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Marguerite Arnold
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Paradox or Paragon? A Non-Techie Look at Blockchain, Cryptocurrency & Cannabis: Part II

By Marguerite Arnold
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Marguerite Arnold

Disclaimer: Marguerite Arnold has just raised the first funds for her blockchain-based company, MedPayRx in Germany (and via traditional investment funding, not an ICO). She will also be speaking about the impact of blockchain on the cannabis industry in Berlin in April at the International Cannabis Business Conference.


To read the first part of this series, click here. The Paragon class action lawsuit is likely to shake up two industries – the cannabis world, which has been following this situation at least in the industry press since the company began to raise money – and the ICO space in general. Why? Just the combination of the two topics is a guaranteed conversation starter. In addition, given the focus on whether tokens are securities or not (or whether so-called “utility tokens” are as well, depending on how they are used and sold) far beyond cannabis, this case may well begin to set precedent on the entire subject. Even more worrying for Paragon in particular right now, beyond the federal government, coordinated efforts are underway by both law firms and consumer groups to recruit aggrieved investors as suit plaintiffs. Beyond the United States and far from the Paragon case specifically, banks in Europe have begun to set guidelines on cryptocurrency and ICOs too. It is not routinely hostile everywhere (see Switzerland if not many Asian countries). But the map is now being defined.

The dilemma that Paragon is now facing is also something that has been coming for some time both for the company and others like them – and from both the cannabis investment and crypto coin directions. Digitally astute cannapreneurs take note: Do you really want your dream business used to define precedent as a defendant in a class action? Or targeted by the new SEC cyber unit whose job is to regulate ICOs (and probably “crowd sales” too?). That regulatory glare is coming everywhere. And soon. Globally.In the world of cannabis, in particular, it is also very important to be careful.

If issuing tokens, particularly if you sell them to raise money – no matter what that money will be used for – realize what you are doing. Even if you state to the world that these are not “investment” vehicles” but “utility” tokens. If you sell them, they are by definition, even if not federally litigated and defined yet in the United States, a contract for future worth, services or other benefit. An IOU in other words. As such they are also derivative securities, which is why the regulatory agencies, barely 10 years out of the last global financial meltdown, are now starting to see parallels. So much so, in fact, that SEC Chair Jay Clayton warned in January that any attorneys who are involved in ICOs might be in breach of professional obligations. Other jurisdictions are following suit.

In the world of cannabis, in particular, it is also very important to be careful. Selling (soon to be federally if not internationally regulated) tokens or securities in general for that matter for certain services or products that can be illegal in some jurisdictions is also a space that cannapreneurs are going to find challenging. See the banking problems of the entire U.S. cannabis industry. Same issue.

This is also going to get even more complicated very soon. Particularly in a world of shifting regs and when it comes to “brand creation.” Right now, for example, a crowdfund or ICO (the terms can be used interchangeably, token issue or not) for a “global cannabis lifestyle brand” promoted and sold online is highly problematic just about everywhere. Why? You cannot transport cannabis across state lines in the U.S. Americans and Israelis also still cannot export anywhere. You also cannot sell what is considered “medical” marijuana to a European regulator if it is not GMP certified. It is, according to local definition, most certainly not “medical”. You may also not distribute cannabis online in countries like Germany. And of course, cannabis itself is still federally illegal in many places, including the United States. Issuing a token or security with the intent of engaging in such practices is ill advised at this juncture. No matter what it is labelled.

Those are also situations where investors could legitimately also sue the ICO or crowd sale holder for breach of securities laws or outright fraud.

Beyond the world of banking law, users face other quagmires, depending on your situation and how you use and issue tokens. Or you certainly will in the emerging future. If you use tokens in situations where members “vote” you may also run into other problems. Like civil liberties issues. Poll taxes (where you force people to pay before access to voting or weigh the impact of their votes on financial contributions) is illegal in many jurisdictions and even more specifically certain use cases that may not always be initially obvious. How that plays out in blockchained ecosystems is a discussion of the future, but it is coming. Along with other labour and regulatory issues surrounding the use of “smart contracts.” Which are also known as “utility tokens.” See, it gets confusing. And fast.

In the cannabis space, liabilities sprout more quickly than even the fastest growing strain.As a result, the first major issue that any cannabis business considering a token generation event (or TGE) will face, no matter whether it is state or federally legit in said jurisdiction, has nothing to do with cannabis but rather rather cryptocurrencies and ICOs – and for right now federal if not international financial law – but look for that to also change as the space develops.

For the present, in most places, token issues where monetary value is assigned or implied are considered securities or even defined outright as currency. Or they will be soon. This means that if you are issuing a new coin for any purpose that you intend to sell for any purpose, including an ICO, especially one that will supposedly be used to pay for goods or services, or even to “assetize” the token to give it a market value (the value of the asset it is assigned), you are now in the federal end of the swimming pool. And federal if not international law is not for novices or sissies much less non-lawyers when it comes to crypto coin. There are great white sharks everywhere in this often-strange digital ocean. That is even before you get to cannabis.

In the cannabis space, liabilities sprout more quickly than even the fastest growing strain.

This is also easy to illustrate – even beyond the concept of an ICO. Say you are a cannabis producer in Colorado – where much of the legal cannabis industry we know today was born. You are in business, have a license and even own your grow space and the acres of real estate that it sits on. But you also want to access additional capital (including that of the international kind) and are, as an aside, overwhelmed by the demands of your cash business. You meet an energetic young blockchain geek who says she can sign you up to her service that will create your white paper, website and even hook you up to one of the several “insta-mint” crypto coin services now available for several thousand dollars (don’t forget lawyer’s fees), plus hiring a good PR firm to manage the ICO process.

Groovy.

You issue your own coins and literally mint them for the sole purpose of assigning each coin to every dried gram of your product that you produce to test the market before potentially holding an ICO. You then “sell” this bud (at wholesale prices) to a dispensary with a wallet that will accept your coin via a smart contract that only releases the funds when the right amount and quality of product is delivered to the dispensary. As a clever marketing technique, you also agree with the recreational dispensary you are working with (who happens to be in Aspen) that you both will also now offer jointly issued coins, at a higher retail price, to any tourist with a medical card or any age-appropriate recreational user who has the ID to prove it, to “pre-buy” their cannabis on the way to après ski and have it delivered, no questions asked, at the hot tub. You advertise the service with a cannabis-friendly ski package operator and travel agent, and voila – customer base is assured. If you have any celebrity friends who are willing to promote it, even better. And why not, while you are at it, do some LinkedIn outreach.

