This March, John Coyles, the MLB vice president of drug, health and safety programs, sent a memo to players about marijuana. He warned major and minor players alike that CBD, much as any other cannabis substance, was banned for baseball players. Echoing what the PGA Tour told golfers earlier this year, he said using CBD could elicit a positive drug test for marijuana.

“Claims of CBD products being ‘THC free’ are false and misleading,” Coyles wrote in the memo. “We have seen multiple positive drug tests…in the past year for THC that appear to have resulted from the use of CBD products, despite the product labels.”

He isn’t wrong, by the way. Last month, Ellipse Analytics tested 250 top-selling CBD products and found THC in 45% of them. Among products that labeled itself “THC free,” 21% of them were detected for THC. While baseball players don’t sustain the level of injury and inflammation as football players, they still need effective and safe pain management tools. What constitutes as safe and effective is under review, the Los Angeles Times reports, following the death of Angels pitcher Tyler Skaggs.

The toxicology report found that Skaggs had the opioids fentanyl and oxycodone when he died by choking on his vomit, as well as alcohol. Opioids and cannabis are listed as drugs of abuse under the MLB’s current policy. Though players undergo routine tests for performance-enhancing drugs, they don’t receive regular testing for drugs of abuse. But in the minors, players have stricter testing and this season 13 players were suspended after test revealed drugs of abuse in their system. However, 80% of those suspended were due to marijuana.

Now the MLB and its players union have discussed the possibility of loosening its testing on marijuana, according to the LA Times. What happened to Skaggs has also opened the possibility of teams testing players for opioid use (team doctors can’t prescribe players opioids). Currently the two sides are now discussing whether players could use cannabis following surgeries, or whether they could use it as general pain relief.

“The parties have discussed whether to loosen baseball’s restrictions on marijuana—not specifically as a trade-off for opioid testing, but as part of the annual review of the sport’s drug policy, according to three people familiar with the talks but not authorized to comment publicly on them,” reports the Times.

Nevada officials have begun to crack down on marijuana businesses amid allegations of possible corruption and lax regulation in the state’s young but lucrative industry.

This week, members of a new task force have conducted unannounced spot inspections at several of the state’s licensed marijuana testing laboratories. Those inspections follow allegations of marijuana testing manipulation and concerns over how cannabis products with unsafe levels of mold, yeast and other microbials were able to pass inspection and make it to the retail market in recent months.

And with federal charges levied last week accusing foreign nationals of trying to buy political influence to enter Nevada’s marijuana industry, the state’s Department of Taxation also announced Thursday that it was indefinitely freezing the sale and transfer of marijuana business licenses based on recommendations from the task force.

“Based on the recommendation, the department will not process any existing or new applications for these regulatory activities while this extended review is in place with the goal of ensuring a more thorough and appropriate vetting process within the industry,” the state said in a statement Thursday.

Will Adler, a marijuana policy lobbyist and consultant, said that it was fair to pause license transfers given recent controversies surrounding ownership of the businesses, including lawsuits over the licensing process and the recent federal indictment.

But Adler added he believes that the companies currently going through the license transfer process that have been vetted should be allowed to proceed.

The state announced last month that it would investigate the labs after two health advisories were issued for multiple batches of marijuana product sold in dispensaries but later found to have unsafe levels of mold, yeast and other microbials.

The governor’s office declined Thursday to comment on the inspections.

Randy Gardner, a managing member for Certified Ag Lab in Sparks, confirmed that investigators had been to his lab Wednesday and again Thursday collecting samples of marijuana products for further testing.

“They just wanted a couple samples,” Gardner said Thursday, adding that he believes the state has “every right” to conduct the inspections to ensure consistency and compliance from the businesses that are meant to act as the watchdog for the state’s marijuana industry.

“They’ve been very polite, very nice. It’s not confrontational at all. Their just doing their job,” Gardner said.

