Deadhead Cannabis Show 0019: Downtown Chicago Opts-Out of adult use

The Chicago politicians have voted to prohibit the sale of cannabis in the city's downtown tourist section.   Jim Marty and Larry Mishkin discuss this  short-sighted decision and how it will impact the industry.   During the music section of the show they start a new series about their five favorite Grateful Dead Shows.

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Jim Marty:
Hello, everybody, and welcome to the Deadhead Cannabis Show. We're here filming another episode in my barn just outside of Lombok, Colorado, here with Larry Mishkin from Hoban law. Group.

Larry Mishkin:
Great to be here with Jim Marty from Bridge West. As always, I anytime I can make it out to the barn to tape a show, I'm happy to do it. Good vibes, good energy and a lot of fun stuff.

Jim Marty:
Just a beautiful day here in Colorado. Just blue sky and trees just starting to turn. And about 80 degrees is just right here. Now we get lots to talk about. Larry, what do you got on your list?

Larry Mishkin:
Well, we are one of the things I know we want to mention is the new box set that's coming out going to be released any day now, I think by the date. I'm not sure what the actual drop date is. But once again, they've gone out and they've chosen a series of shows. This time, interestingly, they they've picked a series of dead shows over a six year span to an eighty seven two and eighty nine and two and ninety one, all from Giants Stadium. Everything I've seen and heard about them suggests they're great. I know that on the serious dead station they've been dropping some of the songs from time to time and online. You can listen to a few of them. You ever see them in Giant Stadium, Jim?

Jim Marty:
I did not, but I'm looking forward to the video. Just the Blu ray video just that comes with it. The block sets and that'll be a nice to watch that and do a catch tour. But no, I never touched a giant stadium for a show, but they said that the Grateful Dead had a way of making that venue just very intimate, even though it was a 60, 80 thousand person stadium.

Larry Mishkin:
Well, that's what I heard. I never made it to to Giants Stadium either for a show. It's a lot of people out there. That's a big, big place. But, yeah. And they had the ability to do that. I saw them in large enough stadiums, Soldier Field and RF K Stadium in Washington, D.C. and some really, really large venues. And, you know, somehow they had the ability, even when you're a large venue like that, to really make it feel like you were kind of in a much more intimate setting. Yeah, Sunday night, of course. But many, many nights. Yes. So what else we got? Well, I'll tell you. We've been talking over the past couple of shows about the debate crisis, which still has not yet been completely resolved. We spoke in quite a bit about it. And I don't know that there's so much new news for us to go over it again other than to acknowledge that it does remain a problem and it's incumbent upon everyone, the government, the industry and people to really take the steps they can take to help identify counterfeit products and to use the legal products and products that are produced and have been inspected and tested. That is important as a matter of public safety, regardless of what type of product it is that you're you're actually taping with.

Jim Marty:
So, yes. So as we said last time, it's a wait and see. So still no breaking news on that front.

Larry Mishkin:
And last since our last show, however, north of the border this last week or two, we've seen some real developments happening up there. And this is interesting because a company called Cannot Trust.

Larry Mishkin:
Which is probably one of the largest Cannabis companies operating in Canada right now in the adult use market. Recently had its license suspended by the Canadian federal authorities. They were gonna go in and seize product, they were going to seize records, they were going to seize money and a whole bunch of things. And it's really kind of interesting to me for two reasons. One, because any time you see a such a large player, get the really what's the ultimate punishment for anybody in the Cannabis industry if you get your license revoked or suspended, you've been put out of business. So so nothing else matters.

Larry Mishkin:
And at the end of the day, what I what I found surprising was nowhere did they completely specify what the particular acts were on cannot trust's behalf that led to this. But in the notice of steps that cannot trust had to take in order to correct the problems. They include things like ensuring the Cannabis is produced and distributed only as allowed by law. They have to take steps to recover any Cannabis that may have been distributed that was not authorized by law. And they have two actions to impose compliance with law. With the law. The regulations among their key personnel.