No cash needed either. ID verification happens with coin purchase.

Easy, right? So many headaches solved with one coin to rule them all. Banking issues evaporate along with a lot of work for accountants at both ends of the conversation. And the price of the coin you issue cannot be illegally pumped and dumped because the “price” is set by the state or federal market and/or supply and demand and/or another kind of asset (like a piece of real estate designed to be a startup incubator space for which people also pay entrance fees in your tokens, to enter and use). Then you can offer these “coins” for sale, at those market prices, set by the dried bud you are growing, to anyone, anywhere, to invest in too. Right?

No ICO, even. No problem. After all, you say they aren’t securities but “utility tokens.”

Wrong.

By definition, such activity is illegal in the United States if it has anything to do with the plant for the same reasons the U.S. industry remains a mostly cash-only business. There are several U.S. start-ups trying to construct “legal” payment gateways for the industry right now in the lower 48 plus 2 (see CanPay in Hawaii) and some creative efforts in Europe. However, all of those depend on the willingness of a banking institution on the other end to allow that to happen. See Uruguay if you still remain optimistic about any American efforts right now. Not to mention the newly awoken willingness of the federal DOJ to prosecute for money laundering in a post-Cole-memo world. And that includes you too, California.

But this is an issue that is not just limited to the United States.

In other places, like Canada, Australia, Israel and the Eurozone, legitimate cannabis businesses have bank accounts. And banks are absolutely involved in both the blockchain and crypto space – see Ripple. As a simplified payment gateway, the technology is imminently useful, if still forming. But banking authorities are so concerned about ICOs that they are moving, quietly, to implement policies against them even as they are still accepting cyber currency (in limited ways and via strictly controlled channels).

Given such concerns and divided loyalties, it is unlikely that authorities in Canada will sit this one out, even though (and perhaps because), to date, the most intriguing ideas about cryptocurrency and cannabis have tended to waft from this part of the world lately given what is about to happen this summer.

Most dangerous of all to the budding crypto cannapreneur is Germany – home of legal, public health insurance covering medical cannabis. Banking regulators in Frankfurt, in particular, have taken a dim view of even just regular old crowdfunding. Add a token into the mix and the Germans are even less amused. The persistent rumor in the Fintech community in Frankfurt this March is that German banking authorities are refusing to accept any funds raised during an ICO anywhere. Verboten for any purpose. Why? Even if they know who you are, and all of your investors meet their KYC requirements, they do not know the source of the cyber currency coming from those investors. No dice. And KYC in this instance does not refer to a new brand of cannabis-flavored lubricant. It is a term that means, in the most comprehensive understanding of how it must be used, not only “know your customer” but being able to verify all points of data on a chain. Including the coin issuer, purchase conditions, currency used to purchase the same and “chain of title” downstream. If you are confused by this already, you should not be engaged in an ICO right now.Not all of these models or even the ICOs that use them are scams.

Add cannabis to this recipe, and every bank in Germany, even the one at the moment who is still more or less openly participating in ICOs, if not the rest of the European financial community, will probably walk. Even if you reach your “hard cap” (the maximum amount you hope to raise) that might be in the tens if not hundreds of millions of euros. In that case, it will probably be even harder to find a bank to accept your business. Worse, you may never raise the amount you hope for. At that point, you cannot go back to traditional venture capitalists – or anyone else – for more money. You are done. You must start over from scratch. If there was an asset of any kind involved (including a license to do business) legally, everyone who holds a coin owns a piece of it. See securities law. This is precisely why you can never raise money again against that asset or with the corporate entity that owns it. Or at least not without a lot of legal fees or begging your peeved investors for more money. Legally, at that point, they could require you to sell all assets associated with the corporate entity holding the ICO. And they probably would. For investors that is the best-case scenario. ICOs for concepts with no assets or strategic partnerships in place at the time of the “token sale,” create many lose-all scenarios for investors.

There are many pitfalls to this world – and not just from the cannabis side.Issuing a “token” that someone has to pay for that acts like cash (even if to buy goods and services in the future from other members of the ecosystem and social community that crypto coins create) that also is vulnerable to market pricing, is another quagmire. In fact, it might be, beyond any techno or financial queasiness about blockchain, the biggest reason that this industry should look, and with considerable caution, at all tokenized and ICO models that also premise their worth on the idea that such coins will inevitably increase in worth over time. There is also anti-cartel, monopoly and market discrimination to consider.

Not all of these models or even the ICOs that use them are scams. There are and will be valuable alt currencies and tokens in the future (even without a cash value assigned). All of the top start-ups in the current ICO space, in fact, are finding unique ways to create a real alternative currency with values attached that are indisputable. And not all of them will succeed.

However, that is not true of the cannabis business at this juncture. The plant, much like cryptocurrency and beyond that, blockchain itself, has not reached mainstream status yet – starting with market economics and regulation that is already international. A pot-based coin, no matter where it is issued and by whom (including a federal government), would run into multiple issues with valuation just because the price of cannabis itself right now is so volatile, not to mention unevenly priced thanks to jurisdictional restrictions and barriers. For that reason, there is no way to issue a “cannabis coin” with global relevance, much less global value.

And that, of course, is beyond the issue of subsequently selling those coins on exchanges that have been repeatedly hacked, fail to give customers access to their accounts, or are, in the case of China, banned outright (which also deemed ICOs illegal last September).

