What’s in the Senate’s Marijuana Tax Proposal

 

Is a nationwide excise tax of 25% on marijuana the right number? The 163-page “discussion draft” presented in the Senate suggests that it is. Is that in line with other prescription and over-the-counter pharmaceuticals? Is it in line with other “vice” products like alcohol, cigarettes, and coffee? Would a 25% tax push marijuana sales back in the shadows of fast-food parking lots and street corners? We look at what’s between 163 pages and explore these questions below.

 

Benefits

The draft bill of Senate Majority Leader Chuck Schumer’s federal marijuana reform legislation would set a nationwide cannabis excise tax initially at 10%, it then rises to 25% in five years. In exchange, The Cannabis Administration and Opportunity Act would unchain marijuana from federal roadblocks and hurdles by removing marijuana from the federal Controlled Substance Act. This does not include any state tax levies.

The top benefits of the proposal are that it would allow the industry to participate in the banking process similar to other industries and also allow cannabis businesses to deduct expenses provided to other legal industries (eliminate IRS compliance with Section 280E).

Comparisons

Other pharmaceuticals, including pain relievers that are sold over the counter, are taxed on a state level, and many states make them exempt. Coffee is taxed if prepared and served in most states but falls under the food category of taxation if bought at a grocer. Most groceries are not taxed directly from the consumer by the state or federal government. The federal excise tax on cigarettes and other tobacco products is just over $1.00 per pack. Large cigars are taxed at 52.75 percent of the manufacturer’s sales price, with a maximum tax of 40.26 cents per cigar. Federal tax rates on alcohol are progressive; for distilled spirits, the government charges $2.70 per proof gallon on the first 100,000 proof gallons in production. Then, a tax rate of $13.34 per proof gallon for the next 22,130,000 proof gallons in production. This increases to $13.50 per proof gallon for production in excess of 22,230,000 proof gallons. Although some see marijuana and alcohol in the same light, current-day medical doctors don’t prescribe distilled spirits for any malady.

For marijuana, beginning in year five, the tax would be levied on a per-ounce rate for cannabis flower or a per-milligram of THC rate for extracts. The rate would be determined by the U.S. Secretary of the Treasury to be equivalent to 25% of the revenue received from cannabis sold in the U.S. in the prior year. Producers with more than $20 million in sales would be eligible for a tax credit on their first $20 million of cannabis sold annually. Sales above that amount would be subject to the full excise tax. Mathematically, some growers might prefer their crop to remain federally illegal with full 280e restrictions on deductions.

If conditions of the draft bill are enacted, regulatory responsibility of marijuana would be transferred from the U.S. Drug Enforcement Agency (DEA) to the Alcohol and Tobacco Tax and Trade Bureau (TTB), and the Bureau of Alcohol Tobacco Firearms and Explosives (ATF). 

The draft Bill is 163 pages of legalese. It represents the thinking of the party in control (drafted by Senator Schumer, NY and Senator Booker, CA) it should be understood and awaits comments from stakeholders. Below is a synopsis.

Cannabis Draft Bill Summary

• Decriminalization of Cannabis, Recognition State laws Have Control
• This section removes cannabis from the Controlled Substances Act.
• It transfers agency jurisdiction from the DEA to the TTB, and ATF. This jurisdiction would follow the same agency responsibilities established for alcohol and tobacco
• Recognition that state laws control the possession, production, and distribution of marijuana. It retains criminal penalties in the case of unlawful possession, production, distribution, or purchase of cannabis
• The bill authorizes the establishment of regulations to track and trace the manufacture and transport of cannabis products
• Authorization to the Secretary of Health and Human Services to continue to include cannabis for drug testing of Federal employees

• Research, Prevention, and Training
• Directs the Comptroller General to conduct an evaluation for Congress on the societal impact of legalization by states. It is specifically related to the adult-use of cannabis-related to -related deaths and violent crime
• Directs the Dept. of Health and Human Services to research the effects of cannabis on health conditions
• The Department of Transportation would be directed to supply statistics on cannabis-impaired driving to foster the creation of an impairment standard for driving under the influence

• Allows the Administrator to provide guarantees for loans to eligible cannabis small businesses or service providers.

• Restorative Justice and Opportunity Initiatives
• Requires expungement of federal non-violent marijuana convictions and resentencing within one year of enactment and encourages states to follow suit.

• Taxation of Cannabis and Establishment of Trust Fund
• Requires a federal permit to sell cannabis products wholesale.
• Imposes an excise tax on cannabis products, similar to tobacco. The draft suggests 10% for the year of enactment, to be increased annually by 5% each year for 5 years. After 5 years, the tax would be levied on a per-ounce rate.

• Public Health, Cannabis Administration, and Trade Practices
• Creates a legal pathway for CBD in dietary supplements and outlines the FDA’s ability to regulate cannabis distribution based on administration standards similar to current regulations for drugs and devices.

The draft is requesting comments on issues such as the necessary funding levels and resources for agencies to implement the bill, consideration of transition rules and effective dates, interactions with state and local laws and international obligations and treaties, and additional opportunities to expand restorative justice.

Take-Away

Changes are afoot in the federal government concerning cannabis. Investors will find that altered regulation and acceptance impact the bottom line of the companies they are invested in. Not missing a new legislative proposal or enactment means watching the feds activity from various sources. Register free for Channelchek to receive our insight daily in your inbox.

 

Paul Hoffman

Managing Editor, Channelchek

 

Suggested Reading:

The Cannabis Administration and Opportunity Act Would Open Doors

Marijuana and Sports, Where Officials Stand

Clarence Thomas Statement on “Half in / Half out” Marijuana Laws

Will Federal Law Surrounding Marijuana be Changed?

