Good morning.
We’re looking forward to seeing many of you in Atlantic City today for MJ Unpacked at the Hard Rock Hotel.
Let’s get to it.
-JR, JB
Today’s newsletter is 1,037 words or about a 9-minute read.
💡 What’s the big deal?
LAWSUIT
A federal lawsuit accuses Cresco, Green Thumb, and Verano of marketing high-potency THC as medicine
What happened: A new lawsuit against Cresco Labs, Green Thumb Industries, and Verano was filed in a federal court in Illinois alleging that the firms have released an "acute intoxicant" at "unprecedented high concentrations on its customers."
The chief attorney is former McHenry County State's Attorney Patrick Kenneally, now in private practice, who previously won a settlement requiring Illinois dispensaries to post mental health warning labels. The lawsuit alleges the companies market THC as medicine to recreational consumers.
Go deeper: The 320-page class action complaint, filed May 4 in the Northern District of Illinois, names more than 40 individual plaintiffs and covers multi-state classes across every market where the three MSOs operate.
The suit argues that high-potency THC is linked to psychosis, schizophrenia, suicidal ideation, cardiovascular harm, and cannabis use disorder, arguing the companies made false and misleading health claims while selling products far more potent than any clinical evidence supports.
What's next: The case is an early stress test for how the industry's marketing practices hold up to Big Tobacco-style tort litigation, a threat the sector has long theorized about but rarely faced in court at this scale.
It’ll also be interesting to see how these claims hold up in federal court, and whether that becomes a test case for these arguments moving forward. Our guess is that the evidence doesn’t support all of these claims, to say the least.
This lawsuit was first reported by The Free Press.
-JB
📣 Quotable
“There's something called the Safe Banking Act, which is to allow for the banking question to be solved by making it legal to bank it,” South Carolina Republican Sen. Tim Scott said on Tuesday at the annual Milken Conference, a Beverly Hills confab of capitalism’s elite.
“You don't want us to have a situation where you have these cash rooms, where you have hundreds of thousands of dollars of cash sitting in a location. Everyone knows you can't bank it, and therefore, the criminal activity is much higher in these places. So there is a quandary that we have to solve. I think we'll get to a solution.”
⏩ Quick hits
SAM sues to block federal cannabis rescheduling, with former AG Bill Barr
Smart Approaches to Marijuana and the National Drug and Alcohol Screening Association filed a petition with the D.C. Circuit Court of Appeals asked it to set aside last month's rescheduling action, arguing it violates the Administrative Procedure Act and exceeds the attorney general's authority under the Controlled Substances Act. SAM hired Bill Barr's firm Torridon Law back in January after Trump signed an executive order directing officials to complete the rescheduling process, and the suit targets DOJ, DEA, Acting AG Todd Blanche, and DEA Administrator Terrance Cole as defendants. The challenge lands as a House appropriations subcommittee last week separately voted to block federal officials from taking further steps to carry out rescheduling.
Alcohol industry group calls House Farm Bill's failure to address hemp ban a ‘missed opportunity’
The Wine & Spirits Wholesalers of America, a big alcohol trade group called the House Farm Bill's failure to address the November hemp THC ban a "missed opportunity," warning that prohibition will push consumers to unregulated online channels and urging the Senate to replace the ban with a durable federal regulatory framework before November.
North Carolina Democrats want to let voters decide on cannabis this November
Three state Senate Democrats introduced a bill that would place two constitutional amendments on the November ballot, one to decriminalize personal possession and one to allow medical cannabis. The bill still needs three-fifths support from lawmakers to reach the ballot, a steep lift in a Republican-controlled legislature.
💸 Earnings roundup
Cannabis Q1 earnings season kicks off this week, and it’s going to be an interesting one as we’ll hear from execs as they digest the medical-recreational rescheduling bifurcation:
RYTHM Inc. reported Q1 net income of $19.9 million on $13.3 million in revenue, or $1.33 per diluted share. The net income figure was driven by a $25.6 million non-cash income tax benefit; stripped of that item, the company lost $5.7 million before taxes. Adjusted EBITDA was approximately breakeven. The company guided for Q2 revenue of approximately $22 million. $RYM ( ▼ 1.46% )
Curaleaf reported Q1 net income of $70.1 million on $324.2 million in revenue, or $0.09 per share. The net income figure was driven by a $98.7 million non-cash income tax benefit; stripped of that item, the company lost $28.6 million before taxes. Adjusted EBITDA was $63.4 million, or 20% of revenue. The stock rose about 6.4% on Tuesday. $CURLF ( ▲ 6.75% )
🚀 Deals, launches, partnerships
ACE Venture, an MWBE-certified holding company led by Steven Acevedo, completed its 51% acquisition of Vireo Health of New York and used the occasion to launch Boukét, a New York cannabis lifestyle brand whose name traces back to a Harlem Prohibition-era codeword for cannabis. $VREOF ( ▲ 3.74% )
🔬 Science & research
Cannabis is the most commonly microdosed substance in the US
A new UC San Diego study published in the American Journal of Preventive Medicine found that cannabis is the most commonly microdosed substance in the U.S., with about 9.4% of adults, roughly 24 million people, reporting lifetime use, nearly twice the rate of psilocybin. Researchers also found that microdosing was more common among people reporting poorer mental health, though the study could not determine whether that relationship is causal.
📰 What we’re reading
What Doctors Want You to Know About Cannabis and Health | The New York Times
What we know—and what we don’t—about marijuana’s health effects | Scientific American
Uncle Sam Is Giving Big Pot a Tax Break. But It’s Complicated. | Yahoo Finance