Future of the US Cannabis Industry – Cannabis | weed | marijuana

What is the future of the United States (US) cannabis industry? While operators wait for the Biden administration to reschedule the herb and for Congress to pass some banking legislation, several states have granted tax breaks within their borders.

But how does the general development look like? What is the potential of the future US cannabis industry? CLN spoke to Nawan Butt, portfolio manager at Purpose Investments, for answers.

“It’s very important to understand that there were many times before regulation seemed to advance and then stall,” says Nawan. “While there is progress, given the story, hope remains very slim.”

Disabling the U.S. Cannabis Industry

Inaction in Washington, DC threatens the future of the US cannabis industry.

While some suspect the Biden administration will delay cannabis approval until the end of the year, others believe Biden will gamble on legalization for the 2024 election, much like Justin Trudeau did in Canada in 2015.

Regardless, the repeated failure of the Senate to pass the SAFE Banking Act has frustrated cannabis operators across the country. Cannabis operators deal with large amounts of cash. Banks deny them essential services such as access to lines of credit.

“Recently,” Nawan reminds us, “Visa and Mastercard divested their entire operations out of the cannabis business.” That’s the handicap these companies have been struggling with.”

However, there are steps state governments can take to take the pressure off the local cannabis industry. Several states are considering tax breaks.

“The tax breaks have only just begun,” says Nawan. “It’s important to understand that it’s very few states.” Right now, New York and Illinois are in the spotlight. However, it is still too early to say how effective this relief will be.

“We will see that positive results come from this,” says Nawan. Because companies have the ability to deduct operating expenses from gross income, they can keep more of their money.

But Nawan is interested in federal regulation. “Right now,” he says, “it’s a very, very onerous tax on these companies.”

Future of the US cannabis industry

Nawan hopes for a future US cannabis industry that doesn’t harm operators and doesn’t penalize consumers. Specifically, it’s about federal regulations that “allow the financial system to get involved in the cannabis space.” Then he says, “People can pay for their cannabis with their credit card.”

“On the business side,” he says, “we’re talking about growth capital being available again, that is, the ability to borrow money and open businesses or open the annex that is being offered to more and more people, so more people can benefit from.” involved in the cannabis business.”

Current barriers prevent less capital-intensive producers from competing with well-funded producers. Also, location matters.

If we look at something like Florida, there are hundreds and hundreds of stores in Florida, but they are only for medical use. And if we take something like New York, while adult use is legal, we’ve only seen about a dozen stores open. And that’s because different states have implemented their regulations in different ways.

Nawan hopes federal regulation will “give access to growth capital, something they’ve lacked for a good two-and-a-half years.”

But it’s not just lack of access to capital and banking that threatens the U.S. cannabis industry. The banks themselves consider anything related to cannabis tainted.

Bank of America, Nawan says, has “made a lot of investors actually liquidate their holdings” related to cannabis. “We saw that many people were not able to participate in the space as they wanted. That will also be lifted if there is either a state postponement or if the Safe Act passes.”

According to Nawan, regulatory changes lie in the future of the US cannabis industry. It’s not a question of “if” but of “when”.

TerrAscend Lead by example?

TerraAscend Corp. (CNW Group/TerrAscend)

What is the future of the US cannabis industry? And when will it happen?

Many cannabis operators are not content to sit and wait for changes from Washington. According to Nawan, many are wondering:

How long can we keep making good money and how can we improve our operations so we can make more money with the same balance sheet as now? Because we don’t necessarily know what the prospects are for next year and how much capital we need to have in our account given the heavy taxes we have to pay.

Nawan adds that without the excessive taxation, “a lot of these companies would have a much better chance of growing. It’s an exorbitant amount that’s holding companies back from growing.”

But while most companies are waiting, others are proactive. TerrAscend is one of those companies. You moved from the Canadian Securities Exchange to the Toronto Stock Exchange.

The latter offers better access to liquidity, resulting in TerrAscend being delisted from institutions like Morgan Stanley.

With better access to investors, TerrAscend has raised $25 million in commercial loans from Stearns Bank. Your stock is up 30%. Nawan calls her a pioneer in the cannabis industry’s attempt to find regulatory workarounds.

“What they did is,” says Nawan.

You said that as long as you have a Canadian shell and hold Canadian assets, you can consolidate your holdings all the way to the Toronto Stock Exchange, which TerrAscend did. We think this is a brilliant move by TerrAscend to really expand access to their holdings. It now also allows institutional investors to acquire a portion of these shares. So we think this is something of a goal. Ultimately, it’s a band-aid. As you know, it is not a comprehensive solution. But nonetheless, TerrAscend allows access to a whole new class of investors where they can actually raise money, either through debt or through equity, but it also gives them access to capital. And now we’re seeing more MSOs focus and shift and see if they can have a small Canadian operation that will allow them to list on the Toronto Stock Exchange and regain access to investors.

Future of the US cannabis industry

Will other multi-state cannabis operators follow TerrAscend’s lead? We will see. Nawan suggests they “find a position where they have reasonable access to capital.”

Because when all your competitors are holding back and not investing, “you want to be the company that’s actually investing the money you have to give those competitors an edge.”

Nawan suggests creating a good footprint because “if regulation suddenly loosens, that footprint will be worth its weight in gold.”

Overall, “I think a lot of these companies should focus on smart growth,” says Nawan. “There is light at the other end of the tunnel because this type of cannabis proliferation is seen as all but inevitable.”