In this month’s video spotlight, get to know Debby Goldsberry, Executive Director of Magnolia Wellness, and her team based in Oakland, California. Debby is a community leader who is active in the campaign to reform the California state cannabis laws and to protect patients’ rights. Learn more about how the team at Magnolia Wellness creates a healing environment for their patients, including the East Bay’s only vapor lounge and dab bar, and how they give back to the community through various social programs.
The legalization of industrial hemp in December, 2018, has opened the door to a host of new products and processes that have the potential to enhance health and technological innovation while being environmentally sustainable and most importantly, highly profitable.
Entrepreneurs who want to stake their claim in the hemp space face some of the same challenges as others starting a new business, but other challenges are unique. Like anyone starting a business, you must understand your market. Right now hemp’s “low hanging fruit,” cannabidiol (CBD), is gaining popularity. Established brands such as Bluebird Botanicals, Endoca, and CV Sciences – which recorded $48.2 million in revenue for 2018, an increase of 133 percent over the previous year – are taking off.
Growth like this explains why predictions for overall expansion in the CBD market are meteoric, with cannabis industry analysts The Brightfield Group predicting it could hit $22 billion by 2022. But in order to get on that ride you will need to understand CBD consumers, prepare to meet their needs, and plan to expand their awareness of ways your product or service can help them. You will also need capital.
Stand out to investors
Once you have a good idea of the market and demand, you will be ready to start thinking about funding your company. It used to be that a passionate founder with a good pitch deck could attract investors after one meeting, but times have changed. Investors want cold, hard data to back up your claims, and they will want better analysis than your gut feeling, and a larger sample size than your friends and family.
Your pitch needs to not only support your market analysis with data, but differentiate your brand from others competing for the same investor dollars. The business model and differentiation need to encompass:
Revenue source
Where will you sell your product? Options include wholesale, white label, and retail through either online, brick-and-mortar store or a third-party vendor, or a combination of those.
Product category
Will you market your product as a cosmetic, pet supplement, nutraceutical, specialty beverage, functional food or something else? You will need specific information about the market for that product category and what roles CBD can occupy in them.
Product quality
What extraction methods are you using? Is your product purity third-party verified?
Are you using the highest grade of CBD isolate or distillate in your product line?
Product sourcing
Where does your hemp and raw materials come from?
How hands-on are you with your suppliers?
How stringently do you track your product from farm to consumer?
Vertical integration is increasingly seen as the optimal approach to CBD supply chain management. Producers such as Shi Farms in Colorado specialize in vertical integration.
Cannabinoid science:
Are your product and marketing firmly grounded in the best available science supporting the uses of CBD and other cannabinoids?
Product story
Do you have a compelling narrative that explains your personal investment in making the product available to consumers?
Does your marketing comply with FDA standards?
Some things you should not DIY
The issue of FDA compliance deserves special attention and professional support for CBD businesses. It is one of a few areas where hiring a consultant can make the difference between success and failure.
Your outward-facing communications will have to walk a line between including all the required elements without making any claims that violate FDA regulations. Cosmetic and nutraceutical labeling must list all ingredients, while nutraceuticals also need to provide a dietary supplement facts panel. Structure and function claims can be particularly tricky. CBD is not classified as a drug and therefore verbs such as treat, diagnose, prevent and cure are absolutely off limits. The language has to convey that some consumers use CBD in certain ways without employing medical terms or guaranteeing any particular outcomes. You can do your own research on compliance but it is always wiser to hire a consultant who specializes in this area.
As you get past the initial planning and push to get your business started, you will find there’s no substitute for long-term planning. Collecting ongoing data on the purity and potency of your product, the costs of raw materials and effectiveness of your marketing will enable you to make mid-course corrections in your projections so that your business and revenue grow.
Long-term planning based on robust data will ultimately make a huge difference for your business. I predict a failure rate of about 70 percent for CBD companies over the next five years. Whether they are underfunded, lack an effective management structure or are out of compliance with FDA standards, many new businesses won’t be able to compete with major players like Kraft, P&G and Unilever as they enter and begin to dominate in the CBD space. But some of those starting a CBD business now will not only learn how to stay afloat, they will prosper to the point that those major players will come knocking at their doors with generous offers to buy. Build in a pathway for your desired exit strategy and have all of your operating agreements and documents at the ready. If this looks like a possibility, or you want it to become one, you will need top notch, cannabis-savvy representation like McAllister-Garfield in your corner.
Learning and networking
If you want to make a deeper dive into starting or building a CBD or hemp concern, The Hemp Biz Conference is here for you. During symposia around the country you can learn about industry trends in an interactive forum, and get access to experts in discussion and workshop sessions designed for everyone from beginners to established professionals. Scheduled tracks – agriculture, processing, manufacturing, extraction, textiles, biofuels and plastics – allow you to focus your time where it matters most to you and your business. The Hemp Biz symposia attract the hottest hemp companies, investors and entrepreneurs in the industry so you will leave with connections that will help you grow for years to come.
Christie Lunsford, CEO, leads The Hemp Biz Conference’s charge into creating a sustainable hemp industry by bringing together the best experts, entrepreneurs, farmers and scientists in the cannabis space in the Hemp Symposium Series.
Before launching The Hemp Biz Conference in 2018, Christie founded Endocannabinioidology, a consulting firm providing cannabis science, FDA compliance support, technology and education management to businesses and individuals in the cannabis and hemp communities, where she successfully wrote or advised on winning cannabis license applications in several states. She has also overseen operations for a producer of horticultural LED technology, helped formulate and launch the first retail channel of CBD nutraceutical products derived from industrial hemp in the U.S, and was named Cannabis Woman of the Year at the 2015 Cannabis Business Awards. In addition to producing The Hemp Biz Conference’s Hemp Symposium Series she is a regular contributor on the business of hemp for Green Entrepreneur.
Partner Blog: CannaCompensation – Are Recruiter Rates Accurate?
Recruiters are on the front lines in the competition for talent. When a role is critical, tough to fill, or requires specific expertise, recruiters can play an invaluable role. They have the contacts, the skills, and the persistence to get the people you need right now.
Recruiters are a special kind of farmer. They aren’t picking the low hanging fruit. They are working on selecting the very best fruit. But, quality can come at a premium price.
The cannabis industry now has several strong talent acquisition firms. They know the industry and the lingo. They have contacts, and their connections have contacts. Currently, they are also one of the few sources of compensation rates for many positions in the industry. The pay data they provide is accurate, but it may not be “right.” How can this be?
Remember, the best recruiters target the best talent. They also target people with current jobs. The best talent usually gets paid more than typical, and still perfectly acceptable, talent. Employed people cost more to hire than unemployed people. This can result in recruiter provided pay ranges that are above industry norms.
The top people in any position commonly make 10-20% more than mid-level people. Motivating someone to change companies can take twice the increase as promoting an internal employee. This means recruiter-provided pay rates are often 20-35% higher than a formal compensation survey would indicate. This is fine for critical people, but it’s a ridiculously expensive way to pay an entire staff. This is why formal compensation surveys, like CannaCompensation, are essential to your success.
Compensation is likely your biggest expense – it may eat up as much as 75% of your revenue. Saving even 5% on paying your staff can mean the difference between growth and failure. This type of savings can fund a marketing campaign, purchase new equipment, develop new products, or become the down-payment on new real estate. When you provide your pay data to the CannaCompensation Study, you are building a foundation for future success. Participating is easy and confidential.
Your recruiters will always remain a vital source of information for pricing your highest priority positions. CannaCompensation will serve as the foundation for your pay decisions. When you combine them, you will be armed to win the battle for both talent and future success.
On May 29, 2019, Governor Jared Polis signed HB 1090 into law, removing burdensome restrictions on who can own cannabis businesses in Colorado and permitting greater outside investment. The law, which goes into effect on November 1, 2019, drastically changes the regulations in Colorado by permitting public companies, currently prohibited from owning cannabis licenses, to own such a license in the state. Additionally, shareholders with equity interests below ten percent will largely be able to avoid the current extensive disclosure requirements.
Before industry participants rush to secure outside investments, there are important issues to be considered.
First, the rules and regulations promulgated pursuant to HB 1090 have yet to be drafted. While the new ownership framework is outlined in HB 1090, the actual rules that will govern Colorado businesses must still be written. Second, the law does not take effect until November 1, 2019. Regulators have previously penalized companies for hastily signing, or announcing transactions before a law takes effect or without first speaking with the regulators. This type of hasty action can put companies at risk of sanctions and hinder the application process. Lastly, this article is only a summary of HB 1090 and does not discuss the nuances of the law. Please consult a licensed attorney regarding specifics of any proposed transactions.
The signing of HB 1090 opens a new era for the Colorado cannabis industry. Where the old law prohibited public corporations from owning even indirect equity stakes, the new law allows certain publicly traded companies to own licensed cannabis businesses within Colorado. And where the old law required at least one owner to meet the one-year residency requirement, the new law only requires all individuals with day-to-day operational control to be Colorado residents. The new law also allows non-U.S. citizens to own equity in a licensed business.
What’s New
Many of the old categories of ownership have been scrapped. No longer are there Direct and Indirect Beneficial Interest Owners or Qualified Passive Investors. Where HB 1040 (the previous law that currently governs ownership) focused on any amount of control or ownership, HB 1090 generally requires more direct control or ownership to trigger disclosures and Marijuana Enforcement Division (MED) approval. HB 1090 creates three new types of ownership classifications and defines “Acquire” and “Control” more effectively. Control is the direct or indirect possession of the power to direct the management or policies of the cannabis business, whether through ownership of voting securities, by contract, or otherwise. This is important because the control requirement now specifically addresses management agreements within the industry. A person “Acquires” a cannabis business not only through the acquisition of ownership interest, but also through the acquisition of direct or indirect control, voting power, or through the sole power to dispose of the owner’s interest through transactions, subsidiaries, purchases, assignments, transfers, exchanges, successions, or other means.
There are three new types of ownership classifications within HB 1090.
First, a Controlling Beneficial Owner, which refers to (i) a natural person, entity, or affiliate (a person that directly, or indirectly through one or more intermediaries, controls or is controlled by or is under common control with, the person specified) or a Qualified Private Fund, defined as a typical venture capital or private equity fund that, owns ten percent or more of a cannabis business, or a person who is otherwise in control of the cannabis business (including managers or others); or (ii) a Qualified Institutional Investor, which is defined as one of a list of entity types that largely reflect passive institutional investors, owning or acquiring at least thirty percent of the owners interest in the cannabis business.
Second, a Passive Beneficial Owner, which is any person holding any interest in a marijuana business who is not otherwise a Controlling Beneficial Owner or in control.
And, third, an Indirect Financial Interest Holder, which is a person that is not an affiliate, a Controlling Beneficial Owner or Passive Beneficial Owner, does not receive a percentage of the revenue or profits of the cannabis business as compensation and satisfies one of the following requirements: (a) holds a reasonable royalty in exchange for the cannabis business using its IP; (b) holds a permitted economic interest prior to January 1, 2020 in a cannabis business that has not been converted into an ownership interest; or (c) is a party to a contract with a cannabis business involving a direct nexus to cultivating, manufacturing, or the sale of cannabis. An Indirect Financial Interest Holder includes a person leasing equipment or real property for use in cannabis operations or cultivation; secured and unsecured financing agreements; security contracts; and management agreements.
Disclosure Requirements and Change of Ownership Process
Controlling Beneficial Owners and Passive Beneficial Owners each have their own separate disclosure requirements under the law. But with reasonable cause, the MED can require any person to report most of the same information as Controlling Beneficial Owners. All Controlling Beneficial Owners and, at the MED’s request and based on reasonable cause, any other person disclosed under the “business owner and financial interest disclosure requirements” provision must submit for a Suitability Judgment from the MED or apply for an exemption from such requirement prior to submitting a cannabis business application. “Reasonable cause” is defined as just or legitimate grounds (based in law and in fact) to believe that the requested action furthers the purpose of the law or protects public safety.
All Controlling Beneficial Owners must submit disclosure and fingerprint-based criminal history checks as required by the regulations. The MED will review the Controlling Beneficial Owner to see if it shows a history of good moral character. Currently, there is no test for what will justify denial based on the background check.
