Category Archives: Investing

U.S. Cannabis Inventions on the Rise As Legal Marijuana Market Grows

“Last year, Reuters reported that the USPTO issued 39 patents containing the word cannabis during 2018 through late November. The USPTO only issued 29 such patents during 2017 and 14 during 2016.”

The shifting status of marijuana from an illegal controlled substance to regulated medicinal product to, in some jurisdictions, legalized recreational activity has created a market that promises to be incredibly valuable in the years to come. An April 2018 report from Grand View Research predicted the global market for legal marijuana products to exceed $146 billion by the year 2025. A 2018 cannabis report by Deloitteforecast Canada’s cannabis market to reach $7.17 billion in total sales during 2019, including $4.34 billion in sales of legal marijuana products. In the U.S., 2017 sales of legal recreational and medicinal marijuana products resulted in revenues of up to $6.6 billion, a fraction of the estimated $50 billion to $55 billion of total U.S. demand for recreational cannabis products.

Although Canada fully legalized both the recreational and medicinal use of marijuana last October, marijuana legalization is occurring more slowly and piecemeal in the United States. In the U.S., marijuana is still a Schedule I drug under the Controlled Substances Act, although medicinal use is legal in 33 states plus the District of Columbia and recreational use has been legalized in 10 states and Washington, D.C. However, even these slow moves in the direction of full legalization have galvanized inventors filing patent applications on cannabis-related inventions with the U.S. Patent and Trademark Office (USPTO). Last year, Reuters reportedthat the USPTO issued 39 patents containing the word cannabis during 2018 through late November. The USPTO only issued 29 such patents during 2017 and 14 during 2016.

Increased research and development expenditures among major cannabis producers are another indication that marijuana’s gradual legalization is spurring cannabis innovations. Canadian cannabis firm Canopy Growth indicated in its second quarter earnings report for 2019’s fiscal year that the corporation spent $1.94 million CDN on research and development for the quarter, a major increase from the firm’s $494,000 in R&D expenditures during Q2 2018. Similarly, Edmonton-based Aurora Cannabis reported that it spent $3.43 million CDN on R&D during the first quarter of 2019, up from $107,000 CDN during Q1 2018. Aurora also identified $2.35 million CDN in patent-related acquisitions since the end of July 2017.

Perspectives from Industry Insiders

Legal professionals in this realm are optimistic about the prospects for cannabis inventions, especially given the early stages of development in many cannabis sectors. Howard Cohn, chief patent attorney and managing partner at THC Legal Group, which is a cannabis-focused specialty division of Howard M. Cohn & Associates, said that, as the market for cannabis grows, he expects the push to obtain market share through patent holdings will only increase. “My gut feeling is that inventors will spend more time developing proprietary ways to integrate cannabis extracts into existing products and far less time attempting to obtain patents on unique strains of genetically engineered cannabis.” Cohn added that the food and beverage industry “is a natural partner for the cannabis space and will likely experience an explosion of innovation vis-à-vis cannabis oils. Cannabis enthusiasts should expect to see great advances in cannabis infusions and a variety of clever engineering moves designed to maximize the potency of the end-product with the least amount of raw cannabis material,” he said.

Michael Brubaker, patent attorney with Cannapatents, likened patenting activities in the cannabis industry to those occurring in blockchain technologies. “Those are two breakout industries that have these areas where you can grab broad patents and license them to companies that will hopefully come into the market in the next few years,” he said. “The broader the patent, the better the patent.”

One issue that has acutely affected the world of cannabis patents is a lack of available prior art, which has allowed some patent applicants to obtain patent claims that would otherwise be anticipated or obvious over the prior art. This is due in part to marijuana’s legal status discouraging publication of cannabis-related innovations by inventors who don’t want to attract the attention of federal law enforcement. Brubaker acknowledged that prior art issues have affected the industry. “A patent examiner only has so much time to search for prior art on each patent application,” he said. “They’ll definitely do a search of patent and patent application databases, and may even do a quick Google search, but it’s possible in the cannabis field that they may not find something that everyone else knows is pretty common in the art. If the examiner doesn’t find it, then there’s no rejection based on the prior art.”

Recently Granted Cannabis Patents

Oral Care Composition Comprising Cannabinoids

U.S. Patent No. 10172786, issued on January 8 of this year and assigned to AXIM Biotechnologies, claims a cannabinoid toothpaste composition comprising an abrasive agent, a binder, a humectant, a fluoridating agent, a surfactant, water, a thickener, cannabidiol (CBD) present in an amount from 0.1 percent to 0.5 percent by weight, and lactoferrin present in an amount from 0.1 percent to 0.5 percent by weight. The oral care composition covered by this patent, which can also come in a mouthwash solution, makes use of CBD to promote the antibacterial properties of the composition.