There are many pitfalls to this world – and not just from the cannabis side. Part III of this series will look at some of the biggest opportunities when cannabis integrates with the DLT (distributed ledger technology).

extraction equipment

The Ever-Growing Importance of Protecting Cannabis Extraction Innovations

By Alison J. Baldwin, Brittany R. Butler, Ph.D., Nicole E. Grimm
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extraction equipment

With legalization of cannabis for medicinal and adult use occurring rapidly at the state level, the industry is seeing a sharp increase in innovative technologies, particularly in the area of cannabis extraction. Companies are developing novel extraction methods that are capable of not only separating and recovering high yields of specific cannabinoids, but also removing harmful chemicals (such as pesticides) from the concentrate. While some extraction methods utilize solvents, such as hydrocarbons, the industry is starting to see a shift to completely non-solvent based techniques or environmentally friendly solvents that rely on, for example, CO2, heat and pressure to create a concentrate. The resulting cannabis concentrate can then be consumed directly, or infused in edibles, vape pens, topicals and other non-plant based consumption products. With companies continually seeking to improve existing extraction equipment, methods and products, it is critical for companies working in this area to secure their niche in the industry by protecting their intellectual property (IP).

extraction equipment
Extraction can be an effective form of remediating contaminated cannabis

Comprehensive IP protection for a business can include obtaining patents for innovations, trademarks to establish brand protection of goods and services, copyrights to protect logos and original works, trade dress to protect product packaging, as well as a combination of trade secret and confidentiality agreements to protect proprietary information and company “know-how” from leaking into the hands of competitors. IP protection in the cannabis space presents unique challenges due to conflicting state and federal law, but for the most part is available to cannabis companies like any other company.

Federal trademark protection is currently one of the biggest challenges facing cannabis companies in the United States. A trademark or service mark is a word, phrase, symbol or design that distinguishes the source of goods or services of one company from another company. Registering a mark with the U.S. Patent and Trademark Office (USPTO) provides companies with nationwide protection against another company operating in the same space from also using the mark.

As many in the industry have come to discover, the USPTO currently will not grant a trademark or service mark on cannabis goods or services. According to the USPTO, since cannabis is illegal federally, marks on cannabis goods and services cannot satisfy the lawful use in commerce requirement of the Lanham Act, the statute governing federal trademark rights. Extraction companies that only manufacture cannabis-specific equipment or use cannabis-exclusive processes will likely be unable to obtain a federal trademark registration and will need to rely on state trademark registration, which provides protection only at the state-level. However, extractors may be able to obtain a federal trademark on their extraction machines and processes that can legitimately be applied to non-cannabis plants. Likewise, companies that sell cannabis-infused edibles may be able to obtain a federal trademark on a mark for non-cannabis containing edibles if that company has such a product line.

Some extraction companies may benefit from keeping their innovations a trade secretSince the USPTO will not grant marks on cannabis goods and services, a common misconception in the industry is that the USPTO will also not grant patents on cannabis inventions. But, in fact, the USPTO will grant patents on a seemingly endless range of new and nonobvious cannabis inventions, including the plant itself. (For more information on how breeders can patent their strains, see Alison J. Baldwin et al., Protecting Cannabis – Are Plant Patents Cool Now? Snippets, Vol. 15, Issue 4, Fall 2017, at 6). Unlike the Lanham Act, the patent statute does not prohibit illegal activity and states at 35 U.S.C. § 101 that a patent may be obtained for “any new and useful process, machine, manufacture, or composition of matter, or any new and useful improvement thereof.”

For inventions related to extraction equipment, extraction processes, infused products and even methods of treatment with concentrated formulations, utility patents are available to companies. Utility patents offer broad protection because all aspects related to cannabis extraction could potentially be described and claimed in the same patent. Indeed, there are already a number of granted patents and published patent applications related to cannabis extraction. Recently, U.S. Patent No. 9,730,911 (the ‘911 patent), entitled “Cannabis extracts and methods of preparing and using same” that granted to United Cannabis Corp. covers various liquid cannabinoid formulations containing very high concentrations of tetrahydrocannabinolic acid (THCa), tetrahydrocannabinol (THC), cannabidiol (CBD), THCa and cannabidiolic acid, THC and CBD, and CBD, cannabinol (CBN), and THC. For example, claim 1 of the ‘911 patent recites:

A liquid cannabinoid formulation, wherein at least 95% of the total cannabinoids is tetrahydrocannabinolic acid (THCa).Properly crafted non-disclosure agreements can help further ensure that trade secrets remain a secret indefinitely.

Although the ‘911 patent only covers the formulations, United Cannabis Corp. has filed a continuation application that published as US2017/0360745 on methods for relieving symptoms associated with a variety of illnesses by administering one or more of the cannabinoid formulations claimed in the ‘911 patent. This continuation application contains the exact same information as the ‘911 patent and is an example of how the same information can be used to seek complete protection of an invention via multiple patents.

An example of a patent application directed to solvent-based extraction methods and equipment is found in US20130079531, entitled “Process for the Rapid Extraction of Active Ingredients from Herbal Materials.” Claim 1 of the originally filed application recites:

A method for the extraction of active ingredients from herbal material comprising: (i) introducing the herbal material to a non-polar or mildly polar solvent at or below a temperature of 10 degrees centigrade and (ii) rapidly separating the herbal material from the solvent after a latency period not to exceed 15 minutes.

Claim 12, covered any equipment designed to utilize the process defined in claim 1.

Although now abandoned, the claims of this application were not necessarily limited to cannabis, as the claims were directed to extracting active ingredients from “herbal materials.”

Other patents involve non-toxic extraction methods utilizing CO2, such as Bionorica Ethics GMBH’s U.S. Patent No. 8,895,078, entitled “Method for producing an extract from cannabis plant matter, containing a tetrahydrocannabinol and a cannabidiol and cannabis extracts.” This patent covers processes for producing cannabidiol from a primary extract from industrial hemp plant material.

There have also been patents granted to cannabis-infused products, such as U.S. Patent No. 9,888,703, entitled “Method for making coffee products containing cannabis ingredients.” Claim 1 of this patent recites:

A coffee pod consisting essentially of carbon dioxide extracted THC oil from cannabis, coffee beans and maltodextrin.

Despite the USPTO’s willingness to grant cannabis patents, there is an open question currently regarding whether they can be enforced in a federal court (the only courts that have jurisdiction to hear patent cases). However, since utility patents have a 20-year term, extractors are still wise to seek patent protection of the innovations now.

Another consideration in seeking patent protection for novel extraction methods and formulations is that the information becomes public knowledge once the patent application publishes. As this space becomes increasingly crowded, the ability to obtain broader patents will decline. Therefore, some extraction companies may benefit from keeping their innovations a trade secret, which means that the secret is not known to the public, properly maintained and creates economic value by way of being a secret. Properly crafted non-disclosure agreements can help further ensure that trade secrets remain a secret indefinitely.

Regardless of the IP strategy extractors choose, IP protection should be a primary consideration for companies in the cannabis industry to ensure the strongest protection possible both now and in the future.

european union states

Q1 European Cannabis Industry Update Report

By Marguerite Arnold
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european union states

While the American cannabis industry deals with both unparalleled opportunity and new risks, Europe is setting itself up for a spring that is going to be verdant.