Jim Marty:
Well, that's really very interesting. I would want to make a comment on one particular company, but it does show the importance of how this industry has to mature in their corporate governance. They have to act like real companies with internal controls and SRP standing operating procedures, producing their financial statements and tax returns timely at Bridge West. That's a real challenge for us. A lot of these people in this industry do not come from a corporate background. And their books and records, quite frankly, are a lot of times a mess. So we have to deal with that everyday basis. But is that just a as I said, a sign of maturity, that that is the direction we need to go in the industry really needs to mature?

Larry Mishkin:
One of the things I want to emphasize in talking about this is that I and neither I nor Jim are in any way passing judgment on cannot trust. It's important to note that as part of the Canadian process, cannot trust has an opportunity to file responses addressing the issues raised by the government and defending themselves against those charges. And there have not been final rulings made to me. The interesting part was, though, that the government was even willing to put such a major company in that type of position. I think that what it tells us is that the Canadian government is very, very serious. I think the other thing that tells us and maybe this was one of the things they wanted to do is there is no better way to send a message to some of the smaller players in the industry by letting them know that even, you know, even the big guys are not going to be beyond the reach of the government if it believes that there is some basis to issue the type of notice that the Canadian government did in this instance. And that's the part that I think is really important. If you really want to win over the public, you have to let them know that no matter how big you are, no matter how small you are. Everyone has to play by the rules. If you want to be, have the privilege of cultivating, processing and selling marijuana.

Jim Marty:
Yes, I know what you're saying. And do you know if they had any U.S. operations?

Larry Mishkin:
I'm not familiar with that. But I can tell you that the value of the stock dropped over 87 percent over this period of time. And, you know, that's another thing, obviously, in the cannabis industry is more and more of these companies go out and take on public investors. You know, public investors expect the companies obviously to operate within the rules and within the law and to avoid a situation where anything might happen that might reduce the value of their interest. Again, I would emphasize I'm not suggesting that cannot trust has done anything wrong here. And it may very well be that they're exonerated and the price of the stock goes back to where it should. But even in that case, then what we see is the government having the ability to step in and interfere with the financial resources of companies, because simply by making the allegation, that's enough to trigger a negative response in the market.

Jim Marty:
Oh, yes, yes. The industry is full of risk. I would say any company that's in the Cannabis business, especially if you're what we call it, touch the plant company where we actually have a license to grow and sell marijuana, very high risk. So many things can go wrong at so many different levels just from your cultivation through your accounting system, through your employees stealing from you, which can cost you your license to sting operations by the MVD, sending in somebody a few hours before they turn 21. So anyway. Yes, it's a very high risk business and we deal with that every day at the same time. It's a product that people millions and millions of people love this product, right.

Larry Mishkin:
And they have to know that it's safe and which is so important for public trust. But likewise, I think it's important. You know, some people we don't talk about are the people that do follow the rules. If you follow the rules, nobody really pays attention to you. But like any you know, if you're going to follow the rules. The thing that motivates you to do so is so that you don't run into a situation where the government might step in. And I think it's reaffirming for them to know that as long as they're following the rules, you know, that's good. People who don't follow the rules. There is a penalty to pay. In other words, it's worthwhile. It's worthwhile to do that. That's a great example, I think, of the federal government getting involved. Obviously, we don't have the opportunity yet the United States or the federal government to play any kind of a role on that side of the coin, although they certainly are playing a role on the Hemp CBD side.

Larry Mishkin:
And we've touched upon that a little bit with the FDA making their statement and their determination. Well, they haven't made a determination yet as to whether or not CBD is a safe food additive. And it's resulted in a number of states taking the position that you can't sell it here.

Larry Mishkin:
So in any in any event, the federal government of any country that has a program has to be mindful of the impact that their their statements and their proclamations can have on the industry.