Packaged Frozen Cubes of Cannabis Juice Purée with Added Decarboxylated Cannabis Material

U.S. Patent No. 9956174, issued in May 2018 to inventor Jeff Nordahl, claims a package comprising a plurality of frozen structures of cannabis juice purée where the structures include amounts of CBD, tetrahydrocannabinol (THC), cannabidiolic acid (CBDa) and tetrahydrocannabinolic acid (THCa) and where the purée is formed by blending leaves of a cannabis plant and the shredded leaves remain in the frozen structures of the purée. The invention, intended as a dietary supplement, provides a means for manufacturing and packaging cannabinoid products which delivers the medicinal properties of THCa and CBDa without those substances being decarboxylated through heating processes into THC and CBD.


Method for Making Coffee Products Containing Cannabis Ingredients

U.S. Patent No. 9888703, issued in February 2018 and assigned to Imbue LLC, claims a coffee pod consisting essentially of carbon dioxide extracted THC oil cannabis, coffee beans and maltodextrin. The invention covers methods of creating a consumable coffee drink that consistently contains about 5 milligrams (mg) to about 50 mg of THC, the primary psychoactive component of the cannabis plant.

Single Serve Beverage Pod Containing Cannabis

U.S. Patent No. 9480647, issued in November 2016 and assigned jointly to CannTrust Inc. and Club Coffee L.P., claims the method of preparing a single-serve container configured for receipt in a single-serve brewing machine, the method involving processing cannabis by pulverizing it to a particle size of less than one millimeter (mm) and by heating it at a sufficient temperature and time period to decarboxylate cannabis, adding the processed cannabis to the single-serve container, adding an effective amount of a lipid-rich food-based extraction agent and sealing the container. This invention, which could be used with Keurig or Tassimo machines, is intended to provide the medicinal benefits of marijuana to patients who may be reluctant to smoke marijuana.

Enhanced Smokable Therapeutic Cannabis Product and Method for Making Same

U.S. Patent No. 10172897, issued on January 8, 2019, and assigned to NC3 Systems, claims a method of preparing an enhanced smokable therapeutic cannabis product by separating hash resin from plant material of a cannabis plant, pressing the hash resin to expel oil and create spent hash resin, extracting further cannabinoids from the spent hash resin using medium chain triglyceride oil, enriching the extracted oil with purified ?-myrcene and spraying the enriched oil onto dried smokable cannabis plant matter. The invention provides more of the therapeutic effects of marijuana by addressing shortcomings in varying chemical content across different strains.

Cannabis Claims Canceled

Cannabis Plant Named Mr. Grass Weedly

U.S. Patent Application No. 20190000029, filed in July 2017 and assigned to Insectergy, LLC, claims an alimentary multifunctional composition including cannabis and insects with a CBD content ranging from 0.00005 weight percent to 15 weight percent and a THC content ranging from 5 weight percent to 63 weight percent. The composition has an insect mass ratio ranging from 25 pounds to 1,500 pounds of insects per ton of composition. The invention addresses a need for a superior blend of cannabis providing improved medicinal benefits and has a high yield to meet demand at a low price.

Brubaker said that it appeared this particular patent application was experiencing a difficult time at the USPTO given the fact that claims 1 through 151 have been cancelled. “It’s very rare for a patent application to start with 152 claims,” he said. A seventh supplemental preliminary claim amendment document posted to the Public Patent Application Information Retrieval (PAIR) image file wrapper for this patent application shows that the patent applicants have cancelled claims 1 through 247 and have proposed new amended claims 248 through 279.

Brubaker noted that it was very unusual to include the brand name of the particular marijuana strain in the title of the patent application.

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Canada Cannabis Payments Face Their Own Hurdles

Since last year, when Canada legalized recreational pot in full, the nation became a kind of country-sized lab for how that new business would play out. That market could reach as much as $5.1 billion in annual sales by 2020, according to one estimate – though some predictions are higher, especially ones that include spending on accessories and growing supplies.

Still, even after all these months, and even with legalization done at a federal scale (as opposed to province by province), the cannabis payments process has hardly hit a full stride. While not as bad as the situation in the U.S., the situation demonstrates that payments don’t always keep pace with rapid social change — change that often encourages entrepreneurship. That said, payments providers are indeed working hard to fill in the gaps when it comes to the growing cannabis business, both in Canada and the U.S.

Cannabis Spending

One month after Canada legalized marijuana for everyone in the country, Canadians spent C$54 million ($41 million) on the product, according to a recent report in Bloomberg. The C$54 million number is higher than the original estimate of C$43 million, illustrating the potential of the market. “Retail figures will vary as new stores continue to come online and the marketplace continues to evolve,” the report said.

