Trulieve's recent legal spat highlights the trouble with cannabis social equity programs
Plus, Canada's legalization experiment five years in.
Hope you all had relaxing weekends and could take a break from the heinous news cycle we constantly find ourselves in.
On that note, allow me a little diatribe.
I’m a journalist. I dreamed of being a journalist when I was kid. I love the news, I love stories, and I love the way journalism can us make sense of the world.
But there is only so much you can inform yourself. Beyond that, it’s toxic. Refreshing X (née Twitter) and watching cable news all day will only make you miserable.
We’ve become prey to algorithmic feeds that exploit our flimsy neurology.
It’s the processed food of news. It feels good to eat, it makes you feel full, but ultimately it’s slowly poisoning you and making us all sicker.
We’re mostly worse off for it. It’s quite difficult, but I’d encourage you all to break the cycle once in a while.
There’s a lot of life outside of our screens. Follow individual writers and publications that embody your values, but try and interrogate your own biases as well.
This is a big part of the reason why I went independent. I hope those of you that subscribe can trust that I’m reporting, curating, and contextualizing useful information and not playing an algorithmic game.
It’s also why I made a decision to delete X and Instagram off of my phone this weekend. I’m not going to leave those platforms, but I’m going to make my use rarer and more intentional from here on out.
My professional success depends on using them, and there are positive aspects to staying in touch with friends, sharing memes, and perhaps more importantly, talking to sources and taking the pulse of the cannabis industry and policy conversation.
I might miss some things, and that’s a small risk. If it takes me a few days to get back to you, that’s why.
Today’s Cultivated is sponsored by Durée & Company.
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I can say that with confidence: I’ve worked with the team and their deep roster of clients on many stories, and I always value their insight and expertise about all things cannabis.
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💡What’s the big deal?
What happened: Florida-based cannabis giant Trulieve continues to be embroiled in lawsuits, as plaintiff and defendant.
In July, Trulieve filed a civil lawsuit against Harvest of Ohio, a medical cannabis company that operates three dispensaries. Trulieve says it’s owed $23.8 million in unpaid loans and other fees.
As with most lawsuits, Harvest of OH’s executives tell a different story.
For context, Trulieve bought Harvest Health & Recreation in 2021. Trulieve said it would offer financial assistance to these Harvest of OH dispensaries as part of the deal.
Okay, so what? Companies sue each other all the time.
Why it matters: The situation reveals the brewing tension between big cannabis companies and state programs that encourage social and economic inclusion in the cannabis industry.
Harvest of Ohio is a Black, female-owned business. It’s worth noting that Trulieve also has a female CEO, Kim Rivers.
But Trulieve is a big, public company and one that is often considered, both for fair and unfair reasons, synonymous with the problems associated with the corporatization of cannabis.
Harvest of OH is tiny in comparison. In September, Harvest of OH filed a response in Ohio court.
What Harvest of OH is saying:
Trulieve, through Harvest Health & Recreation, engaged in predatory practices to designed to “obstruct operations” so Trulieve could take over the business.
Trulieve promised to help them with market-rate funding, so they could scale.
Instead, they were offered “predatory” loans, with overcharges for rent, construction, and other fees and “unachievable” payback plans.
They were given empty promises to support them that were little more than consulting agreements that lined the pockets of Trulieve execs.
They also asserted that Trulieve mislead Ohio regulators that Ariane Kirkpatrick would remain CEO of Harvest of OH.
Beyond these specifics, Harvest of OH is alleging that Trulieve took advantage of Ohio’s medical cannabis laws that were specifically designed to include historically disenfranchised groups in Ohio’s burgeoning industry.
“Trulieve Entities never intended to support Diversity, Equity, and Inclusion in Ohio's cannabis industry. Rather, they schemed to backdoor valuable licenses through a carve out meant to empower those who they conspired against,” Harvest of OH said in a statement.