The ongoing drumbeat for reform in countries across the continent is bringing both money and high-grade medical product into the market. Even if volume is still really at a trickle, it will rapidly widen to a steady stream. It is also very clear that the next two to three quarters are going to deliver news that the cannabiz has arrived, and with authority.

The following is an overview of what is happening, where, and with an eye to informing foreign investors, in particular, about new opportunities in an awakening market.

Germany

Without a doubt, the country is priming itself for a medical market that is going to be large and partially government supported, driving regulation of medical use across the continent. On top of that, the idea of selling 28 grams (1 oz) of product to end consumers who only pay about $12 for their medication has gotten the attention of global producers. Opportunities here for those who did not submit a bid for federal cultivation (see the big Canadian LPs) are still unfolding.

german flag
Photo: Ian McWilliams, Flickr

However here is what is now on the table: an import market that cannot get enough cheap, GMP certified product. Producers from Australia to Uruguay are now actively hunting for a way in, even if cutting a supply deal for the next 18 – 24 months as the German green machine starts to kick into production-ready status. What a bad time for Israel to be so publicly out of the ex-im biz! In fact, Israeli entrepreneurs are scouring the country for opportunities into the market another way (and there are a few efforts afoot in a sleeping giant of a market waking up from a long snooze to find they cannot get enough product). Right now, however, the legal market is absolutely dominated by Canopy, Aurora, Aphria and Tilray along with Dutch Bedrocan.

The German parliament is clearly also going to do something about another piece of reform which will also drive market expansion – starting with announcement of additional cultivation possibilities (potentially this time even open to German firms). On Friday, the day after the British parliament wrangled over the same thing, the German Bundestag debated decriminalization along with a few other hot button topics (like abortion). With only the AfD (right wing) still in the “lock ‘em up camp,” and even the head of the police calling for reform, it is clear that decriminalization is on the legislative agenda this year.

Spain, Italy, Switzerland, Portugal, Denmark & Holland

While it may seem presumptuous to lump all these very different countries under one label, the reality is that the level of reform is generally in a similar state (transition to medical), and that drives potential political and market risk as well as evaluation of investment decisions.

aurora logoIn Spain, federal reform has not come yet, but medical deals involving pharmaceutical companies (both exclusively cannabinoid focussed and otherwise) are afoot. Plus of course there is Barcelona (the Colorado of the country in many ways).

Italy, Portugal and Denmark are all the battlegrounds for the big Canadian (and German) companies now set on having a country-by-country footprint in opening markets across the EU (see Canopy, Aurora, Aphria and their German counterparts of Spektrum Cannabis, Pedianos and Nuuvera). Licensing is political, happening at a high level, and only for those with the bank to back deals that come with high capex attached. That said, there are lucrative opportunities for those with local contacts and liquidity.Nuuvera logo

Holland is another animal altogether, but for the most part everyone is so confused about the state of reform domestically that the only people really in position to take advantage of it are the Dutch, at least for now. That said, Dutch-based plays (in part financed by Canadian backing) for other Euro markets are absolutely underway. Who else has so much experience here, let’s be honest? Regardless, investments in these canna markets, particularly for the Euro-focussed but North American investor, for now, will tend to be through public stock acquisitions of Canadian parents or direct investments in Dutch companies (see Bedrocan, but they are not the only game in town).

Switzerland, for the most part, is setting its own pace, but reform here means the CBD market, including for medical grade imports, is a place for the savvy medical investor to look for cultivation and ex-im opportunities. Including in the home-grown, Swiss pharma space.

Greece

Parthenon, Athens, Greece
Photo: Kristoffer Trolle

The recent pronouncement of government officials that Greece was opening its doors to investment and a medical cannabis business means that there will be a federally legal, EU country that is promoting both investment and tourism opportunities just for domestic consumption, let alone export. Scouts from all the major canna companies are combing both the Greek mainland and its islands.

Poland

If there was ever such a thing as a “virgin” cannabis market, Poland might well qualify. For those distributors with cheap product that has not (yet) found a home, the country is poised to start to announce (at least) distribution deals to pharmacies with producers now establishing themselves in other markets. Medical legislation has just changed, in other words, but nothing else is in place. And with Polish patients now having, literally, to scour the continent for product not to mention foot the bill for the travel costs to get it, the next obvious step is a national pharmacy chain distribution deal or two with producers from all over the world now looking for Euro market entry possibilities. Domestic production is some time off.

The BalticsThe ongoing drumbeat for reform in countries across the continent is bringing both money and high-grade medical product into the market

If there were such a thing as the “Berlin” of the cannabis market in Europe (namely sexy but poor), it is probably going to be here. Cheap production markets and opening opportunities for export across the EU for high quality, low cost cannabis are not going unnoticed. Look for interesting plays and opportunities across the region. Scouts from the big international canna companies already are.

The UK

Britain comes last because of the political uncertainty in general, surrounding the island. However, last week Parliament appeared on the verge of being embarrassed into acting on at least medical reform. There will be a market here and of course, there is already one globally known cannabis company with a 19-year track record and a monopoly license on canna-medical research and production (GW Pharmaceuticals) that calls the British Isles home. This will be a no-brainer, particularly for foreign English-speaking investors still leery of continental Europe. However it will also be highly politically connected. Expect to see a few quick arranged marriages between such landed gentry and foreign capital – potentially even this year.

Marguerite Arnold

Carry On Cannabis: UK Parliament Debates Reform (Again)

By Marguerite Arnold
2 Comments
Marguerite Arnold

The British Parliament considered a new right last Friday – the right of chronically ill patients to treat their conditions with cannabinoids. The bill to reform the law and allow medical use, the Legalisation of Cannabis (Medicinal Purposes) Bill 2017-19 was also re-read. It was first introduced last October.

While reformers at this point are loath to do any more than publicly hope, events in the UK continue to unfold in favour of reform.

This time, it is in the wake of a highly upsetting and embarrassing incident that further highlights the human toll of prohibition. When the British Home Office (a combination of the State Department, Homeland Security and a few other federal U.S. agencies) refuses cannabis oil to six year-old Britons with epilepsy named Alfie, don’t expect the famed stiff upper lip in response.

Not anymore.Why on earth would a home-grown company deny treatment to a British kid with epilepsy? 

