Interview with Erik Sloane of Cboe Canada on U.S. Cannabis Companies Listed in Canada

The Toronto Stock Exchange, a premier financial trading platform in Canada, is not the solitary top-tier exchange available to United States-based cannabis companies seeking to amass capital outside of their domestic market.

Recently, an increasing number of such entities, commonly referred to as multistate operators, are opting for an alternative top-tier exchange. This exchange is none other than the Toronto-based Cboe Canada exchange, as opposed to the relatively less prominent Canadian Securities Exchange.

The Cboe Canada exchange, which is articulated as “see-bow,” was formerly recognized as the NEO Exchange before its acquisition in 2022 by the Cboe Global Markets. The latter is renowned as the parent entity of the Chicago Board Options Exchange, a notable financial market institution.

In the contemporary financial landscape, Cboe Canada has become a favored destination for several operators based in the United States that specialize in cannabis-related operations. Among these entities are The Cannabist Company Holdings, formerly recognized as Columbia Care, as well as other notable organizations such as Glass House Brands, Gold Flora Corp., Tilt Holdings, and Verano Holdings.

Erik Sloane holds the position of Chief Revenue Officer at Cboe Canada, a role he previously fulfilled at the NEO Exchange before its acquisition by Cboe.

MJBizDaily, a notable publication in the industry, engaged in a detailed conversation with Mr. Sloane. This dialogue aimed to gain a deeper understanding of the unique opportunities and services that Cboe Canada offers U.S.-based cannabis companies. Additionally, the discussion delved into the specific listing requirements that American multistate operators must fulfill for inclusion in the exchange. Furthermore, there was a focus on exploring the potential scenario where cannabis operators currently listed on Cboe Canada might have the opportunity to transition to a listing on the United States exchange operated by Cboe Global Markets. This transition would be contingent on the future landscape of federal regulations concerning cannabis.

What Would You Say to U.S. Cannabis Companies Considering Listing on Cboe Canada?

The concept under discussion pertains to a pathway leading towards a senior exchange, alternatively known as a tier one exchange or a mainboard exchange, the terminology of which varies depending on the geographical location of reference. The quintessence of this pathway is to facilitate a company’s access to the most expansive investor base feasibly attainable.

Senior exchanges stand out as being eligible for indexation. This characteristic is significant as it denotes their compliance with criteria that allow them to be included in major financial indices. Moreover, these exchanges are open to institutional investors, a category of investors responsible for overseeing substantial financial resources, such as pension funds, mutual funds, and insurance companies. The governance and control standards imposed on companies listed on these exchanges are markedly higher. This heightened level of scrutiny and regulation mandates that the companies adhere to superior standards, thus compelling them to engage in the highest-level regime of disclosure concerning their business activities to their investors.

For companies that are in a phase of growth, seeking augmented access to capital, and are concurrently being prompted to transition onto a senior market, the aforementioned pathway offers a viable option within the Canadian context. This is particularly pertinent for Multistate Operators (MSOs), for whom this pathway is unequivocally applicable.

The fundamental messages for these companies revolve around the theme of service orientation. These entities must engage in an exchange that demonstrates a willingness to collaborate closely with them. This collaboration includes assistance in identifying best practices, connecting with advantageous partners, and guidance on proficiently managing the capital markets aspect of their business operations while situated in Canada.

The exchange’s approach is characterized by an emphasis on sharing data and intelligence related to the company’s business, such as insights on who is buying and selling their stock. An integral aspect of this service orientation is the readiness to engage in direct communication, exemplified by the willingness to ‘pick up the phone’ and interact.

Significantly, Multistate Operators, as well as other companies, are not mandated to restructure their business to be eligible for listing on the exchange in Canada. While there are certain compliance requirements that MSOs must adhere to for listing purposes in Canada, the overarching intent is to collaborate with the company in its current operational state. The exchange does not require a special structural reconfiguration of the business, thereby providing a degree of flexibility and accommodation to the listing entities.