All applicants for the issuance of a state license must disclose a complete organizational chart reflecting the identity and ownership percentages of its Controlling Beneficial Owners. If the Controlling Beneficial Owner is a publicly traded company, the application must disclose the public companies’ managers and any beneficial owner that, directly or indirectly, owns at least ten percent of the Controlling Beneficial Owner. If the Controlling Beneficial Owner is a Qualified Private Fund, then an organizational chart must be disclosed that identifies the ownership percentages of the Qualified Private Fund’s managers, investment advisors, and anyone else that would control the manager or operations of the marijuana business (this means that, barring extenuating circumstances, funds will not need to disclose their Limited Partners). All applicants (including individuals) must take reasonable care to confirm that its Controlling Beneficial Owners, Passive Beneficial Owners, Indirect Financial Interest Holders, and Qualified Institutional Investors are not prohibited under the law, and failure to do such due diligence can lead to penalties.
For individual applicants, the natural person’s identification must be disclosed for persons that are both Passive Beneficial Owners and Indirect Financial Interest Holders in the cannabis business, any Indirect Financial Interest Holder that holds two or more indirect financial interests in the business or for persons that contribute over fifty percent of the operating capital of the business.
Despite specific disclosure requirements listed in HB 1090, the MED has discretion to mandate additional reporting. The MED may require an applicant or business to disclose each owner and affiliate and, with reasonable cause, may require a list of each non-objecting beneficial interest owner; business or Controlling Beneficial Owner that is publicly traded; Passive Beneficial Owners of the business; for any Passive Beneficial Owner that is not a natural person, the board members, directors, general partners, executive officers, and ten percent or more owners of the Passive Beneficial Owner; and all Indirect Financial Interest Holders of the cannabis business (including non-natural persons that own at least ten percent of the Indirect Financial Interest Holder).
The disclosure requirements primarily focus on individuals with ten percent or more interest in a cannabis business and those persons in control, but HB 1090 does include a strict prohibition on structuring any transaction with the intent to evade disclosure, reporting, record-keeping or suitability requirements, and any such action can lead to denial or revocation of an application.
Conclusion
Regulations for changes of ownership are still not known and will be clarified during the rule-making process. For most transactions, it appears that a new Controlling Beneficial Owner will need to be approved prior to submitting an application change of ownership for approval. HB 1090 will generate exciting opportunities for Colorado, but it is important to know the law, be patient while the MED promulgates regulations, wait until November 1, 2019 before initiating any outside investment transactions, and consult a licensed attorney regarding specifics of any proposed transactions.
Charlie Alovisetti, Vicente Sederberg LLC
Charles Alovisetti is a partner and chair of the corporate practice group at Vicente Sederberg LLP based in Denver. He assists licensed and ancillary cannabis businesses with corporate legal matters, and he has experience working with clients on a broad range of transactions.
NCIA Submits Public Comment To FDA On Hemp and CBD Products
Today, NCIA responded and submitted public comments to the U.S. Food and Drug Administration’s (FDA) request for comments on Scientific Data and Information About Products Containing Cannabis or Cannabis-Derived Compounds.
Given the substantial interest in this topic and the need for regulations and standardization throughout the industry, NCIA and this coalition are providing specific insight into all facets the FDA would like to examine, including health and safety risks, manufacturing and product quality, and marketing, labeling, and sales.
Hemp-derived CBD is in high demand by consumers, and the industry is eagerly awaiting the FDA’s regulatory framework for these products. Our industry coalition firmly believes that by working in partnership with the FDA to inform rulemaking, we can develop an appropriate regulatory framework to ensure the safety and efficacy of these important products.
Top Ten Female Industry Leaders to Meet at #CannaBizSummit
The cannabis community has seen an influx of female entrepreneurs and leaders laying the groundwork for the future. Whether they’re advocating for reasonable legislation, engineering extraction techniques, or hacking the crazy world of cannabis marketing, the cannabis industry continues to boast a higher percentage of female leadership than the national average – with even more room to grow. As a significant part of America’s fastest growing industry, the women of cannabis are determined not to be left behind.
Throughout her extensive career, Lisa has led large-scale corporate campaigns and has made a visible impact on premier organizations in the nonprofit sector. Her dynamic approach allows her to grow and shape organizations from the ground up. Lisa’s work has won numerous awards, including local ADDYs, national awards for predictive analytics, and a Bronze Lion at the Cannes Lions International Festival of Creativity.
Maureen has 25+ years of professional training experience; she is the Founder and Chief Facilitator with Cannabis Trainers™. She has led thousands of workshops and inspires cannabis industry professionals to create and sell products compliantly and professionally. She has combined her skills and expertise with Food Safety and Responsible Alcohol Service into a comprehensive, engaging program to ensure the responsible, knowledgeable and safe sale of cannabis: Sell-SMaRT™.
Kim brings her many years of social responsibility expertise, including participation in numerous and international CSR bodies and community boards, to her role as Executive Director. Prior to joining GCP, Kim spent 11 years at Atlantic Lottery Corporation (ALC) as Manager of Corporate Social Responsibility. During that time, Kim led, developed, prepared and executed ALC’s CSR strategy, which included a focus on diversity and inclusion, health and wellness, volunteerism and responsible gambling. A seasoned media and public relations practitioner, Kim is a proactive and dynamic leader who gets things done.
Laura Wilkinson is an entrepreneur with over 35 years of experience in emerging industries building several companies from zero. She has successfully launched broadcast companies, precious metals recycling entities, an information security company and consumer product manufacturing for retail – all industries with substantial compliance requirements. Between those, she worked in Broadcast Radio and Television in San Diego and Fortune 500 Marketing Communications leadership positions in the energy sector.
Diane has over twenty years of leadership experience in digital marketing and advertising. As CEO of iCre8t Digital Agency, she has crafted award winning national campaigns for brands such as PetSmart Charities, Mizuno and Ferrari. Diane has led digital advertising campaigns for clients such as Kimberly-Clark, Coke, The Home Depot and BMW. Additionally, Diane has executed national social media campaigns to drive in store sales at Walmart for Central Garden & Pet. That campaign increased sales by more than 128% and solidified their vendor shelf-space with the large retailer while winning the 2011 Best Online Brand Experience through social media.
Kara has been an HR professional, specializing in Talent Acquisition, Talent Management, Workforce Planning, Employer Branding, Compliance, Federal/State Employment Laws, and Organizational Design for over 15 years. Her career has spanned multiple Fortune 100 companies and start-ups in a wide variety of industries. More importantly, she has more experience recruiting in the cannabis industry than any other recruiter globally. In addition, she has built companies from the ground up and loves putting together perfect teams. Kara has an MBA in Human Resources & Organizational Behavior and is PRC, CIR, & CSSR Certified.
Ms. Quan has experience representing individuals and businesses in a wide variety of matters, including areas of business litigation, general liability, professional liability, employment law, landlord/tenant, health law and product liability. Her clients have included owners of both small and large businesses, hotels, restaurants and bars, residential care facilities and nursing homes, security companies, national and international companies, and owners and property managers of shopping centers, commercial buildings and other properties. Ms. Quan also assists clients within the cannabis industry, as well as those affected by cannabis legalization.
For the past several years, Lauren has been active in the drug policy reform movement as well as other progressive and humanitarian efforts. She is the former Chair of the Board of Directors of Students for Sensible Drug Policy (SSDP), an international non-profit organization working to end the counterproductive “War on Drugs.” Currently, she sits on the Board of Directors of the Sonoma County Growers Alliance, an organization that advocates on behalf of local cannabis businesses.
Laura is a professional mechanical engineer specializing in the design of HVAC, plumbing, and process systems for the cannabis industry. Using her experience in traditional engineering methods through Root Engineers parent company, ColeBreit Engineering, she applies her team’s depth of knowledge to create efficient and economically sound solutions for cultivation and processing facilities. Taking a custom approach to each project, Laura has experience working in the traditional design-bid-build method, as well as in the design-build arena.
Before heading to law school, Karen was an executive in the advertising business, as well as having been a personal manager to a major recording artist. She also co-wrote of a Top-10 Hit song in Europe that also made Billboard Magazine’s Hot 100.
Today, Karen brings her unique background and skills to the practice of intellectual property and business law. Her firm is an active member of the National Cannabis Industry Association where Karen serves as Chair of the Packaging and Labeling Committee (PLC). Throughout the years, Karen has spoken at a number of NCIA meetings and other Cannabis industry conferences.
CBD (cannabidiol) is everywhere right now. Front page articles proclaim its virtues and ubiquity. New retailers announce their intentions to sell CBD products almost every day. But a lot of the media coverage of CBD is inaccurate or misleading. Below are five common misconceptions about the legal status of CBD.
CBD is legal in all 50 states
Unscrupulous promoters like to claim that the 2018 farm bill has fully legalized hemp as well as any and all derivatives of hemp. That’s not true. The 2018 farm bill exempted hemp and its derivatives from the definition of marijuana under the federal Controlled Substances Act (CSA), but it does not require states to do the same. Furthermore, under the 2018 farm bill, states are permitted to prohibit hemp production and several states continue to do so. While some states explicitly authorize and regulate the production and sale of CBD, or otherwise provide legal protection for authorized individuals to engage in commercial hemp activities, other states maintain outdated drug laws that do not distinguish between marijuana, hemp and/or hemp-derived CBD, resulting in hemp being classified as a controlled substance under state law. In these states, sale of CBD, notwithstanding origin, is either restricted to state medical or adult-use marijuana program licensees or remains unlawful under state criminal laws. Additionally, a number of states prohibit the sale of certain consumable CBD products, such as CBD-infused foods or dietary supplements. So, before you start selling CBD or invest into a CBD company, do your research on the states where you will be producing and selling product; you could be violating state criminal laws.
The FDA doesn’t regulate CBD products
Although the 2018 farm bill removed hemp and the cannabinoids derived from hemp from the purview of the CSA, the 2018 farm bill expressly preserves the U.S. Food and Drug Administration’s (FDA) authority to regulate food, dietary supplements, cosmetics, and drugs, including those that contain hemp ingredients. The FDA’s position is that THC and/or CBD cannot lawfully be added to food or marketed as dietary supplements. To date the FDA has sent warning letters to several CBD companies expressing this position and requesting corrective action. Therefore, although the FDA is accepting public comment and is holding a hearing to evaluate alternative approaches for regulating CBD products, the agency currently has jurisdiction over food, supplements, cosmetics and drugs containing CBD and continues to disseminate warning letters to CBD manufacturers for violating federal laws and regulations.
CBD is non-psychoactive
CBD is often marketed as the non-psychoactive cousin of THC. This is misleading. Research has indicated CBD has antipsychotic, anxiolytic (anxiety-reducing), and antidepressant effects – clearly demonstrating that it is a mood-altering substance (i.e., psychoactive or affecting the mind or behavior). It would be more accurate to say that CBD lacks the intoxicating effects of THC. From a legal perspective this matters because making deceptive claims in advertising is illegal and can result in serious consequences. Section 5(a) of the Federal Trade Commission Act prohibits “unfair or deceptive acts or practices in or affecting commerce.” We have seen the FTC jointly send warning letters with the FDA to a number of CBD companies and ongoing litigation surrounding the marketing of CBD products demonstrates there is meaningful risk that false or misleading label claims can create a cause of action for fraudulent inducement.
CBD has no side effects
There is increasing evidence that CBD has side effects and may interact with other medications, such as the anticoagulant warfarin, especially at high doses. The FDA has identified several safety concerns associated with the consumption of certain CBD drug products, including potential for liver injury, somnolence, lethargy hypersensitivity, decreased appetite, diarrhea and sleep disorders. FDA further noted that the potentially serious risk of liver injury can be managed through medical supervision, but questioned how effectively this particular risk can be managed in the absence of medical supervision and FDA-approved labeling. While more research is necessary to better understand the impacts of long-term CBD use at various levels, blanket claims that CBD has no side effects may provide false and misleading information to consumers.
CBD can be freely included in pet products
Although CBD products are widely marketed for pets, there are currently no hemp (or CBD) ingredients that have received express FDA approval for use in animal products. The FDA cooperates with the Association of American Feed Control Officials (AAFCO) for the implementation of uniform policies regarding the regulation of animal feed products, and although the FDA does not recognize animal supplements as its own regulatory category (it either classifies such products as food or drugs), the FDA’s policy has generally been to exercise enforcement discretion, allowing animal supplements where stakeholder groups such as the National Animal Supplement Council (NASC) permit them. At present, neither AAFCO nor NASC permits the use of CBD in animal products. While NASC’s position on the use of hemp ingredients in “dosage-form products” as of January 30, 2019, is that hemp is allowed in dosage form products (i.e. supplements) provided it doesn’t contain CBD concentrates, isolates, or synthetics, and the THC content is 0.3% or less, AAFCO has not approved any hemp ingredients for use in animal feed. As with human products, risk of enforcement and regulatory scrutiny is increased where products make any disease claims, where products are marketed as containing “CBD,” and where products are advertised widely in interstate channels. In addition, a product may be considered misbranded if its labeling is false or misleading in any way or fails to include required information.
