Social equity programs are designed to address historical and systemic inequalities but often face various specific and unique challenges that can impede their effectiveness. Despite many attempts across the country, social equity programs have yet to make the impact needed to change the trajectory of equity and equality in the commercial cannabis industry. To tackle social equity’s biggest hurdles, we have to understand two things: there is profit in diversity, and investing in minority companies is a long-term play. Although access to capital is one of the biggest obstacles that social equity awardees face, they are much bigger and divergent. Let’s discuss some of the reasons that social equity programs have not moved the needle or made an impact on emerging and sustainable minority ownership in cannabis.
Of course, the elephant in the room is access to capital issues. This is a major problem. Many social equity programs are underfunded, which limits their ability to provide the necessary resources and support to the target populations. More states have adopted state-funded cannabis grants and limited lending programs, but this structure lacks the investment resources to credit sustainable businesses. Grants and small-scale forgivable loans under $200,000 are a great steppingstone but these businesses need to establish consistent fundable business credit profiles. More banks and financial institutions have entered the cannabis space (under U.S. Department of Treasury guidelines established in 2014 and Federal Reserve Bank guidance established in 2015) and are considering lending opportunities but they need creditworthy businesses to give them more of an incentive to offer loans. Additionally, once the banking regulatory climate changes, which it will, commercial cannabis companies must be ready to take advantage of capital opportunities.
Next, many programs are designed with short-term goals in mind and may not address the root causes of inequality, which require long-term and sustained efforts. Investing in minority businesses is a long-term play. We expect minority businesses to be an overnight success, despite deeming them economically, socially, or geographically disadvantaged or to have somehow magically overcome racial and gender-based structural barriers to business entry, scaling, and sustainability that still exist. These expectations are unrealistic, the success of this industry is in inclusion. Achieving this will take the adoption of joint venture programs, supplier diversity initiatives, public and private partnerships, and strategic business planning, that have worked in other industries. We must accept the reality of social economics, in which every culture has a relationship with money. Persistent economic disparities undermine the efforts of social equity programs, as economic inequality often intersects with other forms of social inequality. Understanding the habits, views, and relationships with funds for these disadvantaged communities’ groups can aid in establishing stronger pathways to leveling the playing field and developing general wealth.
If we truly wish to overcome the many roadblocks failed social equity programs face, we have to reexamine creditworthiness. Current underwriting metrics create additional hurdles for minority businesses. Many Community Deposit Financial Institutions, banks, and lenders will have to think about credit differently and set up various avenues and pools of capital to assist diverse businesses. I suggest adopting a socio-economic underwriting system such as Cannas Capital Holdings’s Bank Black Program. Our mission is to bridge the wealth gap via four pillars Social Equity, Social Economics, Social Entrepreneurship, and Social Enterprise. We have designed an AI operating system that will perform underwriting solutions developed with unique metric criteria that consider the disadvantages and advantages of offering provisions for diverse business owners to develop social enterprises in our communities. In addition to many traditional underwriting requirements such as Management Team, Payment History, and Collateral Support, we also employ Community & Demographic Analysis, Social Capital Assessment, Institutional Support, Risk Mitigation Strategies, Long-Term Sustainability, Regulatory Compliance, and Continuous Monitoring as underwriting standards.
Improving the effectiveness of social equity programs often requires addressing these challenges through better funding, streamlined processes, robust data collection, community engagement, and a commitment to long-term, systemic change.
NCIA Statement on Derek Chauvin Conviction
by NCIA Staff and members of NCIA’s Diversity, Equity, and Inclusion Committee
As the nation continues to struggle with the ongoing deaths of people of color at the hands of law enforcement, including recently those of 20-year-old Daunte Wright and 13-year-old Adam Toledo, we are relieved to see that George Floyd – whose killing by police officer Derek Chauvin last year sparked a global reckoning on institutional racism and the urgent need for criminal justice reform – will receive some form of justice with his murderer being held accountable in a court of law.
The fact that the Chauvin defense largely hinged on the presence of drugs in George Floyd’s system at the time of his murder should come as no surprise. Since its inception, prohibition and the accompanying dehumanization of people who use drugs have been used to justify unfairly robbing people of color of life, liberty, and property, with devastating generational effects. This bloody cycle must end.
While many of these deaths are not directly related to cannabis, they take place in the house of horrors that prohibition helped build, and it is our duty to dismantle the walls nearest us through substantive policy reform. Despite yesterday’s guilty verdict in the Chauvin trial, examples of justice like this are still far too rare and do little to ease the pain of those most affected. We acknowledge that there is still much work to do to right the wrongs of the past and ensure they do not continue into the future.
NCIA reaffirms its commitment to helping repair the racially and economically disparate harms caused by prohibition by removing criminal penalties for cannabis-related behavior and promoting a diverse and inclusive cannabis industry. We stand in solidarity with all those fighting against police violence and systemic racism.
Top Five Reasons to Attend Cannabis Caucus Events
1. Registration is complimentary for members!
Back with a fresh new look, NCIA’s popular Cannabis Caucus Series are meaningful networking events that pop up in five of the most burgeoning cannabis markets every three months. We launched this event series three years ago as an exclusive opportunity for NCIA members and their guests to connect with each other, learn about regional issues from influential guest speakers and get the latest news about NCIA’s federal policy work
One of the many benefits of NCIA membership is complimentary access to all of our 15 Cannabis Caucus events a year. Even better, depending on your membership level, you get complimentary tickets for up to to five of your colleagues! This is equivalent to $250 worth of tickets! If you’re an NCIA member and you aren’t taking the opportunity to attend these events, you’re leaving money on the table.
This year, we’re offering limited complimentary tickets to a select group of non-members who are passionate about advocacy and want to join the movement to protect our industry. If this is you, please fill out this form and we will follow up shortly.
Of course, if you’re not yet an NCIA member, you should consider joining to receive unlimited access to these events and more! Contact Membership@TheCannabisIndustry.org for more information!
2. You’ll make meaningful connections with industry leaders
During last year’s Cannabis Caucus events, more than 1,000 attendees turned out for our 32 events nationwide. This means that although these events are growing increasingly popular, they are still small enough to make meaningful connections with other industry leaders in your region. Instead of just making small talk with someone in passing, you’ll get to to have real conversations with some of the most influential leaders in the industry. Year after year, we hear about people striking business partnerships, friendships and impactful connections at these events because they offer the time, space and opportunity to do so.
3. NCIA convenes industry influencers
As the largest national trade association in the U.S. and the only organization representing nearly 2,000 cannabis-related businesses at the national level, we have pretty deep connections. We know that 70 percent of the individuals who attend Cannabis Caucus events have executive level decision-making authority and 30 percent have heavy decision-making influence. All of this is to say that the caliber of the meaningful connections you will make have the potential to benefit your business in very real ways and quickly. We also know that these boutique events are frequently attended by industry pioneers and dedicated policy reform advocates, the movers and shakers of the industry, who have helped support the movement for decades.
4. Simplified, accurate federal and regional policy updates
For many people, federal policy developments can seem a bit dry and/or overly complex. However, in our industry, understanding and staying current on the changing tides of policies can make or break your business. At Cannabis Caucuses, we’ll break down all of the recent federal policy issues you need to know in order to protect your business. Better yet, our intel is coming straight from our Government Relations team on the Hill. Consider this your opportunity for simplified, accurate federal policy insights to inform your business strategy.
At every event, we also recruit influential policy makers, government officials, or industry executives as guest speakers to shed light on important regional issues. Take the opportunity to meet the guest speakers afterwards to ask questions during the nearly two hours worth of networking. When else would you get this opportunity?
5. They’re fun!
This might not be one your boss cares so much about, but we do. Your registration includes hors d’oeuvres, plus enjoy drinks from a cash bar in a relaxed, sophisticated setting. Repeatedly, we hear from guests that Cannabis Caucus events are their favorite because of the quality of the event, the caliber of the attendees and the sense of community and camaraderie they foster.
VIDEO: The Cannabis Industry’s Banking Crisis – Explained
The cannabis industry faces many hurdles along the path to federal legalization. One of the major obstacles faced by cultivators, processors, and dispensary owners is a lack of clear direction for financial institutions about how to provide banking services for those state-legal, licensed cannabis businesses. In this educational video, learn more about the federal banking crisis and the Congressional solution that can fix it.
New Bill: The Veterans Medical Marijuana Safe Harbor Act
In the 115th Congress, there are more cannabis reform bills than ever before — dozens, as a matter of fact! Let’s take a closer look at one of the newest reform bills that was just introduced today!
Bill: The Veterans Medical Marijuana Safe Harbor Act
Introduced by: Senator Brian Schatz (D-HI) and Senator Bill Nelson (D-FL)
What It Does: This bill would create federal, safe harbor protection for veterans and their doctors when using or recommending medical cannabis in states where it is legal. In order to provide our nation’s veterans immediate relief from opioid abuse, the bill directs the Department of Veterans Affairs to conduct research on the effects of medical marijuana on veterans in pain, and to research the relationship between state-sanctioned medical cannabis programs and any reduction in opioid abuse among veterans.
Endorsements: National Cannabis Industry Association, American Academy of Pain Medicine, Veterans Cannabis Coalition, Veterans Cannabis Project, Veterans for Medical Cannabis Access, Americans for Safe Access, NORML, and Marijuana Policy Project.
What To Expect: Now that the bill has been introduced, NCIA will continue to gather cosponsors for the legislation, as well as advocate for a hearing. With midterm elections fast approaching in November (register here), timing will be of the essence.
Member Blog: Raising The Bar – Setting New Standards and Building Public Trust
In 1991, professors Harry G. Levine and Craig Reinarman published an article in the healthcare journal The Milbank Quarterly titled, “From Prohibition to Regulation: Lessons from Alcohol Policy for Drug Policy.”
In their study, they note the quiet effectiveness of an industry that has regulated itself without issue since 1934.
“The leaders of the major alcohol industries, just like other members of the economic establishment, have a strong investment in maintaining order and obedience to law. Now, many decades after national alcohol prohibition ended, it is easy to forget that all this was the outcome of self-conscious public policy and not the ‘natural’ result of market forces or national zeitgeist.”
As recreational cannabis laws continue to evolve, our industry—everyone from cultivators to regulators to entrepreneurs—continues to navigate uncharted territory. As we do, we would be wise to lean on the lessons of history and those responsible for managing and maintaining the alcohol industry in guiding our future. Here’s what my study of history leads me to believe:
Regulation Standards Must Do More to Protect the Consumer
I once had an English teacher who doled out chapter quizzes rather than assigning a culminating test or paper after we’d finished the book. Cram for the quiz by reading a CliffsNotes synopsis, or interrogate your more well-read friends on chapter highlights and chances were you’d pass the quiz.
It’s not unlike today’s state testing policies in which cultivators can breathe a sigh of relief knowing that if they simply do what’s needed to ensure the sample they have submitted for testing passes, their entire strain is in the clear.
The result of these kinds of regulations is a frenzy of activity focused on what’s needed to pass, rather than a shift in behavior focused on producing an altogether better product that is cleaner and safer for the consumer. A similar story goes for process validation. Submit batches for testing over a series of weeks and a passing grade ensures that your cultivation process can be considered “contaminant free.”
If our ultimate concern is public health, regulators should consider avenues that result in testing more product, more often. While there are certainly roadblocks that make this far from easy—namely the cost to cultivators and availability of labs for testing—steps in this direction would signal to consumers that shortcuts and workarounds won’t be tolerated.
