DEA Brief Just Hit: GAO Report Changes Nothing Duh

Thank you for panicking selling a procedural issue

Quick update to this afternoon's piece. The brief we were waiting on hit the docket after the close, and Marijuana Moment posted the filings. Read them yourself. Short version: the government didn't fight the report coming in. It said the report doesn't matter, in plain language, and asked the judge to get on with it.

What DEA filed

DEA defers to the judge on whether the GAO report enters the record. On everything else it pushed back. The report found “gaps in the memorialization” of the process, not flaws in the process. GAO made no critical finding about the science, recommended no different method, and never opined on whether marijuana belongs in Schedule III. DEA called the opponents' reading a mischaracterization, said no further briefing is needed, and asked Julius not to delay his recommendation.

Sit with that for a second. The agency the opponents spent eleven hearing days painting as a reluctant participant just told the tribunal to stop waiting and rule.

The tears from SAM

The opponents' reply asks for more briefing. Fine. The new motion is the interesting part. NDASA, DUID Victim Voices and Dr. Finn want a “narrow reopening” of the hearing for discovery and testimony: who wrote the 2023 two-part CAMU test, who drafted the language, what criteria FDA used for abuse potential. That's a fishing expedition. You ask to depose the authors when the document on its own doesn't get you where you need to go. It's also a much higher bar than admitting a report. The hearing closed July 15. Post-hearing briefs were in August 17. Reopening testimony four months later, over a process audit that never mentions marijuana, isn't the kind of motion a chief ALJ grants lightly. DEA's brief gives him every reason not to.

What it means for the tape

The $4.11 we wrote at this afternoon priced the delay and part of the hostile tail on two weeks of silence. The silence is over, and the government's position is better than our base case. Admission was already in the price. “Don't delay, the report's immaterial” wasn't.

Nothing changes in the book. Core stays long in $TRLV and $GTBIF. The January $4 puts stay on. If Julius denies the discovery motion and moves to his recommendation, the puts get cheaper and the core gets paid. That's the whole design. If he grants discovery, the puts earn their keep. That's the exact scenario we sized them for. The 30% rule is in force from $4.11 either way.

Two things to watch. Whether Julius asks the government to answer the discovery motion, which adds weeks, or rules on the papers he has. And Friday's opex, which adds noise either way.

Procedural got more procedural today. The merits didn't move an inch, and the government just said so in writing.

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Disclosure: We (the author and affiliated entities) are long $TRLV, $GTBIF, $GLAS, $MSOS and $MSOX, hold options expiring into 2027, and hold $MSOS January puts as described in the original piece. This is not investment advice. Do your own work.