Guest Post: Commercial Cannabis Compliance – The Key to a Golden Age

By Mark Slaugh, Founder and CEO of iComply, LLC

As I call another contact in Colorado, the knowledge of the latest Denver Post article is still fresh in my mind. The headline reads, “Denver approves plan to increase staff to enforce marijuana regulations.” Our client, busy as usual managing plants, product, and people, sighs in desperation as I tell her about the additional $3.4m in Denver being added to the $25m budget of State regulators.

Exasperated, she says, “man, it seems like they want to regulate as few of us as possible.” She knows the horror stories etched on the tombstones of businesses now shut down due to regulatory enforcement. Forfeit in the grave are dozens of jobs, thousands in investment, and millions in opportunity.

I know the struggle of marijuana businesses to reach the high bar of compliance that has been set in Colorado for commercial cannabis operators. When I started iComply in 2011, it was with the operational understanding of early rules at an initial stage of medical marijuana regulatory framework. At the time, my work had been facilitating the operations of new dispensaries and directing a Southern Colorado industry group making its way through local laws and state legislation.

Back then, we all knew about cameras, about locks, about badging, about tracking sales. What we didn’t know was how long the arm of the Marijuana Enforcement Division (MED) was. Up until last year, the industry and regulators we still figuring it out. Many people viewed enforcement like a Sasquatch; sightings and rumors abound but with very few inspections ever conducted and even fewer enforcement actions taken.

Typical in new markets, about 60% of the industry went out of business in the first 18 months and the Division had over-projected revenues and under-projected budgets. In short, they were down to 12 employees and very little bandwidth in the field to regulate over 1,000 facilities.

To no real surprise, a scathing audit of the MED found they were inefficient and ineffective. However, shortly after Amendment 64 passed, legislators took action. The Division was robustly funded to make up for years of enforcement gaps. The industry, for the most part, rejoiced over the possibility of removing bad actors from the playing field and leveling the standard for compliant cannabis commerce in Colorado.

The only reason anyone in the national industry is allowed to blatantly violate Federal Law is if they can show clear, unambiguous, compliance with State regulatory regimes. These regulations cover the eight Department of Justice Guidelines outlined in the 2012 Cole Memo. As new states bring regulations online from CBD only, to medical and retail marijuana, the signal is clear: expect enforcement to hold businesses accountable to the law.

For experienced and novice operators alike, compliance is a challenge that is difficult to take on alone. Qualified labor shortages are the nature of the market place and budtenders and growers seldom read legalese and are able to fully comprehend the regulatory expectations of the industry. Managing compliance details is crucial and standardizing best practices is far from complete. As the industry matures in Colorado and expands nationwide, owners and operators must keenly hone in on what the future will look like:

State-wide seed to sale tracking using RFID technology, real-time analytic reporting to law enforcement, standard operating procedure requirements, laboratory testing, manufacturing safety protocols, and product homogeneity under certified processes are just a few of the high level expectations likely to govern any cannabis market in the US.

As operators expand the marketplace by opening more facilities amid multiple states, we must contend with a slew of regulatory nuances. Colorado owners are hiring a scarce qualified workforce as compliance officers to internally manage reporting, tracking, and deadlines. Rules change frequently, and interpretations vary from attorneys to individual enforcement agents in the field – making a complex operation even more difficult.

We have clients who, due to missing the filing of one form, have had over 20lbs of product sanctioned by enforcement. For 6 months, they have simply awaited action by regulators with no clear end to empty shelves and disappearing customers in sight.

States who miss the reality of rubber hitting the road are faced with the question of establishing reasonable enforcement procedures inherent to licensing. In Colorado, a record number of application denials, enforcement actions, and administrative hearings has taken the industry by force and surprise since Retail sales came online Jan 1 this year.

A few words to the wise for the Responsible and Compliant vendors of the future.

• Do everything you can to mitigate the risk of non-compliance.
• Document, whenever possible, the activities of your facilities.
• Be pro-active rather than reactive to changing regulation.
• Support industry organizations to negotiate your rules based on best practices.

Preparing against non-compliance is the first step to ensuring a compliant operation and to reducing scrutiny from Law Enforcement. How we operate will determine our fate and the whole world is watching. Our brave new world still hangs in the balance and any single operator is either an asset or a liability to the overall industry and movement. Compliance is key to unlocking the golden age of commercial cannabis as expectations rise and the industry grows.

Mark Slaugh is the founder and CEO of iComply, LLC, and has more than four  years of experience in the regulated cannabis industry development, consulting and compliance business. His successful startup provides valued services to clients on starting operations, production/manufacturing/retail management, and compliance consulting, training, and certification. Additionally, he served as the Colorado Springs Medical Cannabis Council (CSMCC) industry membership and executive director, and as the Southern Colorado Regional Coordinator for the Campaign to Regulate Marijuana Like Alcohol (Amendment 64).