An FDA-like approach to health and safety are needed to reshape our industry
Levine and Reinarman note that at the time of the prohibition repeal, producers of alcohol, “had to be regulated to ensure that products were safe and of a uniform alcohol content.” These regulatory efforts, “directly reshape[d] both an entire industry and the conditions under which its product are consumed.”
Sounds familiar. While state laws are slowly shifting to allow for greater medical and recreational use, the laws that shape the conditions under which cannabis can be cultivated, sold and consumed are still in flux. Not only do we have to add our voice to the conversation as those laws are being shaped, in doing so we have to advocate for both the industry and the consumer—with lawmakers and in public forums—showing our commitment to safety and uniformity.
That means instituting strict yet sensible FDA-like requirements that center on production, procurement and handling, as well as manufacturing, distribution and consumption of the finished product. It also means implementing common-sense standards like wearing protective gear in our grows, conducting regular analysis of critical control points like storage, packaging and distribution areas, and instituting a contamination kill-step before cannabis extraction is complete.
Reshaping the conditions in which we operate and aligning them with standards already in place for like-minded industries will do for us what it once did for alcohol: move us from an industry continuing its uphill battle for legitimacy to, “something routine and manageable, a little-noticed thread in the fabric of American life.”
We must recognize our responsibility and be conscious of the impact of our choices
Our industry is overflowing with individuals who treat cannabis not as a career, but a lifestyle. It isn’t just about the plant itself. We embrace it for what it represents and how it reflects our core attitudes towards humanity and our planet. Now it is also affording us the opportunity to make a profit in a legal and legitimate way.
As tempting as it is to be swayed by potential profitability, we can’t afford to lose ourselves in the process. Like the leaders of the alcohol industry, we have to be self-conscious about the precedent we are setting. If we can balance passion with profit, we can take pride in being pioneers who reshaped our country’s attitudes on cannabis.
If we take this moment for granted, if we fail to responsibly grow and sell our product, we do more than just damage our businesses; we lose the ability to influence lawmakers and further sway public opinion. Rather than driving cultural change, we will be at fault for failing to take advantage of a moment ripe for change. Now is our time to create our legacy and set the standard for years to come; to evolve our industry from legal to legitimate by being its leaders.
If we play our cards right today, our country may look back at this moment, as Levine and Reinarman suggest, and judge our previous attitudes towards cannabis prohibition much like alcohol prohibition, “repressive, unjust, expensive and ineffective.” With history as our guide, we have a chance to shape our future. Let’s take advantage of it.
Jill Ellsworth is CEO and founder of Willow Industries, which uses ozone-based technology to clean and purify flower and trim while maintaining a plant’s medicinal properties.
Jill is a Registered Dietitian Nutritionist (RDN) with a Master of Science in nutrition, dietetics, and food science.
Member Blog: 5 Things You Can Do While Waiting for License Approval
Your state passed a cannabis legalization bill and licensing applications are underway! Hooray! Now, you’re gearing up to start your canna-business. With your business plans in-hand and your application sent in, the fee paid, there is nothing to do now but wait… or you can prepare. These 5 steps can help ensure your business is ready for a successful, stress-free opening day, and beyond.
Find Solid Employees
It’s important to look for candidates, if not expressly experienced in the cannabis industry already, to at least have transferable skills; anything from customer service to professional horticulture. It’s also helpful to look into the less-obvious employee options, as in, not just growers and budtenders.
Considering the amount of technology licensed cannabis operations requires, whether it’s maintaining your dispensary point of sale hardware, or ensuring your lights are properly wired to your timing system, IT and technology professionals are vital to any well-run business.
Hiring a cannabis compliance officer can be another vital employee to consider while defining the ideal operational structure. Finding a solid compliance officer isn’t an easy task – it takes an individual who has in-depth knowledge of cannabis compliance and regulations. Not only that, but finding someone who is a problem-solver and understands how to navigate even the murkiest of regulatory waters will be essential in growing across U.S. and international borders.
Develop Your SOPs
Standard Operating Procedures (SOPs) serve as the backbone of your day-to-day operations and define how employees can stay compliant while performing tasks, outline safety and regulatory requirements, and construct standardized steps to comply with cannabis business regulations. Implementing those steps and enforcing them creates consistency from employee to employee, even in the event of turnover and new hires.
Find a Software System that works FOR You
Whether you’re a grower, manufacturer or dispensary, you’re going to have to rely on a track and trace software to keep you compliant and keep your operation running smoothly. It’s important to find a software system that works FOR you, not the other way around. Many cannabis software solutions have rigid workflows and limited functionality, which leaves you with no other choice than to operate in a way that syncs up with the software. Others offer flexibility and can be customized to match your process.
Establish Your Brand
From logos and overall design to messaging and developing a social media presence… as Jeff Bezos says, “Branding is what people say about you when you’re not in the room.” With hundreds of other canna-business out there trying to make a name for themselves, developing a strong brand has become vital in the cannabis industry. Outstanding products have come and gone, so differentiating your business in the market can be the difference maker. As the embodiment of essentially everything your business does and represents, developing a solid and unique brand identity will take plenty of thought, and plenty of time.
Keep Track of Compliance in Your State
Do you know the ins and outs of cannabis compliance in your state? If you’ve already sent in your license application, odds are you’ve mostly wrapped your head around it. But understanding it and maintaining it in your day-to-day operations are two different things.
Each state has unique cannabis laws, which as we’ve seen many times are subject to amendments. It’s up to businesses to stay up-to-date on your state’s regulations and any potential changes to them, as well as keeping your operational workflows up to speed. Keeping smart on the proposed, and sometimes implemented regulations, will enable you to stay ahead of compliance changes and implement swift changes to address them.
It can be frustrating the pace at which the cannabis industry progresses, but as one of the fastest growing and emerging industries in the world, the one thing you can’t afford to do is tread water. There’s always something you can do to prepare so when you do open your doors, you’re already 10 steps ahead of your competition.
Leading the sales team at BioTrackTHC, Steve Flaks has helped to establish the company as a leading cannabis software provider operating in over 2,000 business locations. Mr. Flaks has been featured in a variety of industry panels and publications as a subject matter expert surrounding licensed cannabis operations discussing topics including SOP’s, operational workflows, cannabis software, and seed-to-sale compliance.
Member Spotlight: Tidal Royalty Corporation
In this month’s member spotlight, we hear from Paul Rosen, CEO of Tidal Royalty Corporation, a Toronto-based company providing financing for U.S. licensed cannabis operators looking to expand their operations.
Cannabis Industry Sector: Finance and Investments, ExpansionCapital Provider
NCIA Member Since: 2018
Tell me a bit about your background and why you launched your company?
I am a lifelong entrepreneur, having started my career as an attorney with my own firm before founding a number of companies in different industries. Within the cannabis industry, I was the co-founder of The Cronos Group (NASDAQ:CRON, CRON.V), a company that I led as CEO and President for 3 years. I am also a very active investor with over 100 investments in cannabis companies globally, I serve on the Boards of iAnthus Capital Holdings (IAN.C) and Hill Street Beverages (BEER.V), and I am an advisor to numerous companies in the industry.
I see a lot of similarities between U.S. cannabis today and the Canadian markets from 5 years ago, especially around the massive capital investments required to build out an industry of this magnitude. Unlike Canada, however, the lack of access to traditional capital markets makes it much more difficult for licensed U.S. operators to build the scale they will need in order to compete globally. I founded Tidal Royalty Corp. (CSE: RLTY.U) (OTC: TDRYF) to fill this market need and to provide growth-minded entrepreneurs with the resources they need to build sustainable businesses that positively contribute to society.
What unique value does your company offer to the cannabis industry?
Tidal Royalty is a publicly-traded company that provides licensed U.S. cannabis operators with the expansion capital that they need to scale their business. We write institutional-level cheques in the $5MM – $25MM range and have a world-class executive team that can assess and close deals quickly. But what makes us most unique is that we provide financing in exchange for a royalty on future revenue. This is most attractive to entrepreneurs in high-growth industries – like U.S. regulated cannabis – in that they get the benefit of a large capital infusion without dilution, and without the risk associated with debt. We are looking to align ourselves with best-in-class operators that will form the future of this transformative industry: when they do well, Tidal Royalty does well.
Cannabis companies have a unique responsibility to shape this growing industry to be socially responsible and advocate for it to be treated fairly. How does your company help work toward that goal for the greater good of the cannabis industry?
As institutional-level capital providers, Tidal Royalty has a level of responsibility that goes beyond our duty to be prudent stewards of capital for our shareholders. That is, we look to back licensed operators that we feel will positively impact the industry as a whole, in the U.S. and globally. We don’t see these as being mutually-exclusive; the operators that understand their social responsibilities and are willing to accept them are the ones that have the opportunity to make out-sized returns in the long-term. As part of our investment diligence, we not only assess the business case, but also look at how operators interact with their communities and the impact they can have on the segment of the population that they interact with. We think this is important in and of itself, but it’s also simply good business practice.
What kind of challenges do you face in the industry and what solutions would you like to see?
One of the most significant hurdles for many operators is the restrictive banking landscape. The legacy banking environment that discourages many institutions from participating in the regulated cannabis industry poses massive logistical challenges and business risks.
The industry as a whole is working hard to show the level of sophistication and societal benefit that a regulated cannabis market can offer, but the lack of banking infrastructure really creates an environment for criminal activity and black-market operators to flourish. Licensed operators can’t get access to the most basic banking services available to other industries and have to deal with the risks associated with a cash-only economy. I would like to see the states – either on their own or in partnership with private enterprise – really push an agenda to resolve some of these issues. There are a lot of good initiatives proposed that need to get pushed forward to make a difference.
Why did you join NCIA? What’s the best part about being a member?
We joined the NCIA to be part of a like-minded community working to advance the interests of this industry. The level of engagement, innovation, and enthusiasm we’ve experienced from the NCIA organizers and members has been incredible. We’re looking forward to helping contribute in any way that we can.
Campaign Update From Michigan’s Coalition To Regulate Marijuana Like Alcohol
NCIA recently spoke with two key figures in the state of Michigan to get an update from the boots on the ground about the efforts to legalize cannabis for adults this year. Mark Passerini is the founder of a medical dispensary based in Ann Arbor, Om of Medicine, and was also recently elected to serve on NCIA’s Board of Directors. Josh Hovey is the spokesperson for Michigan’s Coalition to Regulate Marijuana Like Alcohol.
Mark, how will adult-use legalization in Michigan affect your business and your community?
For the past eight years, we attempted to make all our decisions from the experience and perspective of a new patient that has never used cannabis previously. This translates to individual consultation rooms so patients may feel free to discuss their medical conditions, symptoms, and concerns in a private space rather than standing shoulder to shoulder at a retail counter.
We believe that when legalization is passed there will be many adults that may want to try cannabis but won’t know where to start, may be afraid, or unsure of the options and our unique consultation process may help them as much as it has helped our medical patients make the best choices for their health and their life. When cannabis is legalized, we plan to continue serving as a resource and education hub with a focus on scientific research.
What are the positive impacts of legalization in Michigan?
Positive change starts with one individual who shares with another who in turn shares with another and so on. Our communities have garnered a better understanding of cannabis, its history, medicinal use, and are actively rejecting the failed policies surrounding its use.
Locking people up for growing or consuming a plant is simply not the best use of critical and limited tax dollars. Many municipalities and states across the country have recognized this fact and passed decriminalization ordinances in order to use law enforcement resources on serious crimes. Communities and states that embraced legalization have also witnessed economic development through the creation of new jobs and much needed tax revenues.