Due to the highly nuanced nature of cannabis regulation, the infancy of the domestic legal industry, and the constantly changing regulatory landscape at both the state and federal level, businesses must be sure to stay informed, educated, and vigilant.
2 – Grayson, L., Vines, B., Nichol, K., Szaflarski, J. P., & UAB CBD Program (2017). An interaction between warfarin and cannabidiol, a case report. Epilepsy & behavior case reports, 9, 10–11. doi:10.1016/j.ebcr.2017.10.001
3 – Scientific Data and Information About Products Containing Cannabis or Cannabis-Derived Compounds; Public Hearing; Request for Comments 84 Fed. Reg. 90, 12969 (April 3, 2019) (to be codified at 21 C.F.R. pt.15).
4 – Id.
5 – Hemp and CBD in Pet Supplements Weaves Same Tangled Web as in Products for Humans (Jan. 31, 2019), NUTRA ingredients-usa.com
Charlie Alovisetti, Vicente Sederberg LLC
Charles Alovisetti is a partner and chair of the corporate practice group at Vicente Sederberg LLP based in Denver. He assists licensed and ancillary cannabis businesses with corporate legal matters, and he has experience working with clients on a broad range of transactions.
Courtney Barnes and Corey Cox are associate attorneys in Vicente Sederberg LLP’s Denver office. They both aremembers of the firm’s hemp and cannabinoid practice group, where they focus on policy, regulatory compliance, and risk management in the hemp space.
VIDEO: Innovation In Cannabis Science And Technology
The cannabis industry is full of scientific and technological advancements. Join the movement and register for one of our upcoming events so you can see it for yourself.
Hear more from these NCIA Members about the amazing industry we are innovating together:
Plus, check out our event calendar and get your team registered!
Not yet a member of NCIA?
Stay up to date about the rapidly evolving landscape by networking with nearly 2,000 member companies who are part of a movement to build a responsible industry.
Progress on the SAFE Banking Act in the House and Senate
Less than two months ago, H.R. 1595: the Secure and Fair Enforcement (SAFE) Banking Act was marked up by the House Financial Services Committee, where it passed out of committee by a margin of 45-15. While the bill must still come to the House floor for a vote by the full chamber and then be taken up by the Senate, let’s take a look at where the bill currently stands.
As a refresher, the SAFE Banking Act would prevent federal banking regulators from punishing banks for working with cannabis related businesses that are obeying state laws or halting their services, taking action on loans made to those businesses, or limiting a depository institution’s access to the Deposit Insurance Fund. The bill would also protect ancillary businesses that work with the cannabis industry from being charged with money laundering and other financial crimes, and requires the Financial Institution Examination Council to develop guidance to help credit unions and banks understand how to lawfully serve cannabis businesses. In the House, the legislation was introduced by Reps.Ed Perlmutter (D-CO) and Denny Heck (D-WA), while the Senate bill was introduced by Sens.Jeff Merkley (D-OR) and Cory Gardner (R-CO).
When the House version of the SAFE Banking Act was introduced in March, you’ll remember it had a historic 108 original cosponsors. As of the beginning of May, the legislation currently has a whopping 172 cosponsors, with 17 members getting on the bill in April alone.
The Senate version of the SAFE Banking Act (S. 1200) was introduced in April with 21 original cosponsors. Currently, the bill is up to 25 cosponsors – that’s a quarter of the entire Senate! Notably, there are six Senators who are running for President in 2020 that have signed onto the legislation.
In addition to gaining more cosponsors in both houses of Congress, other government officials have also thrown their support behind the bill. In April, 27 state banking supervisors signed a letter addressed to congressional leadership that stated, “We urge Congress to consider legislation that creates a safe harbor for financial institutions to serve a state-compliant business or entrusts sovereign states with the full oversight and jurisdiction of marijuana-related activity.”
Even with all this progress and positive signs for the future, we still have some roadblocks in our path to ensuring this legislation crosses the finish line during the current session.
In the House, Republican support is still lagging despite bipartisan original sponsorship. With Republicans making up only 11% of the current cosponsors, we still have much work to do convincing the GOP members of the House to support this sensible legislation.
In the Senate, we will need all the support we can get in Congress to overcome the objections of a key committee head, Sen. Mike Crapo (R-ID), who is the chairman of the Senate Banking Committee. Sen. Crapo will determine whether the SAFE Banking Act can get its first hearing in the Senate, and his recent statements at a conference hosted by the Independent Community Bankers of America (ICBA) that this issue should be left to the Department of Justice highlight the need for us to keep building consensus and momentum to convince him otherwise.
Essentially, we’ve come farther than many thought we would, but there is still much work to do, and we want you to join us!
In just two short weeks, hundreds of cannabis industry professionals from all over the country will descend on Capitol Hill this month for the 9th year in a row for NCIA’s Annual Lobby Days. It’s more important than ever before to make your voice heard and advocate for the federal reforms our industry needs to truly thrive. Whether it’s access to banking for your business, much-needed federal tax reforms, or some of the many other struggles faced by our industry that could be remedied by congressional action, we need you to tell your stories on Capitol Hill with us on May 21-23. See you there!
Apply For A Scholarship to #CannaBizSummit Before May 15!
In an effort to create a more diverse and inclusive industry, we are thrilled to announce the partnership between NCIA and the Minority Cannabis Business Association has opened applications for its scholarship fund for qualified cannabis executives. Throughout the years, MCBA has consistently gone above and beyond to create equal access and economic empowerment for the communities most affected by the war on drugs.
NCIA is excited to have the opportunity to offer 60 applicants a complimentary pass to join us at the 6th Annual Cannabis Business Summit & Expo this July 22-24 in San Jose, CA. If you are a minority in an executive cannabis position, please take a moment to fill out the application. We look forward to seeing you in San Jose!
The scholarship application period closes on May 15, so get your application in today!
Applications are due by Midnight PST, May 15, 2019. Awardees will be notified on June 1, 2019. Scholarship recipients will receive complimentary passes to Day 1 and Day 2 (July 23 & 24) of the Summit. Access to workshops and tours taking place on the Pre-Conference day (July 22) will need to be purchased separately. Scholarship recipients will also need to cover & arrange their own travel and lodging needed to attend the event.
Member Blog: Put Your Cannabis Products to the Test – How Companies Can Work Closely with Labs to Maximize Efficiency and Quality
Laboratory testing regulations for the cannabis industry have been consistently inconsistent, leaving companies struggling to adapt. In the early stages of California’s legal medical marijuana market, labs limited testing to potency, disregarding purity, which put patients at risk. When California legalized adult-use, regulators drastically and rapidly increased testing requirements and purity standards, leaving many producers struggling to adapt.
But despite the frustrations that may arise from convoluted cannabis testing requirements imposed in many states, it is essential that the growing adult-use and, of course, medical cannabis industries ensure that their products across the board are reliable, safe, and pure – free of contaminants such as heavy metals, mold, and synthetic pesticides – and that levels of THC and CBD are accurately labeled.
Companies can prepare for more stringent rules, while being confident in both the purity and potency of their products, by selecting a trustworthy lab to fit their needs, and by developing a lasting relationship with that lab. Once a brand has chosen a lab that they are comfortable with and whose results have proved to be credible, it’s important to stick with that lab rather than play the field.
The first step is to develop a thoughtful selection process to find a lab that best fits your company’s needs and goals. Take the time to meet with various lab teams and have in-depth conversations about their experience, equipment and technology, and operating strategies employed to test for product quality, purity, and safety. This is not the time to take shortcuts, nor should you base your lab choice solely on price and turnaround time. With regards to the latter, a great lab may need a week or more to thoroughly test a product and confirm its purity and potency. The lab is simply doing its due diligence to ensure a company can be fully confident in the products they put forth in the marketplace.
Once you’ve chosen a lab that will work best with and on behalf of your business, consistently stay in touch with the lab team. Build relationships with account representatives so they can fully understand your products, so you can understand the progress the lab is making throughout the testing process, and together be fully prepared to address any issues that may arise. For instance, if there is an expected delay, companies who have stayed in regular contact with their lab of choice can be ready to prevent problems relating to supply chain and inventory.
Fostering a strong relationship with a reputable, objective, third-party lab is another way for brands to distinguish themselves from the pack within the legal market, and to encourage consumers to forgo the illicit market and instead place their trust in high-quality, licensed products that have been properly tested. Companies can add test results to their product labels and their websites for full transparency.
By carefully selecting a lab and learning to seamlessly work together, brands can not only adapt to stricter testing requirements, but can potentially use the increased regulations to their advantage by establishing consumer confidence and by going above and beyond regulatory requirements.
Dr. John Oram, Ph.D., is CEO & Founder of NUG, an Oakland-based, vertically-integrated cannabis company with strong historical growth and performance. Founded in 2014, NUG continues to expand and diversify its portfolio, which includes world-class R&D, state-of-the-art cultivation, extraction, and distillation facilities, one of California’s largest wholesale cannabis distributors, and the new, unparalleled NUG retail store experience. Follow NUG on Facebook,Twitter, Instagram and YouTube.
VIDEO: The Benefits Of Legalization
In this third installment of NCIA’s animated educational video series, we explore the benefits of legalizing cannabis nationwide and beyond. Learn how ending federal prohibition can improve public safety and add economic opportunities to our communities, and how you can help.
Join NCIA today help us push cannabis reform past the tipping point!
WEBINAR: How to Approach Your Local Government – What You Don’t Know Could Hurt You!
Discussing cannabis and approaching government officials can both be daunting, but with a little knowledge and confidence, both can work together quite well!
Join members of NCIA’s State Regulations committee to get guidance and your questions answered so that you can be your best and help your community at the same time.
NCIA’s State Regulations Committee examines and reviews the varying cannabis industry-specific statewide regulations and work to establish best practices or guidelines for states and municipalities to facilitate the development of regulations and compliance procedures.
10 Noteworthy #CannaBizSummit Speakers
Over the past five years, cannabis industry professionals, policy makers, advocates, and entrepreneurs have convened to network, learn, and discover at the NCIA’s Cannabis Business Summit & Expo. As the industry continues to rapidly evolve, getting accurate and relevant information from experts in the field becomes increasingly important for the success of your business.
Fortunately, as the cannabis industry’s largest national trade association, NCIA is able to convene the industry’s leading experts to share their knowledge about issues from cultivation best practices to technology breakthroughs. Don’t miss these 10 noteworthy speakers at this year’s 6th Annual #CannaBizSummit!
Shanita Penny, M.B.A. is an internationally recognized cannabis advocate, management consultant, and entrepreneur with extensive experience helping Fortune 500 companies and startups solve complex issues and improve business performance. In 2015, she founded Budding Solutions to change the perception of cannabis on a global scale. Shanita has supported and coached cannabis advocates, business professionals, entrepreneurs, and policy-makers throughout the country to get results. She works with clients to create and grow compliant, successful cannabis businesses and empower them to positively impact the burgeoning cannabis industry and communities.
Alex Cooley is the co-founder of Solstice, through his diligent efforts they created first ever fully permitted cannabis production facility in Washington State. From inception, Solstice’s goal has been to cultivate the highest quality, most beneficial varieties, including the award winning, CBD-rich Sour Tsunami #3. In addition to this he has helped to author the “collective garden model” of safe, legal access for medical cannabis patients in 2011. As part of Alex/Solstice’s mission to be a positive catalyst in the cannabis industry and offer a new message about cannabis, Alex uses environmentally responsible practices, serves as an adviser to Washington State, and continues to advocate for patients’ rights.
Brittny, a co-founder and Director of Operations of The Cannabis Conservancy, grew up in Canada’s cannabis capital, Nelson BC. In 2018, she was elected to serve as a Councilor for the City of Nelson. She has had a lifelong interest in the cultivation and legalization of Cannabis. Her interest in corporate environmental practices was reinforced while working in Canada’s oil sands with a small contractor at Suncor, the first company to develop the oil sands, which inspired her to pursue an internship on Vandana Shiva’s seed saving farm in India and an M.Sc. in Environmental Science and Policy. Brittny has led teams in product development, service procurement (multi-million-dollar service contracts), sales, and communications.
