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Marijuana legalization is ‘at least three-plus years away’: TerrAscend exec

Curaleaf CEO Matt Darin and TerrAscend Executive Chairman Jason Wild sit down with Yahoo Finance to break down the cannabis industry's outlook for federal legalization in the U.S. and the growth seen despite Congress' stalling of the SAFE Banking Act.

Video Transcript

DAVE BRIGGS: Connecticut is now the 21st state where adult use cannabis sales are now legal and live. I was there at Rize Dispensary in Branford, Connecticut, Tuesday, along with Green Thumb CEO Ben Kovler there in the center, as things kicked off 2023. 37 states now have access to medical marijuana. But while the plant is expanding around the country, optimism is not growing in Congress.

Here to discuss the outlook are Curaleaf CEO Matt Darin and TerrAscend executive chairman Jason Wild. Very cool to have you both joining forces today. I don't think we've ever seen this on television, so it's a real pleasure. And Jason, we'll start with you. What is your level of optimism for the industry as we start 2023?

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JASON WILD: My level of optimism is high as it relates to the industry and the companies within the industry that are moving forward with their plan to be sustainable, profitable businesses without the benefit of any reform federally or tax reform. I think that there are a lot of good companies out there that are positioned well. But I also, because of the lack of progress that the industry made in the Senate last month or the lame duck session, I would say that there are also a lot of companies that are going to be essentially have-nots and may not make it to the other side.

DAVE BRIGGS: Matt, the investor story has been bleak. Stocks have been pounded in 2022. Not much positive movement to start this year. How optimistic are you about the year ahead?

MATT DARIN: Look, it was certainly a disappointing finish to the year. The fact that Safe Banking did not get passed was a disappointment, especially considering that over 90% of the US population is in support of sensible legalization, as well as the fact that not passing federal legislation is not hurting the large companies like Curaleaf and TerrAscend and those as much as it's hurting the entrepreneurs and those that are trying to get into the industry and the small business people throughout the country and the social equity participants as well.

That's ultimately where not having federal reform is hurting the most. And I think it's important for people to understand that, as we continue to look forward into this year and continue to push for some federal reform.

DAVE BRIGGS: Yeah, Jason, Safe Banking repeatedly passes the House, but now it's in Republican control, so we can assume that has stopped. When do you think realistically we could see Safe Banking that allows you access to traditional banks? And give me a bottom line in terms of a year you think we could see federal legalization legislation.

JASON WILD: So I'll start with the second part first. I think full federal legalization, I think, is probably at this point at least three plus years away at a minimum. As it relates to Safe or some of the benefits of Safe, I think we're probably looking at some chance of it happening this year. But as you mentioned, the Republicans control the House now, unfortunately. When the Democrats controlled it, I believe Safe passed about seven times, but now the Republicans control it. And that does not improve our chances.

The fact is, Safe was incremental. And the benefits of Safe were incremental in the first place. I'm not sure that it's really that we necessarily need Safe, but we certainly need some progress as it relates to what we believe are unconstitutional tax laws about the fact that cannabis companies can't deduct their operating expenses and the fact that while these companies are operating on a state legal basis, that the federal government is still treating them as if they're violating the Controlled Substances Act.

I think that we need progress there, but it doesn't necessarily have to come from Congress. There might be some other routes to be able to get there as well. And I'm confident that we make some progress on that front over the next, say, 12 to 24 months.

DAVE BRIGGS: We do not hear enough about 280 and the effective tax rate the cannabis companies are paying. Matt, when do you think federal legalization could happen? And what is the number one thing you think this industry needs if it were to come from Congress?

MATT DARIN: Well, we talked obviously about Safe Banking and all the benefits of it. I think in terms of the value unlock and continuing to stabilize the industry, I do think rescheduling, descheduling removal of 280E will be the biggest catalyst. And whether that happens this year, President Biden has already directed the relevant agencies to be doing their due diligence to evaluate what that looks like. Whether that happens this year or leading up into an election in 2024 is anybody's guess at this point.

But the fact that review is taking place, the fact that there is a growing recognition that 280E is unconstitutional and is ultimately not going to be sustainable for this industry, I think, is a very important development and something that we're really pushing forward the conversation on. And I think in an environment where we're not paying 280E taxes, all of those flow of funds that can go towards continuing to invest in our business, invest in our people, invest in R&D, in the communities that we operate in, is going to really, I think, accelerate and continue to advance the industry.

DAVE BRIGGS: Jason, New York has come online. California was expected to be huge for the business. It's turned out to be everything but. Quite a disaster based on the size of the black market. Could New York see a similar fate?

JASON WILD: I think New York has different problems than California did. In California, there was a very large cannabis industry that already existed. And the state was trying to bring all the illegal operators in and sort of build the plane while they were flying it. There was a lot of cultivation, obviously, in California. New York is different. There's a lot of illicit drug dealers selling cannabis in New York, but it's mostly product that came from other states. So different issues, different growing pains. I think New York is set up to be a better market than California was.

DAVE BRIGGS: Sounds as though consolidation is ahead this year. Matt Darin, Jason Wild, thank you so much. I have some breaking news to get to. Really appreciate you guys joining forces and talking with us today. Thank you.