Canada legalized cannabis after Prime Minister Justin Trudeau said prohibition wasn’t working and provided illicit money to gangs, while allowing for unchecked use by the country’s youth. The legalization of marijuana in Canada was a big win for the prime minister, who said he would legalize pot use when he was running for office in 2015. The idea is to take profits away from organized criminals and to regulate the production, distribution and consumption that is already available illegally.

Bank Participation

But there are still barriers to full access and exploitation of those profits.

According to various reports and analysis, the Bank of Montreal remains the only “Big Five” financial institution in Canada to deal directly with the legal cannabis business there, including via financing of those state-sanctioned operations. That had led to the bank attracting business from cannabis producers seeking bank accounts — news that underscores what happens when a major payment and financial services provider gets in early. Smaller financial firms participated in the action as well.

The U.S., at least via certain federal agencies, has taken a dim view of legal recreational pot use in Canada, a view that has led to warnings and hassles for Canadian citizens entering the country. As well, Canadian financial institutions still worry that dealing with cannabis operations — even though they are legal — could lead to anti-money laundering compliance issues, as is the case in the U.S.

Payments Warning

Those worries, in fact, have bled down into a warning regarding consumer payments — a warning that won’t do much to encourage the further use of digital payment methods and plastic cards for legal cannabis purchases in Canada.

In late 2018, Daniel Therrien, Canada’s federal privacy commissioner — a job that spans larger issues of digital privacy, among other topics — warned consumers in the country to use cash, not cards, to buy their recreational pot. “Cannabis is illegal in most jurisdictions outside of Canada. The personal information of cannabis users is therefore very sensitive,” Therrien wrote. “Some countries may deny entry to individuals if they know they have purchased cannabis, even lawfully.”

Oddly enough, that may be hard for some cannabis buyers, as a recent report noted.

“If you live in Ontario, the only means of buying legal weed is through the Ontario Cannabis Store — an online sales platform that only accepts credit card payments,” according to Civilized.  “The personal information of 4,500 OCS customers had already been breached, though there hasn’t appeared to be anyone blocked from travel because of this.”

The report adds that when it comes to legal medical marijuana in Canada, “the only way for patients to legally buy medical marijuana is online.”

U.S. Progress?

In the U.S., meanwhile, the situation is different – though with roughly similar results of making financial institutions and card networks reluctant to serve the industry.

U.S. federal law still classifies marijuana as an illegal substance, producing a conflict with states that have legalized pot in various ways. But some financial institutions, backed by certain law enforcement officials and lawmakers, are pushing a Congressional bill that would allow “safe harbor” to banks and credit unions that serve the legal cannabis industry (including vendors that serve legal cannabis operations).

It appears likely that when it comes to cannabis, financial institutions and payment services, progress in Canada will stay a step ahead of what happens in the U.S. But that doesn’t mean things will develop quickly in Canada. Even in the early 21st-century digital era, it can take a long time for the realities of payment and commerce to catch up with social change.

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The U.S. Hemp Industry Is Expected to Grow to $2.6 Billion by 2020

The entire cannabis industry has been spreading like wildfire lately, but a particular niche seems primed to becoming the next big thing: hemp.

Following the passage of the U.S. Farm Bill, hemp and all hemp-based products are now legal (not including CBD edibles, currently under attack, as we just saw in New York), which makes for a thriving industry. There are 2 primary differences between hemp and cannabis. Number one, hemp won’t get you high but it has many of the same benefits as cannabis since it often has other cannabinoids and especially high levels of CBD. Number two, hemp has a history of industrial uses such as producing paper, plastic, food, clothing, insulation, and numerous other products.

So what can we expect in terms of growth when it comes to the hemp? Well, we’re looking at an industry expected to double in market size within two years. According to a recent report from New Frontier Data titled The Global State of Hemp, worldwide hemp sales equaled $3.7 billion in 2018 and are estimated to be almost double at $5.7 billion by 2020.

As of now, China is leading the profits game with nearly $1.2 billion in hemp sales. The United States came in second with an even $1 billion, followed by all of Europe at $980 million, and Central and South America rounded out the end of the list with a combined total of $220 million.

As the market grows, it’s expected that the United State may move in to the top slot, depending on how any upcoming regulatory changes are handled. New Frontier Data predicts that U.S. hemp sales will increase to $2.6 billion by 2020. About half of this revenue will come from the sale of hemp-derived CBD products.

If you’ve been looking to invest in the industry, now would be the perfect time, as long as you have done your homework… Check back for more updates on this developing market and make sure to subscribe to our Weekly Newsletter for all the latest news and information about the cannabis and hemp industries.

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Editorial: The Canada-California cannabis connection

Canada often serves as America’s colder, nicer, saner foil, and its handling of marijuana policy exemplifies its more pragmatic side. While federal, state and even local governments in the United States hurtle in different directions on cannabis, our northern neighbor dispensed with much of the confusion by legalizing the drug at the national level last year.