Prior to joining Simplifya, Amy served as the VP of Marketing for COHN, and led its dedicated cannabis division, COHNNABIS, which she helped to launch in 2016 and grow into one of the most respected marketing agencies in the industry. During that time, she worked closely with clients across multiple cannabis verticals from infused products and dispensaries to B2B ancillary service companies including Surna, Seed & Smith, Canna Advisors, Papa & Barkley, Next Frontier BioSciences, Verra, General Cannabis and more.
Sabrina Fendrick is the Director of Government Affairs for Berkeley Patients Group (BPG), the nation’s oldest, continuously operating dispensary in the country. She has over ten years of political, industry and advocacy experience as a cannabis professional and currently works to engage political and industry stakeholders in California regarding cannabis policy on both a state and municipal level. Sabrina works on the development of local ordinances, legislation, and regulations, and in early January 2018, led the notably successful effort to cut Berkeley’s local adult-use cannabis tax rate in half. Before her arrival at BPG in 2015, she spent seven years at the Washington D.C.-based National Organization for the Reform of Marijuana Laws (NORML).
Chanda Macias, PhD, MBA is the CEO and owner of National Holistic Healing Center (NHHC), the leading medical marijuana dispensary in Washington DC. Dr. Macias has spent 15+ years developing knowledge of medical marijuana impact on patients. Under her leadership, NHHC has earned $6.5M in annual revenues in 3 years with 98% retention, and adding 100+ new patients/month. Dr. Macias contributes growth to the market through education on ailment strain alignment, aligning a medical marijuana strain with a specific condition or ailment.
Ben Curren is the CEO and founder of Green Bits, the nation’s leading compliance and retail management platform for the legal cannabis industry. Green Bits helps legal cannabis retailers run compliant, operationally efficient and growing stores. The platform serves approximately 1,000 cannabis retailers across 12 states and processes over $2.5 billion in sales annually through its point-of-sale platform. Before Green Bits, Ben co-founded Outright in 2008, an accounting program for freelancers and consultants. Four years later, he sold Outright to GoDaddy, the giant web-hosting company. Ben believes that you must understand why things are the way they are before you can successfully change them.
Ian Stewart is a partner and co-chair of Wilson Elser’s national Cannabis Law practice. Leveraging his 20 years of legal experience, Ian helps clients navigate the challenging new risk management, business practices and insurance landscape presented by the rapidly developing area of Cannabis Law. Ian helps traditional and new organizations prepare for regulatory changes and liability trends whether dealing with regulatory compliance, product liability risks, defense of false advertising and unfair competition claims, professional liability risks, brand protection and obstacles to protecting intellectual property, assisting startups with novel risk management methods, or insurance coverage problems created by conflicting state and federal laws.
Michael Cooper is the Co-Founder and Managing Member of MadisonJay Solutions LLC, a leading regulatory advisor to the adult-use cannabis industry that helps businesses understand the latest rules and build effective compliance infrastructure to address risk. Michael draws on his time as General Counsel of MHW, Ltd. and prior regulatory law practice where he designed compliance programs, advised on regulatory risks for mergers and financings, and defended companies before regulators. He is a graduate of Harvard College and Harvard Law School, clerked on the U.S. Court of Appeals for the Fifth Circuit, and practiced at Cravath, Swaine & Moore LLP.
Andrew Kline joined NCIA as Director of Public Policy in early 2019 to lead substantive public policy efforts, striving to prepare and protect the state-legal cannabis industry. Kline also served as Chief of Staff and Senior Advisor for Intellectual Property Enforcement in the Executive Office of the President [Obama] where he led public-private partnership and public policy efforts.
Don’t miss your opportunity to network and learn from the industry’s leading experts at the most influential, award-winning cannabis trade show in the U.S. – NCIA’s #CannaBizSummit. See you in San Jose!
As outside industries fuse with the cannabis market, we will begin to see innovations that will flesh out our understanding of cannabinoids and how they interact with the human body. I had the opportunity to sit down with chemist Dr. Mark Scialdone and Chris Barone, founder and lead chemist at The Clear™ to discuss the introduction of semi-synthetic cannabis compounds to the market. We focused on hydrogenated cannabinoids; cannabis with a slight twist that could change everything about why and how we consume cannabis.
Hydrogenation is simply treating a compound with hydrogen, which causes a chemical reaction between hydrogen (H2) and another compound or element, usually in the presence of a catalyst such as nickel, palladium, or platinum. This is done in order to reduce or saturate organic compounds, imbuing them with properties the original compounds did not have. These cannabinoid analogues (or semi-synthetic compounds) have a number of applications in manufacturing and medicine.
Hydrogenation is a minor modification to the natural framework of the compounds the cannabis plant produces biologically. Barone describes the process as, “adding hydrogens across the double bonds, thus changing the molecular weight, the molecules geometry, and also its effects on the body.”
Benefits of Hydrogenated Cannabinoids
A major benefit to hydrogenation is that it offers stability at the molecular level, assisting with both shelf life, and resistance to heat. Scialdone explained, “hydrogenation is a chemical transformation on unsaturated compounds to improve their stability and resistance to thermo-oxidative breakdown,” – which occurs when these compounds are in the presence of air. This is the reason you cannot leave cooking oils on the counter exposed to sunlight, as eventually this reaction will cause them to go rancid. Hydrogenation improves the oxidative stability by removing the unsaturation.
Based on a study referenced in Scialdone’s patents (US10071127B2 & US9694040B2), the effects of cannabinoids and hydrogenated cannabinoids were examined, in reference to tumor growth in mice. In these cases, the hydrogenated cannabinoids showed significant improvement in the reduction of tumor sizes; with Hexahydrocannabinolic Acid (HHCA) at a 39.70% reduction, and HCBDA at 55.83% reduction (compared to the non-hydrogenated compounds THCA at 37.67% and CBDA at 47.02%) (source). It’s possible that hexahydrocannabinoid (HHC), being more stable than tetrahydrocannabinoid (THC), and less prone to dehydrogenation (converting to DHC and CBN), may have an impact on resistance towards oxidative metabolic breakdown in the liver, though there is no critical examination at this time. It has been observed in metabolic studies that hydrogenated compounds are resistant to this kind of breakdown, suggesting that hydrogenated cannabinoids may exhibit this trait as well.
Image: Cannabinoid Structures
Difference Between Natural and Semi-Synthetic Cannabinoids
There is still much research to be done to define the exact pharmacological differences between hydrogenated and their plant-derived cannabinoids, but the chemical differences are quite distinct. “Tetrahydrocannabinoids like THC are metabolized into the 11-Hydroxy-THC-metabolite and ultimately the nor-carboxy-THC-metabolite; because we’ve converted the THC to HHC, metabolites will differ from the ones derived from THC,” explained Scialdone. Thus, they will have a different pharmacokinetic profile because the metabolites are going to be different in hydrogenated compounds. Meaning, the hydrogenated compounds could have a longer half life and bind to different receptors within the ECS.
A study published in the Journal of Medicinal Chemistry evaluates the ability of various cannabinoid analogues to modulate the production of reactive oxygen intermediates (ROI) various metabolic functions as well as their binding capabilities to the cannabinoid receptor (CB1). It was found that hydrogenated CBD and Cannabidiol-dimethylheptyl (CBD-DMH) demonstrated bioactivities different from their original compounds (source). The study focused on the anti-inflammatory and immune responses that have been previously observed in the non-analogue compounds. To compare the hydrogenated cannabinoids, they observed the derivative compounds for their ability to suppress the production of ROI, nitric oxide (NO), and tumor necrosis factor (TNF-⍺) by activated macrophages in vitro. Some of the compounds (7 and 4) exhibited an increase in their suppressive effects of NO, TNF-⍺, and ROI. Compounds 7 and 8 are strongly bound to the central cannabinoid receptor (CB1), but with an opposite effect on their ability to modulate the release of inflammatory mediators. When compared to the effects of natural cannabinoids, it is noted that isolated cannabidiol (CBD) also has tumor growth suppressive qualities, with similar functions of hydrogenated CBD (source). The distinction between the two is the bioavailability and slow breakdown of the hydrogenated compounds, however more research is required.
Image: Chemical Structure of Cannabidiol Derivatives
The JMC study concluded, hydrogenated cannabinoids exhibited good binding to CB1, but have varying effects on inflammation – which could spring opportunities for anti-inflammatory and immunosuppressive properties in murine collagen-induced arthritis, as suggested by the Ben-Gurion University. This is because the hydrogenated cannabinoids seem to have a strong effect on hyper-inflammation, which would reduce pain and swelling of the joints.
Public Health and Safety
When dealing with new compounds, it is crucial that health and safety are considered. “We will want to look at what impacts the hydrogenation has on the metabolic profile, and whether or not the hydrogenation is having a beneficial impact on biological actions with the cannabinoids,” explained Scialdone.
It will still take a few years for a product like this to be available to the public. Although the market may see hydrogenated cannabinoids present in medical and recreational states sooner, extensive research on these compounds will remain difficult under current federal laws. The Federal Analog Act states any substance derived from a schedule I or II substance will be treated as the same schedule substance when its purpose is for human consumption. “Pseudo-synthetic cannabinoids should be allowed in my opinion,” Barone adds, “but only through close analysis of the SOPs and quality control conditions. In states where they do not have the resources, I believe manufacturers should be mandated to hire third-party chemical manufacturers to audit and approve the techniques being used.”
Image: Crystalized HHCA Captured by CM Botanical
Research in this arena will provide greater understanding as researchers gain further understanding about hydrogenated cannabinoids and their impact on the human body. Barone pointed out, “I’d like to emphasize that the human interaction with this molecule is the driving force of the progression. Without the idea and the human, the molecules sit untouched and unexplored.” Utilizing the unbound creativity of science, the cannabis plant has more to offer than we once knew.
Courtney Maltais is co-founder and lead biologist at The Clear; a California-based extract company that brought the first Cannabis distillate to market in 2013. Maltais works with industry leaders in cultivation, manufacturing, and product development to create efficient, safe, and standardized lab practices. Her passion for science and education has led her to expand into educational outreach for both business owners, employees, and consumers alike.
NCIA’s Scientific Advisory Committee is comprised of practicing chemists and other scientific field professionals to advise other NCIA committees as they work to develop standards and guidelines for the various sectors of our industry, ensuring that any formal recommendations produced by other NCIA committees are scientifically sound, sustainable, and legitimate.
Committee Blog: Accurate Pasteur Pipette or Grandma’s Turkey Baster – Cannabis Dosing
by NCIA’s Infused Products Committee; contributors Todd Winter, Ashley Hansen, Danielle Maybach, Lee Hilbert, Trevor Morones, and Greg Scher
Where is cannabis in the journey of dosing edibles?
Edibles are growing as a market share only behind concentrates. It is essential to have accuracy across the industry to protect human health and stabilize the consumer market. Potency, homogeneity, absorption rate, interpretation of dose (by State, County, International), percentage error/variance, labeling, and source of raw materials are just some of the items always questioned.
While we are discussing this issue, there will be no right answer for everybody. What is the dose? What is a serving? A check of an operator’s shelves will show chocolate bars with 800 mg of THC and a similar sized bar with 80 mg of THC. If you walked off the street and bought the 800 mg bar with only experiencing the 80 mg bar; you are in for a trip, and not a good one.
BDS Analytics’ GreenEdge Retail Tracking Platform as presented by Tamar Maritz in February had shown that when California consumers purchased cannabinoid products in 2018, they often want to know the CBD and THC content.
Label requirements vary state by state on the THC side and are often inaccurate both in the reporting of potency and the way they are displayed on CBD products. Extracts used as raw ingredients in product formulation come in various forms, it is important for the manufacturers to know the percent of actual CBD or THC when making purchase decisions. CBD extracts can be in the form of isolates with low bioavailability, or full spectrum which means the cannabinoid retains more of the plant’s original components.
Additionally, there are infused products, where the flower is extracted by an infusion into an oil, retaining even more of the original cannabinoid profile. All these extracts have specific formulation and labeling nuances that need standardization. The medical community wants even more specific terpene profile information as individual levels of Limonene, Myrcene, and other terpenes gain recognition for properties that have some additional benefit.
Do the terpenes solely earn the credit for their benefits or is it in combination with the other chemical compositions?