Our research with the University of Michigan showed a 64% decrease in opioid use amongst patient participants. Continued research into the medical efficacy of cannabis will benefit not only the existing patient base, but the community at large.
By creating a whole new type of industry that operates in a responsible way and holds itself accountable to its community, everyone benefits.
Josh, how have you achieved success so far in the Coalition’s Michigan campaign?
True success will come when we pass legalization in November, but we’ve achieved some significant milestones. The first was creating a unified coalition of cannabis reform and social justice advocates to develop ballot language that borrows from the best practices used by the states that have legalized before us as well as Michigan’s medical marijuana licensing law. We also collected more than 360,000 signatures to place the issue on the November ballot. We’re proud of what we achieved so far, but the “vote yes” campaign has only just begun and there a lot more to do to make sure our initiative passes.
What do the prospects look like for the initiative passing this November?
Multiple opinion polls have shown that 60 percent of Michigan voters want to end cannabis prohibition and create a legalized and regulated system, so that’s a very strong starting position as we head into the campaign season. However, we know we can’t just rely on polls and we know the prohibitionists will continue to spread “Reefer Madness” era misinformation about the initiative.
That’s why we’re working hard to raise every dollar we can to make sure we can get the facts to voters across the state. We want to make sure voters know Michigan is wasting millions of taxpayer dollars on the failed policy of prohibition and that creating a legal and well-regulated marijuana market can raise hundreds of millions for three of our state’s most underfunded areas: roads, schools, and local governments.
Anything specific we should know about the program?
Full details of the proposal are available on our website at www.RegulateMI.org. But in short, our initiative learns from the best practices from other states that have gone before us while also borrowing licensing language established under Michigan’s Medical Marijuana Facilities Licensing Act. That law was passed with bipartisan support in 2016 and the first medical marijuana businesses are just starting to be licensed under that program. We believe our very reasonable and well-thought out business regulations combined with sensible personal possession limits will make Michigan’s adult-use law the new model for the country.
What is needed to ensure Michigan passes adult-use legalization?
We need people to get out and vote, plain and simple. Beyond that, there are a few other things people can do to support the campaign:
Make sure your friends and family are registered to vote and, of course, make sure they VOTE YES in November.
Share the facts about the initiative and about the need for legalization on your personable social media pages. You can find the campaign has pages set up on Facebook, Twitter and Instagram.
Don’t allow prohibitionist misinformation to spread. Correct your friends and family (politely) by giving them the facts on the issue.
Donate to the campaign at RegulateMI.org/donate. We need to get our message out every way possible, including television, mail and social media. All of those things costs money and we can’t win without your support.
The Michigan Coalition to Regulate Marijuana Like Alcohol will host a fundraiser on October 17, 2018 in Ann Arbor, MI. For more information, please contact Robin Schneider, Finance Director.
Phone: 517-974-2265
Email: Robin@RegulateMI.org
Hemp: One of the Nation’s Oldest, and Now Newest, Agricultural Commodities
by Michelle Rutter, NCIA’s Government Relations Manager
HISTORY
Farming and agriculture has long been a part of North American history. When the Great Depression hit in the 1930’s, both President Franklin Delano Roosevelt and Congress knew that the United States would struggle until the agriculture industry became prosperous again. As a result, many New Deal programs dealt with farming, but arguably the most notable agriculture related legislation was the Agricultural Adjustment Act of 1938, which was the first version of what we know today as simply the “Farm Bill” that is updated roughly every five years.
TODAY
In 2018, a new Farm Bill was introduced with a price tag upwards of $800 billion. One of the most notable provisions in this year’s bill was led by Senate Majority Leader Mitch McConnell (R-KY): hemp legalization. Industrial hemp refers to the cannabis plant with less than 0.3 percent THC content and would include CBD medicinal products — so long as it contains less than 0.3 percent THC and is derived from industrial hemp.
While leadership in the House of Representatives blocked the hemp provision in its version of the bill, the Senate’s version of the bill that passed overwhelmingly in June does include it. That means that when the bill goes to conference in early September, that hemp legalization will be debated. Considering that the Senate Majority Leader is championing this provision, it stands a good chance at being included, though nothing is guaranteed.
Marijuana’s “cousin,” hemp, is generally barred because it is part of the cannabis plant, despite the fact that it contains little of that drug’s key psychoactive ingredient, THC. In 2014, Sen. McConnell secured a hemp pilot program in that year’s farm bill. Since then, at least 35 states have taken up the offer and developed industrial hemp programs, and those states will be eligible to pursue a legal, regulated market if the 2018 Farm Bill is passed with the hemp provision included.
If passed, the Farm Bill would legalize hemp as an agricultural commodity by removing it from the federal list of controlled substances and giving states the opportunity to be the primary regulators of hemp production. In addition to removing hemp from the federal controlled substance list, the Senate farm bill would allow industrial hemp to be eligible for crop insurance, a perk already enjoyed by other, more traditional crops. The bill would also reauthorize commodity, trade, agricultural research, rural development, and food and nutrition programs. Under current law, authorizations will expire September 30 or the end of the applicable crop year.
The first farm bill conference committee meeting has been set for September 5, 2018. The conferees from the House and Senate will try to iron out differences between their two bills in the panel. Included in the discussions will be 47 members of the House of Representatives and nine Senators. The results of this could mean a new era for the agricultural industry if hemp returns to American farmlands.
Committee Blog: California Regulations Public Comment Period Nears Close – Act Now!
Do you have views on the regulations that will govern California’s cannabis industry? If so, California’s window for the public to make comments on the proposed permanent industry regulations is about to draw to a close. But you don’t need to be an expert on arcane administrative procedure or even a lawyer to participate in the comment period. Keep reading to learn more about what is at stake and how to make sure your voice is heard.
Overview and Introduction to the Regulatory Process
On Friday, July 13, 2018, California’s three cannabis licensing agencies (the Bureau of Cannabis Control, or “BCC”; the Department of Food and Agriculture, or “CDFA”; and the Department of Public Health, or “CDPH”) released their much-anticipated proposed permanent regulations for cannabis businesses pursuant to the Medicinal and Adult Use Cannabis Regulation and Safety Act. This began the 45-day public comment period of the regular rule-making process. During this time, the public has a chance to review and comment on the proposed regulations, and the agencies must consider these comments and may make changes based on this feedback.
Below are links to the proposed regulations and the summary sheets released by the agencies:
Currently, cannabis businesses in California are operating under emergency regulations that were originally adopted in December 2017 and re-adopted (with a few changes) in June 2018. The emergency regulations will stay in effect until the regular rule-making process is complete and the final regulations have been formally adopted at the end of this year.
In addition to publishing the proposed regulations, the agencies also each published a Notice of Proposed Rulemaking Action (NPRM), which contains various information about the proposed rules such as a summary of existing law and who to contact with questions and comments. The agencies were also each required to publish an Initial Statement of Reasons (ISOR), which contains the agencies’ reasoning and basis behind why they crafted a rule the way they did.
These regulations will have a number of impacts on how the cannabis industry operates in California. For example, new advertising regulations would go into effect; packaging and labeling requirements would change; certain edible products could contain up to 500mg THC per package (versus the current limit of 100mg THC per package); and outdoor licensees would be prohibited from using light deprivation.
Those are just a few of the key proposed changes. Please refer to the summary sheets published by the agencies, listed above, for a more comprehensive list.
What Makes an Effective Public Comment?
There are six standards in the Administrative Procedures Act (APA) that agencies including the BCC, CDPH and CDFA must follow when conducting rulemaking actions. They are:
Authority – The agency must be permitted or obligated by law to craft a particular regulation. (Gov. Code § 11349(b))
Reference – The agency must refer to the provision of law that the agency is implementing or interpreting via the regulation. (Gov. Code § 11349(e))
Consistency – The regulation cannot be inconsistent with other laws and/or regulations, and needs to be harmonious with existing provisions of law. (Gov. Code § 11349(d))
Clarity – The regulation must be easily displayed or written so that it will be easily understood by the people affected. (Gov. Code § 11349(c))
Nonduplication – The regulation cannot serve the same purpose as another existing state or federal law or regulation. (Gov. Code § 11349(f))
Necessity – There must be substantial evidence in the record for needing the regulation in order to fulfil the purpose of the statute or other provision of law that the regulation implements or interprets. (Gov. Code § 11349(a))
Since the BCC, CDFA and CDPH have to comply with the standards above, it’s a good idea to focus your comments around one or more of those specific areas, as opposed to just making a comment that you dislike a particular proposed regulation without giving any reason why. That way, it is more likely that the agency will respond to your comment by making an adjustment to the proposed regulation(s) in question.
How to Submit Your Comments
Comments on the proposed regulations can be submitted to the agencies by mail or email, or offered in-person at one of the agencies’ scheduled public hearings. Your comment must include the following: (1) the subject title of the proposed regulation; and (2) specific concerns regarding the proposed regulation, which the agencies deem most helpful if they identify the section number in question, discuss the issue, suggest changes to the text, and explain why any desired modifications address the issue.
Please note that all comments received during the public comment process become part of the official record which is public information. Thus, you may not want to include any confidential or identifying information in your comments.
All comments must be submitted to the respective agencies by 5:00pm on August 27, 2018 or provided at one of the scheduled public hearings. Below are the locations of the public hearings, which will take place throughout the state during the months of July and August. (This information is subject to change; please check for updates on the California Cannabis Portal.)
Bureau of Cannabis Control Hearing Dates and Locations
The first two BCC public hearings have passed. There will be a final public hearing on August 27, 2018 from 10:00 a.m. to 12:00 p.m. at the Tsakopoulos Library Galleria, 828 I Street, Sacramento, CA, 95814.
California Department of Public Health Hearing Dates and Locations
The first two CDPH public hearings have passed. There will be a final public hearing on August 27, 2018 at 10:00 a.m. at 8400 Edes Avenue, Oakland, CA, 94621.
California Department of Food & Agriculture Hearing Dates and Locations
The first three CDFA public hearings have passed. There will be a final public hearing on August 28, 2018 from 1:00 p.m. to 3:00 p.m. at the California Department of Food & Agriculture Auditorium, 1220 N Street, Sacramento, CA, 95814.
Some Final Words
Collaborate. Join with other groups, trade associations, brain trusts, friends. Have reading groups. Get together and consider problems and solutions from multiple points along the supply chain, so that the solutions you offer can be relevant, functional, and comprehensive. There are many smart people working on this right now, so if you don’t have the time to this by yourself, link up with a trusted group that is commenting in accordance with your interest. Comment letters signed on by many stakeholders are very powerful.
Most importantly, “Keep Calm and Carry On!” Even though operators may see major changes being contemplated in these regulations, these are NOT YET IN EFFECT. Operators still need to remain compliant with the EMERGENCY regulations that are currently in effect, until the final regulations – post comment period – are officially adopted. This draft can and will change, so folks shouldn’t be making major business decisions based on the draft, as elements may either fall away, shift, or be added. (Think about the 24-hour security guard requirement in the Readopted Emergency Regs – it came and went within a 5-day comment period.) There are items in this draft that are sure to receive a LOT of comments and suggestions, so keep calm and carry on following the emergency regulations during this comment period.
Finally, even for operators outside of California, this process is nevertheless important to watch as the path that California takes will impact how the rest of the country chooses to regulate the cannabis industry, and it is also important to participate in if you plan to expand into the Golden State.
NCIA’s member-led State Regulations Committee (SRC) examines and reviews the varying cannabis industry-specific statewide regulations and works to establish best practices or guidelines for states and municipalities to facilitate the development of regulations and compliance procedures.
