Opinion | Common Ground: Political Unity Around Federal Cannabis Prohibition Relief

Benzinga Cannabis , Benzinga Contributor (Originally published on Benzinga Here)

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By J Smoke Wallin

In 1925, five years into Prohibition, journalist H. L. Mencken wrote, 

“There is not less drunkenness in the Republic but more. Not less crime, but more. There is not less insanity, but more. The cost of government is not smaller, but vastly greater. Respect for law has not increased but diminished.” 

Prohibition turned law-abiding citizens into criminals and enabled and empowered organized crime. It would take another eight years for the repeal of Prohibition, with the enactment of the 21st Amendment, paving the way for a set of local option laws and regulations, state by state, known today as America’s beverage alcohol system. While imperfect, the state by state system has functioned well for over 85 years.

Around the time of Prohibition’s repeal, another Prohibition went into effect: cannabis. The Marijuana Tax Act of 1937 eventually made a plant used in medicine, and available recreationally for thousands of years, illegal. Again, this turned otherwise law-abiding citizens into criminals, enabled and empowered organized crime, and also denied countless patients suffering from a wide range of ailments, including cancer, access to a plant that could help them. 

Today, 33 states have some form of medical cannabis provision, with 10 implementing adult recreational use. More are drafting legislation regularly. The 2018 Farm Bill took the non-psychoactive form of cannabis “hemp” out of the hands of the DEA and into the Agriculture Department, paving the way for legal hemp and hemp-based CBD and other extracts for national production and consumption. This is progress—and it is only the beginning.

There is reason to believe the time is now to decriminalize cannabis federally and end the conflicted issues inherently present. While common ground seems impossible to find politically in 2019, there is a sensible center that has always existed and still exists today. Cannabis Prohibition repeal may be one of the few unifying issues one can hope for in Washington today. Here is why I believe it is possible with our current state of divided government.

States’ Rights: Conservatives can be against cannabis reform but still agree to it based on the strong principle of states’ rights. One of the core principles of modern-day conservatives has been a commitment to states’ rights. This goes back to the founding fathers’ expressed interest in limiting the size and scope of the Federal government. While the scope of the Federal government has increased dramatically over the years, there is still a strong expressed interest in decentralization on a whole host of issues, including education and healthcare. Anyone holding these beliefs ought to be persuadable that 33 states and counting were not wrong. They have expressed the will of their citizens. One only needs to listen to U.S. Senator Cory Gardner (R-Colorado) as he fights for his state’s right to regulate legal cannabis — when he originally voted against it. If the GOP intends to keep the Senate in 2020, their members will need the opportunity to support repeal.

Wellness: As Todd Harrison of CB1 Capital says, “Cannabis isn’t about getting high; it’s about getting well.” While US research has been stymied by Prohibition, anecdotally, the evidence is abundant. Whether it be a cancer patient coping with the effects of treatment or a child with epileptic seizures, one cannot argue there are benefits to this plant.

Cannabis clinical trials are underway in Israel and Canada. Large scale university-based research is in the early days (and due to the prohibition, have been disallowed in the U.S. thus far). However, since the 2018 Farm Bill was signed into law last year, cannabis without THC, legally known as hemp, is not under the purview of the Agriculture Department. Cannabinol or “CBD” is one of the components in the cannabis plant and is showing great promise in treating a variety of conditions. It is now in the FDA approved medicine for Epilepsy Epidiolex. Its number one characteristic is as an anti-inflammatory followed by pain relief.

I personally was able to give up Advil through the use of CBD for my minor aches and pains. Additional possible indications for CBD products include autism, psychiatric conditions, diabetic neuropath pain, fibromyalgia, chronic pain, and back pain. Clinical trials in these indications are underway; however, excluding THC from these studies makes zero scientific sense. The scientists committed should immediately be allowed to study the full cannabis plant in all its possible applications. Public demand is at an all-time high, and burying our heads in the sand scientifically is a disservice to the public.