Adler, who also serves as executive director for Scientists for Consumer Safety, a marijuana testing lab association, confirmed that one of his member labs had been spot-inspected this week.

“It was a reasonable request that they were able to comply with in less than 30 minutes,” Adler said.

The creation of the task force was triggered by federal indictment last week that charged four men in a scheme to enter Nevada’s marijuana industry with $1 million provided by an unnamed Russian businessman, and hiding the foreign investor’s involvement due to his “Russian roots and current political paranoia about it.”

One of the men charged in the indictment made donations to Adam Laxalt and Wes Duncan, Republicans who ran unsuccessfully for governor and attorney general last year, respectively, with funds from the Russian investor. The campaigns for the two candidates said they would return the money.

The indictment said that the men knew they missed the September 2018 deadline to apply for a business license, “unless we change the rules” by electing a candidate to state office who might “green-light” their effort.

Marijuana companies selling off their state licenses has been a hot market in a Nevada retail cannabis industry that saw $640 million in sales in fiscal year 2019. Four cannabis businesses were sold in the the second half of 2018 for between $40 million and $290 million.

Gov. Steve Sisolak has also been critical of recent issues that have cropped up in the state’s still-growing marijuana industry, including allegations of manipulated product testing, lawsuits over the state’s licensing process and illegal sales to minors.

REGINA -- Vatic Cannabis Company was the first pot store to open in the Regina area when marijuana was legalized one year ago.

Since then, there have been ups and downs, but CEO Allen Kilback says the first year has been a great learning experience.

“A year ago, you couldn’t walk in this place, we had a lineup to get in, so the industry has changed quite a bit, obviously there’s more stores open, but the novelty of legal cannabis stores has worn out now,” Kilback said.

Many of their customers are regulars with ages between 19 and 91.

Kilback added they’re continuing to look at ways to lower prices and they’ve recently joined together with other independent cannabis stores to form the Saskatchewan Weed Pool.

“We’re operating as a buying group, so we get together once a month, share ideas, talk about consumer trends, we’re really trying to come forward with some positive change,” Kilback said. “We can’t advertise, so there’s quite a disadvantage – especially with our location – so we’re looking at different ways of campaigning/educating the consumers to come support a local business.”

For the Regina Police Service, the first year of cannabis legalization went fairly smoothly.

“It’s had a minimal impact on operations, certainly on day-to-day operations we haven’t seen a huge increase, we haven’t seen a lot of impaired driving incidents with regard to it and even our day-to-day possession or consumption illegally is not something that we’ve seen increase, we have done a bit of work on dispensaries, but generally the impact has been minor,” Chief Evan Bray said.

There were 51 cannabis stores licenses issued by the province and 39 have opened to date. There are currently six licensed stores operating in Regina.

Bray said their biggest issue has been with the illegal dispensaries that have opened up over the past year.

“We’ve taken a fairly public stance when it comes to illegal dispensaries,” he said. “We’ve consistently showed that if we learn of illegal cannabis sales happening in the city, in a location where a license is not possessed, we will take enforcement action.”

Edibles legalization adds another level

The police and Saskatchewan Government are now preparing for the second phase of legalization with edibles, extracts and topicals becoming legal on Thursday.

“It will be very similar to the dried side in terms of the amount of THC, in terms of carrying it with – 30 milligrams equivalent,” Gene Makowsky, Minister of Liquor and Gaming, said.

“It will present a challenge just that it’s another nuance to the legalization aspect,” Bray added. “The where you can possess, how much you can possess, who can possess, those type of things are parallel when it comes to consumption, so it doesn’t if you’re going to smoke cannabis or eat it in a cookie, there still are some rules and those are very similar.”

The Provincial Government expects that it will take about 60 days for edibles, extracts and topicals to be available in stores in Saskatchewan.