 

Sources:

https://www.democrats.senate.gov/imo/media/doc/Cannabis%20Administration%20and%20Opportunity%20Act.pdf

https://www.democrats.senate.gov/newsroom/press-releases/majority-leader-schumer-senate-finance-committee-chair-wyden-and-senator-booker-release-discussion-draft-of-cannabis-administration-and-opportunity-act-legislation-to-end-the-federal-cannabis-prohibition-and-unfair-targeting-of-communities-of-color

https://www.forbes.com/sites/kellyphillipserb/2016/09/29/12-quirky-facts-about-coffee-tax-on-national-coffee-day/?sh=63af49d45b91

https://center-forward.org/explaining-alcohol-excise-taxes/

https://www.cbo.gov/budget-options/56869
https://www.cdc.gov/statesystem/factsheets/excisetax/ExciseTax.html
https://www.pwc.com/gx/en/pharma-life-sciences/pdf/ph2020_tax_times_final.pdf

https://www.taxpolicycenter.org/briefing-book/what-are-major-federal-excise-taxes-and-how-much-money-do-they-raise

 

Stay up to date. Follow us:

What’s in the Surprise Cryptocurrency Bill

 

A Bill regulating digital assets was introduced in the House last Thursday (July 29). It would become a comprehensive law that provides for rules and oversight on everything from stablecoins, to regulators of decentralized finance (DeFi), the validity of exchanges, and other related topics.

This bill surprised most involved in digital markets as it was submitted by Rep. Don Beyer’s (D-Va.) who is not known for any involvement in crypto-currencies or digital assets.  Yet the representative from Virginia presented the 58-page “Digital Asset Market Structure and Investor Protection Act,” as the all-inclusive set of rules and laws that would create the regulatory framework for digital assets. In its current form, it defines which type of cryptocurrencies may be securities, which type fall under commodities rules, and builds on tax data systems for reporting.

The bill also hands power to the Treasury Secretary to veto the creation of stablecoins, it directs regulators to define rules to govern decentralized finance (DeFi) and for agencies to determine whether they should create a charter for crypto exchanges.

 

All-Inclusive

The industry and those that make digital asset transactions would be best served if they know what the rules are (or will be) and that they won’t dramatically change. This bill, if it moves forward, would allow for clarity in ways that make it easier to know what the playing field looks like. The bill covers many areas of the industry, was put together by people who understand both the tech side and the market implications and is specifically about digital assets.

Last week other legislative actions were also taken that involved cryptocurrencies, but they were mixed in with other bills and debates. For example, the infrastructure bill last week included language concerning cryptos. It’s too soon to know whether the new bill has support among Rep. Beyer’s colleagues. Beyer is the chairman of Congress’s Joint Economic Committee and a member of the tax policy-making House Ways and Means Committee.

 

Central Bank
Digital Currency Authorization

There is language that would authorize the Federal Reserve, to create a CBDC. Recently, the Fed, which is expected to release a position paper in the coming weeks, said it wasn’t sure it had the authority to do so under its current mandate.

Infrastructure
Bill

Last week in the Senate, a bipartisan infrastructure bill included a provision that seeks to raise $28 billion in part by enforcing a broader set of information reporting requirements for crypto users than the U.S. currently has. This provision would require cryptocurrency brokers and investors to disclose their transactions to the Internal Revenue Service.

This is just a small part of funding the infrastructure bill that recognizes that the $2 trillion crypto market could be embraced and taxed.

 

Securities vs. Commodities

Under the current version of the bill, the Securities and Exchange Commission (SEC) and Commodity Futures Trading Commission (CFTC) would have to more specifically define what aspects of the cryptocurrency market fall under which jurisdiction.

As far as the SEC is concerned, any “digital asset securities” that provide for equity could come under its oversight. As written, if the owner has a right to equity, profits, interest, dividend payments, or voting rights, the token would fall under the bill’s definition of a digital asset security. This would also hold true for an initial coin offering (ICO), tokens issued to finance the development of a product or platform have an equity component.

There is another provision that is important to this fledgling market and industry. This concerns “desecuritization.” The bill creates a path for a token that is treated as a digital asset security to become a cryptocurrency that will not be treated as a security. This answers SEC Commissioner Hester Peirce’s desire to create a safe harbor for crypto projects while in their infancy.

 

 

 

Cryptocurrencies that don’t fall under the SEC’s jurisdiction would fall under the CFTC’s.  The bill asks these two regulators to publish proposed rulemaking to classify the 25 most-traded cryptocurrencies and the 25 cryptocurrencies with the highest aggregate as either securities or commodities.

Stablecoin
Issuance

The bill exhaustively defines how the U.S. should look at stablecoins. These are digital assets that trade essentially one-for-one with dollars or other government-issued currency.  If passed, this would seem to allow for a CBDC. The stablecoin provision may create hurdles for issuers as it seems to render many illegal. The Treasury Department would have oversight and veto power over the creation and usage of all stablecoins in the U.S. under its terms.

“Beginning on the
date of the enactment of this section, no person may issue, use, or permit to
be used a digital asset fiat-based stablecoin that is not approved by the
Secretary of the Treasury under subsection,” – Digital Asset Securities Law Bill

This appears to give the Treasury Department the ability to restrict trading of any non-government stablecoins. An issuer would need to apply; then, the Treasury would consult with the Fed, the SEC, CFTC, and possibly foreign central banks or financial regulators before deciding whether to approve the proposal. The bill also explicitly prohibits the Treasury from grandfathering any existing stablecoins.

 

Anonymity

The bill also requires the Financial Crimes Enforcement Network (FinCEN) to draft regulations concerning anonymity-enhancing services as it relates to cryptocurrencies.

“The purpose of the rule … shall be to ensure that anonymizing services, money mule and anonymity-enhanced convertible virtual currencies are not used to prevent association of an individual customer with the movement of a digital asset, digital asset security or virtual currency of which the customer is the direct or beneficial owner,” – Digital Asset Securities Law Bill

This prohibits crypto exchanges or others from letting customers use mixers or similar services.

DeFi

While the bill does not explicitly define regulations concerning DeFi, custody, wash trading, or trading platforms, it does direct federal agencies to evaluate and publish reports on regulation recommendations.

 

Take-Away

All digital assets are getting much more attention in Washington.  Protecting consumers and finding new sources of revenue to fund projects along with better surveillance seems to be driving this attention. The Chairman of the Joint Economic Committee put forward a comprehensive bill that could answer and clarify questions the market has been asking and tie the hands and reduce the attractiveness of digital assets.

Keep up with blockchain news by registering to receive emails from Channelchek. We follow events concerning blockchain technologies and many other industries that are important to investors.

