook for Initiated Measure 29 is looking a bit hazy.

Entourage Health Boosts Credit Facility

Entourage Health Corp. is dipping into the LPF cookie jar once again, securing an extra $2.5 million to keep the lights on. It's like finding spare change in your couch cushions—if your couch was a pension fund that already owns over 10% of your company. This amendment to their credit facility comes without any other changes, which is financial-speak for "we needed cash, and they obliged." Previously, LPF gave Entourage a hall pass on its breaches until October 31, 2024, so it's clear they're in this dance together. The transaction skirts the need for minority shareholder approval under MI 61-101, since it's a non-equity loan on reasonable terms. Investors might raise an eyebrow, but in the cannabis industry, sometimes you have to cozy up to your biggest fans to stay afloat.

Canadian Majors Set To Report

Canopy Growth Corporation (TSX: WEED, NASDAQ: CGC) is gearing up to release its second quarter fiscal 2025 results on November 8, 2024, before the markets wake up. Think of it as your financial espresso shot with a twist. CEO David Klein and CFO Judy Hong will be hosting an audio webcast at 10 AM ET.

Aurora Cannabis (NASDAQ: ACB, TSX: ACB) is swooping in two days earlier on November 6, 2024. They're set to discuss their own Q2 2025 results bright and early at 8:00 a.m. ET. With both giants reporting back-to-back, it's shaping up to be a high-stakes week in the cannabis sector—pun absolutely intended.

👾 Number Of The Day

$226.5M Dollar amount of flower sold in B.C. over the last year.

🗞️ The News

South Dakota Marijuana Legalization Initiative Trailing In New Poll

Entourage Health Increases Senior Secured Credit Facility

Trulieve to Open Medical Cannabis Dispensary in Lake Placid, Florida

SNDL to Announce Third Quarter 2024 Financial Results on November 5, 2024

Value of a marijuana trademark is more than just bag appeal

📺 YouTube

Cannabis industry: Canopy Growth CEO Talks Future of Company | Trade to Black

What we covered:

✅ On the latest episode of Trade To Black, David Klein, CEO of Canopy Growth (NASDAQ: CGC), joins us to talk about the future of the company and how it’s structured moving forward in the cannabis industry.

We’ll discuss their latest announcement involving Canopy’s $100M prepayment of the senior secured term loan, which now extends the entirety of the loan’s maturity to December 2026, and the growth areas of their core business now that the balance sheet has been addressed.

Plus, we’ll get feedback from Klein on why the decision was made for him to retire and how difficult that decision was for him.