by Michelle Rutter Friberg, NCIA’s Deputy Director of Government Relations
It may only be February, but the NCIA government relations team has been busy at work this year advocating for you and your business! Just over the last month, the SAFE Banking Act passed the House for the sixth time, we held our first mini-virtual lobby days, and Majority Leader Schumer provided an updated timeline for the Cannabis Administration and Opportunity Act (CAOA). Keep reading to learn the latest:
SAFE Banking
Last week, Congressman Perlmutter (D-CO) followed through on his promise to attach SAFE Banking to any viable legislative package when he filed it as an amendment to the America COMPETES Act, which is a large manufacturing bill. Now, the bill is headed to a “conference committee” – a term for when House and Senate leadership, as well as committee chairs and other members of Congress get together to negotiate differences in the two chambers’ bills.
Congressman Perlmutter and the other lead offices of SAFE Banking are currently talking with leadership about the importance of enacting the provision, however, Leader Schumer and Senator Booker have been clear about their opposition to passing SAFE without broader equity provisions. During early February, keep your eyes on the news to see if SAFE Banking makes it into the final, enacted language!
Virtual Lobby Days
Due to NCIA’s Evergreen members’ investment in shaping policy for the cannabis industry, we have been able to take our Government Relations work virtual by hosting our first ever Mini-Lobby Days! As we continue to represent a value-driven, responsible industry, our main goal is to educate congressional offices on all aspects of cannabis policy reform, including social equity, banking, 280E, scientific data, and much more.
During the first week of February, NCIA’s Evergreen Roundtable members participated in more than 30 virtual congressional meetings, including time with Sen. Cory Booker (D-NJ), Sen. Jeff Merkley (D-OR), and Rep. Dave Joyce (R-OH). Members also met with relevant committee staff and communicated the importance of holding hearings and markups on cannabis policy issues, as well as enacting reform while Democrats hold the majority in both chambers.
Sound interesting? Get in touch with Maddy Grant (Madeline@TheCannabisIndustry.org) to learn more about becoming an Evergreen member today!
Latest on CAOA
Back in September, NCIA and other stakeholders submitted responses to the Cannabis Administration and Opportunity Act (CAOA) discussion draft, led by Leader Schumer (D-NY, and Sens. Booker (D-NJ) and Wyden (D-OR). Since then, the Senate’s focus has been primarily on passing President Biden’s Build Back Better Act, which has significantly slowed progress on the CAOA. While the bill hasn’t been formally introduced yet, the sponsoring offices have slowly continued to have conversations with committees of jurisdiction to tee things up behind the scenes.
In a recent press conference in New York, Leader Schumer announced plans to introduce the CAOA in April. Can anyone say 4/20?
This update just represents a small snapshot of all that NCIA’s government relations team has been working on in D.C. – make sure to keep an eye on the blog, find us on NCIA Connect, and follow us on our social media channels to learn the latest!
Committee Blog: ‘Corporate to Cannabis Crossover’ – An Interview with Portland’s Cannabis Czar, Dasheeda Dawson
by Elise Serbaroli of Strimo, interview conducted May 2021
Elise Serbaroli is a member of the NCIA’s State Regulations Committee, “Informing Local Governments” subcommittee, which aims to bridge knowledge gaps between operators and regulators in the cannabis industry. This is done through interviews with current cannabis regulators in various U.S. states, sharing best practices and lessons learned.
Dasheeda Dawson is a cannabis regulator in Oregon and co-founder of the Cannabis Regulators of Color Coalition (CRCC). As cannabis czar for the City of Portland, she is the highest government official overseeing and advising on cannabis regulation for the municipality. Ms. Dawson brings an incredible breadth of experience to the cannabis space. A self-proclaimed “corporate to cannabis crossover”, she is perfectly positioned to navigate and lead the complexity that is the legal cannabis industry. Before becoming a best-selling author (“How to Succeed in the Cannabis Industry”), she held leadership roles at Victoria’s Secret and Target. Her career is built off of a solid educational foundation, including a Princeton degree (Molecular Biology & African-American studies) and an MBA from Rutgers.
Can you tell us how you got into the cannabis industry?
For the five years prior to formally getting into the industry, I was what you would call a “closeted cannabis consumer/patient.” I have early signs of MS and my mom was actually the one that insisted I give it a try. At the time, I was working at Target in Minnesota. Cannabis was my saving grace for maintaining productivity and overall capabilities. My mom passed away unexpectedly in 2016 and it jolted me out of the standard corporate trajectory I had been on. I ended up moving to Arizona and became a medical cannabis patient there, jumping into the advocacy side of the industry. Arizona legalized adult-use this past November!
From Target to Cannabis Czar! Did you always plan on becoming a regulator?