Two Bay Area business deals this week presaged the literal dividends of that decision. Canadian cannabis concerns acquired the Oakland mega-dispensary Harborside as well as three San Francisco dispensaries owned by Apothecarium. The former transaction, valued at $153 million, is a reverse takeover in which a smaller Toronto company is acquiring its larger Oakland counterpart, which also has a San Jose dispensary and will retain most of the ownership of the resulting firm. Another Toronto company is buying Apothecarium for $118 million in cash and stock.

Both of the purchasers are publicly traded on the Canadian Securities Exchange, which listed about 50 American cannabis companies last year. That will give the firms valuable access to capital markets and dramatically increase their ability to grow in more than the cultivating sense.

That is in sharp contrast to the companies’ situation in the United States, where then-Attorney General Jeff Sessions was still mulling a war-on-drugs-style crackdown on marijuana even as Canada was moving to legalize it. Federal authorities were moving to shut down Harborside until 2016.

Cannabis remains illegal for medical or recreational purposes at the federal level and in 17 states. The nation’s law enforcement agencies are still making more than 600,000 arrests a year on marijuana charges, most of them for possession, a figure that has been rising in recent years despite increasing legalization. Such arrests disproportionately affect minorities.

The costs and harm of continuing criminalization are in addition to the economic benefits forgone in states that have changed course. Cannabis’ legal limbo cuts it off from regular banking and financial services, let alone the stock market.

Former California Treasurer John Chiang at one point advocated a fleet of armored cars to help the state collect marijuana taxes paid with huge quantities of cash. His successor, Fiona Ma, proposed special state-chartered banks to provide services to marijuana businesses; this week, she was among those urging the new Congress, in its first hearing on marijuana, to take steps to give the industry access to conventional financial services.

Both California and Canada have yet to sort out the many complications of ending marijuana prohibition, from ensuring that it doesn’t encourage more use among minors to making the legitimate industry more attractive than the black market.

The difference is in the minimally coherent national policy that remains sorely lacking in the United States.

In contrast to his former attorney general, President Trump has occasionally gestured toward a more forward-looking marijuana policy.

Given his fixation on trade with our northern neighbor, perhaps Canada’s emerging advantage in the industry will push the administration in the right direction.

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The U.K. Just Got Its First Bulk Medical Cannabis Shipment

The first bulk batch of medical cannabis imported into the U.K. since it was legalized for prescription last year has arrived from the Netherlands.

The shipment, exported by the Office of Medical Cannabis, will be sent directly to pharmacies to provide to patients under prescription for treating conditions including chronic pain and multiple sclerosis, according to a statement from British startup Grow Biotech. The company said it worked with investor European Cannabis Holdings and pharmaceutical importer IPS Specials to facilitate the delivery.

The U.K.’s Home Office gave specialist doctors the option to prescribe medical marijuana in November. They will be able to offer the drug on a case-by-case basis when other licensed products cannot meet the patients’ needs. That followed a shift in public attitudes toward cannabis-based medicines after two British children with epilepsy were prevented from bringing medication back into the country, sparking an outcry.

Changing Stances

The regulatory outlook is also shifting in Europe. The European Parliament voted in favor of a non-binding resolution on Wednesday which will seek to encourage European Union countries to increase access to medical marijuana.

The World Health Organization has taken a similar stance, calling on Feb. 1 for marijuana and cannabis resin to be removed from Schedule IV of the 1961 Single Convention on Narcotic Drugs, the most restrictive categorization. Bloomberg Intelligence analyst Gopal Srinivasan said the move by WHO would provide countries with “additional political cover” to reconsider their stances on cannabis.

Canada’s Coming

Europe’s publicly traded cannabis industry remains very small but the industry is proving more lucrative than initially expected. Grow Biotech said in a fundraising announcement in July last year it intends to join the tiny group of marijuana providers on the stock market in the fourth quarter of 2019.

The number of listings in Europe pales in comparison to the boom in Canadian pot stocks born out of the legalization of recreational marijuana. Those names are also looking to a newly liberalized U.K. for expansion, including Canopy Growth Corp., which has partnered with a British cannabis therapies researcher with the aim of introducing products in early 2019. Aurora Cannabis Inc., another of the Canadian pot giants, made its first commercial export of cannabis oil to the U.K. earlier this month. That ingredient is used in wellness products like cannabidiol, or CBD oils which are now sold widely in U.K. pharmacies.

For Aurora too, regulation is key. “One of the things that we’re doing in Europe is making a very clear argument that Europe should move forward in harmonization country to country, so as not to disturb the common market,” said Cam Battley, Aurora’s chief corporate officer said on the company’s earnings call this week. If you want to “operate as a single market, you have to have a harmonized set of regulations.”

