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| 2 minutes read

Expectations in cannabis practice

A physics joke:

“Milk production at a dairy farm was low, so the farmer wrote to the local university, asking for help from academia. A multidisciplinary team of professors was assembled, headed by a theoretical physicist, and two weeks of intensive on-site investigation took place. The scholars then returned to the university, notebooks crammed with data, where the task of writing the report was left to the team leader. Shortly thereafter the physicist returned to the farm, saying to the farmer, ‘I have the solution, but it works only in the case of spherical cows in a vacuum’.” (link)

Why am I writing to you about a witticism about theoretical geometrical bovines? To me, it illustrates the trap of assuming the ideal while ignoring the practical.

Often, cannabis industry participants assume that assertive actions or liberal interpretations of regulations will work without resistance, because, so far, many state and local government agencies (where cannabis has been legalized) have been overall generally favorable to making the cannabis industry work. Even the federal government has contributed to this, such as the Department of Justice generally to date not shutting down the operations of state-compliant cannabis businesses (despite federal law).

However, this assumption that everything will simply work out in favor of the industry only goes so far. I’ve written before about this when it comes to federal regulation (link; link), and we saw this just recently with the allegations about the Department of Justice and antitrust review (link; link). Or consider the so-called “280E management structure” that many plant-touching companies replicated around 2017-18, on the assumption that it would allow operators to shield revenues from the harsh effects of 280E taxes. As many know, the U.S. Tax Court did away with that idea in short order in late 2018, even though the structure was based on an interpretation of the U.S. Tax Code.

Similar arguments are made about the FDA’s regulatory authority over CBD in food/beverages/dietary supplements due to the “red yeast rice” precedent, as well as strained readings of the Controlled Substances Act to argue that Delta-8 THC (a hallucinogen) derived from hemp is somehow legal. Even if these takes on the laws are based in sound argument, that fact has only a limited connection to the reality of whether a federal court or agency is actually going to agree - indeed, history has shown that it’s pretty unlikely. Although the federal government to date has allowed the state-compliant markets operate, the industry can’t assume that federal courts and agencies will do anything to make things easier.

In other words, don’t assume a spherical cow.



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