How Can U.S. Cannabis Companies List on Cboe Canada Without Asset Restructuring?

In our pursuit to address the pertinent matters, it becomes necessary to elaborate on the processes and procedures we adhere to, particularly concerning our interactions with Multistate Operators (MSOs) who are directly involved in plant-related operations. A fundamental aspect of this process involves each of these MSOs acquiring legal opinions from the United States that affirm the legality of their business operations.

These legal opinions, which are essential for ensuring compliance with relevant laws and regulations, are subsequently filed as a part of the comprehensive listing application process with our marketplace. This step holds significant importance as it functions as a fundamental component within our assessment and authorization procedure for prospective listings on our exchange.

Before the acquisition of our exchange by CBOE, a similar protocol was rigorously followed during our tenure as the NEO Exchange. This consistency in approach underscores our commitment to maintaining a high standard of regulatory compliance and operational integrity.

The process of obtaining and reviewing these U.S. legal opinions is instrumental in how our team, comprising experts and professionals in the field, gains confidence and assurance. It ensures that our operators are not only legal and licensed but also in strict adherence to the rules and regulations outlined in our listings manual. This thorough vetting process is vital for us to maintain the integrity of our exchange and to ensure that we only associate with entities that meet our high standards of legal and regulatory compliance.

This meticulous approach to evaluating and approving MSOs for listing on our exchange is a testament to our unwavering commitment to upholding legal and ethical standards. It is through this rigorous process that we ensure our marketplace remains a trusted and reputable platform for financial transactions and investments, particularly in the context of plant-touching MSOs.

Verano President Darren Weiss mentioned in a previous interview with MJBizDaily that his company received assurances from Cboe Canada. These assurances indicated that once a pathway became available, Cboe U.S. would provide them with direct access to a prominent U.S. exchange, without any additional requirements, effectively opening the doors for them to enter the market.

Can You Describe How That Process Would Function?

Cboe Global Markets, the parent company of Cboe Canada, holds a distinguished position in the global financial markets, not only as a world leader in derivatives, options, and futures but also as an owner of stock exchanges in various locations across the globe. This multifaceted presence in the world of finance underscores the company’s expansive and versatile capabilities in the financial sector.

In the United States, Chicago serves as the headquarters for our cash-equities exchange. Here, we operate as a national stock exchange, with regulatory frameworks and listing guidelines that are on par with those of other prominent exchanges such as the New York Stock Exchange and Nasdaq. This parity in rules and standards is indicative of our commitment to maintaining a high level of operational integrity and regulatory compliance.

When considering the broader scope of our business, it is evident that while we are widely recognized for our proficiency in options trading, our stock-trading business, albeit less known, is an area where we are actively enhancing our visibility and impact. A key aspect of this endeavor is the emphasis we are placing on our listings platform.

Our inaugural press release in this domain announced the listing of Abaxx Technologies, a Canadian company, on our exchange in Canada. This company has also expressed intent to “intralist” on our U.S. exchange and thereby join the Cboe ecosystem in the United States. This strategic maneuver aligns with a broader trend we have identified in the market: proficient Canadian firms aiming to enhance their financial presence within the U.S. market. These companies, often U.S.-based businesses that have expanded to Canada for growth and capital-raising opportunities, are eventually faced with a pivotal decision regarding their choice of a listing venue in the U.S.

Our entire business model and unit are intricately designed to facilitate this process. We aim to be the singular, unified global stock exchange operator for any company, irrespective of where they aspire to raise capital. This goal is particularly relevant for numerous Canadian companies that, having established a firm base in Canada, are now looking to penetrate the U.S. markets.

Instead of initiating a new relationship with a different stock exchange in the U.S., our vision is to position Cboe as the premier choice for these companies, both in Canada and the U.S. By offering a unified, global team, we strive to assist them seamlessly in accessing capital markets. This approach is designed not only to simplify the process for these companies but also to ensure a consistent and high-quality experience as they navigate the complex terrain of international capital markets.