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The essential cost guide to becoming a cannabis micro-cultivator in Canada

The application process for a micro-cultivation licence is pretty dense; think between 100 and 225 pages per application

Tucked into the Cannabis Act—the federal legalization that allows for the legal sale of recreational cannabis in Canada—one will find the rules governing how to operate a micro-cultivation facility.

Like the large licenced producers (LPs), there are licensing fees and security requirements; unlike those LPs, micro-cultivators are subject to a designated square footage and output.

The basics

GettyImages 873489192 534x306 The essential cost guide to becoming a cannabis micro cultivator in Canada

First up, it’s important to note that a micro-cultivator can have a facility of 200 sq. m, or 2,150 sq. ft., and with that space, it’s very challenging to get to even 600 kg of dried cannabis per year. (Micro-cultivators are not subject to a 600 kg limit, but processors are.)

“A micro-cultivator approved by Health Canada can only grow cannabis. The only options for selling are another processor, an LP or a researcher,” explains Tom Doran, founder and CEO of Pattern Micro Cultivation, a growing collective of micro-cultivators that also acts as a consultancy for those looking to get into the micro-cultivation business. Micro-cultivators “cannot sell to a provincial or territorial outlet. They can grow cannabis, but cannot make oil with a cultivation-only permit,” Doran points out.

To get a micro-cultivation operation off the ground, a person needs $2,500 for a micro-cultivation licence (this covers growing cannabis plants for distribution) and another $2,500 for micro-processing (this covers anything related to processing and packaging the flower), both through Health Canada. Some consultants stress that if a person wants one of these licences, it’s likely best just to get both.

“[Cultivating], that’s one licence in itself,” notes Edward Collins, vice-president of global sales and marketing at Cannabis Compliance Inc., a Mississauga, Ont.-based firm that specializes in helping cannabis businesses navigate all areas of the industry. “There’s a processor’s licence, that most don’t need if they’re working with a larger LP. There’s a sales licence, and there’s a [nursery licence]. That’s really for genetics more than anything else,” Collins says.

A sales licence will also run a grower approximately $5,000, he says, and a nursery licence will set him or her back another $2,500.

At this point, it’s also worth noting that mirco-cultivators have to go through their municipality to ensure they can operate a cannabis grow facility legally in the area they want to call home, which could incur administrative fees and more depending on the municipality. The specific rules all depend on the municipality in question.

What’s next?

Now that initial fees are out of the way, each micro-cultivator will need to pay $1,654 per person in security fees, which covers directors, shareholders (above a certain percentage) and those holding a meaningful position (master growers, for example) for the site to have the designated clearance to get growing.

Add to this tally, notes Health Canada, that the minimum fee is either $23,000 or $2,500, depending on the types of licences a person is seeking. And once things get under way, there are regulatory fees after revenue starts rolling in, namely one percent for cannabis revenue of $1 million or less and 2.3 percent on any cannabis revenue in excess of $1 million.

What else?

These fees might not be too daunting, yet. However, the application process for a micro-cultivation licence is pretty dense (think between 100 and 225 pages per application, and it can take about eight weeks to complete, Doran says). So, enlisting some outside help could certainly be beneficial, but that assistance doesn’t come for free.

“From the consulting standpoint, a licence to process is about $100,000,” Collins says of what his firm charges. “If you add cultivation to that, it totals out to be about $115,000—somewhere in that price range.”

“There are licensing firms out there,” Doran says. “The one that I use, one of my foundational partners, he charges about $37,000 to complete a micro-cultivation application for Health Canada. If you do processing, it’s about $67,000 for both a micro-cultivation and a micro-processing permit to Health Canada,” he adds.

Other logistics

Money will also become a factor when looking for land to cultivate—a piece of property large enough to play host can cost a prospective grower anywhere from $50,000 to $500,000, depending on the desired location—as well as looking at whether to build a facility from scratch or retrofit an existing structure to fit within the licence’s rules and regulations.

“I think a barrier to entry in micro-cultivation is the cost, the licensing and the construction of the facility,” Doran warns. He also sees marketing as a potential hardship, given that regulations are strict when it comes to marketing cannabis, and LPs will simply have decidedly larger marketing dollars to play with.

“If they dig pretty deep on some of that, there could be some nervousness about releasing that kind of information. Background checks and the security checks might make people nervous. But I will tell you that Health Canada has been fairly lenient, and [his view is] they do want the grey market people to participate in the regulated industry.”

The plus side

There are LPs that are actively looking for micro-cultivators to help supplement or buoy their existing offerings. That being the case, linking up with one of the bigger cannabis brands has its benefits, especially if a would-be grower is looking for a leg-up when getting started.

