On January 18th, John Darwin, Managing Partner at Luminous Capital, an ARC Group Company, took part in the NY State Bar Association Cannabis Conference as a panel speaker. This event was within the NYSBA’s Annual Meeting and the Cannabis Law Section’s program, titled “Navigating the New York Green Wave: Understanding New York’s Cannabis Regulations and Empowering Attorneys for Client Success.”
About the speaker
The panel featured John Darwin, Managing Partner at Luminous Capital, whose trajectory into the cannabis industry started with a departure from traditional private equity landscapes in Dallas, Texas. The catalyst for this shift wasn’t found in financial reports but in The New York Times, leading to an interest in capital investments in cannabis and the start of Luminous Capital. New York-based Luminous Capital made headlines as the sponsor of one of the largest cannabis-focused Special Purpose Acquisition Company (SPAC) listed on NASDAQ, symbolizing the fusion of traditional financial expertise with the dynamic cannabis market. The private investment firm is dedicated to propelling the growth of innovative cannabis enterprises.
Navigating the New York Green Wave
At the heart of the NY State Bar Association Cannabis Conference, Darwin’s expertise was highlighted, emphasizing the unique gathering that brought legal minds together to dissect New York’s growing cannabis market. Unlike typical cannabis events, this assembly primarily consisted of lawyers, reflecting the intricate legal landscape in which the industry operates.
The presentation delved deep into New York’s cannabis regulations, exploring recent industry developments, the landscape of cannabis litigation, and ways attorneys can assist clients in establishing and thriving in the state’s expanding cannabis market. Key highlights and objectives included a better understanding of New York’s legal cannabis adult use regulations, an overview of the cannabis litigation landscape, and guidance on supporting clients seeking capital and real estate.
Challenges in the Cannabis Frontier
One of the highlights discussed during the panel were key challenges faced in the cannabis market. The U.S. legal marijuana market size was valued at USD 16.25 billion in 2023 and is expected to reach USD 108.58 billion by 2032 (*Precedence Research, 2023), faces a substantial hurdle – the persistent federal prohibition of cannabis in the U.S. Despite strides in state legalization, the federal government classifies cannabis as an illegal Schedule I substance, hindering overall growth and posing challenges for investors.
Federal prohibition creates banking and financial obstacles, with many banks avoiding cannabis business dealings. The proposed solution, the SAFE Banking Act, has faced setbacks. Even in stock trading, the volatile cannabis stock market has underperformed the broader market.
One of the challenges, highlighted in the event, involves New York attempting to structure its industry around cannabis mirroring the approach taken with alcohol. This presents a unique hurdle as companies must navigate complexities arising from choosing between the cannabis and alcohol sectors.
Furthermore, The coexistence of legal and illicit markets further adds to the complexity, making it challenging for investors to understand and navigate this nascent industry.
John Darwin states: “There are significant opportunities, but the landscape is complex and challenging for investors to navigate when considering where to allocate funds. Regulatory hurdles add an additional layer of difficulty. Despite these challenges, there is a growing enthusiasm about the potential of New York in the cannabis industry.”
John Darwin explained, “With the NY state legal market only a couple of months old, there’s a critical question about the potential size of the market when considering the prevalence of illegal operations in New York. The current landscape is still largely illicit and complex. On a positive note, there are many intelligent individuals closely examining this market, and there’s confidence that we will find solutions.”
In the course of the panel discussion, there was unanimous consensus regarding the importance of closely monitoring the situation. It is prudent to engage in careful observation and strategic planning before determining the most opportune moment for investment.
2024 Outlook: A Glimpse into the Future
Looking ahead to 2024, John Darwin offered insights based on the trends discussed during the panel.
A key highlight is the potential reclassification of cannabis, moving from Schedule 1 to Schedule 3, signaling a prospective reduction of taxes and a pivotal shift in regulatory dynamics.
The cannabis market in the United States is anticipated to experience significant growth in the coming years. According to Statista, the revenue is expected to reach US$39.85bn in 2024. The potential adoption of this measure, currently under consideration by the DEA, carries significant implications that could extend widely throughout the capital investments in cannabis- as well as the legal adult use market.
John Darwin also noted that companies demonstrating profitability now will likely emerge even stronger as the industry matures.
The insights provided in this article are for general informational purposes only and do not constitute financial advice. We do not warrant the reliability, suitability, or correctness of the content. Readers are advised to conduct independent research and consult with a qualified financial advisor before making any investment decisions. Investing in financial markets carries risks, including the risk of loss of principal. Past performance does not guarantee future results.
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ARC Group relies on reliable sources, data, and individuals for its analysis, but accuracy cannot be guaranteed. Forward-looking information is based on subjective judgments about the future and should be used cautiously. We cannot guarantee the fulfilment of forecasts and forward-looking estimates. Any investment decisions based on our information should be independently made by the investor.
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Precedence Research. (2022). Legal Marijuana Market Size, Share, Growth, Trends Analysis Report By Product Type (Buds, Oil, Tinctures), By Marijuana Type (Medical, Recreational), By Medical Application (Cancer, Mental Disorders), By Region, And Segment Forecasts, 2022 – 2030. Precedence Research. Retrieved from www.precedenceresearch.com.