A Trulieve spokesperson said in a statement:
Harvest’s claims are “nothing more” than an attempt to avoid paying the $23.8 million owed.
Trulieve has extended the terms of the loan 15 times.
The agreements were approved by both the Ohio Board of Pharmacy and the Ohio Department of Commerce — and Harvest’s lawyers.
“Harvest’s CEO is a very sophisticated and successful businesswoman. But at the end of the day, it doesn’t matter who you are — you have to pay your bills,” the statement reads.
🌿 Jer’s take
Harvest of OH’s response gets to the heart of why there’s so much opposition to “corporate cannabis” and why many minority entrepreneurs fear getting into bed with them, so to speak.
The crucial part here is not who’s right. I’ll let the courts decide that.
It’s what the dispute says about how most cannabis social equity programs are doomed to fail unless minority entrepreneurs are given the capital and other tools they need to succeed in a highly competitive and sharky industry.
Giving them those tools will take Congressional action that looks like the SAFE(R) Banking Act, or perhaps it could be a tangential effect of moving cannabis to Schedule III and a memo from the DOJ ironing out the inconsistencies in the law.
These scenarios are far from perfect, of course, but they’re a lot better than the status quo.
Without federal action, these tools will not be available and predatory companies will happily fill the gap.
Progressive visions of cannabis legalization are all window dressing without federal protection
State-led social equity programs are always going to be ripe for manipulation by powerful actors without federal protection.
It’s fantastic that progressive lawmakers and regulators want to use legalization as a way to economically uplift historically disenfranchised communities. I wholeheartedly support that.
But it’s all window dressing unless these minority entrepreneurs are able to get loans at fair rates and access lines of credit. They need to be able to build their businesses in ways that work and take into account the fundamental realities of market economics.
Otherwise, they’ll be forced to get in bed with predators who have all of the capital and all of the control. That undermines the whole project of using cannabis legalization as a tool for economic opportunity and justice in the first place.
Most of these social equity entrepreneurs know how to build sustainable, profitable businesses. They just need the tools to be able to compete fairly.
Is corporate cannabis really all that scary?
Trulieve, admittedly through some fault of its own, is often considered the bogeyman of the anti-corporate, left-leaning world of cannabis advocates and small business owners.
But for what it’s worth, I’m not sure you can look at the balance sheets of any large cannabis companies, including Trulieve, and be scared of them. We’re not talking about Unilever, here.
Big cannabis companies are mostly struggling to make money, and they’re forced to buy scale through acquisitions that frequently don’t pan out, at least in terms of market value.
They’re mostly making decisions from a position of desperation, rather than strength. I don’t think you need a metaphor about a caged animal for the point to come across.
So, at the end of the day, I think there’s a lot of middle ground. Both big cannabis companies and social equity entrepreneurs want the opportunity to make money.
The more the federal government steps in and rectifies this, House Speaker fights and GOP ineptitude notwithstanding, the more the pie can grow for everyone.
🥊 Quick hits
Three long-awaited dispensaries are opening in New York City this week, including Terp Bros, ConBud, and Gotham Buds.
A new study published in the The Journal of the American Medical Association found that cannabis legalization in Canada was not associated with an increase in hospitalizations by itself — but cannabis commercialization was.
🇨🇦 Canada’s legalization project, five years in
Yesterday, October 17, was the fifth anniversary of Canada becoming the first G7 nation to federally legalize cannabis.
I’m proud of my home country. I marched on Queen’s Park in Toronto as a 15-year old to play a small part in making this happen.
My reasons were less than altruistic of course, but sometimes you have to pinch yourself at how full circle things have come.
But it’s not easy being first: Canada’s cannabis industry has gotten off to a rocky start.
I went home to Toronto as legalization took effect, and reported for my old job about some of the problems I foresaw. I’m sad to say I was proven right about a lot of it.
Many companies soared in value, only to later crater, and have now pivoted to selling beer and orchids.
Here’s a quick reading list about the past five years of legalization: