By Omar Sacirbey and Bart Schaneman
Nevada is poised to launch recreational marijuana sales, a cannabis-friendly credit union makes progress in a court case, and Canada’s Canopy Growth is registering losses while expanding its production capacity.
Here’s a closer look at some notable developments in the marijuana industry over the past week.
Nevada rec sales begin
Las Vegas is going to look a little more green than usual at 12:01 a.m. Saturday.
Recreational marijuana becomes legal in Nevada on July 1, and some medical marijuana dispensaries that received adult-use licenses plan to begin sales after the clock strikes midnight.
“It’s huge,” he said. “It’s almost like a Black Friday at a Walmart.”
Andrew Jolly, owner of the Source Dispensary in Las Vegas, is waiting until 9 a.m. Saturday to begin sales, but he’ll have food trucks and a DJ onsite.
“I don’t know what the immediate response is going to be,” he said, “but I’m confident over time the word will get out and people will understand you can buy cannabis just like any other product.”
Neither owner is concerned about a potential supply-chain issue if a dispute lingers between the Independent Alcohol Distributors of Nevada and the Department of Taxation over who can distribute rec cannabis products. A district court judge ruled in favor of the liquor wholesalers, but the tax department plans to appeal.
Regulators are permitting MMJ dispensaries to service the adult-use market from their existing cannabis supplies. But when that supply runs out, the dispensaries can’t procure additional product until the dispute is settled.
Doyle and Jolley expect a deal to be reached before the businesses encounter supply problems.
“It’s just a question of when,” Doyle said. “Nobody’s a winner in this situation. So there needs to be a compromise.”
Fourth Corner’s next move
The Tenth Circuit Court of Appeals awarded the Fourth Corner Credit Union a partial victory, saying the Federal Reserve Bank of Kansas City, Missouri, was wrong to deny the financial institution a master account that would have enabled it to do business with cannabis companies.
The court ruled that the Federal Reserve lacks the authority to deny master account applications or to assume the credit union will violate federal law.
That doesn’t mean, however, that Fourth Corner will be opening a master account anytime soon. First, the credit union must reapply for a master account, Fourth Corner vice president Mark Goldfogel said.
Reapplying for a master account may sound like a long bureaucratic process, but Goldfogel said it’s actually a simple process involving a one-page document seeking a financial institution’s basic information:
- Routing number
- State certification number
The form notes it takes five to seven days to process the application, Goldfogel said.
Despite the simplicity of what should be a formality, he’s concerned the Federal Reserve could find other ways to try to trip up Fourth Corner.
“It’ll be very interesting if we do reapply and they do turn us down. It may get the whole court thing going again,” Goldfogel said. “They may create other objections. The objection that they can’t continue to use is that we will use our license to break federal law.”
Cost of growth
Canopy Growth, the largest licensed medical marijuana producer in Canada, made news because its aggressive expansion plan helped put the company 16.7 million Canadian dollars ($12.84 million) in the red despite posting CA$203 million in sales and doubling its patient base to 58,000.
Besides its main Smiths Falls, Ontario, production facility, Canopy has four locations in Ontario, a Quebec location that’s preparing for a pre-licensing inspection by federal regulators and another in New Brunswick that’s being renovated. Canopy is also pursuing a license in Alberta and expanding one it has in Saskatchewan.
Bruce Linton, chairman and CEO, estimates Canopy has more than 10,000 square feet of vault space across its multiple locations that will be able to hold between $650 million and $750 million in inventory,
Does Canopy have the financial wherewithal to maintain this expansion and recoup the investments?
It’ll help if the federal government allows infused products, concentrates and other types of products, said Bruce Linton, Canopy’s chairman and CEO.
“The way you keep having more value is by diversifying the products. To have the breadth of offerings we want, we need to be looking at triple where we are,” said Linton, noting that Canopy produced 31,000 kilograms (68,200 pounds) of marijuana, tops among Canadian producers.
Omar Sacirbey can be reached at [email protected]
Bart Schaneman can be reached at [email protected]