 

Suggested Reading:

What is the Feds Position on Crypro, Stablecoin, and CBDCs

Cryptocurrencies and the Howey Test

Decentralized Apps Using Blockchain to Change the Internet

Repurposing Powerplants for Crypto-mining

 

Sources:

https://beyer.house.gov/uploadedfiles/beyer_028_xml.pdf

https://beyer.house.gov/news/documentsingle.aspx?DocumentID=5307

https://www.nytimes.com/2021/07/30/us/politics/infrastructure-deal-cryptocurrency.html

 

Stay up to date. Follow us:

	Image Credit: rose_symotiuk (flickr)

Disclosures by Chinese Corps. Trading on U.S. Exchanges Have a Defined Duty to Shareholders

 

Commissioner Allison Lee of the Securities and Exchange Commission (SEC) is requiring that Chinese companies listed on U.S. stock exchanges disclose any known risks related to the Chinese government interfering in their business. This adds an extra level of responsibility toward investors from corporations domiciled in China. Any disclosures are to be included as part of their regular reporting.

Impact

Regular annual and quarterly filings by all public companies contain discussions of the firm’s liquidity, capital resources, results of operations, any favorable or unfavorable trends in the industry, and any significant events or uncertainties. This could include lawsuits, political risks, and other potential shocks.  For companies headquartered in China and listed on a U.S. exchange, they will need to specifically address known risks that are present due to the Chinese government.

There are at least 248 Chinese companies listed on three major U.S. exchanges with a total market capitalization of $2.1 trillion, according to the U.S.-China Economic and Security Review Commission (USCC). There are also eight national-level Chinese state-owned enterprises listed in the U.S. To the extent that any of the companies have reportable circumstances, it may place them in the difficult situation of being required to highlight activities related to the Chinese government and their specific business. If not complied with, they could face penalties from the SEC, including delisting.

Why the Requirement

There are five SEC commissioners, Commissioner Lee’s remarks are the first by an SEC official since Chinese regulators enacted a massive cyber-investigation of ride-hailing company Didi Global last week. The actions by the Chinese government came a few days after its $4.4bn NYSE listing. The “meddling” is suspected of erasing 25 percent of investor value. There is concern among policymakers that Chinese corporations are violating the current SEC rules that require public companies to disclose to investors material risks that may impact their businesses. This order spells out that government meddling must be included.

The Wall Street Journal reported that Didi was warned by regulators to delay its initial public offering and address its cybersecurity. Didi has said it had no idea about the investigation before listing. The SEC does not disclose active investigations.

 

 

Additional Information

During the past decade, Washington policymakers have focused on having US-listed Chinese companies comply with U.S. Public Company Accounting Oversight Board regulations. Last year, Congress passed a law that would delist Chinese companies from U.S. exchanges if they did not comply with U.S. auditing standards. The SEC has been asked by lawmakers to devote more resources to these risks. “U.S. regulators must ensure that American investors and workers are protected from the anti-market behavior that is scarring American investors,” said Senator Bill Haggerty, Senate Banking Committee, in a statement to Reuters.

High-quality, reliable disclosure, including financial reporting, is the core mission of the SEC. It’s tasked with protecting investors, maintaining fair, orderly, and efficient markets, and facilitating capital formation. Although China-based Issuers that access the U.S. public capital markets generally have the same disclosure obligations and legal responsibilities as other non-U.S. issuers, the Commission’s ability to promote and enforce high-quality disclosure standards for China-based Issuers may be materially limited. This leaves the door open to greater risk that their disclosures may be incomplete or misleading. In addition, in the event of investor harm, investors generally will have substantially less access to recourse in comparison to U.S. domestic companies and foreign issuers in other jurisdictions.

Suggested Reading:

Clean vs Dirty Electrons on Power Grid

Slower Output and Increasing Demand Make Uranium Investments Hot

College Scholarships for Esports Gamers

Will Inflation be Transitory or Persistent

 

Sources:

https://www.sec.gov/corpfin/disclosure-considerations-china-based-issuers

https://www.cnbc.com/2021/07/07/china-is-cracking-down-on-stocks-that-trade-on-us-exchanges-what-it-means-if-you-hold-them.html

https://www.uscc.gov/

https://businesshala.com/u-s-listed-chinese-companies-must-disclose-government-interference-risks-sec-official/

 

Stay up to date. Follow us:

Do the Olympics Need Esports or Do Esports Need the Olympics?

 

Prior to the Olympic traditional games in Tokyo, they held The Olympics Virtual Series. This pre-game competition before the main events had participants pitted against each other in events that had similar looks to traditional Olympic events. This included sailing (Virtual Regatta Inshore), Cycling
(Zwift), and intentionally excluded any games that involved killing opponents. This debuted the Esports Series and marked the first time video games have been part of this every four year summer event. Does this mean sports that fall under esports will be included in the Olympics in the future, does it mean they are now formally considered sports, will there also be winter esports?

These are questions that can be polarizing. After all, they defy us to define what “sport” is. It also causes many to wrestle with embracing the past or embracing change. People on all sides of the debate also need to understand the established guidelines to be invited into the Olympics?

Basic
Olympic Criteria

The first criterion for any sport to be considered is they need to have an international federation that is accepted by the International Olympic Committee (IOC). Esports has been represented by an appropriate federation for more than 10 years. The International eSports Federation administers esports competitions allowing ranking and other data for Olympic evaluation. So esports is not disqualified on that measure. 

Another necessary criterion is that a sport must have one of the following:  Men (males) competing in 75 different countries across four continents and/or women practicing in 40 countries on three continents. This hurdle has been cleared for years in esports with men/women in 150 countries on six continents participating.

The last must-have to be an Olympic hopeful activity is it must be recognized
as a sport. Identifying it as a sport can get tricky. It’s okay if players identify as athletes, and the games identify as sports, but do they meet the standard definition?  A sport is defined as a physical activity that requires skills or physical prowess and is often of a competitive nature.

Skill and competitiveness are attributes that can not be denied in the esports arena. The physicality is where the debate begins.

Here are two conflicting “expert” opinions:

A study from the International Journal of Excercise Science shows that esports players do experience increased heart rates similar to people playing physical sports.

A study from ScienceDirect opposes the sport view, concluding that while players do exert themselves while playing games, it is not enough to qualify as a sport.

Ultimately, the IOC would be left to decide whether or not esports could legitimately share the stage with events like curling, live pigeon shooting, or older Olympic events such as hot air ballooning and duelling pistols.

It probably just comes down to making a call on it. The decision, as with most when the financial stakes are high, may rely on criteria not listed.