Especially not when the rest of the EU is moving forward, Canada and Australia (both countries are a part of the British Commonwealth) are now firmly in the medical camp with Canada moving ahead with recreational use this summer. Not to mention continuing reform on both fronts in many U.S. states. Even with setbacks that include the Trump White House and Justice Department (the recently dismissed federal case in New York being just the latest casualty), recreational reform in California is an international beacon of change that will not go quietly into the night. Not now.

One of the more interesting aspects of the Dingley case in the UK, in sharp contrast, is how fast Parliament responded to the plight of the six-year-old and his mother. Not only has Dingley’s medical import license been reconsidered in Parliament, but the matter appears to have finally galvanized significant numbers of the British elected class to do something about an appalling situation that affects hundreds of thousands, if not millions of Brits too.

Cannabis Medical Refugees

Medical refugee policy, especially around cannabinoids, is at least as controversial as the other kind. In Europe and the rest of the world, just like cannabis reform itself, these are national, not state issues as they have been in the U.S., (where the issue of cannabis patient state “refugees” has nonetheless been an issue for most of this decade).

Outside of the U.S., however, it is still the case that national governments can be embarrassed into reform with the right case (or groups of them).

epidiolex
GW Pharma said their product Epidiolex (for the treatment of childhood epilepsy) is being considered by the European Medicines Agency

That was certainly true in Israel in 2014, when the so-called “15 Families” threatened to emigrate from Israel to Colorado unless the government allowed them to treat their sick kids (federal government policy was changed within a month). Not to mention an internal, state to state migration of families in the United States to Colorado around the same time.

It may also be true in this latest British case. The Home Office has been embroiled in a few embarrassing take backs of late, mostly on the topic of immigration of people. The Alfie-Dingley cannabis case hits both medical cannabis reform and lingering buyer’s remorse over Brexit where the British people actually live (and on topics they actually care about).

Refusing at least medical cannabis rights in the UK might also well tip the scales in favour of a redo on Brexit. Or at least capture the support of people who still dream of that possibility. While the UK is still part of the continent, British citizens also have the right to travel freely, with medical rights intact, to other countries and get treatment. The British are no strangers to this idea (in fact, many British retirees end up in Spain and Greece for precisely this reason). Add cannabis to the mix, and current British policy looks even more out of step with reality and the wishes of the British people. Even the older, more conservative and “middle class” (read: American working if not blue-collar class) ones.

Local Production and Prohibition

And then of course, there is this irony. GW Pharmaceuticals, one of the oldest, cannabis companies in the world, is located in the UK. It even grows its own crops there, and has a special license from the British government to do so.

Worse, in this particular situation, it also is busy bringing several cannabinoid-based anti-epileptic drugs (for children and adults) to the market.GW logo

Why on earth would a home-grown company deny treatment to a British kid with epilepsy? And how could a government grant a license to a company to develop the plant for profit, but not a child who desperately needs the drug to live?

In a move that seems more than coincidence, GW Pharma also reported this week that their product Epidiolex (for the treatment of childhood epilepsy) is being considered by the European Medicines Agency, while a separate drug also bound for the epilepsy market called GWP42006 had just failed a Phase IIa trial for focal seizures.

The business press of course, has mostly reported that the only impact of this development so far of course, is that the company took a hit on share price.

It might do a bit more than that. Starting with legislative reform and ending with the sparking of significant home-grown (and legal) competition.

The combined impact of a failed trial in Eastern Europe by the only British company licensed and qualified to produce medicinal cannabinoids for any reason, and the plight of a British boy at home who needs precisely this kind of drug (and has so far been denied it), might in fact be the tinder match that lights political and market reform if not the development of a cannabis industry (finally) in Great Britain.

If this doesn’t, probably nothing will.

KenSnoke

Emerald Conference Showcases Research, Innovation in Cannabis

By Aaron G. Biros
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KenSnoke

Last week, the 4th annual Emerald Conference brought attendees from around the world to San Diego for two days of education, networking and collaboration. Leading experts from across the industry shared some of the latest research in sessions and posters with over 600 attendees. The foremost companies in cannabis testing, research and extraction brought their teams to exhibit and share cutting edge technology solutions.

KenSnoke
Ken Snoke, president of Emerald Scientific, delivers the opening remarks

The diversity in research topics was immense. Speakers touched on all of the latest research trends, including tissue culture as a micropropagation technique, phenotype hunting, pharmaceutical product formulation, chromatography methods and manufacturing standards, to name a few.

On the first day of the event, Ken Snoke, president of Emerald Scientific, gave his opening remarks, highlighting the importance of data-driven decisions in our industry, and how those decisions provide the framework and foundation for sound progress. “But data also fuels discovery,” says Snoke, discussing his remarks from the event. “I told a story of my own experience in San Diego almost 30 years ago while working in biotech, and how data analysis in a relatively mundane and routine screening program led to discovery. And how we (the folks at Emerald) believe that when we get our attendees together, that the networking and science/data that comes from this conference will not only support data-driven decisions for the foundation of the industry, but it will also lead to discovery. And that’s why we do this,” Snoke added.

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Arun Apte, CEO of CloudLIMS, discusses his poster with an attendee

Snoke says the quality of the content at the poster session was phenomenal and engaging. “We had over 500 attendees so we continue to grow, but it’s not just about growth for us,” says Snoke. “It’s about the quality of the content, and providing a forum for networking around that content. I met a scientist that said this conference renewed his faith in our industry. So I firmly believe that the event has and will continue to have a profound and immensely positive impact on our industry.”

Introducing speakers as one of the chairs for first session focused on production, Dr. Markus Roggen says he found a number of speakers delivered fascinating talks. “This year’s lineup of presentations and posters really showcase how far the cannabis industry has come along,” says Dr. Roggen. “The presentations by Roger Little, PhD and Monica Vialpando, PhD, both showed how basic research and the transfer of knowledge from other industries can push cannabis science forward. Dr. Brian Rohrback’s presentation on the use of chemometrics in the production of pharmaceutical cannabis formulations was particular inspiring.”

