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Democrat senators have called for 'ending the federal marijuana prohibition' with a new proposed legislation. Canopy Growth CEO David Klein joins Yahoo Finance Live to discuss.
ZACK GUZMAN: Well, Senate Majority Leader Chuck Schumer, along with senators Cory Booker and Ron Wyden, finally unveiled draft legislation that seeks to schedule marijuana at a federal level here in the United States. The ambitious bill, dubbed the Cannabis Administration and Opportunity Act, would allow businesses to finally tap banking services and would set up an excise tax framework, up to 25%, for businesses-- larger cannabis corporations already doing business.
And the proposed plan set aside-- sets aside some of that revenue be redirected back to communities of color impacted by the war on drugs, something that's unlikely, some say, to attract Republican support needed to hit that 60-vote threshold in the Senate. For more on that push, we're joined by the CEO of one of the largest cannabis companies out there, the largest in Canada, Canopy Growth CEO David Klein joins us once again.
And, David, it was interesting because cannabis stocks actually sold off on the news that this draft legislation was finally out there. And I wonder how much of it stems from maybe the idea that progressives aren't going to be able to get those 60 votes they're looking at. What was your initial take on this draft?
DAVID KLEIN: Well, my initial take really, Zack, was that this is really positive. You know, Americans want and need to end cannabis prohibition. They overwhelmingly support it when you see polling numbers, like recently there was a poll that suggested 91% of adults in America are in favor of legalized cannabis. And so for me, the bill just represents maybe the beginning or a new beginning of a legislative path to get it done.
ZACK GUZMAN: Yeah, and it is interesting, because we've seen states already take that path. We've got, what, I think close to 18 already legalized recreational marijuana. But I maybe would highlight some of the pushback that we've seen. Safe Banking hasn't been through, which is kind of the last progressive push just to get businesses able to access banking services and shift away from a cash business.
But you had Cory Booker coming out and basically saying that he wasn't going to be on board with getting something as moderate as that through. He wanted to focus more on the progressive push to right the wrongs seen by some that had already been incarcerated due to some of that. And just read a quote here that he gave reporters yesterday-- he said, I will lay myself down, do everything I can to stop an easy banking bill that's going to allow all these corporations to make a lot more money off of this, as opposed to focusing on the restorative justice aspect.
I suppose maybe one of your companies-- the other companies out there in the cannabis space have also been pushing for some of the diversity changes on this front. What's your take on that, and saying that maybe some of the Safe Banking Act might not be going far enough?
DAVID KLEIN: Yes, so first of all, we at Canopy support the social equity initiatives that are included in the Cannabis Administration and Opportunity Act. And I think that it's-- the question-- we also support Safe Banking, by the way. But if you're going to start having the discussion around Safe Banking, the question that I have is, why not try to go all the way? Or why not try to fully legalize cannabis, create a federal structure for regulating cannabis, and use some of the excise taxes that would be imposed from that federal program to reinvest in communities that have been disproportionately impacted by the cannabis prohibition?
So you know, to me, as I said, we favor Safe Banking, but I do think that this is a better option if there's a path through the Senate. And if there's not, we'll have to-- we'll have to see what you know what plays out in the Senate if they try to maybe take Safe Banking as a bit of a fallback from this bill.
AKIKO FUJITA: David, what does this mean from a business standpoint? If we take the bill as it is, obviously, the immediate impact on those who've been criminalized as a result of possession of marijuana, but the legislation federally allows states to craft their own legislation, which to me sounds like there's still going to be a bit of a hodgepodge. What fundamentally changes for Canopy Growth if this bill passes in its current form?
DAVID KLEIN: So you're right on the hodgepodge. And I would say as an alcohol industry veteran, the alcohol industry has dealt with that hodgepodge, you know, for the last 70-plus years, right? So that is exactly how alcohol looks with state regulations but federal oversight. And so from that perspective, I think that's quite manageable.
For Canopy, what it does is it allows us to enter the US and take control of the acreage business, which we have a right and/or obligation to assume control of upon permissibility event in the US. So it would allow us to enter the US. It would take away a lot of the uncertainty for businesses that are looking at how to support this fast-growing cannabis industry in the US. So I think cleaning up a lot of those uncertainties would be really advantageous to us and other players in the cannabis space.
ZACK GUZMAN: Yeah, the big question mark still exists, though, when we think about, A, needing the votes, whether or not they're going to get them, and then B, timeline-wise, when we look at that-- some saying that's probably been be around September that this would actually maybe make its way onto the floor there or start to get to maybe the voting stage-- at least the fall.
When you think about how difficult it is for someone in your position maybe planning around that, as the deal has been positioned for years, waiting for this acreage deal to go through with the federal change, I mean, how difficult does it become for you to maybe plan around it and try and invest in different parts of the businesses as you're waiting for it, still hasn't come yet?
DAVID KLEIN: Yeah, and that's a fair question, Zack. I would argue that it's not slowing us down all that much as we sit here today. If you think about our US strategy, it really is to bring products and brands to the market that we can legitimately do so today, like our Martha Stewart CBD products, our Quattro CBD products, our stores and vehicle vaporizer products.
We can have those in the market today, and we are, and we're building out those routes to market, and feeling really good about those businesses. We then have the US THC businesses that we have interest in, like Acreage, but also TerrAscend. And we've grown our position in TerrAscend over the last six months or so. And so there's that THC set of work that we're doing.
And then we continue to work on understanding our consumers through that really in-depth consumer insights, and driving innovation within our brand portfolio, and being prepared to bring those brands to the US, either when we can because of federal permissibility, or Acreage has the right to bring those brands to the US. And you will be seeing Tweed THC drinks in the US over the next several months.
ZACK GUZMAN: And there was one last aspect of the bill I'd be curious to get your take on too, which was around maybe how it might help Canopy catch up to some of the MSOs out there if it passes, which was kind of the way that across state lines, some of this would be able to flow through. Some of those states don't necessarily approve legalization, but they could go through for logistics and deliveries like that.
How does that maybe change how you're seeing this in battling some of those multi-state operators who have jurisdiction in certain states and maybe not others? And can it be trying to make those moves?
DAVID KLEIN: Look, I think that that's how the industry is going to end up being an interstate business, at least from a growth standpoint and a production standpoint. The retail-- the front end of the business may still end up being legislated on a state-by-state basis. And so the MSOs have good positioning as it relates to the retail environment.
But we've been planning all along for interstate commerce, because there isn't another product in the country that doesn't comply with the Interstate Commerce Clause of the Constitution. And so, yeah, we think that the production aspect in the industry will change dramatically post a permissibility event as a result of that.
ZACK GUZMAN: All right, David Klein, the CEO of Canopy Growth waiting with bated breath to see what could happen here, as we all are-- but at least a step forward. Appreciate you taking the time.