“Just like with craft alcohol, we want independent operators to be able to create their own niche and their own branding and to compete,” Doran says. “The independent cultivators in the craft cannabis that’s produced will simply be better than what’s produced by the large LPs, who’ll have more output, but it won’t be as good,” he argues.

Doran also mentions that some LPs, such as B.C.-based Sundial Growers, are adding smaller grow rooms to help produce better flower for their proprietary brand, as well as reporting that his understanding is there are only about 30 to 35 micro-cultivation licence applications pending with Health Canada, so now might be the time to get those papers in order.

Although micro-cultivators may be seen as the little guy in this burgeoning industry, it’s clear there are benefits—monetary and beyond—to starting a smaller, legit cannabis growing company.

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How to claim marijuana on your taxes

With Canada now raking in up to $100 million per year in pot taxes, some of that revenue will soon be heading right back to pot users in the form of cannabis-specific tax receipts.

The only catch? Pot-smokers have to have permission from a physician indicating that they’re toking for medical reasons.

Cannabis is one of the myriad of categories that the Canada Revenue Agency has authorized as a permitted medical expense. The tax agency, which prefers the somewhat outdated spelling of “medical marihuana,” considers pot as no different than braille printers, glass eyes or oxygen tents.

However, tax-filers will be required to show evidence of a prescription. Even if a Canadian swears by cannabis for treating their sleep apnea, the CRA isn’t going to care unless they can provide a doctor’s note.

Medical cannabis users also need to buy their product from a licensed producer. As a general rule, the CRA doesn’t let you write off anything purchased on the black market.

CRA rules also exclude the reams of dispensaries who, prior to legalization, handed out dubious prescriptions from naturopaths.

It’s similar to the way the CRA decides whether to write off a gluten-free diet. If a taxpayer can provide a doctor’s note provide proving they have celiac disease, they are allowed to claim the “incremental cost” of gluten-free bread versus regular bread. If the taxpayer is merely going gluten-free to be trendy, however, they pay full price.

Over-the-counter drugs are similarly denied tax relief, even if they are indeed legitimate medical expenses. A Canadian may require cold relief drugs or skin creams to function, but they can’t claim it against their taxes unless someone with a med school diploma has given them the go-ahead.

Still, even authorized medical marijuana users can’t expect to deduct the full value of whatever they’ve paid for their prescribed pot. As with all medical expenses, Canadians must calculate the full value of all the medical pot they’ve purchased and then subtract either $2,268 or 3 per cent of their net income

Medical marijuana has been eligible as a tax deduction for roughly 10 years, although the CRA confirmed as much in 2015 with a letter to the Canadian Medical Cannabis Industry Association.

Prior to legalization, however, it was arguably much easier for auditors to check if a cannabis write-off was above board, since no cannabis could be purchased legitimately in Canada without medical authorization.

The tax situation is much more complicated in the United States. Even in states that have legalized medical marijuana, it is not eligible as a medical write-off because the United States federal government, and thus the Internal Revenue Service, still considers cannabis illegal.

Of course, that’s proven no barrier to the IRS collecting billions in taxes from U.S. cannabis dispensaries.

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Wild, Wild Weed: Genetics, Business and Politics Changing Cannabis

For thousands of years humans have cultivated a species of plant known as Cannabis Sativa.  In the 21st Century, it may be the plant’s turn to change us.

What began as an ancient crop is now having its cultural moment in America.  In Minnesota, there is the lingering possibility of legalization for recreational use.

“For more than 10,000 years we’ve been shaping it,” said George Weiblen, a University of Minnesota Plant Biologist.

For more than a decade, Weiblen’s lab has been mapping the cannabis genome, by cross breeding two cousins:  marijuana and hemp.

The research has led to the discovery of a single gene, responsible for producing two of Cannabis Sativa’s signature chemicals:  THC and CBD.


“They’re like sister molecules,”  said Weiblen.  “We know the gene is responsible for whether a plan produces mostly the THC, or mostly the CBD.  They’re inversely related.”

THC is the predominant chemical in marijuana that induces euphoria.  CBD is the dominant chemical in hemp, which clinical research shows may reduce anxiety and pain, and boost the immune system.

There is a typically a minuscule amount of THC in hemp, and generally speaking, smaller quantities of CBD in marijuana.

Beginning in the 1970s, breeders in the Netherlands and California began genetically manipulating marijuana for higher levels of THC, often at the expense of CBD.

Marijuana in the 1970s and 1980s sometimes contained 10 percent THC.  Today’s commercial brands, with names like “OG Kush,” “Trainwreck,” and “Sour Diesel,” can contain 20-30 percent THC.

“For a plant to put 20 to 30 percent of its resources into making one molecule is pretty extreme,” said Weiblen.