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Roger Little, Ph.D., owner of CTA, LLC, presents his research

Shortly after Snoke gave his opening remarks, Dr. Roggen introduced the first speaker, Roger Little, Ph.D., owner of CTA, LLC. He presented his research findings on phenotype hunting and breeding with the help of a cannabis-testing laboratory. He discussed his experience working with local breeders and growers in Northern California to identify high-potency plants early in their growth. “You can effectively screen juvenile plants to predict THC potency at harvest,” says Dr. Little. The other research he discussed included some interesting findings on the role of Methyl jasmonate as an immune-response trigger. “I was looking at terpenes in other plants and there is this chemical called methyl jasmonate,” says Dr. Little. “It is produced in large numbers of other plants and is an immune response stimulator. This is produced from anything trying to harm the plant such as a yeast infection or mites biting the stem.” Dr. Little says that the terpene has been used on strawberries to increase vitamin C content and on tobacco plants to increase nicotine content, among other uses. “It is a very potent and ubiquitous molecule,” says Dr. Little. “Cannabis plants’ immune-response is protecting the seeds with cannabinoid production. We can trick plants to think they are infected and thus produce more cannabinoids, stimulating them to produce their own jasmonate.”

Dr. Hope Jones, chief scientific officer of C4 Laboratories, spoke about tissue culture as an effective micropropagation technique, providing attendees with a basic understanding of the science behind it, and giving some estimates for how it could effectively replace cloning and the use of mother plants. You could overhear attendees discussing her talk throughout the remainder of the show.

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Dr. Hope Jones, chief scientific officer at C4 Laboratories, discusses tissue culture during her talk

Dr. Jones has worked with CIJ on a series of articles to help explain cannabis tissue culture, which you can find here. “In this example, we started with one vessel with 4 explants,” says Dr. Jones. “Which when subcultured 4-6 weeks later, we now have 4 vessels with 16 plants.” She says this is instrumental in understanding how tissue culture micropropagation can help growers scale without the need for a ton of space and maintenance. From a single explant, you can potentially generate 70,000 plants after 48 weeks, according to Dr. Jones.

Those topics were just the first two of many presentations at Emerald Conference. You can take a look at some of the other presentation abstracts in the agenda here. The 5th Annual Emerald Conference in 2019 will be held February 28th through March 1st in San Diego next year.

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Israel’s Cannabis Export Plans Evaporate in Fire and Fury

By Marguerite Arnold
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Trump Administration-Israeli relations had the distinct whiff of cannabis to them in the first week of February. In a development potentially just as impactful as transplanting Israel’s capital to Jerusalem, it has now emerged that Israel’s president, Benjamin Netanyahu, has effectively scotched, at least temporarily, the country’s budding medical cannabis international export plans on the eve of finally launching them.

Why? To appease the U.S. president.

What this latest act of international “diplomacy” will eventually impact in the long run is anyone’s guess. There will, however, be winners and losers out of this situation, both now and in the long term.

Who Wins

On the surface (and to gentiles) it might be hard to understand why Israel effectively shot itself in the foot from a global perspective. But cannabis falls into complicated geopolitical and religious crevices at home too. Bibi, as Netanyahu is referred to by an international Jewish audience, has just scored political points over the Jerusalem showdown. Why rock the boat over a plant that has so recently gained legitimacy just in Israel? Remember the country only partially decriminalized recreational use in 2017. However, Israel has explored legal medical cannabis for quite some time, and Tikun Olam, the country’s flagship producer, has been growing cannabis since 2007.

Tel Aviv, Israel, where Tikun Olam has a dispensary

The quote from Netanyahu that has been widely circulated in the press says a great deal. “I spoke with Trump and he told me about his general opposition to the legalization of cannabis, and I’m not sure Israel should be the export pioneer.”

The fact that apparent encouragement of this policy came from the Israeli Finance Ministry only underscores the gravity of the impact for the losing side – and what was also probably threatened. Uruguayan pharmacies, who began distributing medical cannabis legally, walked away from customers last year after their banks were first informed by U.S. partners that they would either have to cut off the pharmacies or sever ties and access to the entire U.S. banking system. The cannabis trade was estimated to be worth between $1-4 billion per year to Israeli firms.

That said, this will also be a short-lived hiccup. Netanyahu apparently wants to see more medical evidence before moving forward with the plan. That means Israel will be in the race, but not for the next 12 to 18 months (minimum).

Prime Minister Benjamin Netanyahu (Bibi)
Image: Kjetil Elsebutangen, UD

This will also not affect the cannabinoid-related export of intellectual property, where Israel has also led the cannabinoid discussion and for several generations now. Recipes, breeding instructions and even seeds cross borders more easily than plants. If anything, it will merely sharpen and shape the start up nation’s many budding cannapreneurs in a slightly different focus.

Canadian, Australian and a few other exporters also win. As of 2018, there will also be multiple European countries and EU-based firms importing and exporting (even if it is to each other).

Who Loses

The U.S. legal state cannabis movement has just been served a two fisted punch in the face by the White House. The Trump administration, in fact, has doubled down, in the space of less than five weeks, on its views towards cannabis legalization.

This also means that there will be no U.S. firms in any position to join a now global and exploding legitimate cannabis industry that stretches from the American hemisphere north and south of the U.S. itself. Not only will American producers not be able to get export approvals themselves from the U.S. government, but they may well be facing federal prosecution back home.israel flag

It will also be interesting to see whether this heralds any post-Cole memo prosecutions of the many Israeli entrepreneurs already operating in the U.S. state cannabis space. American and Israeli entrepreneurs with IP to protect are also the losers here, no matter how much this is being fought on the California front right now. That is just a state battle. IP must be protected federally.

Investors in the U.S. who had already been tempted to invest in the Canadian cannabis industry, now have little incentive to invest domestically or in Israel, no matter how big and bad California is. There is clearly budding (and less politically risky) competition elsewhere.

It goes without saying, of course, that this decision also hurts consumers – both recreational consumers and medical patients.

Bottom Line

This is clearly sabre rattling of the kind intended to make news both internationally and abroad. However, in direct terms, it will have little impact to the overall growth of the industry, no matter who is doing the growing, distributing and ex-im. The cannabis industry will also clearly not stop being a political business for the near term.

Look for prosecutions this if not next year in the U.S. – potentially in California or another high profile “impact” state. We might see pressure on Netanyahu at home, and probably from abroad as well, to get Israel into the cannabis game globally.

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Head of German Police Union Calls for Official Decriminalization of Cannabis

By Marguerite Arnold
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Facing the same conundrum as police everywhere after the start of a medical market only this time with federal authorization, the head of the German police union has called for recreational use of cannabis to also be decriminalized.

