The cannabis industry has no shortage of financial hurdles, but few innovators are rewriting the financial playbook to meet operators where they are. With a background in hedge funds and high-frequency trading, Darren Gleeman didn’t arrive in cannabis to ride a trend. He arrived to fix a broken system. In a space where traditional M&A is limited and Section 280E guts profitability, Gleeman and his team at MBO Ventures have introduced an alternative: a patent pending ESOP model that makes federal income tax, and the pain of 280E, virtually disappear.
As the cannabis industry’s only ESOP-focused investment bank, MBO Ventures has helped execute the industry’s first ESOP exit, preserving founder equity, boosting employee ownership, and turning tax liabilities into long-term value.
In this interview, Gleeman shares how he’s using financial engineering to solve one of the industry’s most entrenched challenges and why he believes ESOPs might be the future of not just cannabis exits, but equitable capitalism.
Cannabis & Tech Today: You’ve called 280E “the silent killer” of cannabis businesses. For readers less familiar with the tax code, can you explain how it impacts cash flow and valuations, and why it creates such a challenge for exits?
Darren Gleeman: 280E disallows cannabis companies from deducting ordinary business expenses. That means even if a company breaks even or loses money on a pre-tax basis, it still pays full federal income tax on gross profit. This crushes cash flow, which in turn suppresses growth and hence valuation multiples are almost non-existent. Buyers don’t want to acquire companies that have very little cash flow due to income tax, and sellers can’t justify their prices based on after-tax earnings. The result is a market with stalled M&A activity and owners with no viable exit path.
C&T Today: Traditional M&A hasn’t taken off in cannabis the way many expected. What’s missing from the current exit landscape that the ESOP model helps solve?
DG: Buyers either don’t exist or are offering fire-sale prices. Most of the large MSOs are capital constrained, and traditional PE avoids cannabis due to federal illegality. Our ESOP model flips the buyer-seller dynamic: the company sells to a trust for the benefit of the employees, using seller financing and future profits to fund the transaction. The owner gets liquidity and upside through warrants, while the company pays zero federal income tax, making the deal financially viable where others fail.
C&T Today: What inspired you to adapt ESOPs, typically used in more mature industries, for cannabis operators? What did you see that others missed? No one else was solving the 280E problem.
DG: Everyone kept asking how to find buyers. I asked how to make the company more profitable without a buyer. The answer was eliminating taxes. When you remove federal and state income tax, cash flow doubles or triples, and that’s without cutting costs or adding revenue. ESOPs already existed. I just applied them to a space where tax inefficiency is the core issue.
C&T Today: Your ESOP methodology has a patent pending. At a high level, what makes your approach different from a standard ESOP structure?
DG: It’s about structural edge. Just like in my previous hedge fund, the advantage doesn’t come from doing something others can’t… it comes from doing it differently. Our model isn’t built around tweaks or legal gimmicks. It’s a fundamentally different way of thinking about ownership, taxation, and alignment. The edge is in the structure.
C&T Today: You’ve executed every ESOP in the cannabis cannabis to-date. What surprised you most during those early transactions, either from the business owners or the employees?
DG: Business owners were skeptical at first. They thought ESOPs were complicated or too good to be true. Once they saw the math—no taxes, full deduction of the purchase price, deferred capital gains—it became real. Employees, on the other hand, didn’t always grasp it immediately. But when they understood they owned the company and that it paid no taxes, it changed the conversation.
C&T Today: Many cannabis founders worry about “losing control” or diluting their vision. How does the ESOP model preserve culture while still enabling an exit?
DG: Founders still manage the company (assuming they still want to) The ESOP trust is a passive shareholder. The board of directors governs the company. If the founder wants to stay, and the Board wants them, they can stay to operate the company. If they want to leave, the Board can install a new CEO. Culture isn’t lost because the people running the company—management—don’t change unless the founder wants them to.
C&T Today: We hear a lot about creating generational wealth in cannabis. How does employee ownership factor into that conversation, and how do employees typically respond?
DG: In traditional exits, employees get nothing. With an ESOP, they’re the buyer via this employee trust. The longer the employees stay, the more they accumulate. It’s not a lottery ticket. It’s wealth earned through continued work. For many, it’s the first time they’ve had any ownership in a company. Over time, this builds retirement value that wouldn’t exist under traditional structures.
C&T Today: As someone who comes from the world of hedge funds and high-frequency trading, what perspectives or skills have you brought into this highly regulated, people-driven space?
DG: I bring quantitative thinking to a market that often lacks financial structure. Hedge funds are built on tax arbitrage and capital efficiency. Cannabis is the opposite—tax-inefficient and capital-starved. So I apply the same logic from trading: eliminate friction, optimize after-tax returns, and find structural edges others overlook. That’s what the ESOP does.
C&T Today: With federal rescheduling on the table, how might that shift the value proposition of ESOPs in the cannabis sector?
DG: If 280E disappears, then all companies get a boost in cash flow. This is awesome. The difference is, an ESOP still pays zero federal income tax and zero state income tax. That advantage doesn’t go away. If anything, it increases valuations across the board, making ESOP exits even more attractive for owners looking to defer capital gains and retain upside.
C&T Today: Finally, for cannabis business owners who feel stuck, burned out but hesitant to sell, what’s the one question you think they should be asking themselves right now?
Ask yourself: “Why am I still paying income tax and worrying about 280E when there’s a structure that can eliminate income tax entirely and double my cash flow?” Most owners think their only options are to grind it out or sell at a discount. But there’s a third path, an ESOP, that lets the business pay zero income tax, giving you the freedom to stay, step back, or exit gradually, all while keeping the future upside.