There are many ways to add cannabinoids into edibles; for example, when developing cannabis-infused products, are the manufactures using the “sprinkle” method to add the raw material/additive by literally sprinkling isolate? Are they using a pipette for exact measurement from a reputable supplier that is approved for food contact having been third-party audited, or a turkey baster from grandma’s kitchen utensil drawer which has seen some years? Methods abound!
Perhaps the most accurate method to create a homogenous product is to incorporate the raw material during the mixing step; before cooking, gassing (CO2), or pasteurization. Not everybody that starts an edible factory comes from the food or pharmaceutical industry. A standard serving size or dosage, whichever you prefer, could make life easier for all stakeholders with a few exceptions. As yield models mature for extraction, markets will adjust, and prices can stabilize based on real data.
In Iowa, they have just legalized for medical use, but the flower is not legal. It is 100% treated as a drug. Any product needs to have no more than 3% THC to be permitted. We can’t forget our colleagues dealing with burdensome regulation. I doubt they can measure with turkey baster there, and if we saw a manufacturer in Iowa, we would probably see a pipette. Consensus on a dose can help elected officials know more and lift heavy restrictions.
Caffeine, like cannabis, is a naturally occurring alkaloid in 60+ plants. Cannabis produces THC and CBD, which are cannabinoids. The next step for the industry in supporting cannabinoid dosing of THC and CBD or any other cannabinoid is to increase general public recognition, routine toxicology studies, and develop appropriate data and work methods to obtain public recognition or certification for food safety, public safety, and documentation.
In the United States caffeine, when in soda, is limited to 65 mg per 12 liquid ounces of beverage. In pill form, the FDA allows 200 mg of caffeine. While this is about THC/CBD, the parallels are plain. While the Cannabis industry addresses dosing challenges are many. Stakeholders composed of consumers, operators, manufacturers, laboratories, distributors, and regulators would like to see the order in the industry.
The Federal Government does not yet consider cannabis as a food additive that is “Generally Recognized as Safe (GRAS).” Caffeine, a GRAS substance under current regulation, attained status under industry practices over 60 years ago. Within our industry, GRAS is not a deeply-rooted measurement for quality or safety standards. Cannabis has no history of being hazardous when infused in products and defining a serving, or a dose should not impact the operations of notable brands that provide excellent food safety and quality.
Each consumer (patient or recreational user) has their personal approach to cannabis dosing based upon their due diligence. Manufacturers are producing THC and CBD products that range from “micro-dose” to “mega-dose” because they understand that no one standard dose is the right for every individual.
Consumers look at labels to determine which product to buy. Manufacturers rely on testing to confirm THC and CBD content. CBD and micro-dose product categories are trending; unfortunately, many laboratories are not equipped to test CBD products accurately and consistently. THC Micro-dose products have similar problems. Not all laboratories have equipment that can report trace amounts accurately. Homogeneity, labeling, and raw ingredient sourcing are opportunities for manufacturers to set themselves apart to the retail operators in a wide-open market. Let us collectively work together towards clarifying the issue and work with all the stakeholders to define for the public some language that can be understood by all, encourage federalization, and develop a standard of excellence.
NCIA’s Infused Products Committee (IPC) focuses on edible and topical products, reviewing existing business practices and state regulations. Regulation of these products is the IPC’s initial key focus, but the committee’s purpose is to ensure the infused product sector is helping shape its destiny, rather than being driven by differing jurisdictional regulations. The IPC is also working with the Policy Council and Council on Responsible Cannabis Regulation (CRCR) to develop standardized regulations for legislators and regulators to adopt as their states legalize the industry.
Member Blog: Weighing the Options for Cannabis Facility Construction
As more investors consider the cannabis industry as a growth market, the need for cannabis cultivation facilities, processing centers and dispensaries is projected to rise to keep pace with demand.
A report from New Frontier Data projects that by 2020 the legal cannabis market will create more than a quarter-of-a-million jobs. These are more than the jobs expected to be created from manufacturing, utilities or even the U.S. government, according to the Bureau of Labor Statistics.
Forbes magazine estimates that medical marijuana sales are projected to grow to $13.3 billion by 2020. With this growth will be the need for quicker, cost effective construction with investors likely to consider the remodeling option.
There is value in remodeling the interior design of existing abandoned or non-productive buildings into state-of-the-art cannabis facilities that can be brought to life quickly and on-budget so that the facility becomes a new source of jobs and tax revenue for the area. This is a popular option for investors looking to tap into the burgeoning cannabis market.
Cannabis businesses have to keep track of many moving pieces in the name of compliance, growth and sustainability. Industry experts are seeing value in integrating processing and cultivation at the same site, which can open the door for better quality control. A well-designed cannabis process goes far beyond just extraction; it overlaps heavily with cultivation on the front-end and product development on the back-end.
Security is a growing issue for cannabis dispensaries, cultivation and processing facilities. According to Security Sales & Integration magazine: “Once the products reach the warehouse or dispensary shelves cannabis companies rely on advanced security systems including visual and audio surveillance to protect their valuables and even their license. In order to prevent diversion of product, most state cannabis regulations require growers, storage facilities, processors and dispensaries to have advanced video security systems.”
Cannabis facility building contractors are charged with integrating top level security measures into their renovation. This is not only relevant to cultivation facilities, but also processing facilities and dispensaries. This builds confidence with clients and investors.
When building a cannabis cultivation facility, it is critical to understand that local codes are constantly changing as local building and fire departments try to keep pace with the rapid rate of changes in the industry. Rather than try to wade through these regulations, it is important to consult with a contractor who is experienced in the industry and is current with the latest changes.
Here are a few examples of buildings remodeled into high end cannabis facilities:
CFC renovated a 5,200 square-foot dispensary in Morris, Illinois that evokes old world charm, including a bar that originally was constructed in the Anheuser-Busch pavilion at the 1893 Chicago World’s Fair. The dispensary was originally the Rockwell Inn.
According to Mitch Kahn, CEO and founder of Grassroots, a national leader in medicinal cannabis, “It really is just a neat building with character that we wanted to keep, from the tin ceiling to the bar that’s over 100 years old, and retrofit it to our purposes. We saw the promise of remodeling an old building and turning it into a modern facility.”
A remodeled 40,000 square-foot cultivation facility in Illinois that was formerly a roller skate manufacturing facility. The facility was positioned in an Enterprise Zone that saved the dispensary owner more than $300,000.
Investors looking to build cultivation, processing and dispensary facilities, particularly in controlling construction costs, should:
Know there is an art and a science to converting raw materials of cannabis and finished products so any construction must meet all state regulations and local fire and safety codes.
Find a partner that can manage security infrastructure and planning as well as permitting and compliance support. It is critical to balance safety and customer-engagement.
Hire general contractors that will work on a fixed sum in lieu of a percentage of construction. This is especially important when it comes to a partner who will closely watch trade contractors to ensure they provide the best possible solutions, taking into account time and money.
Work with a partner that will watch their back from a relationship standpoint, not just the transaction.
Albert Marks is Client Relations Manager for Cannabis Facility Construction based in Northbrook, Illinois. Albert currently works with clients in three states, including Illinois, Wisconsin, and Massachusetts. Marks draws on his extensive knowledge of social media and digital marketing. He oversees the company’s blog, LinkedIn, Facebook, Instagram, and Twitter profiles. Marks is trained in using the SalesNexus CRM software, which he has used to make connections while working with clients, industry partners and trade partners in the residential, commercial, retail, restaurant, exterior and cannabis verticals.
Member Blog: Doing More With Less – Ways To Expand Yields, Save Money, And Keep Quality
As the cannabis industry continues to expand, commercial growers are looking for new and cost-effective ways to get a competitive edge in an increasingly crowded market.
The persistent and ever-growing demand for cannabis products has industry professionals wondering how they can increase their production levels and maintain quality while remaining profitable. Simultaneously, the price of cannabis continues to drop yet operational costs facing growers remain the same — this combination undoubtedly limits the ability to make much-needed investments or updates to their facilities. While the answer may be different for each grower, evaluating a few key areas may lead to increased production without the skyrocketing expenses.
What are some of the best ways to cut down on costs without inhibiting quality? Start by asking the right questions.
Which Lights Provide the Right Intensity, Spectrum, and Efficiency for Your Grow?
It can’t be emphasized enough that lighting plays an integral role in the success of any harvest. When growing indoors, agriculturalists lose exactly what plants need to survive: the sun. LED lights that produce the appropriate light spectrum and intensity can be a (sometimes superior) replacement for the sun.
When used effectively, LEDs can mimic the changing of the seasons — thereby allowing horticulturalists to hasten flowering or encourage dormancy. They’re able to change the appearance, potency and size of the plant. Spectral tuning gives cultivators control over the timing of the plant’s natural life cycle and the resulting harvest, supporting the conclusion that LEDs are the optimal lighting choice for growers seeking higher production levels in a shorter amount of time.
LEDs deliver numerous other time- and money-saving benefits to commercial growers, including:
Energy efficiency – LEDs are an environmentally friendly and sustainable choice for horticulturalists looking to cut down on energy costs — easily surpassing other lighting technologies in this realm.
Cooler running temperature – They runs at a much cooler temperatures than most other options. This means that, even with several LED fixtures delivering bright, intense light, horticulturalists don’t have to worry about burning their plants.
Durability – Lights need to survive a high-demand, busy and ever-changing commercial grow environment. Some lights include especially durable features, such as tempered glass LED chip covers and industrial-grade aluminum — they’ll last for years while also giving growers peace-of-mind.
What Can Be Vertically Accomplished?
Vertical farming has revolutionized the way we think about indoor agriculture. With the advancement of vertical racking, growers can amplify their harvests — sometimes multiplying their crops ten-fold — without having to invest in more square footage.
While this layout certainly isn’t a new idea in agriculture, it was more recently adopted by cannabis growers as some LED grow lights are now capable of being vertically racked. Many growers’ facilities have square footage limitations, whether due to budget or state law; building up, rather than out, offers the opportunity to drastically expand growing capabilities even in smaller spaces.
To keep your vertical cannabis garden in excellent condition:
Ensure your LED lighting fixture delivers uniform light intensity, so each plant gets the light it needs at every stage of growth to flourish.
Assess whether spectral tuning is appropriate. Some growers might opt for more adjustability so they have the greatest level of control when custom crafting their crop.
Make sure you have proper ventilation. This equalizes the environment of each tier and prevents the development of microclimates or condensation — which can lead to disease or rot.
Install moveable benches to easily rearrange and access each tier as needed.
This combination of technology and intelligent design expands the realm of possibility for cannabis cultivators who want to use their space more efficiently.
Which Cutting-Edge Growing Techniques Make a Difference?
It’s also important to explore what the individual cultivator can do to improve harvests and offset costs. After all, they’re the ones who handle the plants on a day-to-day basis, and best understand what they need to prosper. Their approach plays a central role in crop health.
Commercial cultivators are able to implement advanced growing strategies to produce healthier and more profitable plants:
Tissue culture cultivation – This innovative technique is relatively new to the cannabis industry, although it has been used since the 1950s to aid in orchid reproduction. The process involves immersing cuttings from a healthy, mature plant in different hormone solutions. Tissue culture cultivation allows growers to quickly develop several — up to hundreds — of genetically identical plants.
Consolidate veg and bloom rooms – Adjustable LEDs offer an easy solution for growers who want to use the time-saving “flower-in-place” approach.LEDs start by delivering gentle springtime light, and growers gradually ramp up the intensity to replicate the height of summer. This method prevents plants from being shocked when they’re moved from room to room, encouraging resiliency — and reducing the required square footage to get a healthy harvest.
The Bottom Line
Critics of indoor agriculture argue it’s too expensive. And in some cases, skeptics have a point — when approached incorrectly, indoor cultivators are indeed faced with expensive operational costs that may slash their profits. But this doesn’t always have to be the case. Advancements in technology and design, catalyzed by the creative minds leading the industry, are making indoor agriculture more realistic than ever — for any type of grower. Furthermore, indoor agriculture gives the individual grower ultimate control over the environment. One day, variables like unpredictable weather or changing seasons can be left behind. Traditional industrial agriculture results in soil degradation and pollution — moving indoors can help mitigate this negative impact on our environment. In addition, cultivators no longer have to use harmful pesticides, resulting in a healthier product for both the earth and the eventual consumer.
Andrew Myers is President and CEO of ProGrowTech, which helps commercial horticulture operations increase profitability, yield and energy efficiency with industry-leading LED lighting systems. For more information, visit progrowtech.com.
If increased consumer spending is any indication, April 20 has solidified itself as the ultimate cannabis holiday.
Average dispensary sales around last year’s high holiday experienced a 51% increase, beating 2017’s numbers by an impressive 30%. With more U.S. states having legalized cannabis since 2018, April 20 falling on a Saturday, and this year being Canada’s first as a legal nation, 420 is set to break even more records in 2019.
It’s not enough for cannabis retail owners to simply open the doors April 20 and wait for products to fly off the shelves. Everything from marketing and merchandising strategy, to ensuring your staff and operations are prepped, factor into how well your dispensary will perform. For cannabis retail owners wondering how to prepare for 420, Cova’s latest white-paper details 5 key ways to make April 20 your best business day all year:
Marketing Must-Haves: Customers expect dispensaries to offer deals and specials in celebration of the 420 holiday, but creative marketing is what helps bring the heat. For retail owners wondering how to boost sales on 420, learn how creative marketing initiatives can build early buzz, engage your customers, and take your sales from uptick to off-the-charts.
Prep Your Tech, Systems, and Processes: Is your POS ready for larger than usual weekend foot traffic? Find out which critical features your POS software should have to reliably and compliantly handle increased transactions, and how optimizing technology and store flow can help improve the customer shopping experience overall.
Square Away Inventory, Promotions, and Merchandising: On 420, dispensary owners have the opportunity to create an experience that’ll keep their customers coming back all year long. Discover how making key merchandising decisions on the sales floor and in the stockroom, and offering unique cannabis retail holiday promotions will make your 420 event unforgettable while also helping you move through inventory.
Empower Your Staff: Your dispensary team is invaluable, but especially so over the busy 420 weekend. Learn how communication, training, and the right technology can empower your employees, help them feel prepared, and set them up for success.
Review, Analyze, and Plan for Next Year: It’s never too early to start planning for next year. Discover why you shouldn’t procrastinate when it comes to reviewing and analyzing the 420 experience with your staff, how to make the conversation productive, and how to turn your findings into action items for next year’s 420.
Gary leads Cova’s charge into the legal cannabis space by guiding the vision, strategic development, ‘go to market’ plans and culture.
Before joining Cova, Gary was a principal in over a dozen tech start-ups in the mobile communications industry ranging from small VC funded companies to Fortune 100 firms, including Onavo, which was later acquired by Facebook. In those companies he led sales, marketing, business analytics and market expansions. He has also held a multitude of leadership roles with Verizon and AT&T.
Gary holds a degree in finance with a master’s in marketing from the University of Colorado.
Today’s SAFE Banking Act Committee Markup
[updated 11:00 AM ET, Thu March 28]
Today, H.R. 1595, the Secure and Fair Enforcement (SAFE) Banking Act of 2019, received a markup by the House Financial Services Committee and passed in a vote of 45-15. This is the first time in history that a cannabis banking bill has reached this point in the legislative process. As a reminder,a markup is the process by which a congressional committee debates, amends, and rewrites proposed legislation.
Now that the bill has passed out of the House Financial Services Committee, it will continue in the legislative process and be sent to the House Judiciary Committee. It is unclear whether or not the Judiciary Committee will waive its rights to the legislation. If the Committee does waive its rights, the SAFE Banking Act will then be referred to the powerful House Rules Committee before receiving a floor vote from the full House.
If you remember, HR 1595: the Secure and Fair Enforcement (SAFE) Banking Actwas just introduced in the House of Representatives by Reps. Ed Perlmutter (D-CO) and Denny Heck (D-WA) less than two weeks ago. In a stunning, historic surprise, the legislation was introduced with a whopping 108 original cosponsors, and that number has already risen to 151.
There were multiple amendments agreed upon by the committee, however, most were technical and required minimal change. Of note, however, included an amendment from Rep. Ed Perlmutter which would add provisions requiring the federal government to track and issue recommendations on how to expand financial services to minority-owned and women-owned cannabis businesses. Rep. Katie Porter (D-CA) also introduced an amendment that would provide the same protections to de novo financial institutions, which was agreed to. In addition, one of the bill’s lead sponsors, Rep. Steve Stivers (R-OH) offered an amendment that would give much needed clarity for insurers that wish to provide financial services in states that have legalized cannabis.
As a refresher, the SAFE Banking Act would prevent federal banking regulators from punishing banks for working with cannabis related businesses that are obeying state laws or halting their services, taking action on loans made to those businesses, or limiting a depository institution’s access to the Deposit Insurance Fund. The bill would also protect ancillary businesses that work with the cannabis industry from being charged with money laundering and other financial crimes, and requires the Financial Institution Examination Council to develop guidance to help credit unions and banks understand how to lawfully serve cannabis businesses.
Interested in helping with these efforts? You can:
Call your representative and ask them to cosponsor HR 1595: the SAFE Banking Act. If they’re already a cosponsor, thank them for their support. You can find out how to contact your member of Congress and find some helpful tips here.
Learn from expert panelists: Alena Rodriguez, Managing Director, Rm3 Labs; Garrett Cropsey, Project Manager, Canna Advisors; and Tiffany Coleman, Director of Quality, Copperstate Farms.
Without delving too much into the testing methodologies used, we discuss reporting limits and some reasons for variability in test results. We also discuss the basic terminology used in test reports, provide examples of test results, and show you how to read them.
This webinar is great for general audiences that want to learn more about why we test in cannabis, how to interpret test results, and how you can use results as a consumer or cannabis business.
The Scientific Advisory Committee (SAC) is comprised of practicing chemists and other scientific field professionals to advise other NCIA committees as they work to develop standards and guidelines for the various sectors of our industry, ensuring that any formal recommendations produced by other NCIA committees are scientifically sound, sustainable, and legitimate.
For a deeper dive into cannabis testing policy, download this report prepared by NCIA’s Policy Council, where we explore recommendations for cannabis testing policies including requirements for proficiency, contaminants, potency and active ingredients, as well as records retention and laboratory accreditation.
Member Blog: ‘Topsy-Turvy’ Is The Name Of The Game In Cannabis
Now you see it. Now you don’t. What’s in compliance today may run afoul tomorrow. And federal government wishes and whims continue to cast a pall over state operations.
In this topsy-turvy environment, cannabis purveyors need to be able to pivot on a dime. Everything from labeling requirements to product track-and-trace regulations can change quickly.
Recent events in Utah illustrate topsy-turvy in action. First, the electorate approved medical marijuana on the ballot last fall. Then, the state legislature stepped in and passed a bill that overhauls the provisions in an effort to tighten up controls. On Valentine’s Day, Fox 31 in Salt Lake City reported that all of Utah’s major health care organizations will show some love, allowing physicians to recommend medical cannabis. This report follows an announcement of another bill being introduced that would tweak the provisions of the just-passed law.
Still with me? OK, there’s more. In late February, Utah’s Daily Herald reported, “The Utah County Planning Commission decided Tuesday to delay a potential recommendation to amend land use ordinances to allow for cannabis production… The delay came at the request of Robert Moore, deputy county attorney, who asked for a decision to be delayed by three months in order to see if additional legislation on medical marijuana comes before the state this legislative session and to give time for the Utah Supreme Court to review a case questioning if the Utah Medical Cannabis Act passed in a special legislative session in 2018 or if the voter-approved Proposition 2 should be current law.”
The same day, Fox 31 reported, “An attorney representing a pair of groups suing the state over the new medical cannabis law is warning cities and counties that Utah is essentially creating a state-run drug cartel.”
Takeaways for cannabis purveyors in other ‘newbie’ states
Obviously, Utah has a lot of sorting out to do before anything gets solidified. However, this roller-coaster sequence of events can serve to educate (and warn) purveyors in other states where cannabis has been legalized to get and stay on top of all the latest twists and turns. Failure to do so can easily catch someone in a compliance shortfall that can threaten or even close down their business.
Get the right people in the right spots on the bus. Big-picture thinkers and cannabis companies go hand-in-hand. While innovative, expansive thinking can be critical to a successful company launch, detail-oriented thinkers are essential to oversee and develop effective policies and follow-through in every major department—including administration, operations, legal, accounting and marketing/branding. In a complex, rapidly-changing industry such as cannabis, being nitpicky is a major asset.
Find resources providing up-to-date compliance and regulation information. One helpful resource is a report entitled, “Cannabis Packaging and Labeling Regulatory Recommendations for States and Nations,” developed by the Council on Responsible Cannabis Regulation and the National Cannabis Industry Association. There also are organizations specializing in compliance and regulation information for municipalities and states. No matter what resources are accessed, it’s always a good idea to confirm information by directly checking applicable municipal and state information centers. This is especially important given the dynamic changes occurring in the cannabis industry.
Designate go-to trusted advisors inside/outside the company to handle various challenges rapidly. At the outset, draw up a list of advisors who can provide expert advice on-the-spot when needed. In some cases, these may be the same people listed in #1 above. In other cases, more specialized resources may be required. For example, you may hire a cannabis-savvy lawyer to develop/oversee your business structure, partnership agreements and the like. Another legal eagle may be brought in to deal with such real estate-related issues as the buying/leasing of property and buildings. Yet another attorney might be on call when compliance or regulation questions arise.
Build in agility. Cover all the bases, but keep them fluid. For example, in the branding world, development of labels and packaging is a cornerstone priority that should be addressed in a thoughtful and in-depth way. But, then what happens if a state regulation altering label disclosures or packaging comes down with a short compliance lead time? You’ve got to be ready to hit the ground running both to comply and make your continued branding efforts all they can be.
Gary Paulin is Director of Sales and Client Services for Lightning Labels, a Denver-based label printer that has been offering state-of-the-art affordable, full-color custom labels and custom stickers of all shapes and sizes to cannabis purveyors for more than a decade. They offer many options for materials and laminates and special effects to achieve digital short-run requirements (50 minimum) on up to 15 million labels, plus Lightning fast delivery. For more information and to place orders online, visit LightningLabels.com. For the latest in packaging news and labeling promotional offers, find Lightning Labels on, Facebook, Instagram, Twitter (@LightningLabels), Pinterest, Google+ and LinkedIn.
SAFE Banking Act To Receive Full Committee Mark-Up
Big news! The recently introduced Secure And Fair Enforcement (SAFE) Banking Act, will receive a full committee markup next Tuesday. A markup is the process by which a congressional committee debates, amends, and rewrites proposed legislation.
At the beginning of a markup, committee members first make opening statements. Then, the bill is read for amendment, one section at a time, with committee members offering their amendments to each section after it is read but before the next section is read. Committees do not change the texts of the bills they mark up. Instead, committees vote on amendments that their members want to recommend that the House adopt when the House considers the bill on the floor.
If you remember, HR 1595: the Secure and Fair Enforcement (SAFE) Banking Act was just introduced in the House of Representatives by Reps. Ed Perlmutter (D-CO) and Denny Heck (D-WA) less than two weeks ago. In a stunning, historic surprise, the legislation was introduced with a whopping 108 original cosponsors, and that number has already risen to 138.
As a refresher, the SAFE Banking Act would prevent federal banking regulators from punishing banks for working with cannabis related businesses that are obeying state laws or halting their services, taking action on loans made to those businesses, or limiting a depository institution’s access to the Deposit Insurance Fund. The bill would also protect ancillary businesses that work with the cannabis industry from being charged with money laundering and other financial crimes, and requires the Financial Institution Examination Council to develop guidance to help credit unions and banks understand how to lawfully serve cannabis businesses.
Draft legislation of the SAFE Banking Act received a historic hearing in the House Consumer Protection and Financial Institutions Subcommittee last month. NCIA submitted written testimony along with the personal stories about the burdens and safety concerns created by the current banking situation from nearly 100 cannabis industry professionals.
Interested in helping with these efforts? You can:
– Call your representative and ask them to cosponsor the HR 1595: the SAFE Banking Act. If they’re already a cosponsor, thank them for their support. You can find out how to contact your member of Congress and find some helpful tips here.
– Attend one of NCIA’s upcoming Cannabis Caucus events to get an in-depth federal policy update — register here.
There is little doubt that lack of access to banking is one of the most immense challenges facing cannabis retailers. Legally-operating cannabis businesses are at a significant disadvantage, as well as the communities they operate in. Luckily, there are positive signs that a new day is quickly approaching and cannabis banking laws in the United States are about to go through a major change.
