In this episode of MarketFoolery, host Chris Hill chats with analyst Emily Flippen about some of what she saw at this year's MJBizCon, a truly massive cannabis industry conference held in Las Vegas. Tune in to hear more about what industry professionals are most excited about, and what's keeping them up at night; how much the plight of pot stocks in the market does(n't) affect the industry's vibe; why U.S. rollout for legalization might be slower than enthusiasts hope; where in the U.S. we might see a legalization push next; the weirdest thing Emily saw on the show floor; and much more.

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This video was recorded on Dec. 16, 2019.

Chris Hill: It's Monday, December 16th. Welcome to MarketFoolery! I'm Chris Hill. With me in studio today, she's back from a week away from Fool HQ, it's Emily Flippen. Thanks for being here!

Emily Flippen: Thanks for having me!

Hill: Last week, 40,000 people from 75 countries descended upon Las Vegas for MJBizCon, the biggest cannabis conference in the world. You were one of them. There were a few people from Fool headquarters who went. Let's start with this -- what's your headline for this year's MJBizCon?

Flippen: Look, it doubled in size year over year. Part of me wants to say the headline is something like Cowboys Put On Suits. It's still the wild wild west in cannabis. The reason why that analogy is top of head is because, in addition to MJBizCon happening in Las Vegas, in the Las Vegas Conference Center, there was also, I think, a national rodeo convention happening in the same center next door. And there's something just so appropriate about that to me, because in a lot of ways, the people we saw at MJBizCon this year, they're very different than the people we saw last year. They're still new. They're still entrepreneurs. They're still just getting started in a really untrekked industry. But at the same time, they're making a business out of it, that's very clear.

Hill: That's pretty amazing, that the size of the conference doubled year over year. It doesn't surprise me that it grew, but the fact that it doubled is pretty astonishing. My assumption is that you had a lot of new faces. And to your point, some of the faces that were there in 2018 probably weren't there this time around. What was the general mood of the conference? Going into it, from a business standpoint, a lot of the headlines I saw were about the biggest players, the biggest public companies in the cannabis space, and they're smaller than they were a year ago. CNBC had a story about, the six biggest public companies in cannabis have lost a collective $25 billion worth of market cap -- was that reflected in the mood? Or was it more upbeat than that?

Flippen: Not really, no. I think that's probably akin to, the people who are listening to this podcast, us and our jobs, are focused so much on the public markets that we forget about the industry as a whole, and we forget that industries exist even where public market retail investors do not. What was surprising about MJBizCon to me, as somebody who has followed that cannabis market over the past year and seen it in strain, was the fact that there was still so much optimism. In a lot of ways, MJBizCon is aimed at entrepreneurs. It's MJBizCon. It's aimed at small businesses. And the reason why it doubled year over year is because there's so many more small businesses in cannabis today than there was a year ago.

So, the mood I would not describe as down because of the public markets. No, I don't think anybody there really cared. Unless you're coming as a retail investor, you were just interested in this space, nobody there who was working really cared about the market cap of Canopy Growth. "I'm a CBD company operating in Oregon. I'm not worried about the Canadian cannabis market," for instance.

However, it was a kind of negative sentiment simply because of the steps that our government has taken here in the U.S., which has hurt the ability for these businesses to grow. There's a lot of, I guess, disappointment around the Safe Banking Act really becoming stagnant in the Senate, not moving past the House. There was fear about the FDA's seeming crackdown on CBD companies here in the U.S. I mean, there's all these regulatory hurdles which are making people really afraid. Very, very different than what you may expect from just public markets being down.

Hill: Was that counterbalanced in any way by talk of states that are going to have some form of cannabis, either decriminalization or legalization, on the ballot in 2020? Part of the reason I ask that is because, here in Virginia, there is an expectation that the state legislature will pass some sort of decriminalization in 2020.

Flippen: That news article actually broke about Virginia while we were at MJBizCon. The day before, we'd actually had a panel about, where do experts in the field see the most opportunity for cannabis on a state level next? And the overwhelming consensus was Virginia. I honestly scoffed a little bit. I think it's easy for people to forget just how big and just how conservative Virginia really is as a state. But, yeah, it seems like decriminalization at least could be a reality for 2020.