Buoyed by wide-scale public support, legislation to legalize and properly regulate cannabis in the U.S. on the state and federal level continues to gain steam. So why are commercial and investment banks moving in the opposite direction? And what are the risks to U.S. companies and workers who are trying to build out this high growth, CPG (consumer packaged goods) sector? As a result, the U.S. retail investor has become collateral damage.

The passage of the 2018 Farm Bill, which legalized the cultivation and sale of hemp and hemp derived CBD, signaled federal acceptance and expansion of the cannabis marketplace in the United States. Republican Majority Leader Mitch McConnell’s endorsement of the legislation and continued support is a further testament to Washington’s growing embrace of the cannabis industry. And recently, the House of Representatives passed its version of the SAFE Banking Act, which would give cannabis companies access to the U.S. banking system including retail banking, credit card processing and access to institutional lending (as opposed to dilutive convertible debt financings).

So it comes as a surprise that an influential U.S. commercial bank would take a step to thwart the efforts of Americans to invest in legal cannabis companies with U.S. operations.

Bank of New York Mellon Corp., one of the largest custody and clearing banks in the world, announced earlier this month it would stop accepting positions(custody) or trading with U.S. marijuana-related businesses, a decision which would restrict trading of popular cannabis companies that are listed on Canadian exchanges, but have U.S. operations. Canadian-listed firms without U.S. operations would still be able to be traded.

BNY Mellon’s head-scratching decision has moved in the opposite direction of the thrust of U.S. public opinion. A Gallup poll conducted in 2018 found that 2 out of every 3 Americans support legalizing marijuana, while key 2020 swing states including Nevada and Michigan have adapted to voters’ concerns by legalizing recreational cannabis use.

The only way to provide lasting relief for U.S. investors in cannabis is with legislation from Washington.

Currently, if you’re a U.S. company that employs Americans and provides legal cannabis products to Americans, you have to publicly list your shares on the Canadian Securities Exchange, without the benefit of U.S. Securities and Exchange Commission oversight.

Currently, if you are a U.S. retail investor you must do cross-border trades in order to invest in cannabis stocks with all of the capital and fees flowing right out of Wall Street to Bay Street in Toronto. But more importantly, the protection of US exchanges and securities laws are also missing.

It also means that America’s homegrown multi-state operators have to raise capital in Canada where there are major constraints on capital and prohibitive costs to the companies and to investors. Almost every deal/listing in Canada carries dilutive warrants that are ultimately cashed in once professional stock short-sellers drive share prices down. The result is that shares of almost every U.S. multi-state operator are down over 60% from their yearly highs, mostly at the expense of the retail investor who is the primary investor in these deals because large institutions are still restricted from investing in the sector.

Moreover, professional investors operating actively-managed or fixed portfolios of cannabis stocks are unable to invest in some of the highest growth cannabis companies — even though they are operating in states where what they do is totally within the law.

At a time where we are hearing chatter about restricting Chinese companies from listing their shares in the United States, this BONY Mellon decision serves to actually restrict U.S-based operators and investors in the cannabis industry at home.

The U.S. cannabis marketplace is one of the largest and most heralded emerging industries in American history. And unlike other nascent sectors, it’s a 100% American-made story. Because traditional credit and/or lending has not been made available to the marketplace due to marijuana’s antiquated and misguided classification as a Schedule 1 drug – along with heroin – the only meaningful way to access capital has been via a reverse merger go-public strategy in Canada.

The SAFE Banking bill now awaiting debate in the Senate is a historic piece of legislation that will open the door to broader financial and legal reforms. But it’s currently missing a key component that would allow for the movement of American, multi-state operators to the U.S. capital markets, with oversight by U.S. regulatory agencies. Such a provision would provide safe harbor to U.S. exchanges while allowing investment banks and pension funds to invest in U.S. cannabis operators compliant with state and federal laws.

Capital in an exciting, profitable and socially-beneficial industry shouldn’t just be flowing north to Canada. It should stay in the U.S. so that when Americans invest in this space, they can do so with confidence.