Certainly not! Straight out of the gate, I got a lot of work as a consultant in the industry, using everything that I had done in my corporate career, including business strategy and supply chain management. I had owned everything for my categories at Target and when you’re the business owner, you lead and oversee the entire cross-functional team. I applied that to the cannabis space as quickly as I could, working for a lot of clients and gaining an entrepreneurial education from working with large cannabis enterprise clients, small operators, multi-state operators, Native American tribes, even government. I gained the truest sense of how NOT to do it. In a corporate role, you usually write a report about what you have learned, insights, etc., and then you move forward. My workbook, now in its 3rd edition, was really built off of those lessons learned.
When COVID hit, my book tour was abruptly stopped overnight! At the same time, I was selected to become the Cannabis Program Supervisor for the City of Portland. I was only the third Black woman at the time to be selected to oversee a cannabis regulatory office. I believe that now there are more, but women and people of color are scarce in these positions. Most of the regulators are white men, many of whom come from another regulatory agency, like liquor or law enforcement. In order to assure that cannabis regulation is equity-centered, you need people at the table that will center equity. This last year has been amazing. I have a lot of runway and support to be exactly who I am, which is the Weed Head (TM). I refuse to be anything else and I’m in a bureau that allows me to do that.
What exactly is a cannabis czar?
On the state level, the Oregon Liquor Control Commission is currently passing legislation to become the Oregon Liquor AND CANNABIS Commission (OLCC), primarily because cannabis is providing substantial revenue for the state. Most of those people are liquor regulators, and they have organized a sub-group, focused only on cannabis. It started off with four people and now there are 50!
As Portland’s cannabis czar, I am a municipality leader, similar to Cat Packer in Los Angeles, and operate independently of the OLCC. Portland represents approximately 40% of the total cannabis revenue for the state and I oversee the entire cannabis program, including regulatory, licensing, compliance, community impact, and equity initiatives for Portland’s medical and adult-use programs.
In the city of Portland, cannabis regulation and oversight was placed in the Office of Community and Civic Life, as opposed to in the Office of Finance and Revenue or the Office of Business Development Services, which is where they license other businesses. This placement is partly due to the idea at the time that the cannabis industry was going to be disruptive to the community. Many individuals were worried about safety for communities. Our office has been trying to decrease the stigma and canna-phobia around the plant, offering education and equity initiatives. We were the first city to have community reinvestment grants tied to our cannabis tax revenue. These grants are administered through the SEED (Social Equity and Educational Development) Initiatives and grant fund.
CRCC and CannRa are two independent organizations, which happened to both launch at the same time. This caused some confusion in the industry. They are not mutually exclusive memberships! In fact, two of our founding members are also founding members of CannRa. The regulators roundtable was the predecessor of CannRa and that association aggregates insights and learnings state by state. The Oregon Liquor Control Commission (state-level) is a member of CannRa.
CRCC centers equity and support of legalization, while also aggregating insights and learnings state by state. If you are a regulator of color, at the state or local level, it makes sense to join the Cannabis Regulators of Color Coalition. We know that legalization is a requirement to start to undo the harm done through the war on drugs.
Centering equity involves re-thinking how we regulate this industry. One challenge is getting people to realize that this is a regulatory agency, like any other government regulatory agency. The Department of Motor Vehicles (DMV), a regulatory agency, gives out licenses and adjusts to assure that no group is precluded from access (adjusting for wheelchairs, visual and hearing impairments, etc.). Yet, in cannabis, we are regulating the industry without dealing with the inequities in the industry. Some of these inequities are directly linked to the historical prohibition of cannabis and the war on drugs, which we define as the racially-biased enforcement of cannabis prohibition.
Supporting equity also includes gender inequities, economic inequities, and disability inequities, to mention a few, that will positively impact everyone in the industry, including and especially patients themselves. Exclusionary practices would not be tolerated if it was an agency like the DMV. With cannabis, we are over-regulating the industry and excluding many people from participating, which is to the detriment of the market and the community. CRCC is focused on equity-centered regulation for the cannabis industry.
What is one thing that you would like to see in the legislation for cannabis businesses at the federal level?
Well, there’s a misconception about the size of companies in this industry. As an industry, we have to be careful about supporting legislation that only benefits large corporations. More than 75% of cannabis businesses have annual revenue of $2 million or less. Compared to small businesses in other industries, for example, in agriculture ($6 million or less) and retail ($14 million or less), cannabis businesses are very small, so everyone needs to push for legislation to benefit these small businesses in whatever regulatory framework is set up on a federal level. This is one step in leading the industry towards a more equitable path.
One aspect of inequity is how cannabis businesses of different sizes are treated. On average, very small cannabis companies have an after-tax rate of 70%, so when you’re going to the table for the regulatory framework, push back on the tax structure, push back on mechanisms that are inherently disadvantageous to small businesses. Surprisingly or not, most Black, Indigenous, or Latinx businesses are also small businesses, so you are positively impacting racial equity.
