💸 High Impact

The DOJ Barks Back

Looks like the cannabis industry is lighting up more than just joints these days—it's igniting legal battles that could shake the very foundation of U.S. marijuana laws. In a recent courtroom drama, the Department of Justice (DOJ) warned that a federal lawsuit challenging cannabis prohibition could throw a wrench into the Biden administration's plans to reclassify marijuana from Schedule I to Schedule III under the Controlled Substances Act (CSA). Talk about a buzzkill for policymakers!

The lawsuit, spearheaded by cannabis heavyweights like Verano Holdings Corp., Canna Provisions, and Wiseacre Farm, argues that Congress has essentially given up on eradicating marijuana. They point to congressional budget riders preventing federal interference with state-legal medical cannabis and the laissez-faire attitude toward legalization in the District of Columbia. Their claim? The CSA's ban on state-regulated marijuana is so last decade.

But the DOJ isn't rolling over. In a brief filed with the U.S. Court of Appeals for the First Circuit, government lawyers contend that the plaintiffs' arguments lack any legal precedent and could undermine the CSA's entire framework. They assert that if the court sides with the cannabis companies, it could handcuff Congress's ability to regulate marijuana—even if it's rescheduled to Schedule III. In other words, the DOJ is saying, "Be careful what you wish for; you might just get it—and then some."

So, what does this mean for the cannabis industry and investors eyeing those green pastures? If the plaintiffs succeed, it could create a patchwork of regulations where federal authority varies from state to state based on local laws. That kind of regulatory uncertainty is an investor's nightmare. Imagine trying to forecast earnings when the legal landscape is shifting under your feet like quicksand.

On the flip side, a win for the DOJ could solidify federal control over cannabis, even as it moves to a lower schedule. While rescheduling to Schedule III would ease some burdens—like allowing for medical research and possibly changing tax implications under IRS Code 280E—it wouldn't eliminate federal prohibition. Cannabis businesses would still operate in a legal gray area, which could deter institutional investment and access to capital markets.

The DOJ also dismisses the idea that federal enforcement should defer to state laws, labeling it a "novel and erroneous theory of reverse preemption." In layman's terms, they’re not keen on states telling Uncle Sam how to run his shop. For an industry hoping for clarity, this legal tug-of-war only adds to the haze.

But let's not forget the wild card: the interstate commerce clause. The DOJ argues that state-legal cannabis activities affect interstate commerce, citing "marijuana tourism" as an example. If the courts buy this argument, federal oversight remains justified, and the CSA stays intact. That would maintain the status quo—a fragmented industry navigating a labyrinth of conflicting laws.

In summary, this legal skirmish isn't just about whether your local dispensary stays open; it's about the future framework of an industry poised for explosive growth. For investors, the court's decision could either clear the smoke or add more mirrors. Until then, the cannabis sector remains a high-risk, high-reward play—emphasis on "high." Keep your due diligence sharp and your portfolios diversified, because this legal rollercoaster is far from over.

📈 Dog Walkers

StateHouse Files For Banlruptcy

StateHouse Holdings (CSE: STHZ; OTCQB: STHZF) is the latest cannabis company to go up in smoke, filing for bankruptcy in Canada and entering receivership in the U.S. The California-based firm, boasting 11 dispensaries, couldn't keep up with its liabilities—who could've seen that coming? Trading of its shares has been halted, and delisting is on the horizon. Financial woes became public when lender Pelorus Fund REIT moved for receivership after StateHouse defaulted on four loans. Founded as Harborside in 2006—a pioneer in legal cannabis—the company faced turbulence after its founders were ousted in 2020 amid claims of a hostile takeover. An aggressive acquisition spree followed, proving that sometimes, rapid growth can be a real buzzkill.

Hemp Products Are Back In NJ Baby

New Jersey's hemp industry just got a judicial boost as a federal judge tossed out parts of the state's restrictive new hemp law. The ruling overturns the ban on out-of-state hemp companies selling their goods in the Garden State, much to the delight of hemp executives like Cantrip CEO Adam Terry, who called it a "win for hemp." However, the law still tightens the screws by requiring sellers to obtain a state permit, shrinking retail avenues faster than a cotton shirt in hot water. State Senate Majority Leader M. Teresa Ruiz isn't thrilled, citing threats to community health. While this ruling doesn't set a nationwide precedent yet, it could be the first domino to fall in the hemp industry's legal battles across the U.S.

Germany Is Starting To Hit Its Stride

Germany's medical cannabis market is getting higher—literally and financially—with sales projected to just top €420 million in 2024 (yes, €420 million—you can't make this stuff up). Thanks to MedCanG's new regulations, cannabis is no longer classified as a narcotic, making prescriptions and distribution a walk in the park. This regulatory relaxation has ignited fierce competition: existing producers are expanding, new cultivators are sprouting up, and importers are jockeying for market share. But with over 400 flower products and nearly 100 extracts, the market is as saturated as a sponge. Producers must offer exotic, memorable strains at consistent prices and quality because well-informed patients are rating and reviewing like there's no tomorrow.

👾 Number Of The Day

1,900,000 Amount of concentrate products sold in Nevada over the last year.

🗞️ The News

California Judge Harshes Cheech And Chong’s Mellow, Rejecting Effort To Halt New Hemp Product Ban

Texas Medical Marijuana Program ‘Does Not Provide For Statewide Access For Patients,’ Report Commissioned By State Agency Concludes

Native American tribes bridge gap in Minnesota cannabis market

Florida cannabis businesses shut down, halt delivery as Hurricane Milton nears

📺 YouTube

Cannabis Capital Markets Spotlight w Chicago Atlantic | Trade to Black

What we covered:

✅On Friday we had Peter Sack - Managing Partner/REIT Co-CEO of $REFI and Scott Gordon - Chairman and Co-CIO of $LIEN will be joining us to talk about the closing of the acquisition and launching of the Chicago Atlantic BDC. This vehicle is a first of its kind in the cannabis space and will enable flexible lending across the cannabis value chain.

We will also recap the weeks headlines including Tilrays earnings release, Canopy Growth closing on Wana Brands