If the cannabis industry wants to survive intact, it needs to come together, democratize and hang on to its collective hat because it could be bumpy a ride, Todd Harrison, founding partner and CIO at the cannabinoid-focused investment firm CB1 Capital told Benzinga CEO and founder Jason Raznick on The Raz Report.
“It’s been 925 days and what’s happening now is that you’ve got a war of attrition,” Harrison said, referring to cannabis companies who’ve honestly tried but can’t seem to get off the ground in the face of persistent obstacles such as an unfair tax structure known as 280E, which translates, essentially, to a 70% tax rate that does allow cannabis companies to do basic business deductions. This has been exacerbated by having no access to banking and credit.
“They’ve done everything they can to try to hold this industry down,” said Harrison. “It’s been the worst of all worlds for cannabis companies.”
What Pushed Banking Reform Off The Rails?
There were high hopes for the passage of the SAFE Banking Act until the March Silicon Valley banking crisis, Harrison said referring to the third-largest bank failure in U.S. history that was then followed by a series of bank failures.
“The Silicon Valley bank crisis in the spring probably cost us that victory. It pushed everything by a month. But we’ll see what happens in a few weeks when they [DC politicians] come back from their summer vacation,” Harrison said. “We’ll see if we can get through the banking committee, and then the Senate and now we have the HHS and DOJ and the scheduling review, which could solve the issue with the [cannabis] taxes.”
In late August, the Department of Health and Human Services (HHS) called on the DEA to ease restrictions on cannabis by reclassifying it as a Schedule III rather than a Schedule I drug, which could usher in transformative changes in the cannabis marketplace, as witnessed by a surge in cannabis stocks following the news.
Read about Harrison’s view of NY: New York’s Cannabis Program Cleared To Launch, But One Expert Says It’s Back To The Drawing Board
Optimism (But Incremental Steps)
“There are some lights at the end of the tunnel that may not be affixed to the front of the train but after this long, I don’t think many people are giving the benefit of the doubt to our legislators and politicians anymore.”
Harrison stressed that the industry needs to stand together, especially in the face of political reform, which is not yet guaranteed.
“We want Safe banking as the incremental next step, from there we’ll check schedule III because that’s what’s politically feasible right now, not where we want to go, not where we need to go but people shouldn’t be in prison for a plant…but it’s not going to happen in one fell swoop. It’s a multi-step process.”
Watch the full interview on The Raz Report on YouTube.
No doubt we’ll be talking about these issues at the upcoming Benzinga Cannabis Capital Conference in Chicago on September 27-28 where you’ll also meet Todd Harrison in person. All information about the conference is available on bzcannabis.com