If you, as a cannabis business, think you’re a big fish, trust me, Big Tobacco, Big Alcohol, Big Pharma, Big CPG (“consumer packaged goods”) – Target has $70 billion in annual revenue – are coming, so a big fish in this cannabis pond is setting itself up to be eaten by much bigger fish and bigger sharks. If we leave back doors open for the larger cannabis businesses, we’re leaving that same back door open for a Walmart or an Amazon. Large corporations are already investigating and supporting cannabis. They plan years in advance for large takeovers and once it starts, it’s a stampede of well-financed, organized strategic efforts.
At a state level, the industry and those who want to support the industry, need to be careful to not overtax the small businesses and to vote to provide a framework of support mechanisms for small cannabis businesses.
What are some examples of frameworks that support or negatively impact small cannabis businesses?
Some of the early legalization efforts required vertical integration. Because of the way the state and local jurisdictions are regulating and taxing, forcing vertical integration is not a small-business-friendly approach to licensing. This was the case in some earlier states, but we’re also seeing newer states like Georgia taking this approach.
By breaking up the licensing into different parts of the supply chain (like California), you open up possibilities for smaller businesses to operate. If the state is giving out micro-business licenses, there should also be a track to grow into a larger size so that there is no ceiling on those businesses’ growth prospects. For example, in New Jersey, advocates fought to amend provisions that failed to create a way to sell out of a micro-license for a growth event.
Everybody has a different opinion depending on which economist you talk to about how you tax up and down the supply chain. I’d like to see states have tiered tax by production weight. Once you start doing it by the percentage of THC, you’re negatively impacting businesses and patients. It’s meant to be a deterrent and is an example of the government intending to overregulate in an area that it doesn’t fully understand. But usually, those penalties wind up impacting the smaller craft businesses. Too many people are assuming that consumption in the adult-use market is just for recreational purposes, but there are plenty of small niche operators aimed at a specific medical community and they are producing small batches, for example, with high THC, but their clientele may be negatively impacted, simply as a function of the way the tax law was written.
Thanks, Dasheeda, for taking the time to speak with us! If readers want to get involved in changing legislation and connecting with regulators, where should they start?
It’s certainly a long and hard process when dealing with big issues and change. For operators, NCIA is a good place to start. There is also the M4MM and the MCBA. Folks should really try to connect with the local- and state-relevant organizations. Building and operating in coalitions can be very powerful. On a national level, be sure that any group you are part of is actually going to D.C. and is having conversations with the legislators, because at the end of the day, whether it’s cannabis or any other business, you need to be involved with influencing the policies that impact your industry. Everything starts with the law and civic engagement.
Elise Serbaroli leads Global Business Development at Strimo, where she provides cannabis businesses with software solutions around inventory management, cost accounting, QA, and compliance. She’s back in the USA after over a decade of experience in Spain, Germany, Switzerland and Ecuador.
Understanding the importance of efficiency, scalability, and profitability, Elise created solutions to financial and legal processes for the R&D team at CPW, a joint venture of two of the world’s largest food companies, Nestlé & General Mills. As a systems coordinator, she gained a deep appreciation for food safety, GMPs and regulatory compliance. Her supply chain software experience builds off of her Business Development role at Tradeshift, the world’s largest network for digital B2B payments.
Member Blog: Eradicating Pesticide Use in the Cannabis Industry – Without Sacrificing Crop Quality
One of the direst, yet infrequently discussed, issues in the cannabis industry is the lack of federal guidelines regulating pesticide use. Despite the adult-use cannabis market consistently expanding on a state-by-state basis, as long as the crop remains illegal on the federal level, much-needed national oversight will continue to be limited.
The more states that legalize under a national prohibition, the more varying and convoluted state-by-state crop management regulations may become. Meanwhile, without standards firmly set in stone across the country, some cultivators have turned to hazardous chemicals to control pathogens and preserve their crop yields. Such cultivation solutions can compromise the safety of staff, the environment and, of course, the consumers.
Health Hazards of Pesticides in Cannabis
Even when shopping at a licensed adult-use or medical dispensary, consumers today still cannot be 100 percent confident that the cannabis they are purchasing is completely safe and free of contaminants and unwanted components, such as pesticides, harmful microbials, heavy metals, and solvents. Emerging research from Colorado State University shows that contaminants in cannabis, including pesticides, “are imminent threats that directly impact public health and wellness, particularly to the immunocompromised and pediatric patients who take cannabis products as a treatment for numerous human disorders including cancer patients and those suffering from epileptic seizures.” With many consumers turning to cannabis for its health benefits, and because it’s a natural alternative to heavily processed pharmaceuticals, the cultivation process should honor cannabis’ medical use by being as safe and accountable as possible.
The pesticide issue is compounded when we think about how cannabis is often consumed: through inhalation. Additional research has shown that nearly 70 percent of the pesticides used in cultivation remain in the cannabis flower that consumers smoke.
Even when these same pesticides are permitted in other types of American agricultural industries, this is a global anomaly. More than 25 percent of pesticides used in the U.S. are banned in other countries.
Moving Towards a Pesticide-Free Flower
So how do we work towards a pesticide-free cannabis industry? Licensed businesses, regulators, and consumers need to band together to set standards and guidelines for pesticide use across each legal state, and eventually on a federal level.
