Welcome back to Higher Exchanges, the number one independent cannabis investing show, where we break down complex cannabis markets into clear insights you can actually use.
Here your hosts, Jesse Redmond and Morgan Paxia.
Welcome back indeed. I am Jesse Redmond, chief strategy and investor relations officer at an amazing company called Leaf Brands, and I'm here once again with the smartest cannabis investor I know. He is the co-founder presiding. His parents named him Morgan Paxia. Morgan, what's going on, man?
I'm doing great. That was a good one, you caught me off guard there, but yeah, I'm good. I try to switch it up every week, otherwise it gets too dull. It throws you off a little bit, keep it interesting.
Oh, good, good. I was on the road earlier this week and out in a different market. Can't talk too much about it publicly, but it was cool to be checking out something very different from cannabis, something tangential with one of our cool companies. So that was a lot of fun and learned a lot about a whole other sector that, you know, there's parallels or rhymes to so many different things, but it was great to meet with a very large industry doing very different things, but there's still applicability to what we do here.
Yeah, absolutely. Well, that sounds fun. Got yourself a good tan there. Our guest is with us as well, and our guest is pointing out that you had a fantastic tan. He was asking if you were skiing, and I thought you were probably out on your sailboat. Did I guess that correctly, Morgan?
Correct. Yeah, spring is in the air in Southern California. It's already 74 here today, and it's been a great few months. So yeah, try to get out and get that vitamin D. Nice.
Well, let's not waste any time. We have a huge guest today, one of our favorites. He's Boris Jordan. He is the chairman and also definitely the CEO of Curaleaf as well. Boris, welcome back to the show. Thanks for joining us.
Great to be here, guys. It's been a long time and it's nice to regroup again.
Yeah, it has been. I think we were speculating it's been at least 12 or 18 months, probably longer than 12, at least 18 months or so. I think it's your third time on the show and I think Boris it's your first time since we switched over to video as well. We used to do the old spaces thing back in the day. Yep. Yeah. Do they even have those anymore?
I don't see many on the cannabis side. I see some of the crypto guys doing them. So, I think the functionality exists, but it feels like it kind of went the way of Clubhouse. Do you guys remember Clubhouse back in the day like during COVID? Twitter destroyed Clubhouse, didn't they? They copied them and that was it. Yeah, no more.
Yeah. Well, Morgan, why don't I'm excited to dig in. So, but before we do that, do you want to tell me about some awesome dispensary software out there?
Sure. Well, big thanks to Flowhub for sponsoring these episodes. One thing I respect about Flowhub is that they're not just a platform. They're out in the market at events meeting retailers face-to-face. Coming up they'll be at Hall of Flowers Ventura and the Exchange in Oregon, which is March 18th and 19th for both shows. So, if you're at either show, go find them. These are people who actually care about your store performing. So, thanks to Flowhub.
Great. Yeah, I'm going to head over to Hall of Flowers in Ventura. Are you going? You're probably not going, are you, Morgan? No. Yeah. It's only a half hour or so for me, so I'm going to roll over there. See some of the brands we work with, see some friends and at least spend next Wednesday out there. And I was chatting with Annie at Flowhub, so hopefully run into her and say hi to Kyle and the team over there as well. Fantastic.
Yeah, I'm sure it'll be great. We just I've got some portfolio specific stuff going on next week that will keep me from venturing up there. Yeah.
Well, let's jump into it with Boris. And man, Boris, I don't know if this is the worst topic, your favorite topic, or somewhere between, but we are in catalyst season and we're going to have thousands of I don't know if they're angry, if they're frustrated, if they're impatient cannabis investors out there. We're all just waiting for something to move on rescheduling, Boris. So, let me start off with probably the biggest headline out there, which is what are you hearing? When do you expect it to happen? Do you still expect it to happen?
