Week In Review: Ontario’s New Store Cap Signals Retail Market Consolidation; FDA Endorses Historic Shift in Cannabis Classification to Schedule III; Belgium’s Drug Policy Reform

LOS ANGELES–Welcome to the far too-exciting world of cannabis and psychedelics, where it’s a tale of two markets: there’s innovation and progress in full swing in some parts of the country, while in other parts, the industry is on the ropes largely due to collapsing cannabis prices and lack of access to capital, making cannabis business models very challenging.  This week’s ‘Week In Review’ is a roundup of key developments in the industry, showcasing the news from key companies and people making news in the space.

Cannabis stocks continued their strong start this month: the MSOS ETF saw a gain of +2.93%, while the global YOLO ETF closed with a strong +3.00%. Year-to-date performance shows MSOS and YOLO at +24.85% and +12.83%, respectively. The ongoing discussion about potential rescheduling continues to be a driving force behind the outperformance of US operators.

Among the major players, AYR (CSE: AYR, OTCQX: AYRWF) experienced the most significant surge, posting a weekly gain of +21.54%, followed by Trulieve (CSE: TRUL, OTCQX: TCNNF) with a solid +11.33%. Noteworthy is the recent approval by the New Jersey Cannabis Regulatory Commission on January 17, granting Trulieve cultivation and manufacturing licenses in the Garden State.

The impetus behind this week’s rally stemmed from “news” that the DEA is “now conducting its review” of cannabis as a Schedule I drug. 

Headlines

COMPLIANCE ALERT! Cannabis Business Owners need to act on a new law called the Corporate Transparency Act which took effect January 1st 2024. In 2021, Congress passed the Corporate Transparency Act which creates a new beneficial ownership information reporting requirement.This is part of the U.S. government’s efforts to make it harder for bad actors to hide or benefit from their ill-gotten gains through shell companies or other opaque ownership structures.

MEANWHILE…in California, Catalyst CEO Elliot Lewis is set to win his lawsuit against the CDTFA. The voter approved Prop 64 law granted California excise taxing authority on cannabis & cannabis products. The rate of 15% was originally to be collected by retailers. The statutory definition of this taxing authority is specific to mean only the flower or products made from the plant should be taxed. Non-taxable portions of the sale, defined as “cannabis accessories” are defined to mean ANYTHING other than flower or products directly derived from the plant. In other words, CDTFA have been taxing legal elements like packaging and batteries at the sky-high 

We also have updates here for the New York market: https://highlycapitalized.com/insights/challenges-persist-in-new-yorks-transition-to-legal-cannabis-market-amid-illicit-trade/

Week In Review:

#1. Over 2.3 Million Cannabis Convictions Pardoned in U.S. Since 2018: – The recent regulatory change in Ontario, allowing single companies to operate up to 150 recreational cannabis stores – a significant increase from the previous 75-store limit – is poised to reshape Canada’s most lucrative adult-use cannabis market. This move, effective January 1, is anticipated to benefit larger retail chains, potentially driving increased mergers and acquisitions (M&A) activity.

#2. FDA Endorses Historic Shift in Cannabis Classification to Schedule III; In a landmark development, the U.S. Food and Drug Administration (FDA) has advocated for a significant reclassification of cannabis under the Controlled Substances Act (CSA). The agency proposed that cannabis be moved from Schedule I to Schedule III, marking a transformative moment in the legal status and research potential of this substance. This recommendation, detailed in a 252-page document, underscores cannabis’s recognized medical utility and aligns with the evolving legal landscape across numerous U.S. jurisdictions.

#3. Belgium’s Drug Policy Reform: A Deliberate Move Toward Decriminalization Inspired by Portugal’s Model: – Belgium is currently considering significant reforms in its drug policy, a move inspired by Portugal’s successful decriminalization model. Ine Van Wymersch, Belgium’s National Drug Commissioner and a former prosecutor, is advocating for the decriminalization of the possession and use of illegal drugs. This approach marks a shift from punitive to curative strategies in dealing with drug users, reflecting a growing trend across Europe to treat drug use as a public health issue rather than a criminal one.

#4. Canada: A recent regulatory adjustment permitting a single company to manage up to 150 recreational cannabis stores in Ontario marks a significant shift, doubling the previous limit of 75. This change is anticipated to favor major retail chains, fostering increased consolidation in Canada’s most lucrative adult-use market.

While the expansion presents potential advantages for smaller retail operators seeking to offload their stores, some insiders in Ontario’s cannabis retail industry advise caution, noting that buyers’ offers may not align with sellers’ expectations.

Psychedelic Market Highlights:

#1. Rhode Island Explores Psilocybin Reform with a New Legislative Proposal: In a significant legislative move, Rhode Island Representative Brandon Potter (D) has introduced a bill aimed at reforming the state’s approach to psilocybin, the active compound in “magic mushrooms.” The bill, H 7047, proposes a temporary allowance for the cultivation, possession, and sharing of up to one ounce of psilocybin, with its provisions set to expire in July 2026.

#2. Numinus Wellness Inc. Announces First Quarter Fiscal 2024 ; Numinus Wellness Inc. a mental health care emphasizing psychedelic-assisted therapies, has released its financial figures for the first quarter of fiscal year 2024, ending November 30, 2023. The results reveal a nuanced financial picture, marked by both gains in gross profit and challenges in revenue generation.

This study is designed to assess the efficacy and safety of Beckley Psytech’s unique intranasal formulation of synthetic 5-Methoxy-N, N-Dimethyltryptamine (5-MeO-DMT), known as BPL-003. The trial follows the U.S. FDA’s approval for the Phase 2b study of this short-acting psychedelic compound, a first in its category. CCR’s involvement in this trial reinforces its position as a leader in psychedelic clinical research and aligns with its commitment to exploring innovative mental health solutions.

Events

Highly Capitalized will be filming the high and mighty of the cannabis industry and the forthcoming Beard Bros Pharms Friday Sesh Live! in Los Angeles, 26 January 2024. Contact [email protected] for more information.

Stay tuned to Highly Capitalized for more updates as the cannabis and psychedelic industries continue to shape the future at the intersection of wellness and innovation. Subscribe to our newsletter and follow us on LinkedIn.