Cannabis Industry Outlook 2024 | Legal Lunch Byte | Episode 1

Vince thanks for coming on our first ever legal lunch bite we’re not new to this process we did 100 episodes of our firm’s blog during covid we took a bit of a hiatus we’re retooling now a little bit just to try a new format new guests new questions and certainly we’re in a different time of life now as we were during covid so I’m excited to have you, maybe you can provide an intro to folks who don’t know you since I’ll be a regular face on this but you’ll be an intermittent face so maybe you can provide everybody a little bit of a background on you where you came from what you’re doing now and then we get into our topic today which is going to be the Cannabis outlook for 2024 sure yeah thanks for having me to the inaugural I’m I’m happy to be here and happy New Year Jonathan thank yeah so my name is Vince Sliwoski you probably see that on the screen I’m one of the partners here along with Jonathan at Harris Sliwoski I am in Portland Oregon and my practice is business law General business law meaning not litigation helping businesses do things and Commercial Real Estate and that’s kind of what I’ve done my whole career and I’m highly specialized in a couple of Industries cannabis and psychedelics we have robust programs for those Controlled Substances here in Oregon that’s what we’ll be talking about today in my understanding but in a nutshell that’s who I am and what I do and I’ve been doing that I’ve been a lawyer for 13 years now I like you describing yourself as a lawyer who gets things done I feel like that’s what my practice entails as well it’s more we have clients with good problems and bad problems or or good problems and difficult problems and getting them from A to B is really what I enjoy doing helping them get through it in a way you know after you and I’ve been practicing for I think I’m in my 12th year now and I forget sometimes how how much cyclicality there is for us in our work and what the value is for lawyers who see hundreds of transactions compared to our entrepreneurs that see certain deals only once or twice in their lifetime so and certainly interesting to be at this Nexus of cannabis I mean you’ve been involved in cannabis since how early in your career really early maybe second year kind of accidentally we just had a client walk into the firm that nobody else would work with at the time and my boss said are you okay with that and I said yeah I think so and you know because I was willing to work with that guy he started referring other stuff and I just sort of wrote what became a pretty big wave eventually so yeah I’ve been doing it my whole career and followed along and kind of written about it almost like a historian over the years and have a big Archive of how our program’s gone in Oregon and what’s happened federally I guess since that point which has been strikes and gutters I guess we could talk about any of it if you want or or just looking forward to 2024 yeah I’m very interested because when I joined the firm four or five years ago I had a little bit of cannabis exposure and tied in for a couple of years pretty hard on on m&a in Washington so I got a very interesting viewpoint as well and but you’ve always been the one who I’ve looked to for you know all of us I think have said okay if Vince Vince knows what’s going on let’s get Vince’s take on this because you’ve like you said you’ve been breathing it living it for almost your whole career so maybe start with Oregon and differentiate Oregon a bit from from surrounding states maybe California Washington makes Oregon quirky in its own way and then maybe we can eventually Branch out to other interesting states or developments that you’re going to see in 2024 and maybe even International if we have a few minutes at the end sure yes Oregon’s an interesting State it’s always been kind of a Vanguard state for cannabis without going too far back I can say that we were the first state to allow non-residents to own these businesses back I think that was in 2016 or something like that so it’s always been a pretty open market it got a little bit too open and some people’s thinking such that there were so many licenses and just so much cannabis in the state that the state moved to sort of curtail the available pool of licenses a few years ago and you know there’s been a lot of triage and consolidation and right now it’s like a lot of the western states and a lot of the country in general where you know industry is generally having a hard time finding margins and finding success just and there there’s a whole slew of reasons for that starting with Federal prohibition on down but I would say it’s a tougher Market it’s a still consolidating Market we have a pretty good partnership with our Regulators here trying to address issues in the market and you know I foresee better things in 2024 I think for some macroeconomic reasons but also because of some potential changes in federal law which we can talk about here in a bit if you like and how would you describe your relationship with The Regulators generally I are are Oregon Regulators open I know that in your blogs you’ve been openly critical about some of the things you’ve seen is that well received has it has it you feel like it’s affected anything or you feel like you’re still more of a lone voice crying in the wilderness well I I think it’s pretty collaborative approach I mean we don’t pull punches here and you know sometimes I work with them and sometimes we’re working against them ultimately we’re always working in our clients’s best interests but we’ve been collaborative with Regulators over the years we’ve helped them write rules and we’ve helped them write guidance and we talk to them I mean a lot of them have gone it’s like the classic regulatory thing where they work in the commission and then they go outside maybe into some private practice and back in and we’ve just kind of been there all the while so I know they I know they read what we’re writing because sometimes I’ll write something and I’ll get a very quick like email hey what about this correction you could make and I’ll think about it I think the relationship’s healthy I guess is where I put it I mean everybody’s professional they understand we’re not going to agree with what they’re doing a lot and they understand we’re going to call them out when we feel like we should call them out but we also compliment them when they deserve it and I feel like they often deserve it and they’re trying to do a good job in general so healthy relationship overall I’d say interesting and Oregon’s nice because we have a direct line in like for instance I work with our colleagues in California and they can’t just pick up the phone generally and call somebody high up in the BCC the state doesn’t work like that and they’re not as accessible Oregon’s very accessible we can talk to Regulators any number of ways we present with them Etc so I appreciate that about our state and I think in Washington we try to pick up the phone and I have had some good conversations I think candid conversations they don’t like to say anything over the phone they wouldn’t put in writing and so I think they default to written responses when they can but I found Washington Regulators to be fairly fairly level-headed as well when when we’re looking for input on transactions and because invariably you know we run into issues that just don’t come up in in the regulator’s minds as practitioners we comes up and we’re saying this this form looks like it should fit and I know this is the form you want me to use but are some Fields here that just don’t make sense or either don’t work it just don’t fit our situation and they’re not lawyers and you they think of things a little bit differently sometimes I mean a few of them are lawyers sometimes but they may just have a different perspective on things and yeah it’s good that you can take that collaborative approach with them I appreciate that so let’s go turn to National then I know there have been some some big changes I think rescheduling or at least discussion about rescheduling has been going on for years what happened in 201 23 and what what’s likely to happen in 2024 in that regard yeah so there was really big news on that point in 2023 I think it was in late August when we had an announcement that the Department of Health and Human Services in consultation with the downstream agency you may have heard of called The Food and Drug Administration recommended to the Department of Justice or excuse me to the DEA The Drug Enforcement Administration that marijuana should be moved from its current place as a schedule one controled substance down the ladder to to schedule 3 which would mean that it’s still a controlled substance but it would make life better for a lot of cannabis operators for a few reasons in the primary of which is taxation cannabis businesses are taxed I would say oppressively at the federal level they’re not allowed to claim a lot of ordinary business deductions if you start any other kind of business in America you know a coffee shop or restaurant whatever it is you’re allowed to deduct your payroll your utilities all all of these things which reduces taxable income cannabis operators generally can’t do that with the exception of a narrow category of goods I’m not going to geek out further about that but I’ll just tell you that they’re taxed differently and more heavily than other businesses and if marijuana moves to schedule 3 per this recommendation that would change and that’s a really big deal so I mean we’ll see it’s kind of a and it’s the whole process is pretty opaque the memo that recommended this descheduling was released but so heavily redacted as to be you know hardly beneficial to read and it’s a public process where there’s going to be opportunity for comment there’ll probably be litigation around it certain people I’m sure don’t want cannabis to be treated a little bit more leniently by the federal government and another thing I’d say about that is people tend not to really appreciate what it means in other senses for instance it won’t make interstate commerce legal so here where I’m sitting in Oregon we won’t be able to sell our cannabis down to California or anywhere else and another thing that’s helpful to understand about it is cannabis would still be a controlled substance right it would just be on a different schedule so if you think of other schedule three Controlled Substances I talk about you know Codeine anabolic steroids it would be on the same level as those and it would still be kind of a funny federal state tensions where you have all of these shops imagine a Codeine shop just kind of openly selling Codeine everywhere around the country or or an anabolic steroid shop cannabis would be that it would be like a drug un schedule 3 being sold in the open notwithstanding Prohibition in federal law so does that would that open up the banking at all I mean