Who Needs the Other Most?

While debates about what is a legitimate sport, worthy of the Olympic brand sanction, rage. Outside of amateur sports, the games have experienced major financial success. According to a report from Reuters, the esports industry is expected to exceed one billion dollars in revenue in 2021. This would be a 14% increase from last year.

The viewership of esports alone may cause the IOC to heavily consider adding it to the roster of sports. During the 2016 Olympics, NBC had about 27 million viewers watching the games. That same year the 2016 League of Legends World Championships had around 43 million viewers. That was before they became popular.

Suggested Reading:

What Investors Should Consider Before Investing in the Esports Industry

Ten Esports Predictions Worth Looking Into

Investors are Now Better Able to Evaluate Esports and iGaming Performance

Esports: Show me the Money!

 

Sources:

https://www.sciencedirect.com/science/article/abs/pii/S1441352317300700

https://www.ncbi.nlm.nih.gov/pmc/articles/PMC7523899/

https://www.reuters.com/article/esports-business-esports-growth/newzoo-esports-industry-revenue-expected-to-surpass-1b-in-2021-idUSFLM4K2cJ7

https://olympics.com/ioc/faq/sports-programme-and-results/how-can-a-sport-be-included-in-the-olympic-games-programme

 

Stay up to date. Follow us:

When Was the Shortest Recession in Your Lifetime? The announcement Monday from the National Bureau of Economic Research declares April as the official start of the recovery

Comtech Telecommunications Corp. Awarded $7.1 Million Emergency Alerts Contract to Enhance Nationwide Public Safety Comtech Telecommunications announced that, during its fourth quarter of fiscal 2021, it has been awarded a $7.1 million multi-year contract Research, News & Market Data on Comtech Watch recent presentation from Comtech

Esports Entertainment Group Provides an Update on Crypto Mining Application for LAN Centers Esports Entertainment Group announced an update on the rollout of ggCircuit’s crypto mining application for LAN centers Research, News & Market Data on Esports Entertainment Group Watch recent presentation from Esports Entertainment Group

Indonesia Energy Discovers Oil in the First New Well at Kruh Block Indonesia Energy announced that it has discovered oil in its “Kruh 25” well and the drilling rig has now moved to the second well location Research, News & Market Data on Indonesia Energy Watch recent presentation from Indonesia Energy

enCore Energy Provides South Texas Uranium Operations Update enCore Energy announced an update on its South Texas Uranium Operations Research, News & Market Data on enCore Energy Watch recent presentation from enCore Energy

OpRegen® Clinical Data Continues to Demonstrate Functional and Anatomical Improvements in Patients With Dry AMD With Geographic Atrophy Lineage Cell Therapeutics announced updated interim results from its ongoing, 24-patient Phase 1/2a clinical study of its lead product candidate, OpRegen Research, News & Market Data on Lineage Cell Therapeutics Watch recent presentation from Lineage Cell Therapeutics

Endeavour Silver Signs Agreement To Acquire Bruner Gold Project In Nye County, Nevada Endeavour Silver announced it has entered into a definitive agreement with Canamex Gold Corp. to acquire a 100% interest in Canamex’ Bruner Property Research, News & Market Data on Endeavour Silver Watch recent presentation from Endeavour Silver

Capstone Green Energy CEO, Darren Jamison, To Participate In Water Tower Research Fireside Chat Series Capstone Green Energy announced it will be participating in the Water Tower Research Virtual Fireside Chat Series on Thursday, July 22, 2021 Research, News & Market Data on Capstone Green Energy Watch recent presentation from Capstone Green Energy

Stay up to date. Follow us:

An Executive Order to Strengthen Oversight of Large Companies, May be an Opening for Smaller Players

 

The Biden administration is said to be putting the final touches on an executive order to direct agencies to strengthen oversight of industries that are dominated by a few large companies. This would be a wide-ranging attempt to rein in big business power across affected sectors of the economy. The move could allow smaller innovative companies to be less overshadowed, while throwing a little cold water on the ever-growing giants in their sectors.

The executive order, which President Biden could sign as soon as this week, would direct oversight from regulators of a long list of industries. This could force regulators of pharmaceutical, transportation, energy, utilities, banking and other industries, to revisit their rule-making process. The goal would be to inject more competition and to give consumers, workers, and suppliers more ability to challenge large producers or providers.

 

Shining a Light on Potential

The order would come less than two weeks after the Russell Index
rebalancing demonstrated just how large, in terms of capitalization, many companies have become. Assuming that all companies go through a growth phase that begins near zero, the disparity between large, the comparatively small, and those that are smaller is widening. This executive order may bring what some would consider an equitable solution to the competition gap.

 

How This Could Impact Investors

The Securities and Exchange Commission (SEC) regulates all things related to publicly traded U.S. companies. The name Citadel Securities became a household name among investors earlier this year as online brokers banned some WallStreetBets driven “Buy” and even “Sell” orders. The reasons for the unusual restrictions on trading may include protecting large securities firms like Citadel where 47% or retail volume is transacted, or Citadel’s large trading partners. Under the President’s order the SEC may have the power to address big versus smaller firm issues like this more quickly. This is one way retail investors may find more trust in their ability to trade on an even footing with their small accounts through a small or mid-size broker.

Performance of companies categorized as small-cap are exceeding large-cap stock performance year-to-date 2021. Over a longer period, they are still lagging their historic outperformance. As many expect a return to a stable and growing economy will help the return of the long-term relative average performance of small and microcap stocks; orders such as this could dampen large companies enough to moderate their growth and provide light for deserving companies that are less well capitalized. The intentional government support, even if only regulatory, if enacted could allow regulatory approvals for projects, money for research, grants for studies, and an overall experience of more clearance for smaller company projects and products.

Investors considering that the potential is higher for smaller companies, will want to pay attention to the exact wording, and how successful any challenges to its legality may be.

 

Paul Hoffman

Managing Editor, Channelchek

 

Suggested Reading:

The Future of Electric Vehicles	The NFL and Big Companies are Changing their Thinking on Marijuana

Clarence Thomas’ Statement on Half-In / Half-Out Marijuana Laws	How Close is the U.S. to Having a Digital Currency?

