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A mairjuana plant in Edmonton, Alberta, Canada. Photo by Artur Widak/NurPhoto via Getty Images

Canadian cannabis company Canopy Growth, which is 38% owned by beer and spirits company Constellation Brands, bought the right to acquire Acreage Holdings only if recreational marijuana is legalized in the U.S.

The big picture: The tie-up between the U.S. company that grows and sells pot in a handful of states — former Speaker of the House John Boehner is on the board — and the world’s most valuable pot company is essentially a bet on the future that’s valued at $3.4 billion dollars.

Between the lines: The non-deal deal is structured to avoid obstacles that would come with Canopy’s outright acquisition of Acreage before legalization. A deal now would get Canopy’s shares de-listed from the Toronto and New York Stock Exchange, which both forbid listing companies with U.S. cannabis operations since it’s federally illegal. (Canada made marijuana fully legal nationwide in October.)

  • “This is like a very large game of double dutch, as in ‘if the rules change we'll come play, but until then we'll keep spinning those ropes.’ It's a waiting match,” Brent Williams, founder of Highwater Financial, a cannabis-focused investment firm, tells Axios.
  • “It’s a great precedent to set for the Aurora Cannabis's of the world to come in for further expansion of Canadian companies into the U.S.”

How it works: The deal is terminated if cannabis is not legalized (or if exchanges don't change their rules) within 7.5 years, or 90 months. If the deal falls through, no word on what happens to the $300 million upfront cash Canopy agreed to pay Acreage shareholders.

  • But the heads of both companies and many analysts are optimistic legislation will pass within the next 2 or 3 years.
  • The companies said the deal value was a 41% premium over Acreage's share price.

What’s in it for the companies:

  • “Canopy has been at risk of missing out on the U.S. market as it grows. Now they have sort of secured a path towards that, while avoiding an outright acquisition today," Rob Wertheimer, a founding partner of Melius Research, tells Axios. “Acreage is attached to what has become an emerging North American leader and that’s well-positioned for growth.”

The bottom line: This just built a path for companies to buy into a budding U.S. marijuana market without breaking any laws and without facing the wrath of stock exchanges. Analysts say the deal structure could set off a wave of similar transactions.

Go deeper: 4/20 sells high: Corporate America embraces marijuana's big day

Go deeper

Group of 20 bipartisan senators back $1.2T infrastructure framework

U.S. Senate Majority Leader Chuck Schumer (D-NY) arrives for a meeting with Senate Budget Committee Democrats in the Mansfield Room at the U.S. Capitol building on June 16, 2021 in Washington, DC. The Majority Leader and Democrats on the Senate Budget Committee are meeting to discuss how to move forward with the Biden Administrations budget proposal. Photo: Samuel Corum / Getty Images

A group of 10 Democratic and 10 Republican senators (the "G20") tasked with negotiating an infrastructure deal with the White House has released a statement in support of a $1.2 trillion framework.

Why it matters: Details regarding the plan have not yet been released, but getting 10 Republicans on board means the bill could get the necessary 60 votes to pass.

DOJ drops criminal probe, civil lawsuit against John Bolton over Trump book

Photo: Jabin Botsford/The Washington Post via Getty Images)

The Justice Department has closed its criminal investigation into whether President Trump's former national security adviser John Bolton disclosed classified information with his tell-all memoir, “The Room Where it Happened," according to a source with direct knowledge.

Why it matters: The move comes a year after the Trump administration tried to silence Bolton by suing him in federal court, claiming he breached his contract by failing to complete a pre-publication review for classified information. Prosecutors indicated they had reached a settlement with Bolton to drop the lawsuit in a filing on Wednesday.

Fed may raise rates sooner, as inflation is higher than expected

Feb chair Jerome Powell. Photo: Susan Walsh/Getty Images

The Federal Reserve kept rates unchanged at its latest policy meeting, but a shift in sentiment emerged as to how soon it should begin raising rates.

Why it matters: The Fed's rock-bottom rates policy and monthly asset purchases helped the U.S. markets avoid a meltdown during the COVID-19 crisis last year. But as the economy recovers, a chorus is growing for the Fed to at least consider a timeline for pulling back its support before things get overheated.