The Bengal Bite 🐯 | From the Halls of Congress | June 26, 2020
A vast majority of Americans support the legalization of cannabis. With over 200 million Americans living in states where cannabis is legal and with the industry already generating nearly $1.5 billion in annual federal tax revenue, one might wonder why cannabis is still illegal.
Historically, the industry's progress at the federal level has been blocked in "the halls of Congress" by the Senate, though this week's headlines regarding the Department of Justice (DOJ) suggest that the Senate may not be the only organization in Washington putting up roadblocks for the industry.
Over the long term, we believe that overwhelming national support for cannabis combined with the industry's ability to generate tax revenue and create jobs will pressure Washington to relax federal prohibition on cannabis.
The Bengal Capital Team
A DOJ whistleblower alleges that Attorney General Bill Barr improperly targeted cannabis M&A transactions due to his personal dislike for the industry. We are optimistic that this federal whistleblower complaint could stimulate cannabis M&A, given how politically difficult it would be for the DOJ to intervene in light of this recent political interference. Read more about the federal whistleblower complaint in Law & Crime here.
Cannabis case challenges non-deductibility of expenses
Harborside in California, founded by industry veteran Steve DeAngelo, is continuing its challenge of the federal tax code 280E, which the company's legal team says is unconstitutional and runs afoul of the 16th Amendment. Read more on Harborside's appeal arguments here.
Justice Department blocks 'essential' marijuana workers from bankruptcy protection
"People working in the marijuana industry will face challenges if they file for bankruptcy until Congress addresses the conflict with federal drug laws," said Judge Reomero of the U.S. Bankruptcy Court, "Unfortunately, the courts find themselves in a game of whack-a-mole." Read more on the contradictions cannabis operators have to face between the federal and state systems in the Wall Street Journal here.