Opioid Epidemic Overall And Loss Of Veterans: Over 50,000 citizens died in 2018 from some form of opioid incident. Cannabis has been shown to enable people to manage their chronic pain without the harmful side effects of opioids. The current approach is not working. We lose 22 veterans a day to suicide in this country as they cope with PTSD and the subsequent meds prescribed by the VA. I personally know veterans who were on the verge of suicide and were saved by the use of cannabis. Many VA doctors agree and would like the option. Veterans’ organizations stand universally in favor of legalized medical cannabis; so too should our nation’s leaders.

Economics: Since Colorado legalized adult use cannabis in 2014, the state generated over $6 billion in sales and $1 billion in tax revenue. CA generated $300 million in taxes in its first year of imperfect legislation and will amount to well over $3 billion once legal rollout is fully up and running. In fiscal year 2017-2018, Colorado Department of Revenue says it collected $250,968,890 in marijuana tax revenue. The constitution requires the first $40 million in excise tax money go to school construction. Anything over that from the excise tax goes toward public-school funds.

Overall, 47 percent of marijuana tax money went to schools for fiscal year 2017-2018, 41 percent went to other state services, and the remaining 12 percent went to the general fund. Denver alone collected $48 million in tax revenue on cannabis. In Denver, all marijuana tax money goes to the general fund. The city also needs to dedicate portions of that tax revenue to education, enforcement, and regulation. During the last five years, nearly $13 million of the revenue went toward youth prevention efforts. For 2018, the city also carved out money from marijuana revenue for certain projects, including $5 million for deferred capital maintenance, $4 million to fix aging parks and recreation centers and an estimated $8 million per year to help double Denver’s Affordable Housing Fund.

The states cannot afford not to go after this revenue source, not to mention the countless entrepreneurs rushing into the space to create value for their investors and stakeholders. It’s an economic windfall for the states that have moved forward and will be for the country at large if done right.

Social Justice Reform: Congress agreed, and the President signed some justice reform passed into law in 2018. Cannabis reform may further correct a legal system that disproportionately affected certain communities. 

Banking: The Federal Prohibition juxtaposed with state permission has created an untenable system whereby legitimate businesses are unable to access the federal banking system. This creates an unsafe environment with massive amounts of cash being handled. While some local state options exist, the Treasury department has publicly come out in favor of a solution for banking and legal taxation.

Elections And Public Opinion: Gallup has tracked the topic of cannabis legalization for years. 2018 marked the first time the majority of Americans in every segment favored some form of legalization. This applied to baby-boomers and millennials, to Democrats and Republicans. Almost every single presidential hopeful who has declared has come out publicly in favor of repealing the national cannabis ban in the form of the STATES Act, while some have gone much further with full legalization. This includes Amy Klobuchar, Bernie Sanders, Elizabeth Warren, Cory Booker, Julián Castro, Kamala Harris, Kirsten Gillibrand, Tulsi Gabbard and Pete Buttigieg. President Trump has publicly stated his support for the states to decide.

When functioning properly, politicians serve their constituents. To get reelected, these politicians need to find a set of issues that gives them sufficient votes to win. There are no issues today that unite the country quite like cannabis reform.

The toothpaste is out of the tube, and you can’t put it back in. Legal cannabis is coming to the United States, sooner rather than later. Get ready.

J Smoke Wallin is CEO of Vertical Wellness, the leading hemp-based CBD company, and President of multi-state cannabis operator Vertical Companies.

Farm Bill Poised To Pass: Legalizing Hemp Across the Land

The Farm Bill of 2018 just passed the House and Senate and sits on the President’s Desk.  Here are some thoughts on its impact on the Hemp and CBD industries as well as information on our activities in the space, I have shared in a number of interviews.


Here is our Vertical Wellness operation getting started in KY in October

WHV: Vertical Hemp Company Cuts Ribbon To Cadiz Factory

Bloomberg: Hemp Companies Poised to List in U.S. as Farm Bill Goes to Vote

 

QUARTZ: Proposed hemp regulations continue the racist legacy of the US war on drugs

CSP: Instant CBD Strips Arrive in C-Stores Nationwide

WKMS: Hemp Company Vertical Celebrates Opening Of CBD Facility In West Kentucky

 

CNBC’s Fast Money with Smoke Wallin re Branding Cannabis, Wine & Spirits and Market Observations

Thanks to CNBC and the Fast Money crew for a fun interview on the state of the cannabis industry.