“There’s much we still don’t know,” said Weiblen.  “The discovery of these receptors in the nervous system to which THC binds, these turn out to be the most abundant receptors in our nervous system, and they have wide reaching effects on all our mood, appetite, memory, sleep.”

“It’s a much more complex interaction these molecules have on our brain,” said Weiblen.


The THC molecule still defines what is legal or forbidden, depending on where you live.
Ten states, Washington, D.C., and Canada, have legalized marijuana for recreational use.  Twenty-two other states, including Minnesota, have legalized marijuana for medical use.  In Minnesota, patients can be certified for medical use of marijuana if they have one of a dozen different conditions.

“I lived everyday praying for God to allow me to die,” said Donna Davidge, a medical cannabis patient, who once took several opioids for chronic pain.  Now, she just takes THC.

“With this, I just take a couple little hits.  Get some giggles, and I’m good to go.  I’m not cloudy,” said Davidge.

According the Minnesota Health Department’s Office of Medical Cannabis, among the more than 14,000 current medical cannabis patients in Minnesota, most take it for intractable pain (64 percent), followed by PTSD (16 percent) and muscle spasms (13 percent).

For parents like Kim Kelsey, it is not THC, but CBD that is the savior.

Kelsey’s son, Alec, had life-threatening seizures every day – until he began taking high doses of CBD.

“He had tried over 24 pharmaceuticals,” said Kelsey.  The treatment costs her $700 a month, and insurance doesn’t pay a dime.

Kelsey is one of many patients struggling with the high cost but who worry about what would happen to the medical marijuana  program if Minnesota legalized recreational use.

“I’m supposed to go and pick something out of a cookie jar and roll up a joint for my 26 year old,” said Kelsey incredulously. “That’s not going to happen. I’m not going to pick out a bud and extract CBD.  I mean, I can’t even keep a poinsettia alive.”


“There are some roadblocks in Minnesota,” said Dr. Jay Westwater, CEO of Minnesota Medical Solutions, which along with LeafLine, are the two companies licensed to sell medical cannabis in the state.

In just five years of medical cannabis being legalized in Minnesota, the two companies have reportedly lost $11 million.

“Our accountant tells us we are close to break even,” said Westwater.

Asked why they aren’t making money selling cannabis, Westwater has a simple answer:  “We don’t have enough patients.”

Minnesota’s medical cannabis program does not allow the sale or use of marijuana flower (bud). Instead, THC and CBD are extracted from the plant and put into vaping oil, pills and patches.  All contain very precise amounts of THC and CBD.

Westwater said the companies providing medical cannabis are treated more like a drug cartel.  While the overhead is expensive, there are none of the normal business tax deductions because cannabis is still considered a Schedule 1 Controlled Substance.

“I’m coming at this as a physician, and I’m very comfortable in a medical model,” said Dr. Westwater.


At a recent meeting of the Governor’s Task Force on Medical Cannabis, the message from patients was that the cost of medical marijuana is too high.

“The patients are not being heard,” said Maren Schroeder of Sensible Minnesota.

Joan Barron, a medical marijuana patient, told the task for she is grateful the program has allowed her to get off pain killers, but the cost is becoming prohibitive.

“My husband and I are driving two cars that are about to give out on us, because the cost of a car payment is what I need to find a safer alternative,” said Barron.  “The cost has got to come down.”

In other states, where recreational cannabis has been legalized, cost did come down, but at a price.

“We’ve seen quality go up, and we’ve seen people go out of business,” said Craig Small, a Denver attorney who specializes in cannabis.

Like other states, Colorado is growing more marijuana than people are consuming, leading to a drop in prices.  He said the medical and recreational system are now almost identical.

The concern in Colorado and other states is that market forces will mean more people are buying cannabis flower and fewer people will buy the more expensive medicine.

“I know that’s one of the biggest complaints of medical community is how can we say medical marijuana is medicine when we can’t scientifically identify doses,” said Small.

Dr. Charlie Reznikoff, an addiction expert with Hennepin Healthcare, agrees.

“When you draw physicians into it and say we want you to supervise, we are going to have a set of expectations,” said Reznikoff.

Dr. Reznikoff, who also sits on the Medical Cannabis Task Force, said he hasn’t seen the program produce rigorous data and research that will significantly advance the science of medical cannabis.

Dr. Reznikoff believes a recreational program and a medical program could co-exist in Minnesota.  He dislikes the term ‘recreational’ because “it sounds like you’re on a beach somewhere.”  He prefers the term ‘discretionary use.’

“So, if you think about all the substance one uses throughout the day – caffeine to wake up, alcohol to relax – we use it for all different purposes,” said Reznikoff.  “That doesn’t mean my barista is my doctor, or the liquor store is my alcohol dispensary.”