Here's the problem. It's easy to be very positive and frame up cannabis as dominoes. And I do think that it is, in a sense, a domino effect. However, the states that we've seen legalize cannabis -- with the exception of Illinois, which will legalize on January 1st, 2020 -- they did it via ballot initiative, which is not the best way to legalize cannabis, because you have to iron out all the details. We saw two states which were really expected to pass legalization in 2019 -- that's New York and New Jersey -- fail to do so in 2019 simply because they couldn't iron out those little details. So, I think it's easy to say, "There's a general consensus among most Americans that cannabis should at least be decriminalized. Why has nothing been done about it on the state level for a lot of these bigger, more liberal states?" The reality is, it's really hard to get everybody on the same page about those little details.

Going to 2020 I'm hopeful that states will have it on their November 2020 ballot, something regarding decriminalization, legalization of cannabis, improving their medical programs. But when push comes to shove, politicians are politicians. You get stuck up in the granularities.

Hill: It goes back to something you touched on, just with reference to banking. You can pass legalization in a given state, but if the infrastructure for the businesses -- again, to go back to the conference. This is a group of entrepreneurs. If they don't have the underlying support system, particularly when it comes to banking, but other support services as well, then they're going to struggle.

Flippen: I think it's part of the reason why MJBizCon is so popular, is because they don't have the support system. And MJBizCon acts as that support system. So if you're missing something, you as an entrepreneur have the ability to head out to MJBizCon and make connections that you don't really get the opportunity to make otherwise. I think it's filling a needed hole, but nothing can really fill the hole that is the government regulatory actions, which everybody has just been praying for for the past year.

Hill: You mentioned one of the breakout sessions you went to. I know you were very busy. You were going to a lot of breakout sessions, conducting a lot of interviews. Not looking to play favorites necessarily, but what is either a breakout session or a person that you interviewed that struck you as particularly interesting?

Flippen: There were a number of lawyers that we had the opportunity to talk to, which I always find super interesting. I'm not a lawyer by trade myself, but the space seems to be acting in a sense of, you don't know what's wrong until you get a lawsuit over it. And then lawyers, accountants, all these people, are framing their businesses around mistakes that have already been made in this space. A lot of people, virtually every person we interviewed, was kind of -- I go back to that headline. It's the wild wild west. You're acting in a government, regulatory structure that's extremely uncertain. You don't even know what's legal to do until you try to do it. So, a lot of companies are being more aggressive and doing stuff that could potentially get them in regulatory trouble. A lot of people are doing stuff that's more conservative, a little bit more in line with where they see the regulations panning out, but are really hampering their own growth.

Hill: See, again, I just continue to be reminded of the underlying system. It's a great line about how you never know what's wrong until a lawsuit pops up. But yeah, that's just one more thing where, whether it's at a federal level or at a state by state level, one lawsuit leads to court action leads to possibly an appeal of some sort, the judges have to weigh in. It seems like it's all moving a little bit more slowly than, certainly, the entrepreneurs would like.

Flippen: Yeah. The FDA, for instance, in 2019, expected to have guidance for CBD companies here in the U.S. by the end of the year. And they asked for research. They sent out that request for research and they got none back. You know why? Because it's really hard to get research-grade cannabis in a country --

Hill: [laughs] It takes time.

Flippen: It takes time, and it's a schedule one substance, right? The fact is, you can't legally get research-grade cannabis in the U.S., at least not readily accessible. So the fact is, nobody has the research. The research takes time. And what does the FDA do? They take what little bad research they have -- a study on rats, actually, that shows that if you give them absurd amounts of CBD, it causes liver failure -- and they tell people, "CBD causes liver failure." And you know what that does to every CBD business here in the U.S.? It makes their job 20 times harder when they have research, and people have been using CBD, and have different anecdotal research that says, "No, only if you take 30X your body weight in CBD does it cause a problem." There are a number of substances out there that aren't regulated like this. For instance, vitamin D. If you take lots and lots of it, it causes issues. Anything causes issues.