Jim Marty:
Well, of course, it's a very time sensitive part of the year. Major Hemp harvest going on all around the country. My personal prediction is that not enough Hemp will be grown to meet demand. In 2019, the harvest of 2019. But that crop will all be brought in over the next few weeks. My understand I'm not a scientist, but I I learned so much from my clients that Hemp can survive the first frost and not the second. That's a very sturdy plant, so you can actually leave it in the ground right up until about the time your first from us or shortly thereafter. So love. But I don't think enough has grown. People call us and they want to export Hemp and CBD products all around the world. And I'm saying, where do you get the Hemp? Well, it's you know, there's the demand for that. Just the United States is trying to eat out that crop and more. So we'll see.

Larry Mishkin:
Yeah. I think it's going to be very, very interesting times on all fronts with that. And, you know, if we can emulate Canada in terms of demonstrating good compliance and good regulation, I think that's to everybody's benefit. One other thing I want to say on a different topic, but it's it's it's coming out. It's new and it speaks to some of the frustrations, I think, that the THC industry is still running into. We spent a little bit of time on this program talking about Illinois's new adult youth program and how it's kind of unfolding right now in applications for the dispensaries supposed to be dropping sometime within the next week or so. Applications for cultivation and processing are going to drop in January. Licenses awarded in May of the current medical dispensary operators. Hopefully we'll have a good number of their entities up and running as adult use by the beginning of the year. But one of the things we talked about last time, Jim, are a couple of shows back was some of the frustrations that we're setting in because a number of communities in the Chicagoland area were opting out. Naperville, Highland Park, Wheaton, these are these are communities that have large populations in neighborhoods with people who have income levels that would suggest that they could support adult youth and certainly make up of individuals who might very well support that industry. And in the case of Naperville and Highland Park, are they actually already have medical dispensaries in those towns.

Larry Mishkin:
So though the medical dispensary operators are actually being penalized because they can't open up their dual purpose or make their current facility a dual purpose facility there like the other medical operators are, because the community saying no to the adult you site. Everyone thought that in the midst of all of this, the city of Chicago was safe and fertile ground. There have been a number of articles written about big groups interested in coming in and becoming the Apple Store of Michigan Avenue for Cannabis and one or two groups that even had renderings drawn up and one was featured in a recent weekend article in the Chicago Tribune, not too too far back. And last week, almost slipping by everybody's attention in the way that it was announced. Illinois's new mayor, Lori Lightfoot, who was certainly much more of a liberal and and to the left in terms of her political philosophy and someone who was widely seen as a fan of the Cannabis industry, or certainly not an opponent of it, issued a set of rules for the city of Chicago that said they are opting out on any adult used to. Resource facilities in the central business district, which is broad enough to include all of Michigan Avenue, the theater district, the shopping district, the business district in the loop. The areas in the West Loop or all the new nightclubs and restaurants have been built.

Larry Mishkin:
And really those parts of town where you would expect tourists or other people out for a night on the town wouldn't have the type of income to spend, would be very simple to go in and buy whatever they wanted. Perhaps for the evening or for whenever. But now, of course, that's being taken away from them without a whole lot of explanation as to why.

Dan Humiston:
I want to take a quick break. Thank you for listening to today's show. As the leading Cannabis podcast network, we're constantly adding new Cannabis podcasts to support our industry's growth. And that's why we're so excited to announce our newest podcast, The Cannabis Breakout, which premieres October 18th. The show's about the thousands of Americans who remain in prison for violating Cannabis laws that have long since been overturned. The Cannabis breakout gives Cannabis political prisoners a voice. If you're a former Cannabis prisoner or have a loved one who is a Cannabis prisoner, we want to share your story. Please go to MJBulls.com and sign up to be a guest. Well, based on the Colorado exchange, so those decisions are not always take my own hometown of Longmont, Colorado.