 

https://tokenist.com/citadels-1-billion-silver-bet-a-trap-for-wallstreetbets/

https://nypost.com/2021/06/30/bidens-big-business-crackdown-bad-for-wall-street-behemoths-sources/

 

Stay up to date. Follow us:

Stay up to date. Follow us:

An Executive Order to Strengthen Oversight of Large Companies, May be an Opening for Smaller Players

 

The Biden administration is said to be putting the final touches on an executive order to direct agencies to strengthen oversight of industries that are dominated by a few large companies. This would be a wide-ranging attempt to rein in big business power across affected sectors of the economy. The move could allow smaller innovative companies to be less overshadowed, while throwing a little cold water on the ever-growing giants in their sectors.

The executive order, which President Biden could sign as soon as this week, would direct oversight from regulators of a long list of industries. This could force regulators of pharmaceutical, transportation, energy, utilities, banking and other industries, to revisit their rule-making process. The goal would be to inject more competition and to give consumers, workers, and suppliers more ability to challenge large producers or providers.

 

Shining a Light on Potential

The order would come less than two weeks after the Russell Index
rebalancing demonstrated just how large, in terms of capitalization, many companies have become. Assuming that all companies go through a growth phase that begins near zero, the disparity between large, the comparatively small, and those that are smaller is widening. This executive order may bring what some would consider an equitable solution to the competition gap.

 

How This Could Impact Investors

The Securities and Exchange Commission (SEC) regulates all things related to publicly traded U.S. companies. The name Citadel Securities became a household name among investors earlier this year as online brokers banned some WallStreetBets driven “Buy” and even “Sell” orders. The reasons for the unusual restrictions on trading may include protecting large securities firms like Citadel where 47% or retail volume is transacted, or Citadel’s large trading partners. Under the President’s order the SEC may have the power to address big versus smaller firm issues like this more quickly. This is one way retail investors may find more trust in their ability to trade on an even footing with their small accounts through a small or mid-size broker.

Performance of companies categorized as small-cap are exceeding large-cap stock performance year-to-date 2021. Over a longer period, they are still lagging their historic outperformance. As many expect a return to a stable and growing economy will help the return of the long-term relative average performance of small and microcap stocks; orders such as this could dampen large companies enough to moderate their growth and provide light for deserving companies that are less well capitalized. The intentional government support, even if only regulatory, if enacted could allow regulatory approvals for projects, money for research, grants for studies, and an overall experience of more clearance for smaller company projects and products.

Investors considering that the potential is higher for smaller companies, will want to pay attention to the exact wording, and how successful any challenges to its legality may be.

 

Paul Hoffman

Managing Editor, Channelchek

 

Suggested Reading:

The Future of Electric Vehicles	The NFL and Big Companies are Changing their Thinking on Marijuana

Clarence Thomas’ Statement on Half-In / Half-Out Marijuana Laws	How Close is the U.S. to Having a Digital Currency?

 

https://tokenist.com/citadels-1-billion-silver-bet-a-trap-for-wallstreetbets/

https://nypost.com/2021/06/30/bidens-big-business-crackdown-bad-for-wall-street-behemoths-sources/

 

Stay up to date. Follow us:

Stay up to date. Follow us:

Image Credit: McConnell Center (flickr)

Federal Marijuana Laws are Half-In/Half-Out Says Justice Clarence Thomas

 

U. S. marijuana law enforcement may not be “proper,” according to a statement written by Supreme Court Justice Clarence Thomas.  The legal opinion made public Monday (June 28) was in response to a case the court was asked to consider.  That case, which involved a Colorado marijuana business attempting to challenge the tax burden created by federal prohibition and 280E, is a “prime example” of the “mixed signals” coming from the federal government regarding cannabis, according to the Supreme Court justice.

 

Thomas’s Statement

Thomas wrote that the previous Supreme Court ruling from 2005 – Gonzales
v. Raich – may now have no legal usefulness because the federal government has taken a hands-off approach to today’s marijuana industry, effectively rendering its own prohibition out-of-date.  Thomas wrote that a new case they were asked to review is an example of the problems with the conflicting standards coming from the federal government today.  The previously decided case mentioned, Gonzales v. Raich, refers to the 2005 SCOTUS case that may have been used as precedent. It involves a California medical user in 2002 (California approved medical in 1996) who had plants destroyed by federal authorities.

In Thomas’ words, “A prohibition on intrastate use or cultivation of marijuana may no longer be necessary or proper to support the federal government’s piecemeal approach,” in an opinion that denied a Colorado retailer a Supreme Court hearing in a legal battle over the merits of Section 280E of the federal tax code. IRS code 280E is part of the IRS law that states that businesses selling cannabis (or any other federally illegal controlled substance) cannot deduct any expenses incurred in the production, distribution, and sale. The case represents the struggle of many cannabis-related businesses that are operating legally under their state laws, but are by the letter of federal law, second-class business owners at best, and felons at worst. Part of Thomas’ statement discusses marijuana businesses that could be trying to protect themselves by having armed security (firearms laws) while at the same time trafficking in a Schedule 1 substance. He also pointed out inconsistencies in banking practices brought on by federal prohibition, practices which actually increase the need for armed security.

Excerpt from June 29, 2021 Statement by Justice Thomas

Take-Away

Thomas is considered by many to be the most conservative member of the Supreme Court. His formal statement is impactful for marijuana businesses in that it denied hearing the case while suggesting federal cannabis laws and policies ought to be consistent. This was made clear in his words, “Whatever the merits of Raich when it was decided, federal policies of the past 16 years have greatly undermined its reasoning,” and “The Federal Government’s current approach is a half-in, half-out regime that simultaneously tolerates and forbids local use of marijuana.” The Supreme Court, or any court for that matter, can not serve de facto law and laws which are on the books.

Suggested Reading:

Cannabis Customers Served By Ice Cream Truck Business Model	Will Federal Law Surrounding Cannabis Be Changed?

Stem Holdings, Inc. CEO, Adam Berk – C-Suite	Medicine Man Technologies, Inc. CEO Justin Dye

 

 

Sources:

https://www.supremecourt.gov/opinions/20pdf/20-645_9p6b.pdf

 

Stay up to date. Follow us:

Stay up to date. Follow us:

Image Credit: Reji (Flickr)

What are Tax Havens? The Answer Explains Why the G-7 Effort to end Them is Unlikely to Succeed

 

Close your eyes and imagine a tax haven. Does a Caribbean island come to mind? Sand, surf and thousands of post office boxes housing shell corporations?

