B (2:38)

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C (2:45)

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B (3:16)

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C (3:31)

Might be coming early for the cannabis industry, with President Trump expected to substantially ease federal restrictions on marijuana as soon as today. According to reports, Trump will announce a push to reclassify marijuana from a Schedule 1 drug, where it's in the same camp as heroin, to the less Dangerous Schedule 3, home to Tylenol and steroids. This does not mean marijuana would be legalized or decriminalized at the federal level, and as a consumer who regularly picks up gummies at a dispensary, you may not even notice a change. However, reclassification could be a game changer for the $32 billion cannabis industry. First, it give companies a big tax break since they're operating under a pretty oppressive tax regime by selling a Schedule 1 drug. Next, it could light up scientific research in the field, as Schedule 1 drugs have strict limits on studies. And finally, it's a symbolic boost, legitimizing cannabis as part of the mainstream national economy and potentially foreshadowing more integration to come. Wall street was enveloped in a haze of smoke on Friday following rumors that deregulation was imminent. Major cannabis producers Tilray and Canopy Growth each jumped around 50%, while cannabis ETF soared more than 54% for its best day on record. Toby they're calling it the biggest reform in federal cannabis policy since the the 1970s.

B (4:46)

It is interesting that taxes are the biggest reason why these cannabis companies are celebrating. It's not necessarily something that you would associate with the cannabis industry, but right now the IRS has a code to 80e that blocks cannabis businesses from deducting normal operating expenses because marijuana is a Schedule 1 drug. So we're talking an effective tax rate as high as 70 to 80% for a lot of of operators. So if Schedule 3 drugs are not subjected to that to 80 provision from the IRS. So you are looking at improved cash flow, you're looking at better margins, you're looking at finally a survivable business model for a lot of these companies. So yes, the, you know, people who are high are also very excited about taxes right now because of this potential reclassify.

C (5:35)

I see CPA in your future, Toby. You're like getting deep in the IRS tax code. Just want to run down what Schedule 1 is versus Schedule 3 for everyone. Now, Schedule 1 has, these are drugs that are considered to have no accepted medical use and a high potential for abuse. So marijuana is in that right now. It has been for decades. And this category also includes heroin and lsd. Federal law prohibits the cultivation and possession of these kind of drugs except for approved research studies. Now, if Cannabis goes from 1 to 3, it would have a, it would be considered to have medical use and moderate to low potential for physical and psychological dependence. Now the Schedule 3 drugs currently are anabolic steroids, ketamine, testosterone, Tylenol with codeine. So this is what the switch would mean going from that very restrictive Schedule 1 to Schedule 3, which is considered to have medical use and very low risk of dependence.

B (6:32)

And it does kind of put it into more of the mainstream medicine world as well, where it's easier for doctors to prescribe, there's less legal ambiguity around it. But a lot of industry watchers said maybe this is a careful what you wish for moment. Because with that, you know, Schedule 3 classification, it also brings increased federal enforcement risk where, hey, if THC becomes a prescription drug under federal law, dispensaries and growers could be exposed to selling a prescription drug without a license, misbranding a drug, illegal distribution. These charges that right now they're kind of skirting away from because it's not as much regulatory attention on them. Also, maybe big pharma catches wind of this industry and says, hey, we could probably synthesize THC and sell it as an over the counter drug, which leads to increased competition. So when you start to shift towards pharma grade standards, it brings a lot more drug quality, a lot more labeling, a lot more manufacturing standards to the industry that so far has operated a little bit in the gray area.

C (7:32)

And finally, this push for reclassification comes at a time when there's growing questions about whether medical cannabis actually does anything. His headline from the weekend caught my eye. There was this new review of 15 years of research. They looked at thousands of studies and surveys around cannabis. It was published in the very prestigious medical journal jama. It concluded that the evidence of medical cannabis benefits is often weak or inconclusive. They also found that nearly 30% of medical cannabis patients meet the criteria for cannabis use disorder, which is the scientific way of just call it, of just saying cannabis addiction. So these scientists looked at all of these studies and found that really there's not enough evidence one way or the other whether medical cannabis actually does anything. And there also is quite a bit of ignorance around medical cannabis in general. They found a 2021 review in which only 33% of clinicians globally were confident in their knowledge about medical cannabis and 86% said they needed more education. Maybe that is a symptom of the fact that cannabis was in this very restrictive drug tier and there wasn't a lot of research available to do because of, because of these restrictions placed on marijuana. Now this is not happening today, even with the announcement Trump can't do this unilaterally. Needs to happen through federal agencies and it's a process that might take until next summer if it does come to pass. But if it does, you know it is a huge win for this industry.