In 2020, Arizona took a page out of Oregon’s playbook by establishing a regulatory agency and adopting Oregon’s standards for limiting pesticide use in cannabis, setting a prime example for inter-state collaboration and accountability. Measures also need to be taken to lower the cost of testing cannabis products for pesticides and contaminants. And, of course, we need to embrace more sustainability and environmentally-minded education, and emerging technologies.
While testing does not necessarily prevent contaminants during the grow process, frequent, reliable, and standardized testing can help ensure contaminated products don’t make it to market. Unfortunately, testing requirements continue to differ by state, with some being more lenient than others. For instance, certain states only test for certain types of microbials, while others allow companies and cultivators to cherry-pick samples. This makes it easier for companies’ products to meet compliance, however, doesn’t ensure that the final products available for purchase will be safe for the consumer. Looking ahead towards inevitable federal legalization, testing requirements need to be uniform across all legal markets.
However, cultivators shouldn’t wait for federal oversight to hold themselves to the highest possible standards. There are inexpensive testing procedures currently available that cultivators can adopt before sending their cannabis products to the lab, which can help to better ensure what they are doing is working and catch a problem before it starts.
There are also non-toxic crop management technologies available now, and in addition to seeking out vendors offering innovation-driven solutions to replace conventional pesticides, cannabis companies and their cultivators can embrace simple, preventative measures to minimize outbreaks of bio-contaminants. This includes controlling humidity at the grow site, plant spacing, adequate air circulation, and implementing a strict chain of custody throughout the supply chain. Successful prevention mitigates the temptation to turn to potentially toxic pesticides to eradicate contaminants.
While federal legalization looms, it likely won’t happen this year. Therefore, state regulatory agencies should continue to be prepared with comprehensive outreach plans to communicate their pesticide and testing regulations to cultivators and their companies, ensuring that industry participants are fully informed. Planning and communication also sets the stage for the industry to have tried and true standards already in place by the time federal legalization does come to fruition.
The good news is the cannabis industry has the potential to lead a paradigm shift towards a safer agricultural sector as a whole. In years past, the amount of information shared between cannabis and other agricultural industries was limited, cutting cannabis cultivators off from reliable best practices for cultivation and crop management. However, this is changing quickly. Cannabis is also pushing the envelope towards more sustainable practices, with more cultivation sites moving indoors and into greenhouses, complete with LED lighting and additional sustainable practices. Cannabis cultivators are becoming more cutting-edge and setting an example for the broader agricultural community. The industry should continue these forward-thinking approaches by embracing pesticide-free solutions on a broad, scalable level.
Carlos Perea is the CEO and Co-founder of Terra Vera, an agricultural technology company offering innovative solutions to replace conventional pesticides and increase product safety and consumer confidence within the agriculture industry. Carlos is a serial entrepreneur with a focus on the intersection of technology and social impact. Prior to founding Terra Vera, he formed MIOX Corporation, a technology company that treats water in a variety of applications and is distributed in over 30 countries. He is active as an advisor and board member with several early stage companies and social enterprises including YPO, where is he an active board member. Carlos has an MBA from the Stanford Graduate School of Business, and an BS in Mechanical Engineering from the University of New Mexico.
Meet The Team: Kaliko Castille – NCIA’s Director of Marketing
Aloha! My name is Kaliko Castille and I am the Director of Marketing here at NCIA.
My name Kaliko is Hawaiian and means “the bud that blossoms.” It was the name given to my Dad when he was still living in Hawai’i and dancing hula under a well-known kumu hula (hula teacher) named John Keolamaka’ainana Lake. As I tell people when I tell them about my name, it was written in the stars that I would end up in this industry.
Despite the convenient name, I actually didn’t always think I’d end up in cannabis. I actually wanted to go into politics. My dream job is to run presidential campaigns or serve as a top-advisor in the White House, but ever since reading The Emperor Wears No Clothes by Jack Herer, I haven’t been able to keep my mouth shut about the idiocy of marijuana prohibition.
Kaliko with Keith Stroup, founder of NORML
I was that guy in college. The one that every political science department professor knew was going to find a way to do a paper or project on legalization. The one that would stand outside the Werner University Center (at Western Oregon University) collecting signatures for legalization initiatives. The one who would organize debates on campus about legalization. The one wearing cannabis-related t-shirts. You know, that guy.
In the spring of 2010, I attended my first Global Cannabis March in Portland, OR along with some buddies of mine. It was there that I had a chance to meet Russ Belville, who I had been listening to on my local progressive talk station for a couple of years and who was serving as NORML’s Outreach Coordinator. In a lot of ways, that day changed my life. That was the day that I went from being a cannabis enthusiast who was upset by the sinister history of marijuana prohibition to someone who was going to devote my life to helping end it.