Jim Marty:
They did not initially allow adult use, and now they do so with smarter. I always say when people see what legal marijuana looks like, then pretty soon it's not in the paper anymore. You very rarely hear marijuana discussed on the presidential debates or on the Trump side either. The Democratic debates don't really good. That's what I say. Good. I don't want you talking about marijuana. Just let everybody alone and do it. Let people do what they want. And people do, as I said earlier. They love this product. Dispensaries are very busy and sometimes they'll see 60 people in an hour.

Jim Marty:
So anyway, we got got me talking down that tangent. The only time. Sure. Yes.

Jim Marty:
Yes. So it's not a permanent decision. Let's keep these neighborhoods look and see what legal marijuana looks like. The residents will vote in favor of allowing more access.

Larry Mishkin:
Well, you know, I certainly like to believe that's true, and I hope that's true. I think the frustrating part for me and for many of us in the industry is that. Illinois is not breaking new ground here. There are a number of states, Colorado, Washington, we know all of them that have adult youth and in the case of Colorado and Washington have had them for a long, long time. And you and I, Jim, have spent time on this show talking about the very positive impact that those laws have had. And just as much that the minimal amount of negative impact that they've had and that these cities have established the statistical things for violence going down. And do you eyes going down and teenage smoking going down. So communities are aware of the state. They know what they're getting into. They know that it's a money maker. Maybe it's just an overabundance of care and caution. Maybe it's, you know, trying to make their neighborhood not be one where, you know, many other people will come from outside of their neighborhood to come rushing in to buy marijuana products.

Larry Mishkin:
Not really sure. But, you know, they say they don't have any problem selling alcohol in those communities or in the loop business area in Chicago. So it's very frustrating.

Jim Marty:
Well, going back to the Colorado experience, the cities that opted out, though, they did participate in the general sales tax on marijuana. They did not participate on the extra sales tax on adult use cannabis if they opted out. So there was a bit of a stick in there. And if they didn't want to have Cannabis. And I think that's why some of these communities reconsider. Again, my example of one man. Colorado had three of the major players just outside city limits. And I mean, you can kick a football and hit the dispensary from city limits right there. So I said people need to see what it looks like. They have to get used to it and just get used to it in a negative way, but get used to it. And just as a normal part of your everyday commerce, I think that I think you're right about that.

Larry Mishkin:
I think, you know, one of the unintended or who knows, maybe it was an intended consequence, though, is we have a number of operators that are all of a sudden scrambling people who really were convinced that they had they had the ability and the means to tackle those neighborhoods and really do it in a way. I certainly think that would be proper and appropriate and not in any way that would cheapen the experience of being in those neighborhoods or locking down Michigan Avenue. You know, I think that they have the ability to pull that off very nicely. They're all scrambling now where we're going to put our flagship stores, where are we going to even put out our second dispensary if we're being told that this entire area is off limits? And the same with Naperville and the same with Highland Park. And all of a sudden you're running out of communities that are of a size that, you know, an operator of an adult youth dispensary would like to see before they decide to plant their store in that location. And it remains to be seen because nobody sent in applications yet. They haven't even dropped. So, no, but we can't really tell what the overall impact will be on that. In terms of where will people go to look at? Will there be a concentration right along the border of this of this new no smoke zone? Maybe, you know, there's some talk that some people won't go for their second adult youth license until they see whether or not this restriction gets lifted soon.

Jim Marty:
When do Illinois adult use applications come up?

Larry Mishkin:
So the for the current medical license holders, they're in the process of many applications to make their medical facility a dual purpose and to get a second adult use facility, a dispensary facility sometime in the next week or two. We've been told that the applications for adult use dispensary licenses will drop and that they will then be to the end of the year, the first or second week in January. The licenses for the adult youth cult craft grow cultivation and processing will drop and those will be due some time by the end of March. Licenses expected to be awarded in May.

Jim Marty:
Really? So no adult use January 1st or no?