B (9:00)

Moving on, President Trump signed an executive order just before the weekend that aims to turn AI regulation from a group project into a solo one. The order blocks US States from enforcing their own AI regulations with a goal of creating a single national framework for AI rather than a patchwork of state by state rules. If there's fragmented regulation, the White House argues, then that's a recipe for slower innovation and reduce global competitiveness with China. That's the idea, at least in practice. There aren't really any federal regulations for AI right now, so states have stepped in to create laws. Almost half of all states have some sort of rules around things like AI generated deepfakes and misinformation, algorithmic discrimination in hiring in general, consumer protection. But the White House wants those horses held for the time being while they work with Congress to create a federal framework. Neal the issue with this approach is that the cart appears to be in front of the horse. By neutering what states can do without national rules in place, the AI industry gets to continue on its merry way without any real oversight, leading critics on both sides of the aisle to brand the order as a carve out for big tech that dilutes states rights.

C (10:10)

It's funny, this country is almost 250 years old. And we're still having the same arguments as we were when the country was founded. I mean, if you just have to go to see the music, Hamilton, to see the fight between states rights and federal government, we're still having those same debates today. And now when it comes to regulating this new technology with AI now, this is a big win for tech companies. Companies like OpenAI, Google, Andreessen Hurwitz, which is the venture capital firm, invested a lot in AI companies. They have been lobbying for the federal government to block states from regulating AI because they think that is cramping their ability to compete with China. It's the architect this, this executive order, the architect of it is David Sachs, who's the White House's eyes are. He is a part of the PayPal mafia. He co founded PayPal with Elon Musk a couple decades ago and has moved around the private sector and is now in this White House position. He is seen as the person who masterminded this particular order because he is very much against having states go ahead of the federal government in creating this patchwork of laws that companies have railed against because they think it's hamstringing their ability to compete.

B (11:18)

Yeah, the idea is if you have 50 different laws, it's much more difficult to, you know, step into the arena versus just one national framework. You are seeing some interesting divisions across party lines, though. You would think that Democrats are advocating for greater consumer protection and that Republicans might advocate for things like streamlining regulations to, to promote corporate innovation. But then within the ranks, there are people breaking from their party lines. None other than Florida Governor Ron DeSantis called the order a subsidy to big tech. He was one of those vocal critics that I mentioned. Steve Bannon also has said, I needs more regulation, calling it the most dangerous technology in the history of mankind. So within the Republican Party, there are these very prominent voices that are saying, actually, we do need to start regulating this thing rather than take regulations away, which is a fascinating division in a party that you would think would have a more unified stance on this.

C (12:15)

