State Legalization Efforts Put Federal Marijuana Ban Under Fire

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State Legalization Efforts Put Federal Marijuana Ban Under Fire

Several cannabis companies are challenging the federal ban on marijuana, arguing it has no legal basis. 

They claim the government’s original justification for prohibition - curbing illegal interstate trade - is no longer valid since many states have legalized marijuana.

This lawsuit counters the government’s attempt to dismiss the case.

What Happened?

The central issue hinges on a 2005 Supreme Court decision (Gonzales v. Raich) that upheld federal prohibition due to concerns about interstate marijuana commerce.

The companies’ lawyers, however, argue that widespread legalization across the U.S. has fundamentally changed the landscape.

“Dozens of states have implemented programs to legalize and regulate medical or adult-use marijuana,” the lawsuit states.

By providing consumers with “safe, regulated, and local access to marijuana,” those states “have reduced illicit interstate commerce, as customers switch to purchasing state-regulated marijuana over illicit interstate marijuana,” reported Marijuana Moment.

Leading the charge is multi-state operator Verano Holdings (OTC: VRNOF) and the Massachusetts-based cannabis businesses Canna Provisions and Wiseacre Farm, Treevit CEO Gyasi Sellers.

Verano’s president Darren Weiss and chief investment officer Aaron Miles are both guest speakers at the upcoming Benzinga Cannabis Capital Conference in Florida this coming April 16-17.

They argue that state-regulated marijuana marketplaces have demonstrably reduced illegal activity. Consumers, they say, prefer the safety and security of legal products.

Federal Ban Fails Under Scrutiny

The lawsuit highlights the significant challenges created by the federal ban on legal cannabis businesses. “While states may sometimes regulate those activities when appropriate for the public health,” it adds, “the federal ban fails under such scrutiny.”

“The ground-shaking shifts in marijuana regulation since Raich, together with the nation’s long history of marijuana cultivation and use prior to the CSA,” lawyers wrote in the new filing, “demonstrate the widely-held understanding that Plaintiffs’ marijuana activities implicate a liberty interest that requires protection.”

The plaintiffs are being represented by the law firms Boies Schiller and Flexner LLP and Lesser, Newman, Aleo, and Nasser LLP.

Why A Multi-State Operator?

Asked why the suit includes Verano Holdings, a multistate cannabis operator, Schiller told the publication that, “even though it’s a multistate operator, each of its markets is intrastate. They’re not even allowed to bring a seed [across state lines].”

“We like having a multistate operator just to show a different business,” he said, “to show a different story about a different business.”

Verano: A Standout Performer In The Cannabis Sector

Pablo Zuanic's analysis positions Verano Holdings as a standout entity in the cannabis sector, particularly through the lens of its Q4 2023 performance.

Despite widespread market challenges, including flat or declining sales in many regions, Verano has effectively harnessed growth opportunities in states like Connecticut, Ohio, Illinois, Maryland, and Rhode Island.

This success is most pronounced in Florida, where Verano's strategic store openings and operational enhancements have yielded an 11% uptick in retail sales, setting it apart in a highly competitive market.

However, the journey hasn't been without its hurdles. Verano faces retail pressures in markets like Illinois and New Jersey, where an influx of new outlets has impacted revenue per store. Yet, its resilience is evident in Maryland and Connecticut, where the company has registered positive growth, showcasing its adaptability and strategic foresight in a fluctuating market landscape.

Verano's robust valuation of $2.1 billion and a 16% stock increase over the last 90 days reflect investor confidence in its growth trajectory, despite it lagging slightly behind the MSOS ETF's 23% gain.

Zuanic's optimism is rooted in Verano's potential to capitalize on state-level legal shifts and market expansions, despite the uncertain impact of broader macro catalysts like DEA rescheduling and the SAFER Banking Act.

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