Well, great question. First of all, I'm surprised there's still cannabis investors. It's a long time since except on the debt side that I've had a meaningful call with investors on the equity side of the business. But for those that are out there and those that still do believe, listen, I do believe it's going to happen and I think the risk that it doesn't happen is very very low. The question that I can't answer is when it's going to happen. I think there's a lot going on in the administration. I think there's a lot going on at the DOJ. As you all know, we are very much as a group involved and I can say the only thing I can say to you is that everyone is working on it. There's a lot of discussion at every level of the government that's involved in this decision. There's a lot of conversations on how to do it and how to do it in such a way that it's not overturned. And I think that's the big issue because especially after the tariffs and what happened to tariffs, I think the administration doesn't want any major initiatives of theirs and the good news is they do consider this a major initiative to get overturned in court. And so I think that's what the DOJ and the DEA and the White House are all working on. And so I think that's what's holding it back. But if you think about it, it's only been 3 months since he signed the executive order, almost to the day. And I think that's not a particularly long time for any government to get a major initiative like this across the line. And so without going into a lot of the details, because I am privy to that, but I'm told not to talk about them, I can just say that they are sincerely working on this. They do want to get this over the line. The question is when they get it over the line. But I don't think there's a risk that they don't get it over the line.
And do you have any expectation about there being any clarification about things like states' rights under schedule three or even more specifically is there a path to uplisting there? Do you expect anything explicit on either side?
So explicit in the actual rule. First of all, we haven't seen the rule. If they go with the Biden rule, then there isn't anything because we did see the Biden rule. But if they decide to make amendments to the rule, it could change it. I haven't seen them. My gut feeling says to me that they're going to tackle that separately. I don't believe that they're going to deal with markets in the rescheduling. I don't believe that's what they're going to do. I think they're just going to address rescheduling, get a rule that can hold on its own, not get reversed, and move forward on that basis.
And when you look out, Boris, maybe a year from now when we hopefully a final rule's in place, what do you see as the biggest benefit of schedule three to Curaleaf in particular?
Listen, I think that for the whole industry, and I truly believe this is for Curaleaf as part of that industry, it's breaking the glass ceiling. And I think that's very important because of what we've seen in states, every time you get a very restrictive medical program, a year or two later, you start getting that program eased and it becomes a very good medical program. As an example, remember Florida was a vape only medical program. Then they years later they introduced flower and the program really got going. So, we've seen this time and time again in our sector across the country. I can tell you this much that in all my contacts in the Senate and the House and in FDA, I've been meeting with them recently, HHS, which I haven't met with, they're all waiting, including IRS, they're all waiting for this rule. They want this rule to happen because right now, if you think about it, whether you're a bank, whether you're a stock market, whether you're a supplier to the industry, whatever you are, you are dealing with a schedule one illegal substance, which is money laundering. So, you have to take an and most companies are pretty conservative out there for the most part. You know, whether it's SOX compliance and all these other issues, people are pretty conservative about what they can and can't do. And I think dealing with companies that are, you know, we all because we're involved in this and our heads down in it all day, we don't see it. But for someone coming from the outside, we're a federally legal substance, federally legal business. And so, they don't want to deal with it. This rule, I believe, will break that barrier, even though it doesn't change the legality of cannabis, but what it does is it moves it from schedule one to schedule three. It opens up, first of all, the 280E away at least back to January 1st. We'll see how the negotiations go on those unpaid tax liabilities. But, I think more importantly, it opens up for instance, senators have told me, 'We won't even look at safe banking until this is rescheduled.' Pennsylvania has said the Republican of Pennsylvania said, 'We won't even look at legalizing cannabis unless it's schedule three.' So, there's a lot of people that are waiting for this to happen, and I think that will get the ball rolling, and I think we'll see a lot of initiative in the sector on the back of the rescheduling.
Um yeah, Boris, you mentioned the unpaid tax liabilities at least going from where the line starts, addressing that. Do you think or do you have any insight? Is that going to be a one-off negotiated company by company on those past liabilities, or do you think how do you think that's going to be?