Could the Process Used for Abaxx’s U.S. Listing Also Apply to Verano?

Indeed, the possibility exists. It is imperative to acknowledge that the same set of rules and regulations currently impeding United States exchanges from listing various U.S.-based companies, which are otherwise deemed as reputable and solid enterprises, are equally applicable to Cboe in the United States. These regulatory constraints and compliance requirements play a pivotal role in shaping the operational landscape for exchanges such as ours.

The strict adherence to these rules and regulations goes beyond mere legal compliance; it serves as a testament to our unwavering dedication to maintaining the utmost standards of market integrity and safeguarding investor interests. These regulations, which are designed to ensure fair and transparent market practices, are an essential component of the financial ecosystem and serve to maintain the credibility and reliability of the capital markets.

As a responsible entity in the financial marketplace, Cboe in the U.S. is bound by these regulatory frameworks, which are set forth by authoritative bodies such as the Securities and Exchange Commission (SEC) among others. These bodies enforce a comprehensive set of guidelines and rules that govern the listing and trading of securities on U.S. exchanges. The objective of these regulatory measures is to protect the interests of all stakeholders in the market, guaranteeing that firms maintain rigorous disclosure and governance standards.

Consequently, when considering the prospect of listing U.S. companies, it is crucial to understand that Cboe, like other U.S. exchanges, must operate within the boundaries of these regulatory parameters. Our commitment to compliance and regulatory adherence is unwavering, and it dictates our approach to listing decisions and overall exchange operations.

The existing regulatory framework, occasionally perceived as restrictive, plays an essential role in preserving the integrity and stability of the financial markets. It ensures that only companies that meet the defined criteria of transparency, governance, and financial soundness are afforded access to the capital markets through listings. This meticulous procedure is indispensable, serving not only to safeguard the interests of investors but also to uphold and bolster trust in the entirety of the financial system.

Therefore, while the potential for listing U.S. companies exists, it is contingent upon the alignment of such companies with the prevailing rules and regulations that govern U.S. exchanges, including Cboe in the U.S. This alignment is critical in ensuring that only companies that are fully compliant and adhere to the highest standards of market conduct can participate in the U.S. capital markets.

Do You Anticipate More U.S. Cannabis Companies Listing on Cboe Canada Soon?

Indeed, we harbor a strong aspiration in this regard. We earnestly aspire that our endeavors and competencies in catering to the industry will be acknowledged and harnessed by a wider array of issuers. The trajectory of Verano, alongside The Cannabist Co., previously known as Columbia Care, serves as a significant benchmark in our journey. Their decision to list with us, being one of the earliest, if not the inaugural, in this specific sector, has been a monumental step in our evolution.

The subsequent transition of Verano to our market stands as a resounding endorsement of our proficiency and capacity to adeptly serve the needs of this dynamic industry within the Canadian context. This move by Verano has not only been a momentous event for us but also a clear testament to the robustness and appeal of our market services.

Our aspiration extends beyond this singular achievement. We are earnestly hopeful that other issuers will closely examine and recognize the breadth and depth of our capabilities, especially in addressing their unique requirements in the Canadian market. Our commitment to this sector is unwavering, and we are diligently striving to showcase our strengths and advantages to potential issuers.

Currently, our team is actively engaged in concerted efforts to engage in meaningful dialogues and foster relationships with potential business partners. These efforts are geared towards attracting more business to our markets, which remains a paramount objective for us. We are dedicated to enhancing our market presence and influence by demonstrating our unparalleled ability to cater to the diverse needs of issuers, particularly in the rapidly evolving and challenging landscape north of the border.

Our goal is unequivocal: to position our market as the preferred choice for issuers seeking a reliable, efficient, and supportive exchange. We are steadfast in our endeavor to cultivate and nurture these business relationships, believing firmly that our market offers a unique combination of expertise, innovation, and customer-centric services that are essential for the success and growth of issuers in this sector.