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| 1 minute read

What happens if Cannabis isn't legalized?

Friends, hopefully your last week was productive. (link)

Speaking of mergers and acquisitions (again, link), it does seem like deal activity has picked up pace in the past few months in the Cannabis industry. I kinda sorta predicted this back in January (link), a trend driven by an urgency to gain scale and footprint ahead of expected federal legalization, fueled by (relatively) looser capital markets (link) and improved valuations for MSOs (making them more attractive suitors (link)).

Indeed, it seems like every day, a new equity offering or large acquisition in a major market is announced. This growth wave seems different to me from the blitzscaling that took place around 2018-2019 (link) – the deals are bigger, the parties are savvier, the capital is more institutional, the metrics are more refined, the stakes are larger, the expectations are higher, and the industry is (relatively) more mature. The industry is different, and so is the outlook (political and otherwise).

And yet, what happens if federal legalization doesn’t happen in 2021-22? Not trying to be too much of the skunk at the picnic (link), but despite the clear enthusiasm within the industry and beyond (link) for legalization, that result is no fait accompli. See Vice President Harris’ comment last week – legalization doesn’t appear to be much of a priority for the White House. (link) To be clear, I’m not pointing that report out as a criticism of the White House (I really do try to keep these Cannabis Musings generally non-partisan), but as a continued check on the reality of politics.

 Just like I’ve raised the point before that the industry should be thinking about what happens if there is legalization, such as in terms of interstate commerce (link), it seems to me that industry participants ought to have a backup plan if there isn’t. With so much focus and energy and capital currently betting on legalization, a trend that’s likely to continue over the next 12-18 months, the industry and its backers could end up very disappointed


cannabis, interstate commerce

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