The South by Southwest festival is billed as a convergence of music, films and interactive experiences. It’s an event that descends upon Austin, Texas in a mad sprawl. South by Southwest opens previously shuttered businesses just for the weekend, it takes over breakfast spots downtown and rebrands them for dating apps, it restricts access to certain bars only to SXSW badge holders. It boosts intimate musical performances, conference discussions with Hollywood celebrities and esteemed journalists — and, this year, it also included a cannabusiness track.
But make no mistake about it, while SXSW may have dabbled in hemp-derived CBD, there was no THC permitted. Texas still has some of the strictest laws in the nation when it comes to providing even medical marijuana to its neediest citizens. In step with the Federal Controlled Substances Act, cannabis is still one of the most dangerous substances on the planet in the eyes of Texas lawmakers.
The fact that people are still be incarcerated for a plant that’s been legalized in some form in over half the states in the nation was a key element to the cannabis conversation at SXSW last week. And, the nation’s overwhelming desire to end the prohibition of marijuana has made for some surprising additions into the world of cannabis commerce, most notably, the former Speaker of the U.S. House of Representatives John Boehner. At SXSW, everyone was on board to legalize cannabis on a federal level, but the discussion was clearly starting to center on who will make the profits when this seemingly inevitable conclusion arrives.
It’s the first day of the cannabusiness track and I’m sitting in the plush chairs in the Leafly lounge, looking at a wall of cannabinoid and terpene combinations designed to explain the intricacies of the cannabis plant. I’m talking with Leafly’s California editor David Downs. We’re on the sixth floor of the Hilton Hotel, most of the way through the workday, when he remarks at how odd it is to be celebrating cannabis at SXSW when there are people who are still in prisons in Austin and elsewhere for cannabis offenses. It’s a strange concept to consider while looking at the free slushy machine decorated with strain names in the insulated conference room. It’s also a problem Boehner says, in his keynote address the following day, that he believes is about to be resolved, at least, for those who haven’t already been caught up in the criminality of marijuana’s prohibition.
“Washington has just been in the way,” Boehner said. “Thirty-three states have done this. Under the 10th Amendment, the states can do whether they want to do as long as it doesn’t violate the constitution and as long as they’re not bigfooted by Washington. So thirty-three states have done this and it’s not that Washington is purposely getting in the way. It’s just that they have been in the way and they’re not getting the hell out of the way.”
Speaking as the chair of cannabis investment company Acreage Holdings, Boehner noted the banking challenges and onerous IRS regulations against cannabis under its definition of a Schedule I narcotic.
“The federal government just needs to get out of the way, whether it’s the STATES Act, whether the FDA decides we’re going to reschedule cannabis to a Schedule III or IV or deschedule it all together, there are a number of things that could happen, but right now the STATES Act is where, I think most of the momentum is,” he said. “And it says if the state has decided that they want to make cannabis legal, the federal government recognizes that it’s legal in that state. That would be a giant step in the right direction.”
The passage of the STATES Act, Acreage CEO Kevin Murphy said, would give his company a better tax code to operate under and even the playing field between the U.S. and Canada.
“We’ve provided hundreds of careers and hundreds of jobs for people that are passionate about this business that want to help people help themselves,” Murphy said. “Wouldn’t it be nice to have a normalized tax code where we can pay these people better and where we can have a more profitable business to give back more on social issues?”
Murphy said his company was seeking the privilege of being listed on the U.S. Stock Exchange or the Nasdaq, calling out that Canadian companies already have this ability, and mentioning Canopy specifically.
“So they’ll welcome the Canadians to basically, frankly, repatriate all of that money back to their country,” Murphy said. “I think it’s time that we change our view so that we can be on equal footing.”
Boehner, who said he did not personally use cannabis, but might in the future in the place of an Advil PM, made several references to the imminent arrival of Big Business in the cannabis space.
“You’ve got industries who are looking for ways to grow who are shrinking today,” Boehner said. “And long term, that’s not good for their investors, that’s not good for their stock and they’re looking for ways to grow their company. There’s Big Alcohol, Big Tobacco, Big Pharma, soft drink companies… When you look at the size of this market, of what it’s going to look like 10 years from now, of what it’s going to look like 20 years from now, we’re in the very early stages of what is going to be a huge industry.”
Mentioning the 50 billion dollars of sales each year in the tobacco industry and getting a laugh when he answered “my fair share” after being asked how many of those tobacco products he personally consumes, Boehner said he guesses the legal cannabis industry will be bigger than tobacco in the next “seven to eight years.”