Now, this order might not have any teeth, though, because only Congress has the ability to override state laws. So many legal experts that have been consulted on this particular order that President Trump signed last week said, I don't think it's going to deter states from continuing to make AI laws because they're just not scared of the threat because they don't think it's going to hold up in court. So you should see more states like California, Texas, New York, all of these States. You said all, half of, all of them have made AI laws and there's a bunch more in the pipeline. They don't think that this order will bar them from continuing on. They don't think it has any legal teeth whatsoever. So it just kind of the, it's just kind of both these sides staking out their positions in this very big, huge question of how do we regulate the AI within the United States. Let's head to our winners of the weekend, the segment where Toby and I picked two things that managed to avoid slipping on the ice. I won the pre show who made crispier lockers contest, so I get to go first. And my winner is Next Playground, the hottest gaming console no one has ever heard of. Over Black Friday through Cyber Monday, the Next Playground outsold the Xbox top the toys and games category on Amazon, and sold out completely at Walmart, Target and Best Buy in a pre Christmas feeding frenzy. And the wildest part is if you ask people, even analysts who cover the gaming industry, what the Next Playground was as recently as October, they'd say the what? So here's the scoop on this bestselling toy. The console is a small, cute looking cube that sits under your television and is controlled not by a controller, but by your movements. Think of it as the spiritual successor to the Wii or the Xbox Kinect. It's blown up through word of mouth and in parent group chats as a way to keep young kids entertained and sweating instead of handing them an iPad and headphones. And by blown up, I mean literal hockey stick growth. Two years ago, Next sold about 5,000 units of this thing. Last year that grew to 150,000. And this year it's on track for 600,000 units. Revenue has quadrupled from 2024 to reach a projected $150 million by the end of this year. And I haven't even gotten to the wildest part yet, Toby. This company was not even in the business of hardware before 2022. It made an app. What in the world?

B (14:28)

Yeah, this company came out of nowhere. We had never heard of it. And you're right, the origin story is this Nexus first product was called Home Court, which was an iPhone app that used AI to track basketball shots. And unfortunately, despite some power users, there's only so many, you know, basketball obsessive out there in the world. So a very low total addressable market. So they actually pivoted during COVID They use some of their machine learning, they use some of their camera tech to make a new app. That kind of gamified some workouts, brought in some augmented reality, and then they started looking into the data of those usage rates and found that people who put their new app on the TV had the most retention. The bigger screen, you know, playing in front of the TV in kind of while you were stuck at home during COVID They're like, wait a second, there's something here. So then they make the pivot into hardware. They had never built hardware before. That is a crazy thing to do. They didn't know where to source chips from, they didn't know where to do their manufacturing from, and yet they wanted to make a physical, you know, console that expanded on this idea of moving in front of your TV screen. So just a really interesting case study in following user habits and following user data to pivot into a different line of business that you never would expected from an app that started tracking basketball shots.

C (15:48)

There's a lot of reasons for their success, and one of them is that they are laser focused on one market, and that is families with small kids. Now, this is a market that the gaming console industry has largely abandoned due to the types of games that they're releasing. And the prices now, Xbox, PlayStation 5, those are upward. Those cost upwards of $500. The next playground cost $249. And a big reason for its success on Black Friday was it was heavily discounted to $199. So everyone was scrambling to get it for their kids. And just by focusing on this one particular market, they have license Bluey, they license Sesame street, so they know exactly who their audience is. The market has literally abandoned the rest of the market. All their competitors have literally abandoned all of these families with small kids, and then they are absolutely taking it to the bank.

B (16:38)

It is a great story into going into the data rather than listening to maybe your ego. You start this app, you think this is the next big thing, and then you have to pivot not once but twice into this final third iteration. It's letting the market tell you what to do, saying like, hey, we want this. And then you actually serving those needs. And then it's also just surviving long enough. I mean, the founder of this company was taking out loans against his own assets in order to keep this thing alive. So very cool story. I'd never heard of it. I want parents to weigh in because you're kind of ground zero for this thing. It's been circling around in group chats. Feels fun. I kind of want one for the office, Neil. All right, we're going to take a quick break. And come back with my Winner of the Weekend.

D (17:20)

This episode is brought to you by Jack Daniels. Jack Daniels and music are made for each other. They share a rhythm in the craft of making something timeless while being a part of legendary nights. From backyard jams to sold out arenas, there's a song in every toast. Please drink responsibly. Responsibility.org, jack Daniels and Old no. 7 are registered trademarks. Tennessee Whiskey 40% alcohol by volume Jack Daniel Distillery, Lynchburg, Tennessee this message is.