Less than a year later, I was invited into the studio where Russ recorded NORML Show Live, which was NORML’s daily live radio show and podcast. Having listened for a while, it was such a cool experience to see behind the scenes of such an impactful show. Before leaving the studio that day, I asked whether Russ could help me get an internship with NORML in D.C. but he instead tossed out the idea that I could intern for him in Portland, which sold me instantly. For the next year, I would help produce two hours of daily live radio content devoted to cannabis news and culture (as well as hosting my own weekly reggae show). I was lucky enough to interact with and book elected officials, celebrities, musicians, Olympic athletes, and presidential candidates.
That internship also opened my eyes to the world of professional cannabis consumers. A couple of months into my internship, I got the opportunity to attend my first NORML Conference which was held on 4/20 weekend in Denver. This was a mindblowing experience because I suddenly found myself hanging out with lawyers, doctors, and other professionals, smoking joints, and doing dabs (this was when it was just starting to become a thing). It was the first time that I had first-hand, verifiable proof that people of all socioeconomic backgrounds consumed cannabis. Not only would consuming cannabis not relegate you to a life of destitution, but you could actually be a responsible consumer and thrive.
Fast forward to the summer of 2012 and cannabis legalization is on the ballot in Washington, Oregon, and Colorado. Despite the fact that the I-502 and Amendment 64 campaigns managed to raise millions of dollars apiece, the legalization initiative in Oregon (Measure 80) had struggled to attract national funders due to what some saw as a “pie-in-the-sky” initiative. While at Hempfest that August, a buddy and I came up with a plan to start a political action committee to raise money independently of the campaign. In a short amount of time, we managed to raise over $10,000 in small-dollar donations from individuals across the state which allowed us to purchase banners, rally signs, and several prominent billboards in the Portland area. When we started our campaign the initiative was polling around 37%, but by the time election day rolled around, it finished with nearly 47% of the vote. Although Oregon didn’t legalize in 2012, we helped lay the foundation for a successful campaign in 2014.
After that campaign in 2012, I thought I was going to become a cannabis lobbyist but as fate would have it, I ended up opening up a dispensary in Portland, Oregon, shortly after the passage of HB3460 which legalized medical dispensaries in Oregon.
That experience was unlike anything I had been through before but it was a necessary step in my professional evolution and my journey to NCIA. In fact, our company Brightside was a member of NCIA! That experience taught me about all of the hurdles regular small businesses have to navigate, but more specifically, the special hurdles that are in place specifically for cannabis businesses. It was my first introduction into the need for banking access and 280E reform, which are the core priorities of the organization I now work for. I also found out the heartbreak that comes from having to close down due to overzealous regulations that don’t apply to any other sort of business. This has given me a unique perspective into the day to day lives of NCIA members and how despite all the “green rush” headlines we may see, this industry is anything but a get-rich-quick scheme.
Working at NCIA has been one of the greatest experiences of my life. It has allowed me to marry my experiences in cannabis activism with my experiences running a business and building brands. This year we are celebrating the #10YearsofNCIA and looking back at all of the progress our movement has made over the last decade and it is truly remarkable to see how far we’ve come.
10 years ago, I was still in college, working the drive-thru at Taco Bell in Milwaukie, OR. These days, I get up every morning with an opportunity to help shape the course of history with an incredibly dedicated and passionate group of people. If there is anything my journey can teach others, it’s that the world is run by those who show up and that if you can dream it, you can do it.
Committee Blog: Interstate Commerce – Breaking the Laws of Economics (Part 3)
Legal cannabis, for all of its promise, has failed – in some markets spectacularly – to live up to its economic potential. But while each self-contained state market faces its own combination of political and regulatory challenges, the core of the problem everywhere is basic economics. Legal markets exist to efficiently move goods from where they are best produced to where there is the greatest demand. But cannabis, straddling the line between emerging state regulation and the remnants of federal prohibition, has negotiated that legal chasm by violating the inviolable laws of supply and demand, with predictably disappointing results. Perhaps now, in the face of a disastrous recession, with legal and legalizing states in desperate need for jobs and economic stimulus, is the time to get it right by allowing licensed commerce between legal markets.
The inability to move cannabis across state lines creates myriad problems for legal cannabis market operators that have far-ranging effects for all stakeholders in the cannabis industry, from investors to employees down to the patients and consumers who use the end products. The hindrance to economic activity also slows economic growth, employment, and tax revenues to states that have legal cannabis sales.
Oversupply Vs. Undersupply
Oversupply of cannabis in states like Oregon, which has excellent growing conditions and a favorable regulatory environment, are completely artificial and created not by the true excess of cannabis, but by the current inability to export to more populous states. This oversupply causes prices to plummet, which benefits consumers in the short term but is disastrous for small and medium-sized businesses and has far-reaching impacts on the communities that rely on this agricultural cash crop. Long term, the effect of these artificially low prices is that small businesses fail and large businesses take their assets to scale, which reduces employment and revenues in the communities that produce cannabis and extract the profits for investors in the large firms. This reduces competition and diversity in the industry, which hurts the same consumers in the long run who briefly benefited from the low prices. This is not a theoretical or academic argument, as we have seen these exact dynamics play out in Oregon over the past three years, with a staggering failure rate and rapid consolidation across the industry. Hundreds of millions of dollars of local capital have been eradicated as small businesses funded by friends and family have been forced to sell out to larger operators just to cover the worst of their debts.