Outside in the lobby area of the Hilton where Boehner spoke, a small group of activists held up a banner that read “Just Say No to Big Marijuana.” The group was organized by the Equity First Alliance and was in protest of the appearance of both Boehner and MedMen CEO Adam Bierman.
“Less than a mile from Travis County Jail, where people of color are still disproportionately incarcerated for cannabis possession, multibillion-dollar conglomerates that are disproportionately controlled by white men will speak at SXSW about dominating the cannabis marketplace,” the group said in a news release. “[Boehner’s] voting record in Congress (1991-2015) shows that he consistently opposed criminal justice reform, civil rights, LGBTQIA+ protections, environmental protections, and public education. After 24 years of devastating communities with his policies, John Boehner wants to profit off of cannabis in the wake of the War On Drugs.”
The group, which also displayed banners on the highway near the event, also called out Bierman.
“MedMen faces allegations of wage theft, racism, and homophobia in the workplace, as well as financial improprieties in their pursuit of profit,” they said in a release explaining the SXSW actions. “In spite of being valued at $1.6 billion, MedMen has not made any significant commitment to funding equity justice or repair in the cannabis industry.”
The group said both men were representative of a trend towards racial inequality in cannabis.
“When understood in the context of a War on Drugs that has disproportionately harmed low-income communities of color for decades, this state of affairs requires community intervention.”
Also fighting against the tide of Big Cannabis, Project SAM CEO Kevin Sabet tweeted a statement of support.
— Kevin Sabet (@KevinSabet) March 15, 2019
Cannabis as a Spiritual Guide
Speaking at a panel on March 15, Heisman trophy winner and former NFL player Ricky Williams — who went to school at the University of Texas when he played football — offered a different perspective on cannabis than what is typically discussed at events surrounding cannabis commerce. Williams said he had his first meaningful experience consuming cannabis was just blocks from where the conference took place.
“There’s a lot of talk these days about medicinal marijuana and how important THC and specifically CBD are for athletes, especially athletes that are experiencing brain trauma,” he said. “I think that’s real and I think that’s meaningful, but my personal experiences with cannabis have touched me in deeper ways beyond the body.”
Williams is the vice president of product development at Real Wellness, a California-based company developing with a line of both CBD and THC products.
“The story of when I left football was ‘football player giving up millions giving up everything to smoke pot’ and that’s partially true, but the deeper truth is you can’t always judge a book by its cover,” he said. “We’re all victim of our conditioning. I think in many ways I was conditioned to chase money, to chase fame, to chase power, but underneath there was something subtler, something truer. And I think it’s the same with cannabis in that on the outside, most of us have been conditioned that this is a drug and this is bad for us, but just maybe if we go a little bit deeper and ask some deeper questions, we might find a different reality.”
From the Farm to the Las Vegas Strip
In a SXSW panel moderated by Cannabis Now publisher Eugenio Garcia, Matthew Morgan described how his cannabis journey took him from his family’s expectation of taking on the multi-generational family homestead in Montana, to running one of the largest cannabis companies in the world. Morgan started a cannabis company in Arizona (Bloom) before becoming CEO of Reef Dispensary. He has since moved on from Reef to other ventures in California.
“We ended up creating a 165,000 square-foot center, a cannabis center, that was two blocks off the strip in Vegas,” Morgan said. “And when it was medical, there weren’t very many patients, our assumptions were way off, we were just bleeding from every which direction from the company standpoint. Well, the minute they flipped over that recreational switch in Nevada, July 1, 2017, I’ll never forget the company instantly went cash-flow positive.”
Morgan said the recreational marketplace in Nevada allowed him to become head of one of the then-highest revenue cannabis companies overnight. Morgan spent most of his talk giving advice in regards to strategies to secure capital and successfully brand cannabis companies. When asked if the industry will be dominated and can survive without Big Business, Morgan said the answer was no.
“You need Big Business to legitimize the industry and for Washington, D.C. and other politicians to take you seriously,” Morgan said. “I think there’s definitely still room for young aggressive entrepreneurs that want to create a foothold in the space, I think there’s still an opportunity for that. As more time goes, it’s going to be tougher and tougher to enter the space as a stand-alone, but I think Big Business is necessary to give the legitimacy to the industry and, you know, I do see those guys being industry leaders long-term just because they have first-mover advantage and they have so much capital behind them at this point that it would be hard to take them down.”
TELL US, do you think big corporations have a place in the cannabis industry?