Member Blog: Increasing Employee Retention in the Cannabis Industry
A recent report from Headset Cannabis Intelligence utilized Point of Sales systems to gather data from Washington and Colorado state cannabis dispensaries.
The general overview of dispensary budtenders is that they don’t tend to stay around long as the job role has a high turnover rate. In fact, nearly 60% of employees don’t last past two months – and only 40% make it past the first. To make new hires worth the time and cost retention is essential, otherwise any hiring dispensary will be hemorrhaging time and money that could otherwise be directed into the growth of the business.
With only 14% of employees lasting beyond three months, it’s obvious that the quality of onboarding and training is a crucial, determining factor of retention.
The type of welcoming into the workplace, type of training and management they receive in conjunction with the tools they receive for work all contribute to whether that stay past the two-month mark.
While the roles in cannabis dispensaries may come with their own challenges, there’s no clear reason why turnover is so high.
With the industry expected to grow from $9.2 billion to $47.3 billion over the next decade within the U.S alone, it could be that the growing opportunities available allow budtenders to choose and hop between employers within the industry, meaning that dispensaries need to compete against one another to retain employees. Alternatively, it could be the management, burnout, being overexerted or under challenged.
Either way, there are a number of employee management methods that help reduce the employee turnover rates by creating an engaging and hospitable working environment, which will in turn lead to the reduction of hiring and training costs, the boosting of team morale and consistency in the customer experience.
Promoting Workplace Harmony
The running of a dispensary requires management to constantly assess staffing costs and needs for the changing demands of the business. However, too much attention to the needs of the business and too little on employees can lead to the overworking of staff, burnout and an unpleasant working environment.
It’s worth noting that Headset Cannabis Intelligence identified that high growth dispensaries (40% growth) have fairly high turnover rates, while dispensaries with 20% – 40% growth tend to have more stable turnover rates.
With dispensaries that are growing slower and steadier, they do benefit from lower turnover. However, with rapidly expanding dispensaries, it appears it may not matter what the employee churn rate is. Although, regardless of the rate of expansions, employee churn harms the business’s bottom line in the form of hiring and training costs, inconsistent performance and customer experiences.
Effective employee management will maximize productivity as well as engagement. To do that it must involve adequate time off for employees to attend to their personal obligations, like education or family, and time for recuperation.
With a variety of employee management solutions available, it can be hard to know which tools will actually help. With employee organization being at the heart of engagement and productivity, a solid employee scheduling solution should be at the top of the list. Decent solutions will be able to assist in keeping employees’ needs in consideration during the scheduling process by setting working parameters like their availability, maximum working hours and shift lengths, resulting in easier organization with greater visibility of your available resources.
Alternatively, many solutions allow varying degrees of employee self-management. The amount is up to management, but it can range from complete self-management, where employees opt for the shifts that suit them, to allocated shifts where employees can arrange their own shift-swaps, drops and pick-ups with managerial approval.
However employees are managed, the truth is that a workplace that considers and accommodates the workers’ needs is appreciated and makes for a desirable working environment.
Communication/Involvement
The value of effective communication cannot be understated for operation efficiency and performance. Although widely understood, its importance is often overlooked with regards to employee retention.
A staggering $2,100 to $4,100 is lost by businesses each year with poor communication being the sole cause. The Bureau of Labor Statistics (BLS) identified in 2014 that the staff turnover rate was at 66% with that percentage increasing ever since.
People like to feel their role has a purpose and their input makes a difference if they are to remain performing optimally and satisfied in their role. The problem is that communication in businesses is in a usually top down manner.
The promotion of the bi-directional flow of information can be used to elicit feedback from employees on a regular basis. It encourages staff to alert management of any issues they’ve noticed, be it operational or otherwise. Utilizing the snippets of information gathered from employees can be used to drive positive change in both operations and the working environment.
By opening up dialogues with employees, be it weekly, monthly, or via an instant messaging app it shows their opinions and input matters, when acted upon. It makes employees feel like a valued team member and keeps them actively engaged in their role. As such, the working space becomes a much more positive and proactive place that employees enjoy working in.
Recognition and Reward
A cannabis dispensary’s employee schedule may not necessarily be constant from week to week, which can cause missed opportunities and events in their personal lives. If employees aren’t given recognition for their contribution and sacrifices towards the dispensary’s success, they can feel alienated and undervalued, causing them to look for somewhere where they will be appreciated.
That is why recognition and rewards of employee performance is so important. With over 70% of employees feeling disengaged in the company they work for it’s important that we treat employees as more than a cash machine. In doing so, they will see their work is appreciated and continue to remain engaged and productive. The reward itself doesn’t need to be large or over the top, even a few words of praise can be enough or an annual bonus.
It can be difficult to gauge performance solely by watching employees. That’s why a good workforce management solution can help, as it is possible for employees to log completed activities and add shift notes. This delivers and insight into workforce performance of each individual employee and makes it possible to identify those who deserve recognition or are ready for advancement.
Recognition encourages engagement from team members and employees tend to stick around for longer when they feel they are valued in the workplace.
Every dispensary is different and every team is a collaboration of different personalities that require different approach to management. There is no “one fits all” solution, but increasing the standard of employee management with an emphasis of improving the employees experience and sense of value will help to boost employees’ job satisfaction. Upon doing so staff turnover may not disappear, but will drop as job roles to employees today are more than a paycheck; they must carry meaning and value which needs to be communicated from management down.
Matthew Hughes is a British-born content writer with the mindset of a cat, he has a curiosity for the unknown, can be impulsive and can be won over with food. The best place to catch him will be in the offices of Ximble, a dynamic cloud-based workforce management system that simplifies employee scheduling, time tracking, and management. He also hates Sudoku.
New Bill: The Clean Slate Act
In the 115th Congress, there are more cannabis reform bills than ever before — dozens, as a matter of fact! Let’s take a closer look at one of the newest reform bills that was just introduced last week.
Bill: The Clean Slate Act
Introduced by: Congresswoman Lisa Blunt Rochester (D-DE)
Original Cosponsors: Reps. Dwight Evans (D-PA), Gwen Moore (D-WI), Bobby Rush (D-IL), Sheila Jackson Lee (D-TX), Barbara Lee (D-CA), Robin Kelly (D-IL), Danny Davis (D-IL), Lacy Clay (D-MO), David Scott (D-GA), Al Green (D-TX), Frederica Wilson (D-FL), Eddie Bernice Jackson (D-TX), Hakeem Jeffries (D-NY), Yvette Clark (D-NY), Anthony Brown (D-MD), Brenda Lawrence (D-MI), Andre Carson (D-IN), Marcia Fudge (D-OH), Eleanor Holmes Norton (D-DC), and Donald Payne Jr (D-NJ)
What It Does: This bill gives an order to the court to be carried out at the time of sentencing. At that time, the court will enter an order that each criminal record that either relates to Section 404 of the Controlled Substances Act or any Federal, non-violent offense involving marijuana shall be sealed automatically one year after the individual fulfills their sentence. That means that exactly one year after someone has “done their time” or fulfilled the expectations laid out in their sentencing, that their record is automatically expunged of the crime. According to the ACLU, 52% of all drug arrests are for marijuana. Not only that, but of the 8.2 million marijuana arrests between 2001 and 2010, 88% were for simply having marijuana. Combine that with the fact that despite roughly equal usage rates, African-Americans are 3.73 times more likely than their white counterparts to be arrested for marijuana and you have a recipe for disaster. For all of those reasons, the Clean Slate Act is long overdue and should be enacted.
What To Expect: Now that the bill has been introduced, NCIA will continue to gather cosponsors for the legislation, as well as advocate for a hearing. With the House of Representatives currently away for August recess and midterm elections in November (register to vote here), timing will be of the essence.
NCIA Launches Petition Urging Facebook to End Censorship of Cannabis Businesses and Speech
This week, NCIA launched a Change.org petition to pressure Facebook to commit to making sure that the censorship experienced on their site by cannabis businesses, legalization advocates, news sites, and government regulatory agencies ceases, and we need your help.
Facebook has a history of actions and policies that negatively impact state-licensed cannabis businesses and policy reform advocates, even as the majority of U.S. states have legally regulated cannabis for medical or adult use through laws that continue to enjoy wide public support.
NCIA has received numerous reports from our members about their attempts to share information or advertise on Facebook being rejected and their pages being suspended. We have also experienced these discriminatory measures first-hand on our own account. In addition, Facebook has been “shadow banning” cannabis-related groups and pages by blocking them from search results. As the national trade association for the industry, we refuse to stay silent while our members and allies are subjected to unfair censorship.
We will provide updates as they happen, and please feel free to share your Facebook censorship stories with Media@TheCannabisIndustry.org.
Member Blog: The Benefits of Different Types of Building Materials in a Cultivation Facility
When building a cultivation facility, different building material has its own benefits in regards to installation, maintenance, and physical attributes. Cultivators have routine operating procedures and need to minimize as many variables as possible. Using a building material that is low maintenance and long-lasting is a priority. Light consistency is another big role. Walling material should be light reflective so the lighting system is as efficient as possible thus producing less heat discrepancies. And lastly, due to water use, humidity can play an important part of cultivation; water resistant walls can attribute to a well-controlled environment.
Here we will look at three popular materials for commercial cannabis warehouses: Mylar sheeting, FRP, and PVC.
Maintenance and Hygiene
From the daily cleaning operations to the cycle of harvesting, building material can be the difference between easy and difficult. Smooth surfaces are favored over rough or textured due to an easier cleaning process and less opportunity for bacteria and dirt to hide in crevices.
-Mylar Sheeting is commonly used as a greenhouse tarp, it is reflective sheeting that is propped on an existing wall. It must be kept wrinkle-free or light reflective hotspots may disrupt plants. One of the best options for custom indoor grow houses.
-FRP (Fiber Reinforced Plastic) sheets are commonly used as an inexpensive option that is applied to walls with adhesive. It usually has textured surfaces and rivets which may be troublesome to clean. Sheets may also peel off walls after time.
-Duramax PVC (Polyvinyl Chloride) are vinyl panels that interlock with each other to become the wall itself. They are bright white and light reflective. They also have a smooth flush surface.
Installation
Installation and labor time can make a huge difference in overhead cost. The amount of work required depends on what material is used and if any time is needed for drying/layering. Each material has a different process that may require additional time or material.
-Mylar Sheeting is the easiest to install. The reflective sheets can be easily propped to any type surface by one laborer. (Keep in mind that sheets are not allowed to be dividing walls).
-FRP (Fiber Reinforced Plastic) sheets require the most time and skill. Due to requiring adhesive, rivets, and trim between each panel, FRP needs two laborers to install.
-Duramax PVC (Polyvinyl Chloride) panels can be placed on a wall or directly onto the studs before being screwed in. Each panel interlocks with another and may require silicone to be airtight. Duramax PVC requires one laborer to install.
Water Resistance
Since maximizing plant growth is the goal, warm and humid environments are optimal. Walls that are not water resistant have the risk of creating pathogens that can spread into the room and on the plants.
-Mylar Sheeting is waterproof, and as long as the wall that the sheet is covering isn’t wood, there is no risk of mold.
-FRP (Fiber Reinforced Plastic) sheets themselves are waterproof, but usually the backer that it is glued on is wood and is susceptible to mold.
-Duramax PVC (Polyvinyl Chloride) panels are waterproof, but they may need a silicone sealant between each panel to prevent vapor from entering.