In states which experience undersupply of cannabis, whether due to poor growing conditions or unfavorable regulations (or both) prices rise, hurting legal customers and patients of state-legal operators right away. Businesses can ultimately suffer losses of potential revenue, even as prices climb when consumers turn to cheaper cannabis from the illicit market. This undermines the legal systems set up by these states and pushes consumers to less-safe, unregulated products. As consumers drift from the legal to the illicit market, again the small and medium-sized businesses that currently represent the majority of the industry become financially unsustainable will suffer most, with the same end result to cannabis stakeholders as an oversupplied market.
Meanwhile, the artificial boundaries make scaling a business nearly impossible without access to an unlimited pool of capital. If a company from Washington, for example, wished to scale up and access new markets, they would have to completely recreate their entire supply chain, and most of their administrative operations, equally increasing their overhead with physical space and labor, for each new state that they wanted to enter. Effectively, they would have to create a brand-new small business in each state instead of scaling their operations efficiently and just expanding sales efforts to new territories. This is complicated in the extreme, both logistically and financially. What is worse, those redundant operations will become completely obsolete when cannabis is de-scheduled and interstate commerce allowed. This will almost certainly lead to a mass lay-off in the cannabis industry for all multi-state operators seeking to consolidate their operations. This will improve their cost competitiveness and further accelerate price drops that particularly hurt small businesses and stakeholders across the industry.
In fact, the extreme difference between the current state of the industry and a future in which interstate trade is allowed creates perverse incentives to investment, as opportunities that may be attractive in the short-term will ultimately prove disastrous long term. For example, massive energy and water-intensive indoor growing operations would be needed for New York to supply its population locally, and those facilities would require billions in investment dollars. These investments would look fantastic if one could be assured that the current regulatory environment would not change. But, if de-scheduling or other federal action allows for interstate trade, these facilities would have only a few years to reap the benefits of high margins before having to compete on cost with cannabis grown outdoors in the fertile Emerald Triangle of Northern California and Southern Oregon, which can produce much larger quantities of high-quality cannabis with a fraction of the inputs.
Newly legal net consumption states like New York and New Jersey will struggle to match supply to demand for years after initial legalization, resulting in millions of dollars of lost revenue, lost employment opportunity, and lost tax collections as the state struggles to develop the capacity to meet demand in a place that has no history of large scale production. If states that have historically been net importers plan for interstate trade from the outset, they can have a thriving retail industry with fully stocked shelves by taking high-quality products from producer states like California, Oregon, and Colorado within months of being able to import. The rapid change from essentially no legal industry to a robust, rich, and diverse retail environment would provide immediate economic stimulus in the form of jobs, thriving small businesses, and tax revenues. If new states are forced to rely solely on cannabis that is grown, harvested, processed, and distributed within state lines, it could take many years to develop the full economic benefits that a legal market could bring to bear.
All of these issues can be avoided, or at least mitigated, by a shrewd approach to incremental interstate trade instead of an instantaneous switch from 25 or more siloed industries to one national, or potentially international, market. The dynamics of how different state regulations interact can be tested and worked out thoughtfully, allowing for a more seamless transition and a clear roadmap for federal regulation when cannabis is de-scheduled. Successful interstate trade on any scale, between even just two states, will clearly signal to investors that the future of interstate trade is of pressing urgency to incorporate into their investment strategy. An investor in New York could then focus on opportunities related to local product development with the promise that affordable raw materials would be available from California and skip investing in indoor agriculture. Consumers and patients in states that allow for trade across their borders will instantly have access to a wider array of products, and as the size of the market that the industry has access to increases the dramatic supply and demand swings will be dampened by a larger and more diverse base of both consumers and producers.
Ultimately, the purpose of markets is to maximize the efficiency and utility of the flow of goods. They should move from the places where they are cheapest to produce to the places where the demand is highest. This is most effective with commodities and consumer goods, like cannabis. The current restrictions against moving cannabis across state lines completely hobble the market’s ability to perform this critical function. The result is bad for producers, consumers, regulators, and state governments. Interstate commerce for cannabis means better markets for producers, more choice for consumers, and a massive economic stimulus for all participating states in the form of job creation and increased tax revenues.
Gabriel Cross is a Founder and CEO at Odyssey Distribution, LLC, a distributor for locally-owned craft cannabis producers and processors in Oregon. Gabe worked in the sustainable building industry for a decade before starting Odyssey and brings his experience with sustainability and systems thinking to his work in the cannabis industry. Odyssey manages logistics, sales and marketing for boutique producers so they can focus on creating great craft cannabis products for the Oregon market.