Boris Jordan's view, this is not based on anything. This is my view and my experience. I think that the government will negotiate one approach to it, and then each individual company within that approach will negotiate their specific reschedulings, restructurings, or whatever it is. So, I think they'll negotiate whether it's a discount off that amount. And there's different things that are being discussed. There's things about going back to Rohrabacher and saying all medical should never have 280E. There's that kind of discussion. There's a discussion going on, let's go back to 2023 since Health and Human Services and FDA wrote the letter, and let's go back to that. And then let's have a discount against it. I think there's going to be one overall approach, and then each individual company within that approach will have their own conversation with the powers that be about the restructuring or whatever it is they have to do about their UTPs.
Okay. Yeah, because that's obviously something on a lot of folks' minds whether you're a debtor or an equity holder, people are curious how that's going to be resolved and obviously first things first we got to get rescheduling done before we can move on.
The good news Morgan is that if you look at the IRS and I've had to deal with them obviously over the years many many times in different sectors, their goal isn't to bankrupt companies, their goal is to get paid. They have to collect taxes. So they're pretty, although they can be firm, they're pretty open to have a conversation with companies to structure their liabilities in such a way that they can actually realistically pay them and at the same time continue to function as an ongoing concern so that these businesses can continue to prosper and pay taxes going forward. That is the role of the IRS. So I'm pretty, I can't say I'm optimistic but I'm pretty open to the idea that I think these conversations will be constructive.
And you mentioned safer banking earlier, that is what I'm working's trigger words so I have to play a sound effect for him, Boris.
He has a lot of trauma around safe banking as we all do over the last decade, right? So you're here so I'm damaged. I don't even allow that word in my office anymore. So this is a good thing, my door is closed to the office because if somebody heard me talking about it they'd say I thought you said you weren't allowed to talk about that anymore.
I'll send you the sound effect so you have it handy there, Boris. But it does sound like you are, I don't know, I'm going to ask a leading question. What do you think are the prospects of safe banking at this point?
Listen, I think as I said earlier that once we get rescheduling, I think that at least we can get a, I'm not worried about the house, the house has passed this many times. I'm worried about the Senate, right? And the Senate, even though I think they've been disingenuous most of the senators with the sector, I do think that they will at least take this to committees and I think they'll take it to a vote. Whether it passes or not is a different issue, but we couldn't even get into committees or into a vote in the Senate, right? Because Schumer and McConnell were stopping it every time. I do believe this time it will get it. I also think that on the back of the debanking bill that Trump is pushing through the house right now, I think that this is a major issue of debanking as well. And so, I do think it's going to get a fair hearing. I can say that a friend of a friend plays tennis with a very important person on the committee, and that very important person in the Senate Banking Committee said that they received indications from the White House that they would like them to take up safer banking. So. That's all I can say. I think they will take it up, but again, when and what timing, I have no idea.
And did you see the news yesterday? You probably aren't looking over the X news as much as some of us are, but there was a post yesterday or the day before talking about the potential for descheduling committee this summer. Have you heard any rumors of that? Does that sound consistent with things you've heard from the Trump admin before?
So, I've never heard that. As a matter of fact, it's my personal view in the interactions I've had that the president is adamantly against descheduling mainly on the following basis. He believes that the research needs to be done on the plant, which is why he wants to reschedule to determine what are the benefits or the harm of using this plant in whatever form. And I think that they won't look at it until, I think once that happens, it'll take at least 3 to 4 years to do that work before they can consider it. So, it'll be a different administration. Now, by the way, I don't know about this rumor. I haven't seen it, but what I can say to you is that if they do do something like that, set up a committee or something, it would literally be to discuss it, but I don't believe it'll happen until the work of the FDA and Health and Human Services will be done. And that work will take time. They're going to give grants to universities, hospitals, other organizations to do the work on the cannabinoids. Now, a lot of this work has been done in Europe and in Israel, but the US wants its own work done. It doesn't want to use data from other countries. And so they want it done here. And so I think it'll take some time before that conversation will be realistic.
So, what do you think at this point is a fair expectation for cannabis investors to have for the back half of Trump's term? Take it from now until finishing. If you're a cannabis investor, how would you set some baseline expectations about what's reasonable progress to expect over the next 2 and a half years or so?