Overall, there are many options for building materials used in a commercial cannabis warehouse. Depending on the building size, shape, and environment each material can be the right or wrong choice. For start-ups, pricing may be a big factor, but don’t forget about practicality and maintenance in the long-term. Daily cleaning, harvesting, replacements, fire codes, safety codes, and hygiene codes govern the future of cannabis facilities.
Jonathan Tsai is the head of Duramax Building Products Online Marketing division. He has been a lead proponent in educating the market about the latest technology in building materials.
Through his time with Duramax Building Products, he has gained extensive knowledge on the extrusion of aluminum, plastic, vinyls, and other building materials. His mission is to provide value to readers through educational content and media.
VIDEO: Member Spotlight With MedMen
In this month’s NCIA member spotlight, we visit with MedMen at their Santa Ana, CA, dispensary location. MedMen has grown to more than 18 storefront locations across California, Nevada, and New York, and currently employs more than 800 people. Co-founder and CEO Adam Bierman, along with co-founder Andrew Modlin, launched the company nearly a decade ago. Watch this video to learn more about MedMen.
“I don’t think we can expect to ever live out something like this again in our lifetime.”
– Adam Bierman, MedMen CEO and Co-founder
Allied Association Blog: New Approach Missouri Initiative Update
The state of Missouri is about to have a medical cannabis program. In November, no less than 3 measures will be present on the ballot, plus 2 constitutional amendments, as well as a statutory measure. This is an unprecedented occurrence in the history of marijuana law reform.
The New Approach Missouri initiative will be listed first on the ballot. Missouri Cannabis Industry Association has long been a proponent of the grass-roots New Approach Missouri (NAM) campaign, which turned in more than double the number of signatures required to make the ballot. Many of those signatures were collected by the more than 400 amazing volunteers from all across the state.
Missouri is traditionally considered a conservative state, but the urban areas of St. Louis on the eastern side and Kansas City on the western side of the state, are both home to very progressive communities who have made their own strides in local marijuana law reform independent of the state. Kansas City has completely decriminalized up to 35 grams and St. Louis has reduced possession to a $25 fine, with plans in the works for a more aggressive legalization effort in 2019. The legislators of the state may not be ready for legalization, but the people definitely are and they will make their voices clear at the ballot box.
Currently there is only a ridiculously restrictive program which consists of a recommendation for CBD only (must be less than .03% THC), with the single qualifying condition of intractable epilepsy. In addition, the recommendation has to be written by a neurologist. The two licensed facilities, BeLeaf and Noah’s Arc, are each vertically integrated and share barely more than 100 patients between them.
The New Approach Missouri campaign is poised to deliver the framework for a robust and profitable cannabis industry for the estimated 200,000 – 300,000 patients expected by the end of year three. Minimum numbers of cultivation, extraction/infusion and dispensary licenses based on the population (currently 6,000,000 residents) will provide for expansion of the program over time, as the population increases. From the onset, the initiative provides for 60 cultivation, 86 extraction/infusion, and 192 dispensary licenses. The program will be regulated through the Department of Health and Senior Services. The initiative is largely modeled after Colorado, but with some modifications based on the lessons learned from experience.
Recently in San Jose at the NCIA Cannabis Business Summit and Expo, NCIA, MCIA and New Approach Missouri collaborated on a fundraising event sponsored by Simplifya and CannaRegs. Veteran’s advocate, Tom Mundell and Campaign Manager, John Payne from New Approach Missouri talked about what it will mean for Missourians to have access to legal medical cannabis, the status of the campaign and the industry outlook should New Approach win in November. NCIA Executive Director Aaron Smith urged attendees of the fundraising event to do what they could to help. In total, $17,500 in pledges were made to New Approach Missouri. The opportunity that will be available in Missouri if NAM wins is worth investing in.
In addition to fundraising for the legalization campaign, MCIA has set out to provide educational opportunities for midwesterners who are interested in the cannabis industry. It really made sense to bring these two ideas together. September 14th and 15th in Kansas City, Missouri, MCIA will be hosting its second business conference. The first one, held this past March featured NCIA Executive Director Aaron Smith as the keynote speaker and raised $25,000 for the New Approach Missouri campaign.
The September conference will feature world renowned cannabis physician and researcher Dr. Sue Sisley as the keynote speaker as well as Barry Grissom, former US Attorney for the district of Kansas and Michael Correia, NCIA Director of Government Relations. The night before the conference there will be a meet-and-greet, and there will be a fantastic networking event at the conclusion of the first day of the conference. There are also really great sponsorship opportunities that include booth space, marketing perks, and space on the MOCIA.org website. If you would like more information about what’s going on in Missouri or would like to inquire about participating in the September conference, contact karin@mocia.org.
Karin Spinks-Chester is the President of the Missouri Cannabis Industry Association and the Executive Director of Greater St. Louis NORML. She also serves as the Outreach Coordinator for New Approach Missouri. With a background in fundraising, community organization and volunteer management, Karin started working in marijuana law reform at the beginning of 2016 with New Approach Missouri. Immersing herself in the world of activism and learning everything she could about cannabis and the cannabis industry, Karin later combined that knowledge with her fundraising and organization skills to help MCIA develop meaningful educational opportunities for members and raise money to support state level law reform efforts. Missouri Cannabis Industry Association is an NCIA Allied Association.
New Policy Directives For Cannabis Issued By NCSL
by Michelle Rutter, NCIA Government Relations Manager
Last week, the National Conference of State Legislatures (NCSL) met in Los Angeles for their annual Legislative Summit. NCSL was created in 1975 with the goal of establishing a single national organization to support, defend and strengthen state legislatures. NCSL prides itself on being bipartisan and seeks to improve the quality and effectiveness of state legislatures, promote policy innovation and communication among state legislatures, and ensure that state legislatures have a strong, cohesive voice at the federal level.
At the Legislative Summit last week, NCSL hosted two separate panels on cannabis policy. The first was titled “Crossroads: States, the Federal Government and Marijuana,” while the second was titled “Changing Federal Landscape: Financial Services for Marijuana Businesses.” NCIA’s own Director of Government Relations, Michael Correia, spoke eloquently on the banking panel and educated attendees and legislators about the importance of cannabis business’ access to financial services.
NCSL isn’t the only policy related group to show interest in cannabis policy: both the U.S. Conference of Mayors and the National Association of Counties have recently adopted similar positions. In June, a group of 12 governors, both Republican and Democrat, signed a letter to congressional leadership asking that they pass the STATES Act.
Following the summit, NCSL issued two new policy directives related to cannabis: the first stated that NCSL “maintains that the federal government should respect state decisions to regulate cannabis, including hemp in non-FDA approved cannabis products,” while the second said “NCSL acknowledges that due to the expansion of legal cannabis, legitimate business enterprises need access to financial institutions that provide capital, security, efficiency, and record keeping.”
We couldn’t agree more.
NCIA’s Q3 Summer #CannabisCaucus Series Re-cap
The month of July offered not only NCIA’s 5th Annual Cannabis Business Summit in San Jose, but also in the days leading up, we visited with YOU — our members — in 8 regions across the country for our Q3 Quarterly Cannabis Caucus event series.
Across 8 cities, we connected with nearly 1,000 attendees from coast to coast. Northern and Southern California events, as well as Colorado, saw more than 150 attendees at each!
In Northern California, attendees heard from guest speaker Eduardo Blanco, Special legal Advisor, CA Agricultural Labor Relations Board, as he spoke on “Understanding California Agricultural Labor Laws As It Relates to Cannabis Cultivators.” This informative talk provided vital insight into how organized labor regulations impact the cannabis industry.
In New York City at our Northeast regional event, we heard an update on what’s happening in the New York Legislature from Assembly Member Richard Gottfried (D – 75th District).
In Southern California, we were pleased to welcome Jessica McElfresh, Board Member of the Association of Cannabis Professionals, as our guest speaker in San Diego. Jessica provided a comprehensive overview of San Diego regulations and the slow but steady fight she has helped lead to progress the cannabis industry in Southern California over the years along with the local AAP group, the Association of Cannabis Professionals.
We returned to Portland, Oregon for our Pacific Northwest Caucus to hear from Matt Maletis, Commissioner for the Oregon Liquor Control Commission, where attendees dove into a Q & A session with the Commissioner on issues like analytical testing inconsistencies, METRC reporting, as well as the topic of “oversupply.”
At our Midwest Caucus in Cleveland, guest speaker Erin C. Reed, Senior Legal Counsel, from the State of Ohio Board of Pharmacy offered a regulatory update in Ohio, including how licenses are being distributed and how THC levels are broken down for various tiers of medical conditions. Additionally, we hosted a pre-event mixer for newly awarded licensee holders in Ohio, hosted by our Gold Sponsor Frantz Ward LLP, in the Vu Room of Bar 32.
In the Southwest, we gathered in lively Las Vegas, Nevada and heard from NCIA Member Scot Rutledge of Argentum Partners, with an update on Nevada’s social consumption campaign efforts.
We also returned to Miami, Florida to connect with current NCIA members as well as many newcomers to the industry.
In Denver, Colorado, we enjoyed a lively turnout of more than 150 attendees on the top floor of the History Colorado Center located in the heart of Denver featuring wrap around glass walls and an outdoor covered terrace with stunning views of the Front Range and downtown skyline. Guests
Thanks to our sponsors for their participation and support of yet another successful quarter of NCIA’s Cannabis Caucuses.
Want to get even more involved in NCIA? Want more information about your membership benefits, NCIA’s programming, or content? Please take a moment to fill out this Engagement Form to tell us what you’d like to learn more about. Whether you’d like to submit a guest blog topic for our website, be a guest on our weekly podcast, learn more about our Political Action Committee, or sponsor an upcoming event, just click the box next to your interests, and an NCIA staff member will get back to you.
Between October 2017 and May 2018, 180 employees in the cannabis industry completed an Employee Engagement & Satisfaction survey, created by Needle Consultants, LLC. The survey was promoted and sponsored by the National Cannabis Industry Association. The intent of the survey was to obtain national baseline data regarding cannabis companies’ engagement of their employees and, potentially related, workers’ overall satisfaction with their employers. The narrowly designed survey collected data on employee satisfaction, employee desires around benefits (traditional and nontraditional), and employee opportunities to engage in communities, as well as gathering general, anonymous demographic data. What follows is a summary of the data and some conclusions.
Needle Consultants, LLC is a Denver-based Corporate Social Responsibility consulting firm. Marc Ross, Needle’s Chief Instigator, is a 25-year attorney, with experience in the public, private, and nonprofit sectors. Mr. Ross helps to build purpose-driven businesses, specializing in community and employee engagement, strategic philanthropy, and sustainability. He is the former founder and Executive Director of Rock the Earth, a national environmental advocacy organization that works with the music industry, as well as former in-house environmental counsel to Alcoa Inc. He holds certificates in Corporate Social Responsibility from the University of Colorado, Leeds School of Business and Sustainability Leadership and Implementation from the University of Denver, Daniels College of Business, a Juris Doctorate from the Penn State Dickinson School of Law, and a Bachelors degree from the Pennsylvania State University.
Member Spotlight: ProGrowTech
This month, we speak with Andrew Myers, the Co-founder and CEO of ProGrowTech, which is based in Flagstaff, Arizona. ProGrowTech provides LED lighting solutions for grower operations of all sizes.
Industry Sector:
Cannabis Cultivation Supply
NCIA Member Since:
December 2017
Tell me a bit about your background and why you launched your company?