Larry Mishkin:
There is adult use January 1st, but it's going to be the current medical providers and a number of them are already in the process of converting their current location into a dual use location and establishing their second location. But I can tell you that for some of them who were thinking they were going to do it in that downtown area or in Naperville or in Highland Park or in Wheaton or some of these other communities, it's it's a step back for them. And it does create a question as to how many of them will really be situated open at by January 1st.

Jim Marty:
Well, we talked about that earlier in the show about quantifying business risk. So this banding that we would call that political risk very high. Very unfortunate for those folks. On the other hand, you have a group that was had medical who are going to receive a use huge windfall so that when they say this business, marijuana industry is the wild, wild west. It really is. I mean, fluctuations like that from getting boxed out in Michigan. You write you're having your medical facility that was barely breaking even now be in a position of service, your nine point nine million five million adults in Illinois.

Larry Mishkin:
Yeah, it's going to be very interesting to see how this all plays out. But when it goes to show is that government on every level and every country gets involved, sometimes for the better, sometimes in a way that may not seem for the better. But as you say, we're certainly in Chicago land area. We'll give it we'll give it some time and we'll see how things work out and whether down the road.

Larry Mishkin:
Mayor Lightfoot and the Cook County Board are willing to open up that area for further business. All right.

Jim Marty:
Well, let's close it up with a little music talk.

Larry Mishkin:
Yeah. One of the things that we've been kind of going back and forth on for a while, but I think today's a great day to do it, is to start talking about favorite shows that we've seen over the years. You know, they're our favorite show. So obviously it's very, very subjective. You know, some of you may have been at some of these shows and appreciate them as well. Some of you may have been there. I thought they were bad shows, but that's what makes it fun. It gives us something to talk about. So, Jim, you know, throw out the Grateful Dead today. What's what are your top five?

Jim Marty:
Well, I guess one of my favorite shows would have to be Italian, right? August 15th and 16th, 1987. It followed three days of Red Rocks. Tuesday, Wednesday, Thursday night. Thursday show was the last Grateful Dead show ever played at Red Rocks. They just outgrew it. But then we had a day off on Friday to drive eight hours to tell you, right? Saturday and Sunday. Grateful Dead in Town Park. And I had booked a condo very early on, so we had a great place to stay. And the warm up band was Prince Warner, Tonja and his dancers and his drummers with eight foot high drums. They had to climb ladders to play the drums and the girls and rap and grass skirts. Dancing was just a crazy scene. They looked like they were African dancers, but they actually turned out to be from Baltimore because we met them in the hot tub later and got foot massages.

Larry Mishkin:
So you can argue with that.

Jim Marty:
Mickey Hart led a parade down Main Street. They were selling. That's celebrating the harmonic convergence. So there was big drum circles. And like I said, Mickey Hart was there right in the middle of it all. And so great times. They shut down the count, didn't they? Well, you couldn't really get in and out to. Well, it was very difficult. We got it in there early enough and parking was very tight because it's a dead end canyon. There's no there's only one way know one way out of Telluride unless you have a four wheel jeep to go over the top of the mountains over the year, Ray. But one of the special reasons I remember that show is because my wife was pregnant with our older son Matt, who is now 31. So I know exactly how long that show was. Wow. Very cool. So, yeah, Maureen took care of her. She cooked for us. Well, we all had a great time.

Larry Mishkin:
Nice. That's great. Listen, I never made it to tell you, right? I heard wonderful things about it and about that particular show. As long as I'm in Colorado, I think that I it's hard always to narrow down one of my top five favorites. I've got many I've got a few that I can talk about. But being in Colorado, I think I would be remiss if I didn't talk about June 14, 1984 at Red Rocks. It was the third night of a three night run. My wife, who was my girlfriend at the time and some other friends of ours from Ann Arbor, all got in the car with no air conditioning and drove cross-country in the middle of summer to get to red rocks. And we got there and it was we camped out at the chief hosting camp grounds for a couple of nights. And then there was a really bad rainstorm and hailstorm on the second night. And my wife's brand new for an accurate Ford Taurus, rather, had the the roof damaged in the back window blown out by all the hail and we had to get it all changed. We still persevered and got up there. But all of that was window dressing for the next night with the final night.

