Another domino falls … Meanwhile, the FDA inches closer to CBD regulation … Snoop Dogg raises more money for CBD … and new evidence that marijuana can help in the war against opioids
We continue inching closer to total marijuana legalization in the United States … which means we’re closer than ever to a watershed moment for marijuana investors.
On Friday, we saw the 11th state officially legalize recreational marijuana. It was a bit of a soap opera — a last-minute vote, squeezed in just under the wire before adjournment of the General Assembly’s spring legislative session.
It started last Wednesday, when the Illinois Senate passed legislation that would allow adults to buy and possess up to 30 grams of marijuana. Interestingly, the bill also pardoned individuals with convictions for amounts of cannabis under 30 grams.
(Pardoning individuals convicted of marijuana offenses is quickly becoming a presidential race hot topic. Look for more on this from the candidates as we get closer to the 2020 election.)
The bill then went to the Democratic-majority House, which faced a Friday deadline to get any bills passed before the spring session adjourned. The house voted 66 to 47 in favor, after which, Governor JB Pritzker said he looks forward to signing the bill into law.
The effect? Recreational marijuana could be legal in Illinois as soon as January 1, 2020.
Pritzker called for legalization in his campaign for governor. He pointed toward its tax-revenue potential, claiming there would be $170 million in licensing fees in the first year. Plus, a fully established marijuana industry could produce up to $1 billion annually in state tax revenue.
The Illinois legalization now puts pressure on politicians in adjacent states to enact their own reform for tax revenues. Matt McCall, editor of Investment Opportunities recently described this dynamic:
Each year, more states join the movement, and each time that occurs it puts pressure on a neighboring state to consider legalization. (Think about the potential tax dollars that would go across state lines.)
***Looking around the nation, last week saw several other marijuana headlines pointing toward marijuana’s increasing acceptance in mainstream culture
First, there was the FDA’s public hearing.
Last Friday, the Food and Drug Administration heard from CBD manufacturers, researchers, farmers, retailers and more, as it held its first public hearing on CBD (cannabidiol).
CBD is wildly popular right now. That’s because it has a reputation of treating everything from inflammation to depression to epilepsy. Given this, companies are adding it as an ingredient in just about everything — makeup, tea, pet treats, soft drinks. This has been happening even though the FDA has expressly prohibited companies from adding it to food, drinks and dietary supplements.
Despite this, the FDA has done little more than send warning letters to some offending companies. But these letters have focused on misleading marketing claims, such as using CBD for Alzheimer’s, cancer and other diseases it’s not approved for.
CNBC reports that Daniel Fabricant, CEO of the Natural Products Association, suggests that the FDA’s lack of meaningful enforcement has allowed more than 1,500 new CBD products to come to the market in the last three years.
From CNBC:
“These companies aren’t your Fortune 100 companies. These people in a lot of ways are fly by night,” (Fabricant) said. “That’s not how a regulatory agency should work.”
Many marijuana and CBD companies themselves want this regulation. For instance, take Canopy Growth, one of Canada’s largest marijuana companies. Its CEO, Bruce Linton recently said:
“The principal challenge of CBD is there’s not a verified process to create the resulting products so it can’t be consistently defined. Our argument is that you need to regulate it so we can actually get it stabilized and then deliver you the data you want.”
On this note, you may remember the story from last Wednesday’s Digestof 69-year-old grandmother, Hester Burkhalter who was arrested at Disney World for having a vial of CBD oil, which tested positive for THC, despite the fact that the bottle reportedly claimed it contained zero milligrams of THC.
The hope is Friday’s public hearing will get us closer to meaningful regulation that will benefit all involved parties.
***One company hoping for this meaningful regulation is none other than Ben & Jerry’s
That’s because the ice-cream maker wants to add CBD to your favorite flavors (some of which already have names that are a nod to the marijuana community, such as Bonnaroo Buzz, Phish Food, and Half Baked).
Given this, Ben & Jerry’s is encouraging its fans to contact the FDA during the public consultation period on CBD’s use in food which runs now through July.
If you’ve been following CBD’s popularity within the food/restaurant space, Ben & Jerry’s interest comes as little surprise. A recent survey published by the National Restaurant Association reports that three in four chefs named CBD — and cannabis-infused food — as one of 2019’s hot trends.
***Continuing our review of marijuana news from last week, we saw the “Uber of Weed” look to raise more money in the private markets
The cannabis company, Eaze — backed by Snoop Dogg — is raising a new round of financing. The expected valuation?
$800 million.
More interesting than that valuation is the growth which this number represents. You see, $800 million is 140% more than the valuation Eaze was pegged at in its last round — only six months ago.
So, where will these funds go?
You guessed it — CBD products.
The company is looking to use the funds to sell its CBD line throughout the U.S. This is on top of Eaze’s on-demand marijuana delivery service, which operates in California and Portland. This service, which arranges deliveries between marijuana dispensaries and customers, has led to its “Uber of Weed” nickname.
***We’ll wrap up last week’s marijuana news on a more serious, hopeful note
As just another sign of the tailwinds behind marijuana, a new study found that states with medical marijuana laws have seen a drop in opioid prescriptions for people aged 55 and younger.
Researchers from the University of Texas looked into prescription opioid use among people with private insurance (rather than those on publicly funded Medicare or Medicaid programs) and compared those rates in states with and without medical marijuana.
From the study:
When results were examined within each individual age cohort, opioid prescription rate varied depending on the stringency of state cannabis laws. In particular, in states which implemented medical cannabis use laws (but not other categories of cannabis liberalization laws), lower rates of opioid prescription were seen in the younger age cohorts (18-25, 26-35, 36-45 and 46-54 years).
This new study comes in addition to past research, which has shown that states with medical marijuana laws have issued fewer opioid prescriptions to individuals with government-funded health coverage. Matt McCall, our resident marijuana expert and editor of Investment Opportunities, recently wrote on this point:
I know people who suffer from chronic pain. And, of course, the standard treatment is opioids. The biggest reason for that is simple — the power of global pharmaceutical conglomerates. Unfortunately, we now see the tragic consequences every day.
We are now losing 130 people a day to opioids in the United States, according to the CDC. And many turn from pills to heroin, causing those overdose rates to skyrocket.
How many people overdose on non-synthetic CBD? Zero. There aren’t even any major side effects.
With the recently passed 2018 U.S. Farm Bill that legalized industrial hemp, I expect we’ll start to see the research and education we need to have CBD largely replace opioids across the country.
The impact of that would be enormous. In 2016, the U.S. opioid market was valued at $23 billion. I expect a large amount of that to shift to alternatives in the next few years, most notably CBD, so we’re talking about billions of dollars.
Helping those suffering from opioid addiction while helping drive portfolio returns — looks like a great win/win for CBD investors.
As we wrap up, I’ll just remind readers who have been considering investing in marijuana, but been holding off, that your investment timing is important. The legalization in Illinois puts additional pressure on our federal government to enact meaningful reform. When that happens, the floodgates will open as a wave of investment capital floods the marijuana sector. You want to be invested before that happens.
On that point, here’s Matt:
Please don’t wait until the major news outlets run stories about legalization. Don’t wait until your neighbor and co-worker are talking about legalization. And definitely don’t wait until legalization is a done deal.
The really big money is made by investors who are able to buy early. My entire investment career has been about this. Buying ahead of the legalization of marijuana could be one of the best investments you make in your life.
We’ll continue to keep you up to speed.
Have a good evening,
Jeff Remsburg
