Crypto News: Now representing cannabis, David Boies

Welcome to my newsletter on the cannabis and psychedelics industries. Last week's story about the Alaska Airlines pilot has stirred new questions about whether the drugs or their users are to blame when something goes wrong. Meanwhile, a challenge against the US government over federal interference with state-sanctioned cannabis businesses could be just the solution the marijuana industry's been looking for.

Just as the cannabis industry was bemoaning its legislative prospects with the appointment of House Speaker Mike Johnson, a new lawsuit showed a potential path out of political gridlock.

David Boies, the lawyer famous for taking on historic and often controversial cases involving US elections, Microsoft, Harvey Weinstein and Theranos, has a new high-profile client: the cannabis industry. Boies, chairman of law firm Boies Schiller Flexner, filed a lawsuit last week in Massachusetts challenging the federal government's ability to interfere with cannabis businesses in states that have legalized the drug. The lawsuit drives at a contradiction between two measures: the federal Controlled Substances Act and the Interstate Commerce Clause of the Constitution.

More important for the cannabis companies, it could be a quicker way to achieve a more favorable legal environment than going the legislative route, a prospect that dimmed last week as Johnson was elected speaker of the House. He has opposed legislation known as SAFE Banking that would provide legal protection for banks who do business with the marijuana industry.

If the lawsuit succeeds, it could do as much or more for the industry's struggling companies than SAFE Banking, or even a reclassification of cannabis as a lower-risk drug.

Equal banking

Boies said a victory in the case should allow all cannabis companies to bank like all other companies. Currently, cannabis companies can only work with state-chartered banks and credit unions.

"It has advantages for small businesses as well," Boies said in a phone interview, saying it could help them be eligible for Small Business Administration loans.

Indeed, small players aren't doing well in the current landscape. The lawsuit was brought by independently owned Massachusetts-based plaintiffs Canna Provisions, a retailer, and Wiseacre Farm, a cultivator. They've been harmed by federal prohibitions despite their state legalization, according to the lawsuit, which described Canna's trouble posting jobs and running workshops, and Wiseacre's difficulties leasing out acreage from other farmers.

But Verano Holdings, a multistate operator, is also a plaintiff. Although not named in the lawsuit, other large companies with operations in multiple states — Ascend Wellness Holdings, TerrAscend and Green Thumb Industries — are also "foundational supporters" of the suit, according to a press release. So are investment firms Eminence Capital and Poseidon Investment Management.

A spokesman representing Boies' work on the lawsuit declined to clarify whether the supporters are funding the case.

Big companies like those would also stand to benefit from a victory in the lawsuit — even more than if the industry achieves its goal through new national laws. That's because of the particular way companies have evolved due to the patchwork of state-by-state laws.

Double-edged sword

Full federal legalization of marijuana and the interstate movement of raw and packaged marijuana product that could come with it would actually be a double-edged sword for those and other major companies. While they would presumably get many of their main wishes — the ability to take institutional investments, list on major stock exchanges, and take tax deductions like normal companies — those that have already built duplicative cultivation, processing and distribution networks in each state they're in might not look so efficient anymore.

Boies said not having interstate marijuana transport could be a particular advantage for small businesses that only operate in one state, as well.

Whether such a legal challenge can prevail — or do so in time to pre-empt political change — remains to be seen. Meanwhile, some cannabis companies aren't so pessimistic about political prospects despite the new House speaker's stance on SAFE Banking.

"While Speaker Johnson has personally voted against legislation reforming cannabis laws, the will of the House has been clear on supporting sensible reforms," said Bryan Barash, vice president for external affairs at Dutchie, a technology company that works with cannabis companies. "The SAFE Banking Act is a bipartisan bill with strong momentum in Congress, having passed the House seven times, including 91 Republican votes the last time it was voted on."

Boies and his partners began working on the case around a year and a half ago.

"It seemed like an important states' rights and constitutional question, a civil-rights and individual-liberty question," he told me of his rationale for taking up the challenge, "and we knew people for whom access to legal medical marijuana was vital to their well-being."

51%

The percentage of cannabis consumers who report using cannabis during celebrations and special events (though cannabis sales last Halloween, on a Monday, rose just 4% compared with other Mondays that month), according to a recent analysis by cannabis data tracker BDSA.

"I'm not OK."

— Joseph David Emerson

Off-duty Alaska Airlines pilot

Emerson made the comment just before he tried to cut the engines on a jet in midair, and 48 hours after taking psilocybin mushrooms, according to a New York Times story on a lawsuit that's spurring new questions about the risks of "magic mushrooms."

Meta Platforms, the owner of Facebook and Instagram, will ignore some of its ethics watchdog's advice to tighten up its oversight of drug-related posts, in a decision with widespread ramifications for how people learn about psychedelic drugs.
New York lawmakers are pressing for legislation that could help root out rogue financiers among illegal marijuana shops in the city that could be a source for terrorism groups, the New York Post reported.
New House Speaker Mike Johnson, who has repeatedly invoked his evangelical Christian faith, has opposed legislation that would provide legal protection for banks who do business with the marijuana industry in states where the drug is legal.
British development-stage biopharmaceutical company Compass Pathways said Chief Financial Officer Mike Falvey is leaving the company.
An appeals court ruled that an ayahuasca-using church has standing to sue the Internal Revenue Service for tax-exempt status.
Beckley Waves, the first venture studio focused on building and investing in companies in the thriving psychedelic ecosystem to advance mental health and well-being, announced the acquisition of Nue Life, a leading ketamine-assisted therapy provider.
The flagging rally in K-pop stocks is facing a new headwind from concerns over recent police investigations into drug use by Korean celebrities.
While people turn to cannabis to relieve anxiety, marijuana use is probably making their anxiety worse, the Wall Street Journal reported.