Some tax havens, like the Cayman Islands or Bermuda, fit that description. Many others do not.

The key to a tax haven is the taxes, not the tan. Any place that allows a taxpayer – whether an individual or a company – to get a lower tax bill overseas than at home is a tax haven. Thus, depending on the taxpayer’s jurisdiction and business, many places turn out to be tax havens, even the United States.

A recent agreement by the Group of Seven wealthy nations seeks to eliminate corporate tax havens by imposing a global 15% minimum corporate tax rate. However, as a tax expert, I find the effort hard to take seriously.

Put simply, tax havens are jurisdictions that offer low or even no taxes in a bid to attract foreign investment.

From a taxpayer’s perspective, the first sign of a good tax haven is that it’s completely legal. While there may be a perception that people who use tax havens to lower their tax bills are breaking the law, that’s rarely the case.

A taxpayer who is comfortable doing that does not need a tax haven. Instead, a dishonest accountant and a less honest banker are all that’s required.

The second sign of a good tax haven is transparency, political stability and rule of law. If it costs more in lawyers, accountants and bribes to avoid taxes overseas than it costs to pay the tax at home, there is no point to a tax haven.

The third sign is privacy. For many years, Swiss banks provided the gold standard in that regard by refusing to reveal anything about their depositors to anyone. That changed in 2008, when Swiss banks agreed to report on their depositors to 43 European countries.

The loss of the complete secrecy that Switzerland once provided has made shell companies – and the countries that make them easy to set up – much more attractive. Shell companies are basically companies without active business operations or significant assets that are stacked one on top of the other to make it harder to trace ownership.

 

 

In the Eye of the Beholder

Identifying a tax haven isn’t as simple for the government’s intent on controlling them as it is for the taxpayers who seek them out. This is mainly because governments and international organizations tend to think a tax haven is somewhere other than where they live.

For example, the European Union produces an annual list of tax havens that contains no EU member countries, even though many other lists identify Ireland, Luxembourg, and a host of other European countries as tax havens.

And while several groups have described the United States as a tax haven – Forbes even calls it the best in the world – the U.S. government would never do so, even though it fits all the key criteria, such as providing legal ways to avoid virtually all taxation and strong taxpayer privacy.

The Race to the Bottom

This is why the G-7 global corporate minimum 15% tax agreement is unlikely to work.

Of course, I applaud the effort. Without a minimum tax, countries are stuck in a never-ending race to the bottom, whereby every time one government cuts its corporate tax rates, another soon follows with even lower rates.

The problem is the G-7 has to get more than 130 other countries to go along with its minimum tax rate. Many countries, including Ireland and China, seem unlikely to give up something that has brought them so much economic advantage.

 

This article was republished with permission from The
Conversation, a news
site dedicated to sharing ideas from academic experts.  It was written by
and represents the research-based findings and opinion of  Beverly Moran, Professor Emerita of Law, Vanderbilt University

 

Suggested Reading:

No-Cost Brokers Like Robinhood Could be the Big Winners With Rising Rates	Can Brokers Level the Playing Field for Individual Investors?

Is Zero Trust Architecture Enough?	Important Russell Reset Data 2021

 

Stay up to date. Follow us:

Stay up to date. Follow us:

Companies Developing Therapeutics to Fight Covid-19 Will get a $3.2 Billion Injection

 

Some antiviral pills related to coronavirus will get a $3.2 billion shot in the arm to help accelerate testing and development of therapeutics to combat the Covid-19 virus. This was announced (6/17/21) by the Department of Health and Human Services.

“New antivirals that prevent serious Covid-19 illness and death, especially oral drugs that could be taken at home early in the course of disease, would be powerful tools for battling the pandemic and saving lives,” said President Biden’s, chief medical adviser, Dr. Anthony Fauci.  

The $3.2 billion allocated will be from the $1.9 trillion coronavirus relief package Biden signed into law in March.  Dr. Fauci said the funding could accelerate clinical trials “already in progress” for some antiviral pills and potentially make candidates available by year’s end. He noted that antiviral pills that patients can use to self-treat at home would serve as an important compliment to vaccinations in preventing severe illness or hospitalization.

There are a number of small and microcap biopharmaceutical companies that are in various stages of exploring new antiviral treatments for Covid and other threats. With Washington’s $3.2 billion as yet unallocated support, perhaps some of these are worth visiting.

CoCrystal Pharma, Inc. (Nasdaq:COCP) is a clinical-stage biotechnology company employing its unique structure-based technologies and Nobel Prize-winning expertise to create and develop first- and best-in-class broad-spectrum antiviral drugs for serious and/or chronic diseases. These technologies are designed to efficiently deliver small-molecule therapeutics that target the viral replication process and are safe, effective and convenient to administer. Cocrystal’s development programs include influenza, COVID-19, hepatitis C and gastroenteritis caused by norovirus.

52 Week Range $0.76-$3.46

CytoDyn, Inc. (OTC:QB CYDY) Inc. is US-based clinical-stage biotechnology company which focuses on the clinical development and potential commercialization of humanized monoclonal antibodies to treat Human Immunodeficiency Virus (HIV) infection. IPIX will hold a webcast on June 21 to Discuss Unblinded Data from COVID-19 Long-Haulers Trial and Other Developments .

52 week price range $1.63-$10.01

Avalon GloboCare Corp. (Nasdaq:AVCO) Avalon GloboCare, a leading biotechnology company focusing on cell-based technology and therapeutics, is about to launch clinical trials of its novel blood filtration system to mitigate symptoms of a cytokine storm in COVID-19 patients and a mucosal intranasal spray vaccination against SARS-CoV-2.

52 week price range $0.87- $2.16

 

Too Many to List

Other companies at various stages of testing development can be found below the article by scrolling down. Click on the tickers for more details on their work and data on the company.