On the first Monday of February, the head of the BDK – the Association of German Criminal Officers told The Bild (sort of like the New York Post but a national “tabloid” here) that his group, the largest organized union of German police officers, favoured a change in German cannabis laws. Andre Schulz argued that the current laws stigmatized those charged with minor amounts and created opportunities for “criminal careers to start.”

“The prohibition of cannabis has historically been seen as arbitrary and has not yet been implemented in an intelligent and effective manner,” says Schulz. “My prediction is that cannabis will not be banned for long in Germany.”

Why this sudden pronouncement? It is actually not all that sudden and has been long in the offing. One of the largest contingents at both the ICBC and the IACM last year (the biggest cannabis-focussed business and medical conferences in Germany) were police officers from California and Deutschland. And all were singing the same tune.

André Schulz
André Schulz, chairman of the BDK

However beyond a realistic assessment of changing political reality, there are actually several other concrete reasons for not only the statement but the timing of it. In a country where patients can now pick up bud cannabis from the local apotheke (which is that easy for some, although it is still hard for most), the police have the unappetizing prospect of potentially arresting patients. On top of that, the idea of someone being arrested for CBD flower (rather than THC) gives the German polizei plenty of pause. Not to mention that they face this possibility at a time when many of them potentially could be patients themselves (or their families). The idea of arresting an activist in this situation is also one the police do not relish. Legalization rallies here get formal police protection when they march. Ask the average beat cop what they think about cannabis legalization and they tend to roll their eyes.

Then there is this: In stark contrast to the wars over prescribing medical cannabis at a state level in California in the late 90’s, here in Germany, there is a cultural commitment to the concept of sick people having a moral and civil right to obtain the medication they require. The idea of the police arresting them in the process of obtaining the same or because they might be recreational users, is as antithetic to core German sensibilities as the concept of Donald Trump as U.S. President. So is the idea of branding someone a “criminal” if not “drug user” for possession of a drug that is now used as medicine in Germany.

As has been rumoured for some time now, one of the few things that all political parties in Berlin can agree on is a change on the current cannabis laws.As a result, the very idea of both arresting the sick or labelling someone for the rest of their life with a police record for a drug “crime” that nobody considers as such anymore, causes a shock to the system. In many ways, German culture is far more conservative than the U.S. On another, there is a deeply humanistic, liberal strain to German life that also allows nudity, alternative healthcare and lifestyles to flourish (and not just all in Berlin). The current situation over cannabis, in other words, is becoming a political and legal embarrassment even to the beat officers who have to implement such laws.

And then of course there is this: One of the country’s top judges, Andreas Müller, a man well-known to the senior level of BDK, has recently written a book about the horrible situation that faces his own brother because of drug laws in Germany called “Kiffen und Kriminalität.”

Cannabis also falls into this crevice of cultural questioning if not the national zeitgeist of the moment, in multiple ways. It is, beyond the stigma, a natural medicine that is now federally recognized as such and one that the statutory health insurers (public healthcare) is required to cover. No matter that only 64% of submitted rezepts have been formally approved 11 months into Germany’s foray into this world. There are doctors writing them. And there are insurers picking up the tab.

It also means that there are at least 10,000 legal medical cannabis patients that der polizei have no wish to bother. And 10,000 German patients, who look the same as anyone else, are already too many legal users for current laws to stay in place.

Decriminalization, Cultivation & Changing Culture

There are some who say that Europe is “backwards” if not slower than the United States. Certainly those who experience German culture as Auslanders are struck by the procedural requirements of everyday life. Things do move slower here.

However when things do move, they are determinative shifts. Right now, it is impossible to live in the country and not be aware that Kiffen – a slang term for pot auf Deutsch – is legalizing in the U.S., Canada, the rest of Europe and of course other places. Further, Germans with their distrust of bureaucracy and authority and certainly currently rebellious mood, are looking to a way forward for the country in a sea of uncertainty both locally and regionally not to mention globally on any issue, no matter how “symbolic.”

As has been rumoured for some time now, one of the few things that all political parties in Berlin can agree on is a change on the current cannabis laws. The idea of decriminalization, now suggested by one of the country’s top cops, is a natural solution to political deadlock, if not a changing society.

The idea that other countries are also moving on this topic, from the now Brexiting UK to France next door, not to mention all the cultivation focused reform in many European countries, seems to indicate that decriminalization and even recreational reform are coming and now officially on the schedule, and not just to Germany but the entire continent.

Vermont Becomes First State to Legalize Cannabis Through Legislature

By Aaron G. Biros
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On Monday, January 22nd, Vermont made history becoming the first state to legalize adult use cannabis via the legislature. Governor Phil Scott signed the bill, H. 511, into law, which legalizes adult possession and cultivation of cannabis, eliminating penalties for possessing one ounce or less and up to two mature marijuana plants and up to four immature plants for people 21 and older, beginning on July 1.

Vermont Gov. Phil Scott

According to the Marijuana Policy Project, they have been lobbying Vermont’s legislature since 2003 and they plan on working with the Vermont Coalition to Regulate Marijuana and the state task force to implement sensible and effective regulations for the state’s new industry. This makes Vermont the ninth state to legalize cannabis.

On Thursday, January 4th, the Vermont House passed this bill, sending it to the Senate for concurrence. On January 10th. The state’s Senate also passed the vote, sending it to Gov. Phil Scott’s desk to sign. Now that he signed the bill into law, Vermont is officially the first state to legalize cannabis through their legislature.

“After more than 15 years of hard work by MPP and our allies in the state, adults in Vermont no longer need to fear being fined or criminalized for low-level marijuana possession and cultivation,” says Matt Simon, New England political director for the Marijuana Policy Project. “This is a great step forward for the state and the whole region. Responsible adults will soon have the freedom to enjoy a safer option legally, and law enforcement will be free to concentrate on serious crimes with actual victims. We are looking forward to working with lawmakers and state leaders to continue improving marijuana laws in the Green Mountain State.”

Greece Moves Forward on Legalizing Medical Use

By Marguerite Arnold
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The Greek Parliament is finally expected to approve the medical use of cannabis – probably in the first weeks of February. The move is far from a surprise. Greek politicians announced last summer that this development was in the cards.