Larry Mishkin:
And there was a great night. It was a beautiful, beautiful evening. No rain, no nothing. We had bumped into some old Ann Arbor friends who had provided us with some things that were truly enhancing the evening and and making it a lot of fun. And they came out on fire, opened up with a great ACO. And, you know, whenever they do that, to me, it always suggested Jerry was in a kind of a playful mood and really ready to have a fun night. They burned right through their first set, playing great tunes. And in fact, I don't often say this, but they were playing so well that night that we didn't even mind the day job for set closer, you know. And for those of you who don't know, in one of the dead compendium of songs, they actually have this line where they talk about the notes of all the different songs. And when they talk about day job, they say that the band stopped playing the song at the request of the Deadheads. So, you know, I always thought maybe it got a bad rap. But, you know, it certainly was not one of Jerry and Robert Hunter's better tunes.

Jim Marty:
But you gotta keep your day job until your night job pays. Yeah, it's not a terrible song. No, not at all. But they did play it that night. But then they went into the second set.

Larry Mishkin:
And it was one of those, you know, for all of you. And the Grateful Dead shows, you know what it's like when you when you have a second set. It just kind of takes off and goes off in directions that you never saw coming. And they came out. I should say, by the way, this was my 30th Grateful Dead show. So I was very excited to be there. They came out the second set. They opened with Shakedown Street and there we were in the middle of Red Rocks and, you know, Jerry booming and Phil's bass guitar booming. And, you know, they played it forever and then went into playing in the band, which when you're in the Right State of Mind, is the most beautiful, rich song to take you out there to wherever they're gonna go. But then came the highlight of the set. Almost a forced manor branch started going off in some other direction. None of us could figure out what he was doing. And the next thing we know, he and Jerry were at the microphone singing Dear Mr. Fantasy and the house up for grabs. It was the first time they had ever played it. Know one of those tunes that you just never really thought was gonna be a possibility? And yet, you know, off they went and they did it live.

Jim Marty:
It had to. Hey, Jude sequence in a little bit.

Larry Mishkin:
May have had the Hey Jude sequence in the middle as well as I was at that. Yeah. They I'm quite sure they. It was just tremendous. Completely unexpected. A song we all knew and never expected to hear it in that context. And then they did it great that they can they came back out of the drums back into play and I think there was a black Peter and then they did, you know, throwing stones not fade away, which as we may have talked about. The only reason I started to get frustrated was that was because it became too predictable. You know, they were throwing it into the middle of a set where it didn't automatically signify the end of the show. But again, on this night, there were there were just so hot that we were happy to have them play it. They played it great. And then, of course, the funny part of the night was it was June 14. So Bobby comes out, it gives a little speech about how one hundred and fifty or two hundred years ago, whenever it was a U.S. Congress declared the Stars and Stripes to be the flag of the United States of America. So for all of you were here the first night when they played US blues. We're really sorry.

Larry Mishkin:
And they launched the US Blues for the second time in three nights. But they killed it. They played it great. And it was one of those shows where you didn't want to leave Red Rocks. And at the end of the night, the people were coming around very politely and saying, you really have to go now. And nobody wanted to walk out of that place. It was just it was a it was it was a magical night. It was certainly one of the best shows I ever saw. Excellent. So. Well, that's a good start for us on that. We have the good news is we have many, many more shows to talk about. Lots of other great topics to talk about. I'm going to have to figure out when I can get back out here to the barn again. But just again, really quickly, thank you to our whole staff and crew and everybody who working with us. Dan Humiston, the wonderful producer who's still on the mend from some surgery, but like a trooper is is out there keeping Halston Future, who has come out from the Hoban law. Group. And he's helping us today with all the video work. And Jim, are all of the hospitality. Letting us use the barn. I can't thank you enough. But.

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Raising Cannabis Capital