I spent more than 14 years in state and national politics before founding ProGrowTech with my partners. I was especially involved in Arizona’s budding cannabis industry, serving as campaign manager and chief spokesperson for Proposition 203, Arizona’s successful effort to legalize medical marijuana. I was also one of the authors of the 2010 Arizona Medical Marijuana Act, and co-founded the Arizona Medical Marijuana Association, an organization for licensed medical marijuana dispensaries. I also served as executive director of the Arizona Dispensaries Association.
My team and I founded ProGrowTech because we knew cultivators were unhappy with the quality of grow lighting available. None of the established players in the marketplace had developed a solution that fully met the needs of commercial growers. We designed our Evolve Series LED fixtures to address common grower pain points, helping them conserve energy, increase the quality and quantity of their harvests, and improve profitability.
What unique value does your company offer to the cannabis industry?
Beyond providing top-tier, energy efficient technology, our team works one-on-one with growers, assisting with facility design, energy rebate applications, installation, advanced growing techniques and ongoing maintenance to help their operations succeed. Growers can consider ProGrowTech a long-term partner who can help them elevate their operations in a sustainable way.
Cannabis companies have a unique responsibility to shape this growing industry to be socially responsible and advocate for it to be treated fairly. How does your company help work toward that goal for the greater good of the cannabis industry?
The cannabis industry is still very much in its infancy, which gives businesses like ProGrowTech the unique opportunity to make a meaningful impact. Our team has had a long-standing commitment to supporting responsible growth in the industry.
We’re members of the Resource Innovation Institute’s Founder’s Circle and sponsor and sit on the board of the Cannabis Certification Council. Both of these organizations are hyper focused on improving the efficiency, sustainability and ethics of commercial cannabis operations. We’re also members of NCIA, which has supported, protected and advocated for the cannabis industry since its founding.
My experience with Arizona’s medical cannabis legislation and other team members’ experience as cultivation facility owners and growers themselves has given us a unique, holistic perspective on the industry and where we can make a difference.
What kind of challenges do you face in the industry and what solutions would you like to see?
In the lighting industry, our main challenge is to bring cultivation lighting technology into the 21st century. A lot of large cultivation facilities were built years ago when there wasn’t as much openness in the industry and high quality, energy efficient lighting was scarce. Our role is to not only provide the world class technology growers are missing, but also to educate them. We can help growers expand their vision of what is possible in their facility, allowing them to increase yields while lowering operations costs so they can remain competitive.
Why did you join NCIA? What’s the best part about being a member?
We joined NCIA because we believe in and support the organization’s mission. I have been supportive of NCIA since its founding, and have known NCIA co-founder Aaron Smith for many years.
Most importantly, NCIA brings together innovative, engaging cannabis industry leaders at numerous events each year. These events have been tremendously valuable for ProGrowTech, allowing us to spread our message, showcase our technology and connect with like-minded people across all facets of the cannabis industry.
New Bill: Fairness in Federal Drug Testing Under State Laws Act H.R. 6589
In the 115th Congress, there are more cannabis reform bills than ever before — dozens, as a matter of fact! This week, we want to highlight another brand new bill introduced in the House of Representatives.
Bill: H.R. 6589: Fairness in Federal Drug Testing Under State Laws Act
Introduced by: Congressman Charlie Crist (D-FL) and Congressman Drew Ferguson (R-GA)
What It Does: This bill would protect federal workers “whose residence is in a State where that individual’s private use of marijuana is not prohibited” from being denied employment or being “subject to any other adverse personnel action” as a result of a positive cannabis test. There is, however, an exception is laid out if there is “probable cause to believe that the individual is under the influence of marijuana” at the workplace. The bill’s language applies only to civilian federal employees across departments and agencies, from being punished for their off-the-job cannabis consumption as long as it is in accordance with a state law — whether that be medical or adult-use. The bill does not cover those applying for or holding positions involving “top secret clearance or access to a highly sensitive program.”
What To Expect: Now that the bill has been introduced, NCIA will continue to gather cosponsors for the legislation, as well as advocate for a hearing. With August recess underway and midterm elections in November (register here), timing will be of the essence.
NCIA’s government relations team was happy to work with Congressman Crist’s office on the Fairness in Federal Drug Testing Under State Laws Act’s language and roll-out. It is undoubtedly time for federal law to respect states’ decisions to legalize cannabis — and protect consumers and employees alike.
What to Know About the New bill: Marijuana Data Collection Act
In the 115th Congress, there are more cannabis reform bills than ever before — dozens, as a matter of fact! This week, however, a brand new bill was introduced that actually does not involve the cannabis plant at all, but rather focuses on data collection and information that can be gathered from states that have chosen to legalize cannabis in some form.
Bill: The Marijuana Data Collection Act
Introduced by: Congresswoman Tulsi Gabbard (D-HI) and Congressman Carlos Curbelo (R-FL)
Original Cosponsors: Reps. Don Young (R-AK), Darren Soto (D-FL), Beto O’Rourke (D-TX), Earl Blumenauer (D-OR), Dana Rohrabacher (R-CA), Matt Gaetz (R-FL), Peter DeFazio (D-OR), Eleanor Holmes Norton (D-DC), Dina Titus (D-NV), Charlie Crist (D-FL), Tom Garrett (R-VA), Lou Correa (D-CA), Barbara Lee (D-CA), Mark Pocan (D-WI) and Salud Carbajal (D-CA)
Endorsements: National Cannabis Industry Association, National Organization for the Reform of Marijuana Laws (NORML), Third Way
What It Does: This bill requires data collection and study with regard to the impact of state-regulated cannabis legalization on revenues and state allocations, the medicinal use of cannabis, (other) substance use, criminal justice, and employment. Specifically, this bill requires the Secretary of Health and Human Services to coordinate with the Department of Justice, the Department of Labor, and relevant state agencies. The bill also directs the National Academy of Sciences (NAS) to publish a biannual study on the health, safety, and economic effects of state legalized cannabis programs– whether they be medicinal or adult-use. The report will also outline best practices for state-led data collection, as well as recommendations to overcome any barriers preventing data collection and gaps in data.
What To Expect: Now that the bill has been introduced, NCIA will continue to gather cosponsors for the legislation, as well as advocate for a hearing. With August recess around the corner and then midterm elections in November (register here), timing will be of the essence.
NCIA’s government relations team was happy to work with Congresswoman Gabbard’s office on the Marijuana Data Collection Act’s language and roll-out. While many studies have looked individually at many of the effects that the Marijuana Data Collection Act seeks to, this is the first time a congressional bill has directed federal agencies to research, collect, and aggregate such data in one report. At a time when “fake news” and misinformation run rampant, we can’t think of a better thing than a bill solely directed at data.
A year ago, NCIA’s Infused Products Committee (IPC) made the decision to tackle the issue of cannabis testing. It is an issue we feel is at the heart of cannabis legalization and is negatively impacting cannabis businesses across the nation. Although it has been a struggle to get comparable lab results across different labs, IPC believes there is a future where cannabis testing will reach consistency.
We began our process by asking several questions and with the assistance of the NCIA, we crafted a survey that was sent to experts in the field. During our preliminary research, we discovered that most cannabis testing labs view their protocols and procedures as proprietary information.
To gain better insight about the testing sector, we asked Alena Rodriguez, a member of NCIA’s Scientific Advisory Committee (SAC) to participate in an interview. Alena represents Rm3 Labs, a cannabis testing laboratory in Colorado.
IPC: Are you concerned about the inconsistent and varying test results and the impact it has on consumer safety?
Alena: Yes, I’m concerned. I do not take my job lightly; I know that contaminated cannabis can be harmful and sometimes life threatening. That is why I am involved with state regulators and groups like NCIA’s SAC and Testing Policy Working Group. We aim to educate regulators and stakeholders on the importance of practices such as independent audits, proficiency testing and ISO/IEC 17025 accreditation for cannabis testing labs.
IPC: Do you think we are close to having consistent cannabis test results from different laboratories?
Alena: We are well on our way. In Colorado, licensed labs must undergo Proficiency Testing (PT) twice per year. PT is done through an inter-laboratory comparison where participating labs receive the same sample and analyze it using their methodology. Even though our procedures are not standardized to one method, most of the labs arrive at the same result. Unfortunately, not all states require PT yet, but I feel more and more states will adopt these programs.
Along with PT, consistent testing across labs requires the use of high-quality reference materials that are used to validate analytical methods and calibrate instruments. Cannabis testing labs in the United States have limited access to reference standards. Like cannabis, most industries started with limited resources, but over time the science will progress as federal barriers are lifted to make more research and better standards possible. It took decades to develop standardized, consistent methods in other industries, such as in pharmaceuticals and food testing. I don’t see the cannabis industry being any different.
IPC: Should there by penalties if a testing lab consistently provides drastically different results from prior tests of the same product?
Alena: It depends on the situation. If the lab is knowingly breaking the rules or trying to cheat the system, then absolutely. But, most of the time inconsistent results have causes other than fraud or negligence. This industry produces new products every day and some manufacturers and laboratories don’t “get it right” on the first try. There is a lot of research and development that is involved. Three of the biggest hurdles for consistent testing of cannabis products are 1) the variety of sample types 2) the lack of certified reference materials for uncommon cannabinoids and terpenoids and difficulties in obtaining concentrated standards and 3) inhomogeneity in some infused products or concentrates. Product uniformity is critical and should be confirmed by analytical testing for consumer safety. Variable results across multiple labs may suggest a product lacks uniformity.
IPC: Do you believe testing procedures and protocols areproprietary?
Alena: Yes, third-party cannabis laboratory protocols are just as proprietary as the protocols developed by cultivators, concentrate extractors and infused product makers. Testing labs having proprietary methods is not novel to this industry. If a lab in any other industry (e.g. food, medical, agriculture, environment) develops an alternative method to the standard method, they can use it if they can validate against the reference method.
IPC: Should labs be required to prove their analytical methods are accurate by submitting their practices confidentially to a regulatory body?
Alena: Absolutely! Colorado labs are currently required to send all new Standard Operating Procedures (SOPs) and method validations to the CDPHE prior to implementation. I hope more states adopt this practice, if they aren’t doing so already. As of January 1, 2019, all cannabis testing labs in Colorado will be required to be ISO/IEC 17025 accredited. ISO/IEC 17025 accreditation is the international gold standard for assessing the competence and quality management systems of testing labs across all industries to ensure consistent, accurate test results. More than a dozen cannabis labs have achieved this accreditation across the country.
IPC:Are you aware that the ASTM Committee D37 reportedly drafted testing procedures? If published, will cannabis testing labs follow published procedures that are not their own?
Alena: Yes, I’m excited! This is a great step for our industry. I imagine the committee will develop similar protocols to those being used by third-party labs. But as I mentioned before, labs will have the choice to use the published standard methods or their own alternative method, granted it is validated against the reference method. I expect some labs will attempt to validate their methods against the standard methods and some will adopt ASTM’s methods.
IPC: Are you aware of testing labs that allow for “tipping” on their order forms? Does this concern you, and why?
Alena:It concerns me that there are bad actors in the testing sector of the cannabis industry but I’m afraid there are bad actors in every segment of every industry. At Rm3 Labs, we do not participate in or condone unethical behavior such as paying for the results you want. We would never risk falsifying test results because we are aware immunocompromised individuals and children are possibly taking the products we are testing. I would not risk my entire scientific career to give you 5% higher THC potency results or lie about your contaminant testing results. I advise all cannabis testing labs to always act ethically because you are in the business of public safety and your lab is subject to investigation by regulatory agencies at any time.
IPC conducted the above enlightened interview with SAC. While we were inspired by some of the answers, much like our survey attempt this past year, many of our questions remain unanswered. For example, we don’t agree that cannabis cultivators or manufacturers are to blame for receiving inaccurate “clean/approved” test results from labs due to products being inhomogeneous.