B (17:46)

A paid partnership with Apple Card I'm a person who really appreciates simplicity and when it comes to credit card rewards, the simpler the better. That's one of the many reasons I have an Apple Card. The rewards are super straightforward. I earn up to 3% daily cash back on my everyday purchases. There are no points to calculate, no limits or or deadlines. Plus it's super easy to access my card and make payments from the wallet app of my iPhone. If that sounds like the kind of simplicity you want in a credit card, apply for Apple Card in the Wallet app on your iPhone. Subject to credit approval. Apple Card issued by Goldman Sachs Bank USA Salt Lake City Brands terms and more@applecard.com My winner of the weekend is mozzarella sticks and financial anxiety because diners are ordering way more appetizers than entrees these days to save some money when they eat out. Appetizer sales are up 20% year over year through August, according to data from Buyers Edge, who looks at over 200,000 restaurant locations. One VP at the company thought the 20% spike was a data era because entree sales were flat and typically grow only around 3% per year. But a hankering for pickled chips, egg rolls and jalapeno poppers is leading to massive growth in appetizers because they feel like full meals sometimes with much less sticker shot for cash strapped consumers. Restaurant chains are following the data too. Applebee's recently launched a $15 Ultimate Trio appetizer designed explicitly to replace an entree. And who can forget Chili's Triple Dipper appetizer, which has powered insane foot traffic and same store sales increases for parent brand Brinker International throughout the year. Neil, you get the chicken wings, I'll get the sliders, and we each have a little bit of both.

C (19:29)

Let's run down the top Growing appetizers too. So what a number one in terms of growth over this past year, according to Buyers Edge. So the number one is mozzarella sticks up 36% then pickle chips up 35%. Cheese curds 33%. You don't find cheese curds on the menu up in the northeast, but if you go to other parts of the country, Wisconsin, it is there, and they are delicious. Jalapeno poppers, up 20%, and cheese bites, up 17%. They are seeing explosive growth, in part because of what you talked about with Applebee's. They are tied. Restaurants are tying appetizers to promotions, and we know that the consumer is looking for value and various promotions. So when you see Applebee's, come out and say, we're. Here's this $15 appetizer platter that you can order. Well, you look at the rest of the menu. A steak is $26, pasta is $22, salads, $18. You're saying, okay, well, that appetizer seems pretty appetizing, and that's why you're seeing all this growth in this particular area of the menu.

B (20:24)

And they're just American portions in general. You can absolutely order an appetizer and get away with it as an entree. This is the best move to when you're going out to eat. I was not being facetious when I said, you order this, I order this. We eat split. Everyone does that when they go out. I think at some point, people realize, like, I'm getting enough food here. I don't actually need the $26 steak, the $46 burger, you know, with gold leaves on top. I'd rather just try more food and be, you know, financially comfortable throughout my meal rather than feel like going out is such a big burden on us and the family.

C (20:57)

What's interesting is the amp ification of food is also happening in the pizza realm. As the average price of a large pizza heads towards $17 nationwide in October, executives at Papa John said they're seeing way more customers shifting from large pizzas to medium pizzas and adding fewer toppings. That's because pizza chain sales have been flat since 2023. And Papa John's, Pizza Hut, Domino's, they're all looking for ways to get more out of that very squeezed consumer. So it's happening in Applebee's and Chili's in the restaurant world, and it's also happening in the takeout pizza chain world. It's Monday, so here's what you need to know to stay ahead in the week ahead, Wall street will be up to its eyeballs in data as reports that were delayed from the shutdown comes streaming down into gusher. That will tell us a ton about the current economic situation. The two big ones are the jobs report for November arriving on Tuesday and the monthly inflation report on Thursday, but will also be treated to retail sales, which should offer a gauge of early holiday shopping. Toby, these reports will be like putting on goggles when you've been swimming in murky water.

B (22:00)

The data dogs have almost too many bones to choose from at this point. I am really curious. The reports will drastically alter the path of the Fed post December, meaning the dot plot showed a consensus for only one one more cut in 2026. Maybe this will change now that we actually have some insight into what the heck has been going on.

C (22:21)

One of the most highly anticipated movies of the year, the third Avatar Called Fire and Ash, hits theaters on Friday and cinemas just love it when director James Cameron supplies them with content. Of the top 10 highest grossing movies of all time, Cameron has three the original Avatar at number one, the Avatar sequel at number three, and Titanic at number four. To be excited for a return to.

