Week In Review: Cannabis Stocks Rally; FinCen Compliance takes effect; Oakland Tragedy Highlights Urgent Need for Federal Cannabis Policy Reform; Tennessee Hemp Industry Faces Setback from New Regs; AMA Introduces Psychedelic Therapy Codes In FDA Review of Prescription MDMA

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.

Straight out of the gates in 2024, cannabis stocks showcased a robust performance, witnessing the US cannabis MSOS ETF gaining 13.12%, while the global YOLO ETF marked a 9.11% increase. Noteworthy was the sustained outperformance of US cannabis equities over their Canadian and global counterparts, buoyed by positive sentiments surrounding a potential DEA and HHS agreement on Schedule III recommendations. If materialized, this agreement would eliminate the taxing 280E code affecting US operators directly involved with the plant.

Within the week, a specific cluster of companies exhibited historical outperformance during market rallies. Jushi (CSE: JUSH, OTCQX: JUSHF) led the way with an impressive 34.78% surge, closely followed by The Cannabist (NEO:CBST, OTCQX: CBSTF) at 34.50%, Cresco (CSE: CL, OTCQX: CRLBF) at 32.03%, and AYR (CSE: AYR, OTCQX: AYRWF) at 23.89%.

In contrast, operators with lower leverage and solid cash flow traditionally experienced more moderate increases during such periods. Green Thumb Industries (CSE: GTII, OTCQX: GTBIF) observed a 5.40% uptick, Verano (NEO: VRNO, OTCQX: VRNOF) rose by 8.93%, and MariMed (CSE: MRMD, OTCQX: MRMD) posted a modest gain of 1.89%. While typically not significant within a four-day trading period, this trend may suggest a continuation from the previous fall.

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. This information, reported by Punchbowl News on January 3, originated from a letter dated December 19 from DEA Acting Chief Michael Miller to Congressional Cannabis Caucus Co-Chair Rep. Earl Blumenauer. Observers closely monitoring the industry suspect that the DEA likely initiated its review shortly after the HHS recommended Schedule III on August 29.

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 Oakland Tragedy Highlights Urgent Need for Federal Cannabis Policy Reform: A somber mood has fallen over the Oakland Police Department following the tragic death of Officer Tuan Le, who was fatally shot while responding to a burglary at a cannabis dispensary. The incident underscores a pressing national issue: the impact of federal inaction on cannabis policy, which significantly elevates risks for dispensary workers, the public, and law enforcement officers.

#2. Tennessee Hemp Industry Faces Potential Setback from New Regulatory Proposals: Tennessee’s burgeoning hemp industry is confronting potential challenges due to new regulatory proposals by the state’s Department of Agriculture. Business owners and growers within the state are voicing concerns that these new rules, if implemented, could significantly hinder the industry’s growth and viability.

#3. UFC Pioneers Change by Excluding Cannabis from Banned Substances List</em><em>:  In a landmark decision that is set to reshape drug policies in professional sports, the Ultimate Fighting Championship (UFC) has removed cannabis from its list of banned substances. Announced in Las Vegas, Nevada, this move signals a significant shift in how sports organizations approach cannabis use among athletes.

#4 Missouri Legislature Addresses Cannabis Regulation and Law Enforcement Policies: The 2024 legislative session in Missouri, convened in Jefferson City, has sparked significant discussions on cannabis regulation, with a particular focus on cannabinoid products and law enforcement practices.

Psychedelic Market Highlights:

#1 AMA Introduces Psychedelic Therapy Codes Amidst FDA Review of Prescription MDMA; The American Medical Association (AMA) has taken a significant step in the realm of psychedelic therapy by introducing specific codes for these treatments. This development aligns with the Food and Drug Administration’s (FDA) ongoing evaluation of MDMA as a potential prescription medication for post-traumatic stress disorder (PTSD).

#2 Cybin Inc. Advances Psychedelic Therapy with Promising Phase 2 Results and Upcoming Trials; Recognized for approach to mental health care, has announced a significant milestone in psychedelic-assisted therapies. Its research arm, Cedar Clinical Research (CCR), has been selected as a pivotal site for a groundbreaking Phase 2b clinical trial by Beckley Psytech, focusing on Treatment Resistant Depression (TRD).

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.

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.