How cannabis MSO TerrAscend is responding to federal marijuana rescheduling

Lynn Gefen (courtesy photo)

This is part of a regular series of MJBizDaily interviews with major THC industry players. To be considered for an interview, contact editorial@mjbizdaily.com.

With medical cannabis now reclassified as Schedule 3, multistate cannabis operator TerrAscend is ramping up its growth plans.

The publicly traded company, which has offices in Toronto and Pennsylvania, plans to deepen its presence in key markets such as Pennsylvania, New Jersey and Ohio while evaluating expansion opportunities, TerrAscend Chief Legal Officer Lynn Gefen told MJBizDaily.

“We’re looking to go deeper into existing states,” Gefen said. “We look at attractive opportunities all the time.”

The company is poised to scale when the right opportunity comes along but plans to grow responsibly, she added.

“We want to be one of the best companies, not just in cannabis,” she said.

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Last week’s reclassification of medical marijuana as a Schedule 3 drug is a critical development for cannabis. TerrAscend, which has medical licenses “in all of its state businesses,” is looking forward “to the benefit of 280E tax relief,” Gefen said.

The company is also planning to register with the U.S. Drug Enforcement Administration as a medical marijuana provider via the portal that opened Wednesday.

“We are following all the steps dictated by the DOJ and DEA to register our state-licensed medical facilities,” Gefen said.

With rescheduling, the national industry is set to see significant changes, including lower taxes, expanded research opportunities and a reduction in the stigma surrounding cannabis use.

Other reforms may soon follow.

“While the rescheduling of medical cannabis will not in and of itself solve banking problems, we think it’s likely to be a catalyst for state and federal reform, including with respect to banking,” Gefen said.

Compliance is king

TerrAscend has been proactive in preparing for the shift, ensuring its licensed facilities are in compliance with state regulations.

“Compliance is the cost of admission,” Gefen said. “We can’t grow unless we’re compliant. It’s just ingrained in our culture. We have very few violations. There are always things that are gray, but we’re a leader in the industry, and a lot of regulators look to us.”

The company recently reorganized its regulatory and compliance team to stay ahead of industry changes.

A portion of the team is dedicated to monitoring legislative developments, engaging with regulators during comment periods and working with industry groups to influence outcomes.

“We’ve built the infrastructure, so now we’re ahead,” Gefen said. “We’re ready when change happens.”

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The company also works closely with regulators to shape policies that impact the industry.

For example, TerrAscend Regulatory Affairs Manager Jes Morgan is helping the Maryland Cannabis Administration on potentially drafting new regulations for sublingual pouches, a product unfamiliar to the MCA.

“They have had numerous meetings with us to learn about how they can allow this product and build the standards around it,” Gefen said.

Another example of working with state regulators to set policy occurred in New Jersey, where TerrAscend was among the first licensees to open a greenhouse. The state Cannabis Regulatory Commission visited TerrAscend’s facility to learn about setting up systems like cameras, fencing and motion detection, Gefen recalled.

“We had the CRC onsite numerous times to assist in building the framework for security and safety so they had something to go on and would be comfortable allowing other licensees to open similar greenhouses,” she said.

The New Jersey CRC also modeled its Office of Diversity and Inclusion on TerrAscend’s practices.

“The director asked permission to use our method of state reporting on social equity as the standard across the entire state,” Gefen said.

“Now every licensee in the state of New Jersey uses our reporting form that we developed in-house – of course, now it has a CRC logo instead of a TerrAscend logo.”

What guides Gefen’s approach?

Gefen wasn’t looking for a job in cannabis when she joined TerrAscend in 2022. Rather, she was seeking an opportunity to secure the top spot as chief legal officer in a complex industry.

In most industries, legal teams mainly try to avoid risk, she said. In cannabis, however, legal and HR teams help drive the business forward and support company growth.

“There are very few industries where solving a legal problem can impact the business’s growth and strategy,” Gefen said. “I can help with changing regulations and lobbying, and that can directly impact the growth of the company.”

Navigating the push and pull between compliance and business objectives is a constant challenge.

“Marketing always wants to make bold claims, but we have to ensure those claims are substantiated,” Gefen said, emphasizing the importance of evidence-based claims.

Drawing on her experience in other highly regulated industries, such as alcohol and food, she said it’s important to maintain strong relationships with regulators.

“When there’s a problem – and there always will be – it’s much easier to have tough conversations if you’ve built a good relationship with your regulator,” she said.

Finding the balance between caution and risk

At TerrAscend, following the rules is the starting point for everything the company does. There’s a team dedicated to compliance, but Gefen said everyone in the company is responsible for making sure they follow the rules.

“We act as if every decision will be on the front page of the newspaper or I’m going to have a conversation about with my mother,” she said.

But there’s always a balance between following the rules and meeting business goals.

When the rules aren’t clear, companies must be careful – not too cautious, but not too risky, either.

“Where things are not as clear, we don’t want to be the most conservative because that can impact our competitive positioning,” Gefen said.

“Compliance has to be balanced against the commercial business because we’re here to make money for our shareholders and grow.”

Margaret Jackson can be reached at margaret.jackson@mjbizdaily.com.