 

Suggested Reading:

Capitalism Vs Coronavirus (April 2020)	Stem Cell Based Therapies for Alzheimer’s Disease

Avalon GloboCare at the World Stem Cell Summit	HealthyLynked at the World Stem Cell Summit

 

Sources:

https://www.hhs.gov/about/news/2021/06/17/biden-administration-invest-3-billion-american-rescue-plan-as-part-covid-19-antiviral-development-strategy.html

https://www.nature.com/articles/d43747-020-01139-4

 

Stay up to date. Follow us:

Stay up to date. Follow us:

Companies Developing Therapeutics to Fight Covid-19 Will get a $3.2 Billion Injection

 

Some antiviral medicines related to coronavirus will get a $3.2 billion shot in the arm to help accelerate testing and development of therapeutics to combat the Covid-19 virus. This was announced (6/17/21) by the Department of Health and Human Services.

“New antivirals that prevent serious Covid-19 illness and death, especially oral drugs that could be taken at home early in the course of disease, would be powerful tools for battling the pandemic and saving lives,” said President Biden’s, chief medical adviser, Dr. Anthony Fauci.  

The $3.2 billion allocated will be from the $1.9 trillion coronavirus relief package Biden signed into law in March.  Dr. Fauci said the funding could accelerate clinical trials “already in progress” for some antiviral pills and potentially make candidates available by year’s end. He noted that antiviral pills that patients can use to self-treat at home would serve as an important complement to vaccinations in preventing severe illness or hospitalization.

There are a number of small and microcap biopharmaceutical companies that are in various stages of exploring new antiviral treatments for Covid and other threats. With Washington’s $3.2 billion as yet unallocated support, perhaps some of these are worth visiting.

CoCrystal Pharma, Inc. (Nasdaq:COCP) is a clinical-stage biotechnology company employing its unique structure-based technologies and Nobel Prize-winning expertise to create and develop first- and best-in-class broad-spectrum antiviral drugs for serious and/or chronic diseases. These technologies are designed to efficiently deliver small-molecule therapeutics that target the viral replication process and are safe, effective, and convenient to administer. Cocrystal’s development programs include influenza, COVID-19, hepatitis C and gastroenteritis caused by norovirus.

52 Week Range $0.76-$3.46

CytoDyn, Inc. (OTC:QB CYDY) Inc. is US-based clinical-stage biotechnology company that focuses on the clinical development and potential commercialization of humanized monoclonal antibodies to treat Human Immunodeficiency Virus (HIV) infection. IPIX will hold a webcast on June 21 to discuss unblinded data from the COVID-19 Long-Haulers Trial and other developments .

52 week price range $1.63-$10.01

Avalon GloboCare Corp. (Nasdaq:AVCO) is a leading biotechnology company focusing on cell-based technology and therapeutics, is about to launch clinical trials of its novel blood filtration system to mitigate symptoms of a cytokine storm in COVID-19 patients and a mucosal intranasal spray vaccination against SARS-CoV-2.

52 week price range $0.87- $2.16

 

Too Many to List

Other companies at various stages of testing development can be found below the article by scrolling down. Click on the tickers for more details on their work and data on the company.

 

Suggested Reading:

Capitalism Vs Coronavirus (April 2020)	Stem Cell Based Therapies for Alzheimer’s Disease

Avalon GloboCare at the World Stem Cell Summit	HealthyLynked at the World Stem Cell Summit

 

Sources:

https://www.hhs.gov/about/news/2021/06/17/biden-administration-invest-3-billion-american-rescue-plan-as-part-covid-19-antiviral-development-strategy.html

https://www.nature.com/articles/d43747-020-01139-4

 

Stay up to date. Follow us:

Stay up to date. Follow us:

image credit: CDC (Pexels)

The Case for Investing in Regenerative Medicine in 2021

 

Political change along with updated White House priorities have certainly created a need to review investment portfolios. As the national focus shifts from one area of fulfilling citizens’ wants and needs to another, some industries are getting more attention while others are put on “hiatus.” Weeding out holdings of sectors getting less federal support, and adding those that could benefit from new attention puts the probability for investment success more on your side.  We’ve seen this with the rush toward infrastructure stocks and building materials. ESG companies are similarly enjoying their moment in the sun. Digging past the larger headlines, investors can often find opportunities that aren’t well covered by the media, opportunities where the biggest move has not been missed.

 

Focusing

Last month while investors were focused on earnings season, cryptocurrencies, and interest rates, the administration released an important federal funding update that eases restrictions related to stem cell research. The update also removes a ban put in place two years earlier on important medical research using human fetal tissue. This support opens up an area of stem cell work that may lead to breakthroughs in regenerative medicine, treatments of disease, and understanding issues of aging.

Although the research dollars would be headed to centers of research like the NIH or medical research centers at U.S. colleges and universities, this research is shared. Further, it is not uncommon for centers for research to work with and provide financial support to private companies for important work. So the increased funds available can directly benefit publicly-traded and privately-owned companies in the field of regenerative medicine.

 

Discovering Companies

Life sciences companies in developing fields of research are usually sharply focused on a few small areas within the field. As an example, Lineage Cell Therapeutics (LCTX) is holding phase 1/2a clinical trials on spinal cord injury treatment, retina therapies, and phase 1 studies of a lung cancer vaccine.  Whereas another publicly-traded company working on stem cell treatments has more of a focus on aging, organ maintenance, and tissue repair is Longeveron (LGVN). How does an investor learn how to better understand the value between the different fields of work, the different stages of development, legal and ethical issues, and develop a list of companies to follow? A good way to jumpstart your knowledge base is to hear directly from the companies at a conference or summit.

Each year the Regenerative Medicine Foundation (RMF) holds its World Stem Cell Summit. This June 16^th the summit will be conducted virtually. The event is online and at no cost to registered Channelchek users. This is a perfect opportunity for investors to learn of the various disciplines, sharpen their knowledge of the different stages of medical developments, and perhaps become inspired by one or more of the presenting companies or interviews held with their management.

 

Take-Away

The year has been full of winning investment sectors and themes. One area less covered has been regenerative medicine and last month’s lifting of federal support barriers.

The businesses researching stem cells to enhance longevity, regenerate life-changing cells and organs, and provide tomorrow’s breakthrough treatments are complex. Investors immersing themselves in education, discussion, and interviews with management will have a strong advantage when developing their watchlist of these companies. The World Stem Cell Summit can serve as the no-cost place online to receive all this.

A link for more information is provided below.