I know I know banking is quote unquote open at this stage and the banks are are the bottleneck because of their stringent requirements so they’re really I’ve seen at least personally maybe tell me if I’m wrong I see the banking hiccups as more of an internal U Banks decide their own risk profile that cannabis just isn’t worth it and so that’s been limitation is is there more than than what I’m describing if it goes to schedule three I don’t think there will be huge changes I think there may be changes faster if we get Federal legislation on banking passed like the safe Banking Act that has gone through the house like seven times but seems to fail every time to get a senate hearing and finally made it through the Judiciary Committee last year which is big news but it never quite gets there I think that would be the change that Banks need to really Bank these businesses like broadly and openly and publicly right now I mean the industry is banked in a sense it’s mostly smaller State chartered Credit Unions it’s more limited Services it’s more expensive en cumbersome banking but I think a move to schedule 3 wouldn’t really fix that, I mean it’s we need some sort of change in federal legislation to fix that not administrative action okay so we are we’re trying to keep this to 15 minutes or less so we’re already at already 10 or so minutes in so I want to mention one thing which is you do have a Cana webinar coming up next Wednesday at 12: PT do you want to give a little preview on that yeah that it’s going to be me it’s going to be two other partners here that we have Griffen Thorne down in our Los Angeles office he’s a business attorney like me and he also is licensed up in Washington and Jesse Mondry who’s here in Portland with me and he’s a litigator so what we’re going to cover is just trends that we’re seeing in the Cannabis industry currently and what we expect to see in 2024 and those are pretty smart guys and they they’ve done a lot of public speaking I’ll be interested to hear their perspective but it’s going to be a free flowing Q&A type webinar and it’s free to attend so people can submit questions in advance and we’ll pick out the ones we want to answer that are good we’ll answer them and or people can just type stuff into the live chat and we’ll deal with it as we go but I it would be an interesting hour and I look forward to that so yeah sign up should be on our blog excellent and we can drop the link for that sign up in the in the comments of this video as well when when we republish it all right so last question then what’s happening internationally with cannabis oh good question so a lot of things are happening internationally with cannabis it the the restrictions were removed to some extent on some of the Cannabis trade a couple of years ago now we’ve been helping clients do interesting things like ship seeds from the US to Europe you never used to be able to to comfortably do that with a like a sufficient legal basis to do so but based on like a DEA letter from early 2022 people are taking the position now that marijuana seeds even if they’ll grow up in Germany into big old flowering intoxicating plants that those are not actually Controlled Substances the seeds themselves until they germinate so people have been sending those across borders big companies we’ve been helping them do that we have a pretty developed International Trade practice here at the firm and I you know have to rely on those guys heavily with some of that stuff so that’s been interesting and just you know restraints of Trades are a little bit less than they were and then you just have other countries continue to liberalize their loss in come on mind I think foremost right now most people’s minds would be Germany just because it’s the biggest country in Europe essentially the biggest economic engine my understanding in Europe but you’ve just got stuff going on all over the world with you know medical cannabis programs and cannabis is under international law can be studied for research and scientific purposes and they it’s essentially acknowledges medical marijuana which is something we don’t have here in the US so it’s just a different game and it’s fun to watch that evolve and it’s fun to watch you know different countries take different approaches and watch the international trade regime sort of build out and I should add that you know people are already trading in hemp and that’s another part of the cannabis plant we we talk about frequently here that’s great I have been involved in some of those discussions I’m always interested to see which clients are doing what and how quickly they go International or finding Partners International that want to do some kind of collaborative effort it’s been very very interesting and certainly more much more International than I expected when I first started working in the cannabis space so we’re at our time Vince I want to thank you for spending a few minutes hope that everyone who tuned in today found it valuable and we’ll be spinning up other topics later of a of a wide variety based on things we’re seeing in our different practice areas we’ll touch on China we’ll touch more on cannabis China to Mexico China to Latin America China to southeast Asia just anything and everything that’s noteworthy we’ll find certainly no shortage of things to talk about and hope we get to have you on again before too long Vin great thanks for having me thanks a lot see you soon all right thanks Vince thanks everyone