Gary Seelhorstof Flora California has a passion for developing high-quality cannabis products so their most therapeutic effects can be realized. His 25 years in pharmaceuticals and medical devices helps him bring scientific rigor to the cannabis industry. Gary is very active at both the State and Federal level as an advocate for policy reform/higher quality standards. He enjoyed lengthy stints at Eli Lilly and Pfizer (in clinical development and corporate development) and worked with several start-ups developing corporate and compliance strategies. Gary has a B.S./B.A. from UC San Diego in Biochemistry/Psychology, an M.S. in Clinical Physiology from Indiana University, and an MBA from the University of Michigan.
#IAmTheCannabisIndustry: Joseph Hopkins, The Greener Side
Joseph Hopkins, with his wife Chelsea, owns and operates The Greener Side, a dispensary in Eugene, OR. As some of the original entrepreneurs to open a dispensary in the state of Oregon, their story of being raided by federal authorities shows how resilient one needs to be in the cannabis industry. Hear their story in this video feature.
Member Blog: Cross-Pollination Poised to Prompt Litigation in Light of New USDA Hemp Rules
On October 29, 2019, the USDA released regulations establishing a domestic hemp production program, paving the way for hemp cultivation on an industrial scale in 2020. While the potential benefits of a robust hemp industry in California are exciting, large scale industrial hemp cultivation increases the risk of cross-pollination for hemp and cannabis growers, which may significantly impact the value of both crops.
Cannabis sativa, the plant used in both hemp and cannabis production, is a dioecious species, meaning that male and female flowers are borne on separate plants. Cannabinoids, including THC and CBD, are more concentrated in the female flower than in the male flower. Therefore, cannabis or hemp growers who desire a crop with a high yield and potency of either THC or CBD will typically use feminized seeds or clones and will weed out male plants if they appear. Growers of industrial hemp produced for seed or for fiber, however, are not concerned with producing potent cannabinoids and therefore will generally grow both male and female plants.
Cross-pollination between female and male plants can cause problems, such as seed production, lower crop yields, and altered THC or CBD content of the flowers that are produced. This can devastate the value of crops grown for their THC or CBD content. Moreover, if hemp exceeds the 0.3% THC concentration threshold allowed under the federal regulations, it must be destroyed.
Unfortunately, cannabis pollination can occur over large distances depending on the concentration of plants and weather conditions. Industry experts recommend a minimum distance of ten miles between outdoor growing operations, but research shows it is possible for cannabis pollen to travel much further. Therefore, cross-pollination is possible even if a neighboring farm is miles away. This dynamic poses a huge problem to the young industry.
At this point, there are few regulations in California designed to prevent cross-pollination. Several counties enacted temporary moratoriums on the production of hemp, primarily based on the USDA’s inaction. In those counties, cross-pollination has not been a problem since cultivation was not allowed in the first place. Now that the USDA has issued regulations governing the hemp industry generally, counties will likely lift these temporary moratoriums. But since the USDA regulations are silent as to the distance between hemp and cannabis operations, cross-pollination will almost certainly occur and will likely result in litigation in the near future. Indeed, cross-pollination has already caused litigation in other states. For example, lawsuits related to cross-pollination have already commenced in Oregon. In Jack Hempcine LLC v. Leo Mulkey Inc., et. al., a hemp grower alleges that cross-pollination by male plants on the property of several nearby growing operations raised the THC levels of the Plaintiff’s female plants, rendering his entire crop unmarketable. The grower who brought that action alleges damages exceeding $8,000,000 in lost crop value.
There are several legal theories available to growers seeking to recover damages caused by cross-pollination of their crop by a nearby hemp or cannabis operation, including negligence, trespass, nuisance, strict liability, and interference with prospective economic advantage. If your crop is or was negatively affected by cross-pollination or another grower alleged that you have damaged their crops via cross-pollination, you should contact counsel as soon as possible.
Ryan McGuire is an attorney at HK Cannabis Law, a practice group of Huguenin Kahn LLP, a full-service law firm representing clients throughout California and beyond. Ryan has years of experience litigating a broad range of legal actions, including personal injury, employment, contractual disputes, and construction defect claims. Ryan also has deep ties to California’s agricultural community, and has successfully represented growers, packers, and distributors. Ryan’s knowledge and experience are valuable assets for clients involved all aspects of cannabis production from seed to sale. Established to provide legal representation and counsel in the emerging field of cannabis law, HK Cannabis Law stands ready to serve clients at every stage of the cannabis business cycle, from business entity formation, real estate acquisition, land use, contracts, business transactions, regulatory compliance, licensing and permitting, enforcement defense and, should it ever be necessary, legal representation in both civil and criminal trials and appeals.
Committee Blog: Ending The Ban On Interstate Commerce (Part 1)
Oversupply and shortages, high prices and lack of choice for patients and consumers, illicit markets, tainted products, and the inability to access banking and capital all plague the burgeoning cannabis industry. While cannabis advocates and industry leaders are working on each of these problems, there is one solution that would ease the burden on all of them. Allowing for interstate trade between states with legal cannabis markets would improve each of these issues while supporting the individual solutions to each that the industry has been working on. This is the first post in a series that explores the benefits and barriers to setting up a legal framework for interstate trade, even before wholesale legalization at the federal level.
