Senator Paul’s move to strike hemp ban fails 🥊

HEMP
Sen. Paul’s move to strike hemp ban from the funding bill fails 🥊

Driving the news: Sen. Rand Paul on Monday introduced an amendment that would strike the language banning hemp-derived THC and most CBD products from the bill that would temporarily re-open the government. 

The amendment failed 76-24 in a floor vote in the Senate on Monday night. The Senate then passed the broader funding bill 60-40.

What’s in the bill: The language in the bill would effectively close the “loophole” created by the 2018 Farm Bill that allowed hemp-derived THC products to proliferate around the country. (Read more in Monday’s newsletter).

Paul was one of few lawmakers to oppose the language. Sen. Mitch McConnell, his Kentucky counterpart, originally pushed to include it. President Trump supports the ban, per NBC News. 

And even Speaker of the House Mike Johnson accused Paul of “gumming up the works” and to set aside the “parochial priority” of hemp to pass the bill. 

What they’re saying: “My amendment would strip the provision designed to regulate the hemp industry to death,” Paul said. Sen. Jeff Merkley also spoke in support, per Marijuana Moment.

“The bill, as it now stands, overrides the regulatory frameworks of several states, cancels the collective decisions of hemp consumers and destroys the livelihoods of hemp farmers.”

And: “I have long believed that the regulation of hemp and marijuana products should rest with each individual state. Reasonable minds can disagree, and a blanket federal prohibition disempowers the voters in each of the fifty States,” Sen. Ted Cruz said. He voted for Paul’s amendment.

“A one-size-fits-all federal standard will undoubtedly create unintended consequences that harm consumers.”

Why it matters: For many hemp companies, the stakes are dire. 

Cornbread Hemp cofounder Jim Higdon told me the vast majority of his company’s revenue would be made illegal once the new rules take effect, a year after the bill is signed into law. His company is also sitting on about $1 million of inventory which they’ll need to sell before then. 

Higdon believes the language in the funding bill is intended to kill the booming hemp-derived THC beverage market, which could wipe out Cornbread and its competitors. 

Though there is a small silver lining: It’s the first time the legality of THC, whether hemp-derived or not, has received a full floor vote in the Senate. There’s now a record of each Senator’s support, or lack thereof. That could prove a valuable path forward for advocacy. 

“I had an all-hands meeting with our 100 employees,” Higdon told me. “I told them don’t update your resumes yet. We’ve still got time and we’re going to win.”

Market moves: Cannabis stocks skyrocketed on Monday as it appeared the ban was likely to remain in the bill.

The conventional wisdom among cannabis investors is that the intoxicating hemp industry is a dire threat to publicly traded, state-regulated cannabis firms.

The market certainly thinks so. $MSOS ( ▲ 11.43% ) , an ETF that tracks US cannabis stocks, shot up 11% on Monday. Trulieve $TCNNF ( ▼ 3.13% ) , a US cannabis firm, closed up over 12%, and Curaleaf $CURLF ( ▼ 3.06% ) 11%. But companies that derive a large chunk of their revenue from hemp, like RYTHM $RYM ( ▼ 16.98% ), dropped nearly 18%.

But the reality is, the hemp and cannabis industries are intermingled. Many traditional cannabis firms have hemp product lines, and vice-versa. 

Our take: I’ll again reiterate my position that creating coherent federal rules around the sale of low dose THC beverages anywhere alcohol is available is the most logical policy choice, or at least explicitly allow states to do so. Dispensaries could continue to sell higher dose products. 

What’s next: The funding bill now goes to the House

A year is an eternity in politics, and even longer in cannabis. The political and economic conditions around hemp could completely change.

So, what’s true today may not be tomorrow. But for now, it appears that the hemp ban is likely to become law.

-JB

Safe Harbor refinances its way back on to the Nasdaq 📈

Safe Harbor Financial announced that it was set to return to the Nasdaq thanks to a refinancing plan that eliminated $18.8 million in debt. As part of the plan, the cannabis financial firm raised $6.8 million. Listing on the Nasdaq requires at least $2.5 million in shareholder equity. $SHFS ( ▼ 8.37% )

Rubicon Organics borrows $4 million to fuel growth 💰

Rubicon Organics secured up to $4 million in new credit from Community Savings Credit Union — including a $3 million five-year capital loan at 6.79% and a $1 million line of credit at prime + 5.5% — to fund growth projects at its Pacifica and Cascadia facilities while maintaining balance sheet flexibility. $ROMJ.TSX ( 0.0% )

Teen cannabis use falls in Canada post-legalization 🇨🇦

A new study in Addictive Behaviors Reports looked at nearly 66,000 Canadian high school students before and after legalization and found that teen cannabis use actually declined slightly, from 15% to 12%. But the biggest shift was in why teens use — mental health issues like anxiety and depression replaced low school engagement as the strongest predictors of cannabis use. Read the full study.

LIT ALERTS’ INSIGHTS
New York retailers are right-sizing their inventory: What the data shows

New York now has over 500 stores open.

So how much shelf space is available?

According to Lit Alerts' analysis this month, the median number of cannabis items on a cannabis retailer's menu is 245. Including accessories and apparel, that number moves up slightly to 257.

Nearly 50% of stores are carrying 250 cannabis SKUs or fewer. Nearly 80% of stores are carrying 500 cannabis SKUs or fewer.

Hopefully this is a positive sign for the industry as New York retailers are taking note and right-sizing their menus for sustainable growth.

Next week, Lit Alerts will break down these medians by category, revealing how many slots are available in the market for brands currently operating or planning to enter.

Have a look at Lit Alerts’ exclusive insights into SKU counts among New York cannabis retailers. 👇

To learn more about Lit Alerts and get a special offer only available to Cultivated readers, visit litalerts.com.

Jay and Jeremy caught up with Cronos Group CEO Mike Gorenstein on Monday morning’s Cultivated Live. They chatted about the company’s third-quarter earnings, and did a little MBA 101 about how to lead a company in the challenging cannabis industry. $CRON ( ▼ 1.17% )

Watch it here:

Cannabis earnings season continues:

Village Farms International $VFF ( ▲ 6.07% ) reported $10.9 million in net income — a sharp rise from $1.5 million in the same quarter last year — on nearly $67 million of revenue, or about $0.09 per-share. The stock closed up 17%. 

Ascend Wellness $AAWH ( ▲ 0.71% ) reported a $25.8 million net loss on nearly $125 million of revenue, down from $127.3 million the same quarter last year. The stock dove mid-day Monday then recovered up about 5% by market close. 

Nov. 11

C21 Investments - 8:00 AM
Grown Rogue - 5:00PM

'Gandalf' the Medical Marijuana Grower: Folk Hero or Criminal? | New York Times

'Survival mode': It was once California's top pot-producing county. Now it's a bust | SFGate

A company known for towers of fruit pitches THC as an alcohol alternative | The Washington Post