 

 

Sources:

https://grants.nih.gov/grants/guide/notice-files/NOT-OD-21-111.html?utm_source=dlvr.it&utm_medium=twitter

https://www.msci.com/our-solutions/esg-investing/esg-indexes

 

A New U.S. Treasury Secretary May Mean Reshuffling Personal Investments

 

How will an incoming Treasury Secretary Janet Yellen impact the economy and markets? The 74-year-old former head of the Federal Reserve Bank and Brooklyn-born Economics Professor has been in the public eye for a long time, so she has left us many clues. It’s more than likely there will be dramatic shifts in approach in the position vacated by Steven Mnuchin. Adjusting portfolios and investment strategies to take advantage of change, particularly high impact shifts, is where opportunity lies.

On Friday, the Senate Finance Committee unanimously approved Janet Yellen’s nomination as Treasury secretary; it’s expected that she will win full Senate approval this week. Her nomination was approved 26-0 by the evenly split committee, with concerns expressed by Republicans about the President’s expensive plans for massive economic relief spending, infrastructure investment, and tax hikes. The unanimous vote from both sides of the evenly split political aisle sends the message the Senate Finance Committee is making a solid effort to work together with the Yellen appointment on economic matters.

Now on the Table

President Biden has proposed a $1.9 trillion pandemic economic plan and another proposal to spend $2 trillion more in infrastructure, green energy projects, education, and research for the purpose of advancing American competitiveness. Yellen’s confirmation hearing created an opportunity for lawmakers to discuss their discomfort executing Biden’s economic policies, which include a bigger federal debt burden and repealing parts of the stimulative 2017 tax cuts.

Yellen told senators they needed to “act big” on the proposed $1.9 trillion stimulus package or risk a longer recession and long-term economic scarring, job, and loss of revenues. Her responses to questions shed light on a new angle from which government is beginning to view debt. Some economists and policymakers are looking at the interest cost and returns generated rather than the size of the borrowing. In recent months, Treasury’s interest outlays have fallen from pre-pandemic levels due to lower rates, of course, rates on debt, which the U.S. Treasury issues with maturities as long as 30 years can rise as well.

Comments of Interest to Investors

The topics included tax policy, FOMC activities, climate change, foreign exchange, national debt, and policy surrounding China.  The following categorizes some of the more noteworthy points from her answers to the Finance Committee:

National Debt

• Yellen will review the Treasury’s debt-issuance strategy, including the weighted average maturity of federal debt
• She did not suggest major changes on the horizon.
• She said the demand for U.S. Treasury debt is sufficiently strong to meet current and proposed financing needs.
• As it relates to longer, more complex, ultra-long debt, she said it “deserves further study.”

Taxes

• Yellen promised to “work with members of Congress” on the idea of protecting households earning less than $400,000 a year from increased taxes if President Biden tries to implement his campaign promise of reversing the 2017 tax cuts.
• Another Biden proposal was repealing the cap on state and local tax deductions. The plan would effectively deliver a sizeable tax cut to higher earnings, especially in high tax states. She did not give a response one way or the other on this plan, which appears to help those least in need.  
• She did respond to jabs at Biden’s plan to reduce the threshold for the federal estate tax by saying it would impact very few.

Treasury-Fed ties

• As it relates to the economy and stimulus, she warned, “Right now, taking too little action poses the greatest risk
• As it relates to reviving several Federal Reserve lending facilities that were phased out by her predecessor that was implemented by Yellen when she was former Fed Chair and Former Chair Bernanke, she answered: “The Federal Reserve will continue to provide support to the economy through its ongoing programs and the use of its available tools, but as mandated by Congress, the 13(3) facilities funded by the Cares Act will not be available.”
• Yellen pledged not to pressure the Fed on the level of its yield targeting asset purchases: “I understand deeply why it is so important to maintain the tradition of the independence of the Fed in monetary policy.”

U.S. Dollar Value

• Yellen pledged more than once the U.S. won’t seek a weaker currency.  She did not comment on the “strong dollar” policy the Treasury once pursued
• She said the administration would work, across agencies, “to put effective pressure on countries that are intervening in the foreign exchange market to gain a trade advantage.”
• Yellen singled out bilateral deficits as an indicator of unfair trade practices, which she said she would “vigorously oppose,” although she said the gaps should be assessed in the context of the U.S.’s broader trade relationship with each country rather than a “single catch-all metric.”

China Policy

• Yellen asserted there would be no immediate lifting of tariffs on China and that the Biden administration will be monitoring China’s adherence to pledges made in the Trump administration’s “phase one” bilateral trade deal
• She assured the new administration would use the “full array of tools” to counter China’s “abusive economic practices.”
• She said the U.S. needs to compete with China’s “economic statecraft” around the world and build partnerships distinguished from President Xi Jinping’s signature Belt and Road Initiative

Climate change

• In a written response, Yellen replied: “We cannot solve the climate crisis without effective carbon pricing.”
• She reminded: “The president supports an enforcement mechanism that requires polluters to bear the full cost of the carbon pollution they are emitting.”
• She believes tax policy should be used to provide incentives for individuals and businesses to adopt “climate-friendly policies.”
• She is concerned about proposals to use stress tests on banks to determine their ability to withstand the economic impact of climate change on their assets, including fossil fuels. “Generating environmental regulation is not the mission of financial regulators,” she said.

Take-Away

Regardless of how one feels about the growing national debt or money creation, it appears the next Treasury secretary is on board with continuing the course we’ve been on. This could lead to another good showing for assets, including the overall stock market. There will be some sectors that should do better as the focus shifts more toward “green energy.” She recognizes the importance of a strong banking industry, which may inadvertently help lenders by swelling longer debt issuance we which ordinarily causes a steepening of the yield curve. Yellen seems to want to manage to a stable dollar. Weakness adds to higher exports and inflation, while a strong dollar allows Americans to buy more imported goods. The tax and redistribute policies President Biden promised while he was candidate Biden may have been softened a touch, based on Yellen’s responses; however, she is not currently part of the administration, and the concept does not sit well with a large percentage of the members of the Senate Finance Committee who supported the 2017 Tax cut in taxes.

 

Suggested Reading:

Where Could Investors Profit When the Economy Fully Opens

Renewable Projects Surge

What are Stock Market Valuations Signaling?

 

Enjoy Premium Channelchek Content at No Cost

 

Sources:

Finance Committee Questions for the Record – Jan. 21, 2021

Treasury Nominee Yellen Testifies Before Senate Finance Committee

 

Follow or Subscribe to ChannelChek on your preferred social media: