TSX-V Beginning To Ease U.S. Cannabis Restrictions

Most of the focus on “regulatory issues” in the cannabis industry is in the United States. However, even in Canada cannabis companies are still facing regulatory restrictions that are impeding growth and development.

One of these restrictions comes via Canada’s exchanges. The TSX Venture Exchange has imposed restrictions on its Canadian-listed companies from owning (or having a commercial interest in) U.S.-based cannabis assets.

Prohibitions are very strict with respect to any U.S.-based business that has any plant-based cannabis operations. Guidelines provided by the TSX-V provide a little ‘wiggle room’ with respect to U.S. operations that are tangential to the cannabis industry.

It is here where we seem to be seeing an easing of restrictions by the TSX-V. As reported by MJBiz Daily, the Venture Exchange has allowed a Canadian cannabis company listed on its exchange, 48North (CAN:NRTH / US:NCNNF) to acquire a U.S.-based vaporizer company: Rare Industries (dba Quill).

MJBizDaily sought a legal opinion on the significance here.
 

It hasn’t been a quick deal for 48North. The review process by the TSX-V took between 3 – 6 months. As noted by MJBizDaily, what may have tipped the scales in favor of this deal is that Quill is expected to generate most of its revenues north of the Border.

This appears to be a new precedent.

At least with respect to businesses that are ancillary to the cannabis sector, a company won’t deemed to be “U.S. based” if, in fact, it generates most of its operating revenues in Canada. Potentially, this would also apply to ancillary businesses that derive a majority of their revenues in a different (but fully legal) jurisdiction.

The open question here is whether the TSX-V is planning to move in a similar direction with respect to plant-based cannabis businesses. Is the new “test” for permissibility going to be simply where a company derives the majority of its cannabis-based revenues?

Either way, at the very least this is a small regulatory step for the Canadian cannabis industry. While more progress is needed, this still represents good news for Canadian cannabis companies and their shareholders.