Cannabis industry exploding with growth here, says top pot exec

The cannabis business is growing like a weed, even as pot stocks see wild swings. With Smoke Wallin, Vertical Companies, CNBC’s Scott Wapner and the Fast Money traders, Pete Najarian, Tim Seymour, Karen Finerman and Guy Adami…

Smoke Wallin on CNBC’s Fast Money

A few shots from the day at CNBC:
 

 

 

 

Tapping the Booze Business

May, 2018

Tapping the Booze Business

Hemp, CBD and extraction companies can crack the infused alcoholic beverage market but must navigate a regulatory thicket

By Vicky Uhland

When Prohibition was repealed in 1933, small, local brewers and distillers were the first to get back into the alcohol business. Many either grew into national brands or were snapped up by larger companies looking to expand.

Today, the same scenario is occurring with beer, wine and spirits infused with hempseed oil, cannabidiol or cannabis terpenes. Colorado-based New Belgium Brewing, for example, recently unveiled a hemp beer, while California-based Lagunitas Brewing last year offered a brew infused with cannabis terpenes.

“We’re in a unique moment in time. There are no big hemp or CBD alcohol brands yet, so there’s a window – maybe for the next three to five years – to establish a brand,” said Smoke Wallin, chief marketing officer and president of distribution for Vertical, a company in Agoura Hills, California, that is developing a CBD oil that can be infused into alcohol.

Some big companies are wasting no time, especially with Canada poised to legalize recreational marijuana. Last October, New York-based Constellation Brands, which distributes more than 80 wine, beer and spirits brands, paid $190 million (CA$245 million) for a 9.9% stake in Canadian cannabis cultivator Canopy Growth Corp. Wallin and others believe more large beverage companies will follow.

 

Smoke Wallin, former WSWA Chairman and President of Vertical Companies

 

“I’m absolutely certain the Anheuser-Busches, the Bacardis, the Jack Daniel’s are going to get into this, but they will wait until marijuana is fully legal to do it,” said Wallin, who has more than 25 years of experience in the alcoholic beverage business. “Anyone that can get a brand established in the meantime, and show traction, is going to be very attractive to the big players.”

That translates into business opportunities for hemp growers, CBD producers and companies that extract oils such as cannabis terpenes. Those products don’t carry the same stigma in the United States as THC-laden marijuana, but it won’t be a slam dunk.

The marriage of alcohol and cannabis faces unique regulatory and legal hurdles, making it difficult for hemp, CBD and extraction companies to produce their own booze. The simpler option for those companies is to sell their products to alcoholic beverage manufacturers to get a foothold in what could become a lucrative product niche.

Striking a Partnership

That’s what Joe Pimentel did. In 2017, Pimentel, the owner of Luce Farm in Stockbridge, Vermont, decided to start producing CBD-infused honey to set his farm apart from other area hemp growers. He approached Long Trail Brewing in Bridgewater Corners, Vermont, about carrying the honey in the brewery’s restaurant and gift shop.

“The CBD hemp market is so immature, so our strategy is to align with a lot of Vermont brands that are better known than ours,” Pimentel said.
Long Trail decided not only to sell the honey, but also to make a beer with it. “We liked that the hemp gives us new flavors we can’t get anywhere else,” said Head Brewer Ian Harbage. But the honey played havoc with the beer’s consistency, so the brewers opted for Luce’s CBD extract and hemp terpenes instead.

Terpenes are separated out at the beginning of the hemp-extraction process, like an essential oil, and then the CBD extract remains. Pimentel used to do his own extractions, but “nothing we could create in our kitchen had consistent levels of THC,” he said.

He started researching the best extraction techniques and decided on a carbon dioxide method offered by the PhytoScience Institute in Waterbury, Vermont. PhytoScience now handles all of Luce Farm’s hemp extractions, and the terpenes are consistently documented at less than 1 part per million THC.

CBD has more health properties but not as much flavor and aroma as terpenes. “The main terpenoid in cannabis is the main flavor in hops, which makes terpenes and beer a good partnership,” said Andrew Follett, the owner of Philadelphia-based Keystone Canna Products, which was founded in 2014 to help hemp farmers distribute nationally.