That said, it is clear by a couple of the responses that some states, like Colorado, are making substantial progress in oversite and legal requirements for testing laboratories, while other states, like California, are still leaving significant and dangerous gaps.
In our opinion, the industry’s need for consistent and accurate testing results remains at the forefront of the issues facing commercial cannabis today. The ability to send the same sample, from the same batch, under the same conditions, and have it tested by multiple labs, achieving the same results, is paramount to our industry’s future and success. State laws should require it. The industry should demand it. And the consumers most certainly deserve it.
As such, the IPC will continue its mission to drive this conversation forward with both testing labs and operators alike. Only together, can we really solve this crucial issue facing our amazing industry.
Member Blog: Risk Factors in Private Placement Memoranda for Cannabis Businesses
Conflict between state and federal law gives rise to unique risk factors in private placement memoranda for cannabis businesses. Equity interests in private businesses are frequently offered to investors by means of private placements. The standard disclosure document for private placements is the private placement memorandum, or PPM. One section of the PPM is “Risk Factors,” which discusses various possible sources and areas of risk in the private placement. This paper examines whether risk factors that are conventionally included in a PPM for a cannabis business that touches product are sufficient to address this tension between federal and state law.
Disclosure to Investors
Federal securities laws and regulations, as well as the securities laws of many states, are based on the “blue sky” concept of disclosure, rather than value. For publicly traded securities, this disclosure takes the form of initial and ongoing public filings with the Securities and Exchange Commission (SEC); private companies often employ a less rigorous form of disclosure – the PPM.
The exemption from filing for a private placement is set forth in section 4(a)(2) of the Securities Act. Most private placements are made pursuant to Rule 506 of Regulation D to this section, which is the safe harbor rule for private offerings. Rule 506 permits an unlimited amount of money to be raised from an unlimited number of accredited investors in addition to up to 35 unaccredited investors.
Use of a PPM is optional if all investors are accredited and sophisticated, and given an opportunity to make inquiries about the offering. However, use of a PPM is highly advisable, if only to estop the investor from claiming reliance on information outside of its four corners.
The structure of a PPM is set forth in Regulation S-K, 17 C.F.R. Part 229. For our purposes, the most significant part of the document is the discussion of “Risk Factors,” which is required under a concept with the ungainly name of the “Bespeaks Caution Doctrine.” Risk factors are described as follows in 17 C.F.R. §229.503(c):
Risk factors. Where appropriate, provide under the caption “Risk Factors” a discussion of the most significant factors that make the offering speculative or risky. This discussion must be concise and organized logically. Do not present risks that could apply to any issuer or any offering. Explain how the risk affects the issuer or the securities being offered. Set forth each risk factor under a subcaption that adequately describes the risk. The risk factor discussion must immediately follow the summary section. If you do not include a summary section, the risk factor section must immediately follow the cover page of the prospectus or the pricing information section that immediately follows the cover page. Pricing information means price and price-related information that you may omit from the prospectus in an effective registration statement based on §230.430A(a) of this chapter. The risk factors may include, among other things:
Your lack of an operating history
Your lack of profitable operations in recent periods
Your financial position
Your business or proposed business
The lack of a market for your common equity securities or securities convertible into or exercisable for common equity securities.” 17 C.F.R. §229.503(c)
By way of example, a risk factor addressing a lack of an operating history might read as follows:
The Company Has No Operating History
The Company was established on [DATE]. It remains a development stage business with limited operating history. There can be no assurance that the Company will be successful in building its business or that its business model will prove to be successful.
This, in fact, would be an appropriate risk factor for many of the California cannabis startups that focus on recreational use. By contrast, many of the entities that were set up to serve the medicinal use market have been structured as mutual benefit associations. As such, they would not in general be engaged in securities offerings.
How should cannabis business PPM risk factors address the federal-state tension?
The cannabis industry is broad, and “cannabis businesses” can include the following:
Cannabis grow facilities
Grow facility support businesses, such as potting soil and soil amendments, fertilizers, grow lights, irrigation and hydroponic systems
Extraction services and extraction equipment
Laboratory testing services and testing equipment
Transportation of cannabis products
Sale of cannabis products to consumers
Leasing of real estate to any of these business lines.
All of these businesses are subject to some level of economic risk if the sale of cannabis products is interrupted by enforcement of federal law; however, this article will focus on those businesses that “touch product” and on private placements by those businesses. The discussion of this issue will be organized according to suggested risk factor headings.
An example of a risk factor recently used in a PPM for a debt offering by a medicinal cannabis dispensary reads as follows:
Cannabis is a DEA Schedule 1 Substance and risk exists related to its status as an illegal drug under federal law.
The current regulatory climate for the marijuana industry is inherently risky. The substance is illegal under the Controlled Substances Act and its current DEA Scheduling. Even in those states in which the use of marijuana has been legalized, its use remains a violation of federal law. Since federal law criminalizing the use of marijuana preempts state laws that legalize its use, strict enforcement of federal law regarding marijuana would likely result in our inability to proceed with our business plan. Noteholders may be exposed to legal prosecution under federal law and assume any and all risk associated with prosecution including incarceration and asset seizure.
On the face of it, this risk factor appears to be ample: It states that marijuana is illegal under federal law, that there are inherent risks even in states where it is legal under state law, and that strict enforcement of federal law could be fatal to the business plan. In terms of sanctions, it lays out the worst-case scenario: incarceration and asset seizure.
Clearly, this is sufficient to apprise the prospective investor that the investment is risky. But does it adequately warn of the full range of potential hazards?
A careful reading of Regulation S-K would suggest that it does not. It is true that the words “most significant factors” in the phrase “the most significant factors that make the offering speculative or risky” could be taken to mean the maximum penalty that might be incurred. However, it also could be read to refer to the likelihood that an event will occur, rather than the severity of its consequences. And in the cannabis business, lots of things can happen.
What risk factors are more likely to affect cannabis companies?
Securities
The company could be precluded from debt or equity fundraising, whether by means of a public offering or a private placement. Securities are regulated at both the federal and state levels. Engaging in criminal activity at the corporate level can result in sanctions, including suspension of trading. At the federal level, the SEC has given no clear indication whether it intends to pursue sanctions against cannabis companies that touch product.
Banking
The company is not permitted to open a bank account or to engage in banking transactions. Banks are regulated by federal statutes and regulations, and do not currently permit cannabis businesses that touch product to open accounts or engage in banking transactions. This creates a number of risks for the company, including lack of verifiable financial records and accumulation of cash.
Real Estate
The company’s access to real estate could be limited, its rights to such real estate could be voidable, and it could be forced to incur substantial extraordinary costs. In the view of many landlords and neighboring tenants, cannabis businesses contribute to an undesirable environment for a variety of alleged reasons: cash accumulations and the presence of cannabis create a target for theft; some customers are loud and unruly; and some processes, such as extraction, can create unpleasant odors. Therefore, many landlords will refuse to rent to cannabis businesses, or will do so only on condition that the tenant installs substantial and costly security devices.
Under the terms of many standard commercial leases, a cannabis business could be subject to cancellation on the grounds that illegal activity was being conducted on the premises. If a landlord’s real property were to be seized in the course of a raid by federal drug enforcement authorities, the company could become liable to the landlord for the value of that property.
Management
The company could experience difficulty in attracting qualified senior management and directors. Negotiated settlements in SEC actions often involve an agreement by a sanctioned executive not to act as an officer or director of a publicly traded company for some period of years. This prospect, should the SEC adopt a negative posture toward the cannabis industry, could discourage experienced executives from serving in such capacities in cannabis businesses.
Transportation
The company’s ability to transport its products is limited. Interstate commerce in cannabis products is a felony. Transportation of cannabis products from one state to another, even if cannabis is legal in both states, is prohibited. Within a state, transportation via air or sea is subject to federal regulation, and therefore illegal. Whether transportation intrastate on federal highways also is felonious is an open question.
Intellectual Property
The company’s proprietary intellectual property may not be protectable under patent, copyright or federal trademark law. Inventions, logos or other intellectual property that the company develops or acquires may not be afforded protection under federal law. Trade secret or state level trademark protections may be available.
Bankruptcy
The company may not be accorded the protection of federal bankruptcy laws. Most bankruptcy law is federal law. A cannabis company that wishes to obtain temporary protection from creditors may seek protection under common law or state laws relating to creditors’ rights, but may not be able to use the protections afforded under Chapter 11 or other provisions of the Bankruptcy Code.
Immigration
Involvement in the company’s business could jeopardize the visa status of non-citizens.
Visas may be denied or cancelled upon conviction of a crime. Investment in, or management of a cannabis company could result in deportation or cancellation of an existing visa.
Insurance
The company may not be able to obtain insurance of any kind. Insurance companies generally do not insure illegal activity. While a small number of companies are venturing into the cannabis space, companies in this industry may have difficulty obtaining insurance for loss, liability, business interruption, director and officer liability, errors and omissions, and other matters.
Firearms
Involvement in the company’s business could prevent a person from legally acquiring a firearm. All firearms transfers in the United States must include the filing of ATF Form 4473, the “Firearms Transaction Record.” This form is filled out by the buyer and seller of the firearm and forms the basis for the buyer’s background check. Statements are made under penalty of perjury, and false statements are grounds for disqualification. Sections 11 and 12 of the form consist of a series of yes or no questions.
For example, Question 11e. asks: “Are you an unlawful user of, or addicted to, marijuana or any depressant, stimulant, narcotic drug, or any other controlled substance?” And lest there be any confusion as to the meaning of the word “unlawful,” the following appears in boldface:
Warning: The use or possession of marijuana remains unlawful under federal law regardless of whether it has been legalized or decriminalized for medicinal or recreational purposes in the state where you reside.
While this question would appear to indicate that the Bureau of Alcohol, Tobacco, Firearms and Explosives comes down squarely on the side of the prohibitionists, it is noteworthy that the warning contains the words “use or possession,” but the question only asks about use. This is one of only two questions in Sections 11 and 12 (the other refers to straw-man purchases) that contain a warning.
Conclusion
This should not be treated as an exhaustive catalog of industry-specific risk factors, nor should it be imported wholesale into every PPM for a cannabis offering. The PPM should be tailored carefully to the specific business, and an important part of the job of a securities lawyer is to select those risks that are most noteworthy without so heavily padding the Risk Factors section as to render it unreadable and therefore ineffective.
William Tolin Gay is an attorney in the Business Services Group in the Los Angeles office of Wilson Elser Moskowitz Edelman & Dicker. He graduated from the University of Washington, where he also received his J.D. in 1982, his MBA in 1983 and his LL.M. in Japanese law in 1984.
From 1984 to 1988, he practiced law in Tokyo, where he represented U.S. companies in their Japanese operations, and Japanese issuers and underwriters in Eurobond securities issues. He speaks and reads Japanese.
Since 1988, he has worked in Southern California, where his practice focuses on corporate finance, mergers and acquisitions, real estate and technology transfers. He is a certified mediator. In 2001, he was named one of “The Hot 25 People of Orange County” by OC Metro magazine.
He is currently a member and Chief Financial Officer of the Executive Committee of the International Law Section of the California Lawyers Association, and is the former Chief Financial Officer of the Business Law Section of the State Bar of California, and former Chair of its Committee on Cyberspace Law, and past President and Board Member of the Corporate and Business Law Section of the Orange County Bar Association.