Hill: It's like we saw earlier this year with vaping, where one of the challenges around the vaping industry is, we have decades worth of research around what cigarettes do to the human body. There is not decades of research of what vaping does to the human body, because it hasn't been around for decades.

Flippen: Yeah, and it very well could be very negative. I don't mean to frame this all very positively. There's nothing wrong with CBD. There's nothing wrong with vaping. There could be. The point is, we don't know yet. That takes time and it causes uncertainty for most of these businesses.

Hill: Alright, I have to ask because I'm always interested in this whenever anyone from The Motley Fool goes to a conference, particularly in Las Vegas -- what's the strangest thing you saw on the convention floor? I mean, it's over a quarter million square feet of convention space. What is the booth that you went by and did a double take because you were like, "What in the world is that?"

Flippen: There are so many things. For Marijuana Masters members out there, I wrote an entire dispatch about the interesting stuff that I saw. There are companies that are incorporating AI and AR into their products and labeling.

But I think the strangest thing I saw actually wasn't on the convention floor. Our team had the ability to go to Planet 13, which is a publicly traded company. It's the largest cannabis dispensary in the world. Went down there. Met with management. The co-CEO said, "Have you seen the air show yet?"

Hill: The air show?

Flippen: The air show. And we have no idea what he's talking. "No, we haven't seen the air show." So he brings us down to the dispensary floor. He's like, "OK, look up." And there was a special, I think orbs is what he called them -- essentially, they had imported these orbs from Germany, programmed to fly around the ceiling of the dispensary kind of like a light show that you would expect around Christmas music and Christmas lights, but with these cannabis orbs. So, that was in general, probably the strangest thing, but also most entertaining thing that we saw.

Hill: I don't know what I expected you to say, but flying cannabis orbs was definitely not on the list.

One or two things. Separate from the conference, did you get a chance to hit the gaming tables? Did you get a chance to get a good meal? There are a lot of good restaurants in Vegas.

Flippen: Well, I'm always good at eating. I do not gamble, though. I unfortunately saw some people who were very upset with their losses gambling. That always reminds me that that's usually a good decision.

You know what the funniest thing was? While we were super busy at the convention, it was my first time in Las Vegas, so I had the ability to walk around, see all the people drinking on the street. It was all very absurd. But, Auri Hughes, our analyst who came with us, he had never been to an In-N-Out Burger before. Out of all the things we ate in Las Vegas, we all were like, "We have to go to In-N-Out, Auri's never had it."

Hill: What was his review? Thumbs up?

Flippen: He's a very reserved person, in the sense that he doesn't get super excited the way that I do about In-N-Out Burgers or milkshakes. But, he was very, very positive on it, which makes me think that the average person, it would have blown their mind.

Hill: In his own quiet way.

Flippen: In his own quiet way. That's how I'm interpreting it, though. I want to believe that that was his reaction. Being a vegetarian now, I unfortunately just had to sit there and watch them eat those delicious burgers.

Hill: You didn't get a milkshake?

Flippen: I did. I did get a milkshake. I got a milkshake and I dipped my fries in it, which grossly upset a lot of people at the table.

Hill: Well, look, anyone who's ever been to Las Vegas for a conference knows that you're spending a lot of time on your feet. If you've got a step counter, you're logging a lot of miles, somewhere in the neighborhood of eight to 10 miles easy when you're on your feet all day. So you know what? You and Auri and everyone else, you more than earned that trip to In-N-Out Burger. 

Flippen: Thank you for making me feel better about my life choices, Chris.

Hill: Emily Flippen, thanks for being here!

Hill: Thanks for having me!

Hill: As always, people on the program may have interest in the stocks they talk about, and The Motley Fool may have formal recommendations for or against, so don't buy or sell stocks based solely on what you hear. That's going to do it for this edition of MarketFoolery. The show's mixed by Dan Boyd. I'm Chris Hill. Thanks for listening! We'll see you tomorrow.