Follett also said CBD, which has a slightly nutty flavor, is a better option for wine and spirits manufacturers that don’t want a distinct cannabis taste or smell in their products. But he noted that it takes time, effort and creativity to mix the oily product into beverages, which can deter some brewers and distillers.

Regulatory Headache

Like the cannabis sector, the alcohol industry faces a web of regulations – in this case from both the states and the feds. Consequently, hemp, CBD and extraction companies must be aware of the complicated regulatory process when wading into the alcohol business.

The U.S. Drug Enforcement Administration’s declaration in December 2016 that CBD is a Schedule I controlled substance – like marijuana and heroin – complicated matters. Last year, a Colorado craft beer producer, Dad & Dude’s Breweria, butted heads with the feds over the brewery’s production of a non-THC, CBD-infused beer. Dad & Dude’s had previously won approval for the brew from the federal Alcohol and Tobacco Tax and Trade Bureau (TTB). The brewery, which continues to sell the beer on its premises, is for now locked in a legal battle with the DEA as well as the agency.

The TTB, meanwhile, presents other hurdles. Any alcohol company that sells across state lines, for example, must secure approval from the agency. Back in 2000, the agency’s predecessor issued requirements covering formulas, processes and labels for domestic hemp products. The policy requires all alcoholic beverages that contain hemp or a hemp component to submit a lab report stating the amount of THC in the hemp, a move that dovetails with the DEA’s policy.

“It follows the DEA’s rules, and the intent of those rules are to ensure the product is THC-free or has trace amounts,” said Ryan Malkin of Malkin Law, a Miami Beach, Florida, firm that specializes in alcohol law.

In December 2017, Weatherford, Texas-based TVM Wines received TTB approval to manufacture and sell its hemp wine across state lines. The process took two years and 28 different paperwork submissions to the agency, said Elease Hill, TVM co-owner and vice president of sales and marketing.

Hill said the key was to supply the agency with lab tests showing the hempseed oil used in her sweet, citrus-based wines had less than 4 parts per million THC, and that the oil was derived from hemp stalks, roots or stems rather than flowers or resin, which is considered a Schedule I substance by the DEA.

“You have to be careful where you get your hempseed oil from,” Hill said. “I had one that was 3% THC, from mature hemp stalks, and the DEA said that was too high, so the oil must be coming from hemp resin.”

Hill found her suppliers through a list provided by the Texas Hemp Industries Association and by simply Googling hempseed oil companies. She read product reviews and then called the companies to check their references and lab work documentation.

Hill eventually partnered with Keystone Canna Products. Its hemp oil and food brand, Cannagenix, specializes in paper trails and lab testing, according to Follett, the owner.

“There are a lot of hemp and CBD products but not a lot of quality documentation,” he said, noting that growers and CBD companies that can’t produce a regulatory paper trail are likely to be shut out of the alcohol business.

Labeling Semantics

Hill said even though TVM’s wines contain CBD, they’re labeled as “hemp seed oil infused” because the TTB and DEA preferred the word “hemp” to “CBD.”

But, like most cannabis law, this is a gray area. The determining factor appears to be where the beer, wine or spirits are sold. Even if alcohol doesn’t cross state lines, regulations vary from state to state, just as they do with cannabis.

So far, Long Trail’s Medicator beer hasn’t run up against the TTB, even though the can says: “Vermont’s first CBD infused beer.” But the company has made only three small batches and has limited sales to the brewery’s pub.

In California, Petaluma-based Lagunitas Brewing uses cannabis terpenes in its SuperCritical Ale. CannaCraft, a vertically integrated medical cannabis producer and distributor in Santa Rosa, California, extracted terpenes for the beer using a carbon dioxide process.

“There is no THC in the beer, so we simply made the beer and did not ask for permission to do that which we do every day,” said Lagunitas founder and Executive Chairman Tony Magee. “However, the TTB became interested, and we are talking with them about it right now. I’m pretty confident they will understand what we intend to do, and we’re looking forward to making a whole lot more of it.”

 

Real March Madness – Indiana Says No To Leadership & Open Mindedness

Indiana Legislature Tells The NCAA, NFL, NBA, Eli Lilly, GenCon, Amazon, Salesforce, YPO, The Chamber of Commerce and Others to Take a Hike

Really? Is this what we elected a super majority of Republicans to do? Apparently, the leadership decided it made sense to push through the “Religious Freedom Act”. I wrote a piece called “It’s 2015: Where Have All The Leaders Gone?” last week, I had no idea how timely that was. Here is a recent story on the issue.Indiana closed for business

Indiana House OKs controversial religious freedom bill

The basic argument of those in favor of these laws seems to be quite weak. This post discusses the fact that the language is very similar to existing law at the Federal level and in the state. If that is so, why is it needed?

Indiana’s So-Called ‘Right to Discriminate’ Law Appears Very Similar to Existing Federal Law

I have yet to hear or read a strong argument in its favor. This is an issue drummed up by those wanting to drum up issues and make a seemingly principled stand on what other people do in their private lives. The hypotheticals they use like a caterer who does not want to serve a gay wedding are simply dumb. If any business like that really does not want to get someone’s business for any reason, they could simply make their bid not competitive and lose out to others. The idea you need a law to turn away business is the very example of conservatism gone amuck.

One of the more ridiculous arguments for a change in the language put forth was “A House committee last week tried to assuage the concerns of some business interests, including the Indiana Chamber of Commerce, with an amendment that exempts employers from any lawsuits brought by employees under the legislation.” They completely miss the point.

Have any of these people voting for this considered what this legislation actually permits? What if a Muslim shop owner decided their religion prevented them from serving Christians or Jews? Or Visa versa? Under the language of this legislation, that would be permitted wouldn’t it? How about another example, where a restaurant owner believes adultery is against their religion and refuses to allow people they suspect of committing it to dine in their establishment based on their religious conscience. How about couples living together in sin, unmarried, against the teaching of an owners religion. Who gets to decide? The idea that small government conservatives would put into place a framework for the state to arbitrate these questions strikes me as worse than counter intuitive.

And while I do not agree with much of what passes for journalism on MSNBC, this story was well done on putting this in perspective nationally and why this fight is not only wrong but in the end will cause damage to Indiana and ultimately will fail – Why ‘religious freedom’ laws are doomed

The bottom line is why do we have such an activist state government that feels it necessary to make a law like this? Starting with Governor Daniels and continued under Governor Pence, the state has done a great job of attracting businesses and rebuilding the economy in spite of the ridiculous headwinds from Washington. Indiana has a great track record in this regard, especially relative to its neighbor states of IL and MI. So why risk that momentum and progress now?

Consequences:

The big table top game convention that brings 56,000 people and $50 million to the State and is Indianapolis’ second-largest convention, is threatening to relocate its massive late-summer annual event to another city if Gov. Mike Pence signs the controversial “religious freedom” bill into law added in a letter to the Governor “Legislation that could allow for refusal of service or discrimination against our attendees will have a direct negative impact on the state’s economy, and will factor into our decision-making on hosting the convention in the state of Indiana in future years,” GenCon CEO Adrian Swartout said Monday in a letter to Pence.

GenCon threatens to exit Indy over ‘religious freedom’ measure

The Backlash to the Anti-Gay Backlash: “Religious Freedom” Bills Fail, As More People See What They’re Really About

My question is: how long can an organization like the NCAA or a company like Eli Lilly or Amazon who keeps expanding here stand by and do business as usual in such potentially hostile environment to their employees, customers and constituents. Many of my CEO friends around the world in Young Presidents Organization (YPO is a group of over 22,000 CEOs with a combined $6 trillion in revenue and 15 million employees) have been sending messages to the effect of “REALLY Smoke, what kind of state do you live in?” In the case of Arizona, Governor Jan Brewer vetoed similar legislation when confronted with the uproar of the NFL (and Super Bowl pullout) and the business community. Governor Pence, do you think we are immune to this? Do you think you are standing on principle? If so it is the wrong one.

How long until the NFL pulls the combine? How many NCAA tournaments do you think we will land going forward. Oh and by the way, what great timing Legislature to put Indiana in the national spotlight during March madness.

Conservatives Against Close Mindedness

Yes, one can be a conservative and be completely opposed to this kind of legislation and behavior. In fact, it is the opposite of true conservatism. This is government intervention at its worst. I’m a long time supporter of conservative causes and of many Republicans, who cannot reconcile this. For example, I whole-heartedly supported the Indiana legislative takeover led by Mitch Daniels and others that was mainly about fixing the education system in Indiana. The fact is the Teachers’ Union had a lock on the legislature and a group of like-minded business people and conservatives got together and supported state legislative candidates and made them competitive for the first time. This led to the current makeup of the legislature here. And there are many good things that have come out of that takeover. That said, this is not one of them.

In fact, it makes me want to put a fund together of like-minded people to knock off the knuckleheads who voted this legislation into law.   While I’m glad the Democrats (and 5 brave Republicans) all voted against this, I certainly don’t want to see the teacher’s union back in control preventing all kinds of experimentation and change in our troubled education system, but I also don’t want to see the current crop of “leaders” in place. Is there not a sensible center? How about a group of fiscal conservative, libertarian minded folks who can knock off the current group and create the kind of government that this state and its people deserve?

Who is with me?

Supporting the “Religious Freedom Act”:

Voting Yes:

Republicans: Arnold, Aylsworth, Bacon, Baird, Behning, Borders, Bosma, Braun, Tim Brown, Burton, Carbaugh, Cherry, Cook, Cox, Culver, Davisson, Dermody, DeVon, Fine, Friend, Frizzell, Frye, Gutwein, Hamm, Harman, Heaton, Judy, Karickhoff, Koch, Lehe, Leonard, Lucas, Mahan, Mayfield, McMillin, McNamara, Miller, Morrison, Morris, Negele, Nisly, Ober, Olthoff, Price, Rhoads, Richardson, Schaibley, Slager, Smaltz, Milo Smith, Soliday, Speedy, Steuerwald, Sullivan, Thompson, Torr, Truitt, Ubelhor, VanNatter, Washburne, Wesco, Zent, Ziemke.

Democrats: None.

Voting No:

Republicans: Beumer, Clere, Eberhart, Kirchhofer, Saunders.

Democrats: Austin, Bartlett, Bauer, Charlie Brown, DeLaney, Errington, Forestal, GiaQuinta, Goodin, Hale, Kersey, Klinker, Lawson, Macer, Moed, Moseley, Niezgodski, Pelath, Pierce, Pryor, Riecken, Shackleford, Vernon Smith, Stemler, Summers, Wright.

EXCUSED (not sure why you can be excused from something like this) Dvorak, Harris, Huston, Lehman, Porter, Wolkins.

At the very least, the businesses that choose to not serve Gays or Muslims or Jews or Adulterers or whatever this bills proponents and the supposed beneficiaries of it are really after, should be required to place stickers that get applied to the front door of their establishments and to be put on an easy to find list on the web. Those who think this is some great move to respect individual’s religion don’t get to have it both ways – The ability to discriminate based on your conscience AND the ability to remain anonymous. You may well choose to not serve someone out of your religious conscience under this law, but we don’t need a law to choose not to do business with you.

 

3/29 UPDATE: Well its been quite a week and Indiana has taken a beating on the national and international stage. Based on everything I’ve read including the law itself (here), this explanation in the Weekly Standard and a balanced analysis in the Star (here) and this lawyers blog post (here) among other things, I stand by my remarks above.   One thing I’ll add, the fact that similar laws exist around the country does not mean they are right.  There are so many laws on the books that may have made sense at one time or another, but today make no sense.  The attempt to balance an individuals right to practice their chosen religion with the basic right to not be discriminated against is not difficult in my mind.  No one has the right to discriminate for any reason.   Governor Pence, that was the right answer on today’s  This Week show with George Stephanopoulos.

Aside from that, the shear political ham handedness of the Indiana Republican leadership (who I supported and elected) is breathtaking.  Every lead in to the Final Four this weekend will have this issue front and center (assuming the NCAA does not pull it at the last minute).  The damage being done economically and reputationally to our state will take many years to overcome. And why?  What compelling reason or case was there that drove this?  You who practice politics for a living, have no excuse.   The damage to my business, my friends, and to my state of over 25 years gives me a high level of motivation to work to get you out of office.

 

April 4 Update:  An excellent post #RFRA firestorm overview…@CarlyFiorina ​ has it right. “Creating an Artificial Divide in Indiana

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