What’s Going on with Cannabis Banking Laws?
Recently and for the first time, the U.S. Congress held hearings on the all-cash nature of the cannabis business. The bill at the center of these monumental hearings: the Secure and Fair Enforcement (SAFE) Banking Act, originally introduced in 2006 and has been stuck in a holding pattern, as have similar bills, ever since.
The committee heard testimony from cannabis industry stakeholders, police departments, and banking executives. These witnesses painted a robust picture of the cannabis banking problem, from the danger it poses to communities in the form of increased risk of armed robbery, to the burden it places on legal dispensary owners who have to find alternative cash management solutions, to the lack of accountability cash creates from a tax perspective.
The bill has yet to come up for a vote. While there are elected officials who reject the concept outright, there is an ever growing coalition in both houses of Congress pushing for a cannabis industry banking solution. More than ever, it seems the U.S. could finally see a loosening on federal restrictions to banking legal cannabis business.
4 Reasons why the U.S. will Loosen Cannabis Banking Regulations Soon
There is more political will for the legal cannabis industry than ever before.
While one hearing is far from passing the law, it is a sign that times are changing. Ten states have legalized recreational cannabis and 33 more have some form of medical cannabis laws in place; this is a drastic increase in the last decade. Shockingly in a time of so much partisan rancor, 62% of Americans favor legalizing marijuana. That is more than double the approval rating cannabis enjoyed in 2000 (31%).
The cannabis banking law being discussed is relatively innocuous. It does not legalize or reclassify cannabis at all, just allows banks to offer services to state-legal cannabis businesses. All in all, considering the strong support across party lines and the success of state industries, passing this law would be an easy win for Democrats, Republicans, and President Trump in a time when political wins are a rarity.
Current banking solutions are prohibitively expensive and states want to see their prosperous legal cannabis industry grow.
Credit unions and banks that currently offer cannabis industry banking charge prohibitively expensive fees, up to $2,000 a month for a simple business checking account. This is a problem for state elected officials.
Recreational and medicinal cannabis states seem, generally speaking, to enjoy the tax revenue they receive from this robust and rapidly growing industry. It is in the best interest of the state for legal cannabis businesses to thrive. If cannabis business owners can’t afford the currently available banking services, it hinders their ability to build upon their business. Even worse, these prohibitive fees keep dispensaries operating on an all cash basis, creating a much higher risk of robbery and violence in the community.
California’s behemoth market is drastically tipping the scales.
It is hard to overstate just how massive California’s legal cannabis market is. Expected to rake in over $50 billion by 2026, the influence this one state industry has is profound and its cash management problem will significantly magnify the problem.
The industry will continue to grow and mature, pushing out the gray market over time. As more cash comes flowing into the legal cannabis industry, it will begin to strain the cash supply and law enforcement to such a degree that action, more than it already is, will be imperative.
Money talks; state and federal governments want their tax revenue.
More than anything else, what will ultimately carry a cannabis banking law across the finish line is money. Cash-only businesses are fertile for tax fraud, simply pocket a little cash here and there and then never report it to the IRS. If there is one thing that can motivate an otherwise slow-moving government, it is tax revenue being left on the table. Allowing cannabis industry banking is a clear way to increases transparency and ensure the state and federal government get their share of the profits.
Access to banking will allow the rapidly growing cannabis industry to advance even faster. Will you be ready? Subscribe to our blog to stay up to date on the latest cannabis news, industry trends, and best practices for running your cannabis dispensary!
Gary Cohen leads Cova’s charge into the legal cannabis space by guiding the vision, strategic development, ‘go to market’ plans and culture.
Before joining Cova, Gary was a principal in over a dozen tech start-ups in the mobile communications industry ranging from small VC funded companies to Fortune 100 firms, including Onavo, which was later acquired by Facebook. In those companies he led sales, marketing, business analytics and market expansions. He has also held a multitude of leadership roles with Verizon and AT&T.
Gary holds a degree in finance with a master’s in marketing from the University of Colorado.
MCBA’s Model Municipal Social Equity Ordinance
Recently, NCIA’s Policy Council contributed toward a larger effort by the Minority Cannabis Business Association (MCBA) to create model social equity legislation for cities across the country. The legislation’s drafting committee started with the basic framework of the RESPECT Resolution introduced by Congresswoman Barbara Lee in 2018. The drafters also “borrowed liberally” from social equity ordinances in development in other cities such as Los Angeles, Oakland, San Francisco, and Sacramento, “attempting to improve upon these pioneering works with the benefit of hindsight.”
Khurshid Khoja, co-chair of the MCBA Policy Committee and Vice Chair of NCIA’s Board of Directors, led the drafting team. “The Model Ordinance is a statement from the communities we represent to the local lawmakers, regulators, entrepreneurs and other stakeholders who are building our nation’s cannabis industry one town at time – social equity is not only possible, it should be the industry standard moving forward. Our work gives those actors the tools they need to make equity a present reality in our industry rather than a lost opportunity.”
“We are grateful to have had the opportunity to assist the Minority Cannabis Business Association with crafting this important model ordinance,” said Aaron Smith, executive director of NCIA. “As we replace prohibition with regulated cannabis programs, it’s important that the communities most adversely impacted by the disastrous war on marijuana have access to the new economic opportunities of the post-prohibition era. Policymakers across the country should look to this model ordinance as the framework for ensuring that their local cannabis market is inclusive and reflective of the broader community.”
SAFE Banking Act Introduced in House of Representatives
Here at NCIA’s Washington, D.C. office, we’ve been alluding to this moment for quite awhile, and it’s finally happened!
Last week, HR 1595: the Secure and Fair Enforcement (SAFE) Banking Act was introduced in the House of Representatives by Reps. Ed Perlmutter (D-CO) and Denny Heck (D-WA). In a stunning, historic surprise, the legislation was introduced with a whopping 106 original cosponsors. That means that a quarter of the entire House of Representatives understands that the cannabis banking issue is untenable and must be addressed.
As a refresher, the SAFE Banking Act would prevent federal banking regulators from punishing banks for working with cannabis related businesses that are obeying state laws or halting their services, taking action on loans made to those businesses, or limiting a depository institution’s access to the Deposit Insurance Fund.
The bill would also protect ancillary businesses that work with the cannabis industry from being charged with money laundering and other financial crimes, and requires the Financial Institution Examination Council to develop guidance to help credit unions and banks understand how to lawfully serve cannabis businesses.
Draft legislation of the SAFE Banking Act received a historic hearing in the House Consumer Protection and Financial Institutions Subcommittee last month. NCIA submitted written testimony along with the personal stories about the burdens and safety concerns created by the current banking situation from nearly 100 cannabis industry professionals.
Now that the bill has been formally introduced, NCIA will continue to build support for the legislation by gathering additional cosponsors, and then pushing for a committee mark-up in the spring.
Interested in helping with these efforts? You can:
– Call your representative and ask them to cosponsor the HR 1595: the SAFE Banking Act. If they’re already a cosponsor, thank them for their support. You can find out how to contact your member of Congress and find some helpful tips here.
– Attend one of NCIA’s upcoming Cannabis Caucus events to get an in-depth federal policy update – register here.
The beginning of a new year brings an opportunity to take stock of your cannabis business and ensure you’re doing everything possible to succeed. And because packaging is such a critical piece to brand wins and losses in this market, now is an ideal time to evaluate your process. It’s absolutely possible for your cannabis packaging to stand out while staying operationally efficient, it just takes careful planning. Get started with these four steps to streamlining your cannabis packaging process.
Step 1: Look for Flexibility
Rules and regulations for the cannabis and hemp industries are continually evolving. Streamlined cannabis packaging and labeling should accommodate data that changes regularly—as well as any required content that may be revised in the future. Always leave space on your package for legibly printed variable data (state-mandated warnings, potency, testing results, etc.). Utilizing secondary labels are often an unfortunate necessity of cannabis packaging. However, if these additional labels are composed creatively, they can actually serve a functional purpose and enhance the package design. A great example of this is a well-designed label that offers messaging while making the package tamper-evident. If possible, consider using an on-demand printing system on pre-printed label stock to minimize material cost and waste.
Step 2: Confirm Compliance
Now that you’ve dialed in your packaging options and are confident you can be agile with information, it’s time to ensure your product is compliant with state regulations. Brands with non-compliant packages can have their products pulled from store shelves or even face fines from state regulators. Re-printing labels or packaging can be very costly in print, labor and time.
Confirm that your package or label includes correct warnings, universal symbols, and produced with the correct material thickness and opaqueness if necessary. Edible products may need to include allergen information and other FDA requirements. Many states require tamper-evident or child-resistant packaging. Verify that your packaging container is compliant by requesting child-resistant certification from your supplier, or check to see if it is already on your state’s pre-approved packaging list.
It is highly recommended that brands don’t rely on their own interpretation of the laws. Consulting legal counsel is well worth the investment of confirming your packaging meets all the necessary requirements.
Step 3: Efficient & Effective from Sale to Shelf
Key to streamlining the packaging process is making sure your packaging is efficient and effective from the time you sell it, to the moment it’s merchandised on shelf. This relates to both the process of packaging your product and protecting your profits. Being efficient and effective with packaging will have a significant impact on your bottom line.
We suggest brands design their packaging to fit the size of the item. Oversized packaging costs more and can be misleading to the customer. In addition to selecting an appropriately sized package, brands need to accurately determine the labor cost associated with packaging options. Adding a sealed pouch for a pre roll takes labor hours. Consider the amount of time it takes to package a single product in comparison to the wholesale unit price. It’s easy to overdo packaging for a small profit margin. Make sure to test prototypes or samples with your production team or partners before you order a large quantity of packaging or labels. It’s essential to understand what the package will be subjected to once it leaves your facility. If at all possible, consult with existing distribution associates or wholesale customers for their input before investing in packaging. For example, your retail clients may prefer to display their products utilizing slat wall, which means that peg holes would be a valuable consideration to your package design.
Another consistent issue is knowing how dispensaries store your product in the back of house. If you have big mylar packaging for a small item, organizing those in bins, drawers or big safes becomes a mess down the line. Wholesale cannabis producers can also benefit from a primary panel label paired with a child-resistant container or mylar bag to streamline their distribution or sales process.
Step Four: Timing is Everything!
Advice we consistently offer brands? Understand your production timeline before you place any packaging order.Think about the implications of ordering stock or custom containers, and your shipping options. While custom containers and labels ensure differentiation in retail stores, they may take longer to produce than ordering off the shelf solutions. Processing art, approving proofs, production and shipping will all impact how fast your product can get to market. Packaging shortages in the cannabis industry are widespread so if you do decide to use stock containers such as glass jars or child-resistant tubes, make sure to place an order far in advance or well before you run out of packaging. Having a plan B can also be helpful. Ordering custom packaging may take longer, so stock items (like a label on a pouch or pop-top) can be used in the interim and may also be used for samples.
One Last Tip
It’s always smart to network with other brands that have similar packaging challenges to you. If they are willing to share them, lessons learned in the market are invaluable to brands making packaging decisions. Doing your fair share of market research by seeing what’s working in retail can also guide you in the right direction.
Have any tips yourself? We’d love to hear them in the comments!
Member Blog: Four Reasons ERP Helps Growing Cannabis Companies
Owners, presidents, and CEOs understand that you have to spend money to make money but it’s often difficult to justify investing in Enterprise Resource Planning (ERP) software when you could spend that money on new equipment or other tangible assets. Implementing the right ERP software can dramatically improve every aspect of your business from employee retention to customer satisfaction with consider cost savings and increased profits. Further, ERP software can significantly increase the value of your business for owners and investors. ERP helps executive leaders to understand what’s happening throughout the business with alerts, dashboards, and tools to make strategic decisions when necessary.
With dispensary ERP, companies serving the legal marijuana supply chain finally have the tools they need to drive innovation and gain insights for expanding their operations. ERP software automates many cannabis accounting functions related to technology, services, and human resources, all while allowing cannabis businesses to organize and manage real-time data from various solutions into a single view.
It’s easy to see why businesses operating in the cannabis industry would have intricate inventory management needs, but there’s another business side to cannabis which many might not consider. The cannabis industry has complex accounting requirements that go hand-in-hand with their inventory and other business processes.