What is even more promising for the sector domestically, not to mention in terms of European reform, is the unflinching acceptance of this industry by the establishment and national politicians, and further as one with great economic development potential for a still-ailing economy.

A $2 Billion Injection of Capital

Deputy Agricultural Development Minister Yannis Tsironis (for one) has already publicly expressed his hope that the Greek medical program will attract beaucoups bucks from overseas.

However given the context in which this announcement has taken place, is this seriously a commitment to medical cannabis? Or is it an easy (if not slightly buzzy) way to attract foreign capital to a Mediterranean paradise still in dire need of a capital injection from any source it can get one?

Deputy Agricultural Development Minister Yannis Tsironis

Maybe it is a combination of both.

Many in Europe are forecasting that 2018 might finally be the light at the end of the tunnel for the Greek economy, which has been mired in austerity for the last decade. The Greek government is now in the process of moving forward with the final requirements of both labour reforms and receiving what is hoped to be the last bailout of its economy by foreign investors before it finally goes it alone by August 2018.

The Greek economy finally grew 1.5% last year. In 2018, in part thanks to the final package of reforms, the economy is expected to grow by 2.4%.

A foreign-financed medical cannabis business might be just what the economists have ordered. Especially if it is also open to visitors.

Medical Marijuana on Mykonos?

The development of a domestic medical cannabis industry in Greece is good news for not only medical reformers but also those who are looking for ways to expand the influence of the flower into the broader economy.

And Greece is one place where such ideas could easily and quickly take root in Europe.

Mykonos, the Greek island
Image: Maggie Meng, Flickr

Greece has long been the haven for a highly niche, international tourist audience. Tourism in general has also been on the uptick over the last two years again as particularly Europeans look for relatively cheaper beaches and sunshine. Over 30 million foreign tourists flocked to the country last summer – a number of people roughly three times the population of the country.

Again, mainstreamed medical cannabis would only add to the economic results in a way that is just as heady if not (economically) stimulating as a good sativa.

The idea of a medical tourism industry here, could also potentially create not only a Greek medical paradise, but potentially also have a growth impact on European cannabis programs too. Especially if reciprocal medical rights we

re also offered to EU citizens looking for an extended canna-friendly vacation.

Greek Cannabis Club Med?

Of all the countries in Europe, the Greek cannabis experiment offers the first real chance for a Canadian/American style cannabis industry to begin to flourish in Europe. In colder, more northern European countries, medical cannabis is still being treated as an expensive adjunct to traditional healthcare. And no matter how much citizens are moving towards acceptance of a recreational industry down the road, things are moving much slower in the rest of Europe. Germany, to put things in perspective, passed medical reform several months before the Greek decision to legalize medical use last summer. Yet now it appears that Greece might actually move into a full-fledged, domestically grown industry before its Teutonic neighbour to the north.

Parthenon, Athens, Greece
Photo: Kristoffer Trolle

And further, unlike Germany, Greece may well decide to develop its “medical cannabis industry” as an adjunct to its tourist industry.

Sure, Holland and Spain led the way in this part of the world if not internationally. Neither country, however, needs new industries now in the same dire way, nor is emerging from a national, decade-long recession.

All the elements are here, in other words, for the Greeks to turn a new page in their very long and documented history, and do something a little different.

Marguerite Arnold

Mainstream Media Picks Up On Cannabis

By Marguerite Arnold
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Marguerite Arnold

The British online newspaper, The Guardian, has just begun to cover cannabis. The regular feature, part of their “society” section, is clearly attempting to cover cannabis a bit more consistently and regularly as the California rec market begins to gain (legal) steam.

The writer now helmed to lead this effort is Alex Halperin, a business journalist in the U.S., who landed the gig apparently on the success of Weedweek – a highly cryptic weekly summary blog of mostly U.S.-based industry events and updates.How the Guardian will cover the industry and related issues will be interesting to follow.

This is also not The Guardian’s first foray into the topic. The media outlet, which got its start in the 1800’s in Northern England and expanded dramatically to reach a global digital audience over the past decade, has covered cannabis legalization on a fairly regular basis for the last four years. This new focus also comes at an interesting time. Apart from events in the U.S., Canada is moving forward with recreational this summer. And in Europe, the medical discussion continues apace. That said, it appears the Guardian is going to focus on the U.S. market, at least initially.

It will be interesting to see if that focus shifts (and if they allow other journalists outside of the U.S. to participate in the expanded coverage). While California might well be the largest state economy in general, the Canadian market is already larger and more developed, being regulated nationally across multiple provinces.

Another Mainstream Media Cannabis Column?

This is hardly news. The Guardian is actually treading on ground established already by most of the big news and business publications – including niche publications, blogs and of course, the trade press.

How the Guardian will cover the industry and related issues will be interesting to follow.

The purpose of the column apparently is to spark an “adult conversation” about cannabis – and how it is “changing modern life.” The initial focus on the U.S. market (and California in particular) may have seemed to make sense to a media outlet looking for outrageous stories. But as everyone knows, the U.S. is only one market – and further one still without federal protection.

However, the Guardian is also now competing with other business and mainstream publications that are already in this space. Main Street, the online business ‘zine helmed by Jim Cramer, created one of the first mainstream specialty cannabis sections almost four years ago with the coincidence of the Colorado rec market. Other notable publications and media outlets have significantly increased their coverage of cannabis as well. CNN has been reporting consistently on cannabis topics like legalization and U.S. federal reform efforts for some time now. Business Insider and Forbes have covered ongoing and growing investments and the financial side of things for several years. The Denver Post has its own entirely cannabis-focused subsidiary, The Cannabist.

And as public companies, in both the U.S. and elsewhere have begun to move through the legal thickets of legalization, business-focussed journals and blogs are even beginning to cover cannabis stocks. Starting with Motley Fool and Seeking Alpha (although again, most of this coverage is of companies outside the United States). Specialty publications are also of course, flourishing online, particularly with the beginning of an advertising market that is also beginning to establish itself, albeit around some still thorny regulatory issues.

In general, although the Guardian has a reputation as critical of the British monarchy, with strong left-leaning tendencies, its coverage of the industry has been fairly mainstream – so far at least.

Will that begin to change? And what will really be tackled and covered? And while the ostensible focus is what is going on in the world of cannabis in California (and presumably other foreign markets) could the Guardian’s ostensible new feature also be geared to drive reform at home? The U.K. has yet to even approach the topic of criminalization.