Video Spotlight: W Vapes
Learn more about NCIA member W Vapes in this month’s video spotlight. The California-based, award-winning vaporizer company focuses on pure, pesticide-free, CO2 extracted, lab-tested oil. Their products are now also available in Nevada.
Member Blog: Increased Enforcement Is Coming – Takeaways for California and the Broader Cannabis Industry
As June came to a close, so too did California’s phase-in “Transition Period” of cannabis regulation. As a result, a number of additional labeling and testing requirements are now live. And with those newly effective regulations, there are also heightened prospects for enforcement actions. But the lessons from California’s regulatory rollout do not stop at the state border.
What should California cannabis businesses be doing differently? The simplest answer is, of course, the same as in every state cannabis market: follow the rules that are in effect. But it is a universal truth of highly regulated industries that not every possible scenario will be addressed by the rules. That is, in cannabis as in all highly regulated industries there are potential ambiguities and questions of interpretation inherent in the regulations.
California Bureau of Cannabis Control chief Lori Ajax recently tried to help calm industry concerns by offering insights into her team’s enforcement mindset. Ajax noted that “[t]here’s a lot of confusion out there” on what is and is not compliant. As a result, she explained that when the Bureau finds conduct it concludes is a violation, the regulatory response will be informed by whether the business “honestly thinks they’re in compliance.”
So how should a business go about demonstrating its good faith attempts to comply with cannabis regulations, in California and in the other state-legal markets?
Start at the Top
Good compliance practices start with the tone at the top of the company. There is a reason why so many of the nation’s leading companies involve their senior executives in formulating and promoting compliance efforts. Doing so sends a strong message to the entire organization that compliance is a priority, and that the path to corporate advancement does not involve cutting corners. Putting real resources into compliance provides a powerful indicator of a company’s values, and senior executives’ time is a key corporate resource. Put another way, if a regulator is trying to decide whether you have made a good faith effort to comply with the rules, you do not want to lay the decision at the hands of an inexperienced intern.
Build Strong Processes
Leaders in highly regulated industries tend to implement strong compliance processes. Why? For one thing, clear written policies help staffers understand what they can and cannot do. And these policies are a permanent resource for your team, even when your compliance staff is not on premise. But in addition to helping your team follow the rules, strong processes also help regulators understand what you are doing. If, for example, a regulator wants to see if you “honestly think[]” you are in compliance, one of the best pieces of evidence is a clear roadmap of your efforts to be in compliance.
Maintain Focus
This is a fast-moving industry, and the rules are rarely static. A business could have a strong commitment to compliance and detailed processes, but if its compliance efforts are keyed to regulations that have been out of date for many months that is unlikely to sway a regulator. For example, regardless of what they may have done in the past, a Colorado retail licensee would likely receive little sympathy from regulators if they failed to update their policies regarding statements on possible health benefits of their products in the wake of the MED’s recent bulletin regarding retailers recommending cannabis for morning sickness. A regulator will have little sympathy for a business that fails to alter its compliance efforts in the wake of contrary guidance. Effective compliance requires vigilance.
In short, cannabis businesses in California can likely expect heightened levels of enforcement as these additional rules come into effect. But the best practices for California businesses are no different than for those around the nation: by prioritizing compliance throughout the organization and building and updating strong compliance procedures, a highly regulated business takes key steps towards demonstrating its good faith, honest attempts to comply with the law.
Michael Cooper is the co-founder and managing member of MadisonJay Solutions LLC, a leading regulatory advisor to cannabis companies and a member of the NCIA.Agraduate of Harvard College and Harvard Law School, he previously served as General Counsel of MHW, Ltd., which provides compliance services to the beverage alcohol industry, and in the litigation department of Cravath, Swaine & Moore LLP, known as one of the nation’s premier law firms for nearly two centuries.
Top Three Ways to Support Policy Reform During Congress’ August Recess
Between vacations and time with the family, July’s Quarterly Cannabis Caucus events, and running your business, summer is a jam-packed season. Every year, Congress recesses for the month of August. Traditionally, this time has been used for those Members to leave the Capitol and return home to their districts and meet with constituents and, of course, campaign for re-election. Though this makes August a quiet month in D.C., it’s a great time for you and your colleagues to get involved with the political process, engage with Members of Congress, and educate them on the benefits of a legal, regulated cannabis industry. Here are the top three ways you can get involved in your home state during August recess:
Attend a town hall
Town hall meetings are an excellent way for businesses, local leaders, and representatives of the cannabis movement to communicate with elected officials about issues affecting your community. Make sure you call or check your Representatives’ and Senators’ websites to see if any town halls have been scheduled during August recess. If they aren’t planning on holding one, consider planning a town hall yourself and inviting various elected officials to talk about cannabis policy in your community and on the federal level. Check NCIA’s Facebook page regularly for information about upcoming town hall events in your region.
Invite Members of Congress or their office on a tour of your business
Even though cannabis is arguably more mainstream than it’s ever been, many elected officials still have not had the chance to experience what the responsible and legal cannabis industry looks like with their own eyes. Whether you’re involved with growing, processing, or dispensing cannabis, or operate an ancillary business, a tour with a member of Congress and/or their staff can be eye-opening and educational to them. Reach out to your elected officials’ district office and ask if they would be interested in a tour – their answer may surprise you!
Schedule a meeting with your Member’s district office
August recess means members of Congress are home for an entire month and it is a great opportunity to meet with them and their staff! There are very few things more compelling than a personal story when talking to elected officials, so whether your experience has been with the benefits of medical cannabis, the unfair tax burden of 280E, or the struggle to gain, and keep, access to traditional banking, be sure to schedule an appointment with your district office to tell that story.
We all have a responsibility to educate and engage with elected officials in order to change the perception surrounding cannabis. August recess is the perfect opportunity to get involved with federally elected officials without having to leave home! If you need advice, help, or materials to assist you, remember to contact NCIA’s Government Relations team in Washington, D.C. by emailing michelle@thecannabisindustry.org.
The Push for Equity in the Cannabis Industry
by NCIA Editorial Staff
It’s no secret that the cannabis industry still has much work to do in terms of building a diverse, equitable, and inclusive workforce. But what barriers stand in the way, and how can we overcome them?
According to the ACLU, cannabis use is roughly equal among African-Americans and whites, yet African-Americans are nearly four times more likely to be arrested for possession of the substance. Higher arrest and incarceration rates for these communities are not reflective of increased prevalence of drug use, but rather of law enforcement’s disparate focus on urban areas, lower income communities, and communities of color.
People of color are unequivocally and disproportionately affected by the prohibition of cannabis — so, what happens when a state decides to end prohibition?
Many states that have chosen to tax and regulate cannabis have included provisions in those laws that prohibit individuals with any prior convictions from working in a licensed cannabis company. Not only that, according to the Minority Cannabis Business Association, “heavy regulation, the high cost of entry, and information gaps hinder minorities from entering the industry as owners, employees, and patients & consumers”.
Not all states have taken that route, however. Massachusetts state law requires the Cannabis Control Commission to promote full participation in the industry by people disproportionately harmed by marijuana prohibition and enforcement. The goals of Massachusetts’ social equity program include reducing barriers to entry to the adult-use cannabis industry and providing technical services and mentoring to individuals facing barriers.
Action is also being taken at the local level. In January, the District Attorney’s office in San Francisco announced that they would be retroactively applying Proposition 64, which legalized the possession and recreational use of cannabis for adults ages 21 years or older, to misdemeanor and felony convictions dating back to 1975.
The important message of social equity, diversity, and inclusion in the cannabis industry has also reached the halls of Congress. A year ago, Sen. Cory Booker (D-NJ) introduced S. 1689: The Marijuana Justice Act, which was the first piece of federal legislation to ever order federal courts to expunge cannabis convictions and actually punish states that have racially disproportionate arrest rates or disproportionate incarceration rates for marijuana offenses.
Just last week, Senate Minority Leader Chuck Schumer (D-NY) introduced the Marijuana Freedom and Opportunity Act, which creates a dedicated funding stream for women and minority-owned cannabis businesses that will be funded by revenue generated by the industry and directly linked to the industry’s growth. Not only that, the bill provides $100 million in grant funding to encourage state and local governments to develop, enhance or expand expungement or sealing programs for individuals convicted of marijuana possession.
In addition to these pieces of legislation, there have also been resolutions filed that address these disparities. In June, Congresswoman Barbara Lee (D-CA) introduced the Realizing Equitable & Sustainable Participation in Emerging Cannabis Trades (RESPECT) Resolution, which encourages equity in the cannabis industry. The resolution urges state and local leaders to implement a series of practices when granting licenses for legal cannabis businesses to improve access for communities of color to the nascent industry, such as minimal application and license fees, no caps on the number of licenses, increased local control of the licensing process, and removing broad felony and cannabis convictions as automatic disqualifiers for participation. NCIA was proud to endorse this resolution and looks forward to advocating for its passage.
There’s still an incredibly long way to go before we have a cannabis industry that’s as diverse and rich as the cannabis community as a whole. Here at NCIA, we know the task of representing the legal and legitimate cannabis industry is more than just advocating for the biggest or richest companies — we’re also here to advocate for diversity, inclusion, and equity in this industry that we are all building together.
VIDEO: Join us at a #CannabisCaucus near you this month!
NCIA’s popular Quarterly Cannabis Caucus event series returns to a city near you in July! Watch this video to learn more about the event series and to hear from NCIA members why you should attend, like garnering insights about how recent policy developments impact your business, and connecting with other industry executives in your region! This event is free for NCIA members, and just $50 for non-members.
Back with a fresh new look, NCIA’s popular Cannabis Caucus Series are meaningful networking events that pop up in five of the most burgeoning cannabis markets every three months. We launched this event series three years ago as an exclusive opportunity for NCIA members and their guests to connect with each other, learn about regional issues from influential guest speakers and get the latest news about NCIA’s federal policy work 
During last year’s Cannabis Caucus events, more than 1,000 attendees turned out for our 32 events nationwide. This means that although these events are growing increasingly popular, they are still small enough to make meaningful connections with other industry leaders in your region. Instead of just making small talk with someone in passing, you’ll get to to have real conversations with some of the most influential leaders in the industry. Year after year, we hear about people striking business partnerships, friendships and impactful connections at these events because they offer the time, space and opportunity to do so. 
5. They’re fun!
Jill Ellsworth is CEO and founder of 
Leading the sales team at 
For the past eight years, we attempted to make all our decisions from the experience and perspective of a new patient that has never used cannabis previously. This translates to individual consultation rooms so patients may feel free to discuss their medical conditions, symptoms, and concerns in a private space rather than standing shoulder to shoulder at a retail counter. 
True success will come when we pass legalization in November, but we’ve achieved some significant milestones. The first was creating a unified coalition of cannabis reform and social justice advocates to develop ballot language that borrows from the best practices used by the states that have legalized before us as well as Michigan’s medical marijuana licensing law. We also collected more than 360,000 signatures to place the issue on the November ballot. We’re proud of what we achieved so far, but the “vote yes” campaign has only just begun and there a lot more to do to make sure our initiative passes. 
The running of a dispensary requires management to constantly assess staffing costs and needs for the changing demands of the business. However, too much attention to the needs of the business and too little on employees can lead to the overworking of staff, burnout and an unpleasant working environment. 
Matthew Hughes is a British-born content writer with the mindset of a cat, he has a curiosity for the unknown, can be impulsive and can be won over with food. The best place to catch him will be in the offices of 
Jonathan Tsai is the head of 
The state of Missouri is about to have a medical cannabis program. In November, 
Industry Sector:
Michael Cooper is the co-founder and managing member of 
