MJBizCon Day 2: Emerging Markets and the Regulatory Landscape

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Images by Mike Rosati for mg.

After having obtained a high-level view of the industry on MJBizCon’s opening day, many attendees of day two were focused on drilling down into more discrete topics, including emerging markets in the U.S., Europe, and Latin America, and how the regulatory landscape will impact viability and growth of the industry in these new markets.

Overall, the news was positive for investors and entrepreneurs eyeing new opportunities in the U.S. and abroad, but as with every new region that has legalized cannabis in some form, challenges abound. In Europe, the consensus was that it will be a long, slow grind for medicinal and recreational marijuana, while the CBD side of the industry is making more steady and promising progress.

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One of the most highly-anticipated regions for investment and launching or expanding cannabis companies is, of course, the East Coast. Andrew Freedman, co-founder at Freedman & Koski in Denver, and a former director of cannabis coordination for the State of Colorado, gave a presentation about prospects for legalization on the East Coast in 2020, and offered his opinions and predictions for legislative breakthroughs in several states.

“A positive for the East coast is the legacy systems,” Freedman said. “Obviously in California, the legacy system has been a major detriment to the regulated system and those tensions run deep. Those tensions don’t run as deep on the East coast, and a lot of those people will be interested in the regulated market. I don’t see those tensions popping up there for direct competition for the same consumers…a lot of these states import their illegal cannabis, so they’re not home-grown markets like we see on the West coast.”

In New York, where a bill to legalize cannabis for recreational use failed to pass last summer, Freedman said prospects are looking up in 2020. Governor Andrew Cuomo (D) has declared marijuana legalization a priority, but legislative leaders couldn’t come to an agreement about how tax revenues would benefit communities disproportionately affected by the current laws.

“New York is the most interesting of the markets going forward on a political level,” said Freedman, who noted that Cuomo is now more committed to “throwing his weight” behind a legalization bill, and putting a deal together that will work. “New York will end up working out,” he predicts. Across the river in New Jersey, however, Freedman said the politics are more complicated—a majority vote by both the house and senate is necessary to advance legislation—and he is less optimistic about a bill passing next year.  

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Prospects for new legislation in Southern states was the focus of a panel that discussed the slow road to legalization in the most conservative region of the country.

The panelists commented on legislative efforts in states including Georgia, Mississippi, Alabama, Florida, and noted that Arkansas has one of the most promising new markets, with more than 30,000 patients and 32 dispensary licenses; however, only 11 of those licenses have opened dispensaries, which has frustrated legislators who are now looking for answers. In Mississippi there is a medical marijuana amendment that may appear on the ballot in 2020 that would provide medicine for individuals with a debilitating medical condition. In Alabama, there is a commission that is expected to draft a medical marijuana bill that’ll be introduced to the legislature next year.

Whitt Steineker, an attorney with Bradley Arant Boult Cummings LLP in Birmingham, questioned some of the provisions, noting one of the proposed requirements is applicants pay a licensing fee and 10 percent of their net worth to receive a license. When someone commented that such a provision would be unconstitutional, Steineker said it “wouldn’t be the first time that we passed something that was [unconstitutional].”

A panel discussing prospects for investment in Europe agreed that there are tremendous opportunities for cannabis and hemp/CBD companies, but regulatory agencies have very strict policies around Good Manufacturing Practice (GMP) and other standards for companies that want to import products from the U.S. and Canada.

“In Germany the regulatory framework for CBD products is gray, but there are opportunities for companies that like to play in an unregulated field,” said Oliver Zugel, chief executive officer of FoliuMed in Bogota, Columbia. “But regulations for THC as medicine is crystal clear, and there will not be major changes. Whereas for CBD I think will be up for big change in the next twenty-four months.”

Whereas Germany and the UK are tantalizing markets for companies looking to gain a foothold in Europe, the panelists agreed strict regulations make it difficult to operate and the sizes of the markets are very limited. France and Luxembourg are countries with more flexible regulations, and are two places that could be promising for pilot programs, noted Charles Feldman, a consultant with Gateway Proven Strategies in Denver.  

Crafting a metaphor the crowd in Vegas could easily wrap their heads around, Zugel said, “you need to place multiple bets, and they need to be sufficiently small to work.” He added companies might be wise to invest in a trifecta: pharmaceutical-grade products, CBD products, and medical cannabis products. “It’s a hard thing to pull off, but to use a roulette analogy, I think it’s wise to spread your chips around these three segments.” 

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