With cloud accounting software built specifically for cannabis companies, organizations within the cannabis supply chain finally have the advanced technologies to support their unique operational and accounting needs. Today’s growing cannabusinesses need to adapt in a rapidly changing environment and when they’re successful, it gets noticed. This often results in company leadership seeking investor funding or entertaining mergers and acquisitions talks. When companies operating in this space attempt to position themselves for growth, they need field-tested cloud accounting software to prove it.
In this rapidly changing industry, here are a few ways an effective, flexible, and secure cannabis ERP solution will allow you to adapt, positioning your cannabusiness for growth:
Know Your Customers – Data and Predictive Analytics
Dispensary ERP solutions allow you to compile and understand data about your cannabusiness and the marijuana industry as a whole. With a better understanding of supply and demand pattern, dispensaries can make informed strategic decisions about products and operations.
By capturing relevant data about your cannabis operation, you answer many efficiency and profitability questions. What are customers most interested in? Which products are they buying and in what quantities. How much are they spending? Are there patterns in accompanying purchases or complementing products? These insights and more help your cannabusiness to create customer personas allowing you to better service your clientele.
280E Tax Woes – Accounting
A fully integrated, purpose-built cannabis accounting software package which offers financial reporting, meets GAAP and auditing board compliance standards also needs to be robust enough to handle other complexities within the industry. Does your off-the-shelf solution ensure compliance with section 280E of the IRS guidelines which prohibits a cannabis operation from deducting certain business expenses? If you’re not sure, the answer is probably not.
With modern cannabis solutions available, your operation can fully organize financials by department across multiple locations as well. Dispensary ERP gives you all the financial reporting tools you need for journal postings, purchase orders, invoices and cash management by recording all transactional data in detail, by location.
Staying In Compliance
Regulation and managing regulatory compliance continues to be top priority for growing cannabis companies. As legislation changes, cannabis operators need varying levels of up-to-date reporting capabilities surrounding seed-to-sale traceability, product recall capability, and proper labeling among many other considerations.
Built to exceed compliance standards, your dispensary ERP delivers individual and aggregated reports, unalterable custody tracking with time stamps to provide the real-time data needed for compliance initiatives – as well as for auditors, CPAs and others who will need access to the books.
If you have multiple locations, you will need to monitor, track and record data from each of your locations, jurisdictions, or intra-industry verticals (growers, processors and dispensaries). With one centralized database and integrated reporting, individual factions of your business are no longer operating as silos and staff have access the real-time access to accurate data for regulators.
Growing Your Business – Scalability
Consider growth plans as you look for technology solutions. If your plans include multiple locations or jurisdictions, you will need cannabis-specific software to manage the complexities that arise as a result. If you decide to diversify your product line by vertically integrating other seed-to-sale products, you will need industry-specific solutions to address the inventory, accounting and compliance ramifications not offered by out-of-the-box technology.
Growing cannabusinesses need to work efficiently with suppliers and growers, accurately forecasting demand and staying abreast of current regulations. As a result, your growing company needs solutions which are flexible and customizable with built-in cannabis-specific features.
Like any other business, growing a successful cannabis business requires technology tools to readily handle its industry’s trends and business process complexities. A flexible, powerful and scalable dispensary ERP will help you address those challenges while you continue to expand your operations.
Vice President of ERP Sales, Frank Nisemboum,is a trusted advisor at e2b teknologies who has guided organizations of all sizes enabling them to establish a technology presence and expand their business through technology. His proven ability to analyze the current and future plans of a company and work with team members to subsequently bring technology solutions to the organization result in improved processes and controls that assure continued growth and profitability. Frank has worked in the ERP and CRM software selection, sales and consulting industry for almost 25 years. His strong ability to understand, interpret and match the needs of an organization to the right ERP and/or CRM solution make him an asset to all of his clients.
At e2b teknologies, our passion for solving problems drives us to deliver innovative solutions for everyone we work with. Visit e2btek.com for more information.
Member Blog: Cannabis Edibles – Preparing for Government Regulations & Inspections
by Martha Ostergar, Content Marketing Manager of RizePoint
Advice from RizePoint, a leader in the quality assurance and regulatory compliance space for over 20 years.
As more states legalize medicinal and recreational marijuana, more companies are getting into the business of cannabis infused food products (CIFPs), more commonly known as edibles. These food products can take many different forms such as baked goods, sweets, oils, capsules, and tablets. As an alternative to smoking or vaping, cannabis-infused products are already on track to become a 5.3 billion-dollar industry over the next five years.
But if cannabusinesses want to get into the edibles production industry, their products need to comply with new cannabis-related city, state, and federal regulations, as well as established regulations for food and pharmaceutical products. The cannabis edibles industry is still in its infancy, and many states are still deciding how to best regulate these new products for public health and safety. This means navigating regulations can be tricky, but there are a few things to keep in mind to stay above board in this developing market.
Evolving Cannabis Edibles Regulations
Cannabis is considered a Schedule 1 controlled substance according to the U.S. Drug Enforcement Administration (DEA), and an “adulterated food product” under the U.S. Food and Drug Administration (FDA). However, the cannabis edibles industry as a whole lacks systematic federal oversight. At this stage, this means that states must decide on how to best regulate these products once voters and legislators have agreed to legalize recreational or medicinal marijuana in each respective state.
This lack of federal oversight can lead to a great deal of confusion in the industry. Nearly 100,000 packages of CIFPs have been recalled over the last few years due to inaccurate labeling, the use of banned pesticides, and other regulatory hiccups. In fact, a recent study of edible label accuracy revealed that 83% of CIFP labels differed from the actual contents of the product by over 10%, and only 17% were labeled correctly.
Key Regulatory Concerns
If cannabusiness owners want to avoid similar quality and compliance issues, they need to make sure they are following their state’s laws and regulations regarding CIFPs. That being said, some states have yet to decide how they will regulate this industry, which can leave businesses on unsure footing or without a viable quality management plan. However, the cannabis industry isn’t totally in the dark — they can look to other industries and resources to create quality-related processes that will help them protect their products, their customers, and their bottom line.
For example, cannabusinesses can look to the National Environmental Health Association (NEHA) for guidance. The NEHA has established a list of regulatory guidelines that states and other regulatory bodies can use as a reference point when drafting legislation.
Here are some examples of regulatory guidelines from NEHA’s list:
All ingredients used in CIFPs should be from FDA-approved sources, including suppliers that maintain good agricultural, manufacturing, and processing practices.
All CIFPs should be safe for public consumption and should not exceed the Code of Federal Regulations tolerance levels for controlled substances such as THC.
CIFPs should be handled in a manner similar to the methods used by the pharmaceutical industry, including accurate product labeling, product homogeneity, and accurate information regarding dose concentration per serving and as a total.
CIFPs should comply with the food laws laid out by the regulatory body, including portions, labeling, processing, and packaging.
CIFPs should not be made to appeal to children or those under the age of 21, such as using words like “candy” on product labels and in product advertising.
Additionally, looking to established federal and state regulations in the food and pharmaceutical industries can help businesses proactively understand and set important quality standards until cannabis regulations become more consistent and clear.
CIFP Quality Assurance Management
With these regulatory concerns in mind, cannabis companies can start adjusting their business operations. Proactively creating a quality management plan with high standards and consumer safety in mind is the most important step businesses can take to prepare for official regulations.
The next step is to focus on the supplier quality management process. Whether suppliers or vendors are supplying cannabis ingredients or raw agricultural ingredients, suppliers also need to meet outside regulations as well as internal brand standards that reflect a company’s specific business goals. An edibles business will need to make a plan that includes auditing suppliers at least once a year, collecting relevant and current certifications, and tracking supplier performance.
After that, quality assurance falls to the production process. As mentioned above, government regulations are only part of the quality management process. Each company will have different internal standards they wish to meet that reflect their goals as a brand, including how to produce each product consistently for a better customer experience. This process involves collecting data from yearly or quarterly audits and daily checks as well as taking corrective action when those audit questions or daily checks fail. Best practice includes reviewing and analyzing quality data to proactively understand and improve any failings in the process.
Tools for Cannabis Quality Management
That brief overview may sound like a lot, and frankly, it is. The good news is there are already tools and resources available to help the cannabis industry create and manage quality and compliance processes.
Technology is key. It’s tempting for new CIFP companies to manage everything with pen and paper and spreadsheets as a cost-saving measure. But if you look at the food industry (among many others), it becomes quickly apparent that tech and software are needed to keep up with ever-changing regulations and to properly scale a growing business. Quality management software (QMS) helps businesses gather data efficiently to create a single source of truth. But the right QMS can also help you easily analyze that data so you can spot trends, gain actionable insights, and proactively fix issues before they become bigger problems.
These types of software have helped many other industries with regulatory compliance as well as quality consistency and brand standards. However, not every QMS is created equal, so it’s important to take your time in finding a digital solution that is right for your compliance and quality needs as well as your budget.
Consultants can help. Several cannabis consultancies already exist to help new and seasoned business owners set up and maintain internal programs for regulatory compliance and quality management. Most consultancies will be able to assess and advise cannabusinesses in cultivation, manufacturing, or dispensary management, and some have resources to do all three.
Consultants are not there to set goals for you, but the right consultant can help you achieve your goals. Before contacting a consultant, it’s crucial to think about your specific needs based on your business goals so each party can manage expectations about responsibilities and deliverables. Choose a consultant that gives you a plan upfront that includes a clear timeline as well as the detailed steps you will each take in your partnership to achieve success. It’s also a good idea to be wary of consultants in any industry that ask for payment with equity.
Takeaways
No matter how much rules and regulations change, you can keep a competitive edge with little disruption to you business. If you model your quality management system on other regulated industries — such as food safety and pharmaceuticals — you’ll proactively create a robust, government-friendly plan. Additionally, when you have a comprehensive plan in place, it’s easier to pivot when there are changes, to train new employees to meet the required standards, and to scale your efforts as your business grows.
Martha Ostergar is the marketing content manager at RizePoint, a quality management software company that has helped top brands to digitally manage compliance, quality assurance, corporate social responsibility, and supplier quality management for over 20 years. VisitRizePoint.com for more information.
New Bills: Marijuana Justice Act, REFER Act, and RESPECT Resolution
by Michelle Rutter, NCIA’s Government Relations Manager
Last week, multiple pieces of legislation and one resolution were introduced to address social equity, diversity, and fairness in the cannabis industry.
The Marijuana Justice Act was introduced in both the House and the Senate by Cannabis Caucus Co-Chair Rep. Barbara Lee (D-CA) and 2020 presidential-hopeful Sen. Cory Booker (D-NJ), respectively. Last session, the House version garnered 43 cosponsors, while the Senate had six in the last session. It is currently the most far-reaching and comprehensive cannabis policy reform legislation being considered in Congress.
The Marijuana Justice act would not only remove cannabis from the Controlled Substances Act schedule and eliminate federal criminal penalties for its possession, cultivation, manufacture, import, and export, but also includes several provisions to address the historically discriminatory enforcement of cannabis laws and sentencing. All federal cannabis use or possession convictions would be expunged under the measure, and a special grant program would be created through the Department of Housing and Urban Development to reinvest in communities that have been most impacted by prohibition. It would also allow Congress to withhold federal funds from states that exhibit racially disproportionate arrest and incarceration rates under their own cannabis laws.
In addition to this bicameral piece of legislation, Rep. Lee also introduced the Restraining Excessive Federal Enforcement & Regulations of Cannabis (REFER) Act in the House. The REFER Act “prohibits the use of funds made available by Congress to a federal department or agency” to intervene in state-legal cannabis programs or penalize financial institutions that service the cannabis industry.
Rep. Lee also introduced the Realizing Equitable & Sustainable Participation in Emerging Cannabis Trades (RESPECT) Resolution, which recognizes that the people most harmed by the racially disparate enforcement of prohibition benefit the least from some of the state and local policies regulating the cannabis market. The resolution urges officials and lawmakers to implement a series of practices when granting licenses for legal cannabis businesses to improve access for these communities 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 is proud to include the Marijuana Justice Act as one of our priority pieces of legislation, and we look forward to working with members of Congress to build support for the bill.
If you’re interested in lobbying in support of this bill, or any others, make sure you register for NCIA’s 9th Annual Cannabis Industry Lobby Days in Washington, D.C. on May 21-23 so that you can tell congressional offices your personal story. There’s strength in numbers, and we can’t do it without you!
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Martha Ostergar is the marketing content manager at RizePoint, a quality management software company that has helped top brands to digitally manage compliance, quality assurance, corporate social responsibility, and supplier quality management for over 20 years. Visit