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California’s Cannabis Legalization: Where are we now?

BENICIA (KRON) — Currently, there are 6,756 active seller’s permits issued for cannabis businesses in the state of California and each day more are added to the list.

For example in Benicia, with it’s population of 28,000 residents, the city council just approved for the first time in the city’s history, two retail shops and spots for manufacturing and growing cannabis.

“We are hopeful that our lower tax rate, geographic position in the Bay Area, adequate space, will attract diversity,” said City Councilman Steve Young.

Young says it is all about cashing in on the cannabis bandwagon.

Cities who welcome cannabis can tax the businesses and that helps pay for police, libraries and other vital services.

“We’re trying to diversify our tax base” he said.

As the saying goes, there are only two things you can count on in life, death and taxes, and some feel right now that the high tax on the cannabis industry is killing the spirit of the law.

“We know there is a black market out there, and we are trying to deal with that now,” said Assemblyman Rob Bonta.

Right now, there are as many as 9 bills at the state capital to tweek Proposition 64, which legalized adult recreational use of marijuana.

State Assemblyman Bonta from Alameda is throwing his support behind AB286. If passed, it would reduce the tax rate from 15 percent to 11 for three years.

“This will allow us to bring more into the legal and regulated market,” the assemblyman said.

The latest figures from the California Department of Tax and Fee Administration report that in the first three quarters the state excise tax took in $234 million.

The fourth quarter is out in a few weeks. While that is significantly higher than zero dollars before Proposition 64 rolled in, some argue it is far lower than what was projected.

“Well, this is historic. We’re going from 80 years of prohibition — I would say it’s amazing, it’s doing incredibly well. That said, there are a lot of challenges they’re facing,” said cannabis attorney Patrick Goggin.

Goggin is an attorney who specializes in legal work surrounding cannabis. He says they’re not taking in as much revenue as what was projected.

He says the high taxes are hurting bringing everyone into the fold and he hopes legislation like AB286 can make a difference.

While regulation continues to face challenges, so do other aspects of Proposition 64, such as the impact on California roads.

The latest numbers from the California Highway Patrol show a dramatic increase in the number of arrests and crashes of those driving under the influence of marijuana and the cost to society for that is unknown.

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Cannabis legalization cautiously on the move

Democratic lawmakers are already moving on two tracks to legalize marijuana.

When I first wrote about cannabis legalization in December, I got a strong sense of ambivalence from the new Democratic majority in the Minnesota House. Understandably, they didn’t want to be viewed as the pot party in the weeks after a big election victory in which health care was the key battleground.

But the grass-roots (forgive the double entendre) must be restless because Democratic lawmakers are already moving on two tracks to legalize marijuana. Rep. Ray Dehn, D-Minneapolis, proposes giving voters the chance to approve a constitutional amendment in 2020 that would legalize cannabis, while Rep. Mike Freiberg, D-Golden Valley, and state Sen. Melisa Franzen, D-Edina, would pass legalization through a regular legislative approach and enlist the Department of Health to regulate.

Rep. Ryan Winkler, the Democratic majority leader, was dismissive of the constitutional amendment idea when I put it to him last week.

“Voters don’t think you should be using the constitutional amendment process to avoid making decisions that the Legislature is supposed to be making, or to play politics. It strikes me as too cute by half. And I don’t know that marijuana belongs in the Constitution,” he told me last week.

Freiberg and Franzen are expected to hold a news conference early this week to roll out their bill.

Here’s the key: Franzen has enlisted a Republican cosponsor in state Sen. Scott Jensen, R-Chaska, who adds extra credibility because he’s a physician.

Winkler said we can expect some form of marijuana legalization this year, but the order of proposals he listed to me is telling: broadening the medical marijuana program; criminal justice reform to lessen penalties for nonviolent drug offenders; finally, “highly regulated” legalization for recreational use.

In that vein, pay close attention to the Freiberg bill. Freiberg is a public health lawyer in real life, and a public health approach to legalization could help mitigate concerns of suburban members.

Even many advocates of legalization shuddered with angst recently when proponents of legalization could be seen on TV news shouting at their opponents, including law enforcement and families negatively affected by marijuana.

Franzen, who is also focused on helping nonviolent offenders clean up their criminal records through an expungements clause in the measure, told me that advocates should not expect the wild West when it comes to a Minnesota cannabis market. “It has to be closely regulated. We have to learn from other states,” she said.

She’s also in no hurry: “We need to be thoughtful about it. It’s going to take time to create the framework,” she said. Her proposal wouldn’t take effect until 2021.

In her measure, Franzen left blank the cannabis tax rate, perhaps signaling to her colleagues that the point of this exercise shouldn’t be revenue, which could be illusory anyway.

Long way to go on this issue for sure.

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