B (22:43)

Pandora actually, yes, I am an unabashed Avatar lover. Give me blue alien people, give me all the special effects and give me side characters who despite existing in a franchise that have three of the two of the top movies of all time, I still couldn't tell you the name of any of them. But it doesn't matter when you're having such a nice time at the theater. So yes, count me as an Avatar lover. I think the movies are great.

C (23:07)

All I got is Jake Sully.

B (23:08)

That's only the only character you got. It's the side characters where you get a little lost.

C (23:13)

All right. And sports. The college football playoffs get underway with Oklahoma and Alabama kicking off the first round on Thursday, followed by three more games on Saturday. In basketball, the finals of the NBA cup are on Tuesday. That's that in season tournament launched a few years ago with the spurs facing the Knicks. And the NFL reaches Week 16 featuring high stakes games on both Saturday and Sunday. More importantly, your friends who are in their fantasy football playoffs are going to be a complete mess.

B (23:39)

That would be me. I really need a big game for Devon H and tonight to make it three for three and advancing in the playoffs. I didn't even listen to any other things you said. I'm fully locked in on fantasy.

C (23:50)

For anyone who's feeling lucky, the Powerball jackpot has swelled to $1.1 billion ahead of tonight's drawing after no Ticket won the prize on Saturday night. It's the game's sixth largest payout ever and the second lottery to top a $1 billion jackpot this year. Toby, I'm already doing a SWOT analysis of whether I'll take the lump sum or the annuity.

B (24:08)

Is it just me or. I feel like the powerball is always $1 billion. I swear this thing was just 1 billion do dollars. It's like the Pick Me news stories. It's always saying, hey, I'm back at a billion again.

C (24:20)

Well, here's the thing. We don't talk about it until it hits $1 billion. But when it hits 1 billion, we talk about it because people want a piece of that. And finally, since this is the last full week before the holidays, we're bringing back a fan favorite game for you to play the latter. Here is how it works. The Bruise Puzzle Master Jack has ranked five things in a particular order based on some metric. What is the metric he used to order them? Here are the five things and you're going to want to write this down. I'll take it slow. Number one, Mario. Number two, Garfield. Number three, SpongeBob. Number four, the Hulk. And number five, Cookie Monster. I'll read that one more time. And you definitely want to write this down if you want to play. Number one, Mario. Number two, Garfield. Number three, SpongeBob. Number four, the Hulk. Number five, Cookie Monster. Head to the Show Notes or Instagram for the link to submit your answer and we'll select a winner at random to send Morning Brews Swag. But Swag is only available to people in the US And Canada. Blame Shopify. The contest will run through Wednesday evening and we will announce the winner on Friday. Good luck. Toby, you got an early idea.

B (25:28)

I know the answer, Neal. Can I say it? No, I'm joking. I'm joking. I really pray for people's brains, you know, listening to this early in the morning and you just get Mario, Garfield, SpongeBob, the Hulk, and Cookie Monster just rumbling around in your head. Good luck, people. You got this.

C (25:42)

That is all the time we have. Thanks so much for starting your morning with us and have a wonderful start to the week. If you want to get in touch with us, you can send a note to Morning Brew Daily at Morning Broadcom or DM us on Instagram @MB. Daily show, let's roll the credits. Emily Milian is our executive producer. Raymond Lu is our producer. Our associate producers are Olivia Graham and Olivia Lake. Hair Makeup is wondering if you're going to have that last mod stick. Devin Emery is our president and our show is a production of Morning Brew. Great show today, Neil.

B (26:08)

Let's run it back tomorrow.

D (26:20)

And Doug, here we have the Limu Emu in its natural habitat. Helping people customize their car insurance and save hundreds with Liberty Mutual. Fascinating. It's accompanied by his natural ally, Doug Limu.

C (26:36)

Is that guy with the binoculars watching us?

D (26:38)

Cut the camera. They see us. Only pay for what you need@liberty mutual.com Liberty Liberty Liberty. Liberty Savings Ferry Unwritten by Liberty Mutual Insurance Company and affiliates. Excludes Massachusetts.