Since the beginning of legal, adult-use cannabis, when Colorado and Washington passed the first ballot measure allowing for adult-use, the industry was guided by the Cole Memo, which laid out the parameters for the federal government staying out of the states’ cannabis experiments. Among other things, the Cole memo stated that the DEA could crackdown on cannabis moving from states with well-regulated systems to states that do not allow cannabis. This statement has been interpreted conservatively to mean that no cannabis should cross state lines for any reason, ever, based on the fact that at the federal level, cannabis is still a Schedule I drug under the Controlled Substances Act.
Today, there are 10 states which have legalized adult-use, another 19 which allow for medical use, and six more which allow the use of CBD products only. Many of these states share borders, and producer states could serve several nearby markets without ever entering a state that does not allow cannabis in any form. Furthermore, the Cole Memo, which was rescinded by Jeff Sessions in 2018, has not been replaced by any guidance whatsoever. This means that each U.S. Attorney’s office is free to set their own enforcement priorities around state-legal cannabis activities, and there is no official overriding policy at the DOJ on interstate trade between states with medical or adult use. Corresponding guidance from FinCEN, however, remains in effect and similarly discourages the transfer of cannabis between states.
Cannabis markets vary widely from state to state with regard to the underlying market dynamics and challenges that they face. Some states produce too much while other states experience shortages. Meanwhile, new states pass legislation or have voter initiatives that allow medical or adult-use every year without any infrastructure in place to supply that state’s demand. In each new legal market, the vast majority of demand had long been met through illicit market supply, and generally from outside of the state’s boundaries.
The artificial boundaries around cannabis markets have far-reaching impacts for local economies, patient access, illicit market activity, and social equity. Later posts in this series will take a deep dive into each of these issues, and in this post, we will look at how this has impacted states, the industry, and consumers so far.
Lessons Learned:
Washington State chose to take the strictest possible reading of the Cole Memo, and insist that not only must cannabis not cross state lines but also sources of funding must come from within the state. Combined with their high capitalization requirement for licenses, the result was a disaster from an equity standpoint: only wealthy and well-connected individuals in the state (which are overwhelmingly white males) were able to even attempt a license. This decision was based substantially on the fact that interstate trade was not allowed.
In Oregon, which has an ideal growing climate and a long tradition of exporting cannabis (albeit in the illicit market), the artificial boundaries created by the ban on interstate trade lead to a massive oversupply for its small population, which crippled the industry and tanked many small businesses. Despite the fact that Oregonians consume more cannabis per capita than any state, their climate and culture have led to growing massive quantities of world-class cannabis that cannot reach patients and consumers, even in neighboring states that might have under-supply issues. The result is that hundreds of small, mom-and-pop shops and family farms have gone out of business, eradicating millions of dollars of local capital, and accelerating mass consolidation of the industry into the hands of a few foreign corporations. Meanwhile, in medical markets like Illinois and Michigan, patients have had sporadic access to quality cannabis-based medicines.
When Nevada originally launched, due to the influence of local liquor distributors, it was almost impossible to get products to market, and the state’s dispensaries sold out on the first day of sales. After ironing out some of the kinks, sales are going strong, but the practice of growing thirsty plants indoors in the desert is of dubious value when the same plant can be grown with a fraction of the inputs in northern California and southern Oregon.
California’s legal system is a perfect example of how over-regulation fuels illicit market activity. Because of the structure of their regulatory framework and high taxes, the state is served by only 800 licensed dispensaries, whose prices are double and triple those found on the illicit market for similar products. This has led to the emergence of thousands of “pop-up” or unlicensed dispensaries, selling untested products tax-free in a thriving illicit market. The booming illicit market in California has also led to massive wholesale markets of hardware, branded packaging, and flavoring and cutting agents (all technically legal) to supply the illegal operators with everything they need to look legitimate. This is a major contributing factor to the wide-spread vaping related illness cases popping up all over the country, as many illicit market operators purchase their supplies in downtown Los Angeles.
The ban on interstate trade promises to continue to create new and novel problems as well. If New York, the 4th most populous state in the union, legalized adult-use (which seems likely in the near future), and interstate trade were still banned, it would require a massive investment, on the order of billions of dollars, to create enough indoor and greenhouse grow facilities to supply the demand created by its 19 million inhabitants. The recent legalization of hemp under the last Farm Bill has created a number of legal dilemmas as well, as some individual states that do not recognize any difference between hemp and cannabis flower have seized products and arrested individuals taking hemp legally grown in one state to a market where it is legal to sell.
Some suggest that these issues will be sorted in local markets, and in each state individually this approach might seem to make sense. When you add these problems together, though, a much more elegant, efficient, and obvious solution emerges: let states that have always exported cannabis send it to states that have always imported it. A set of different and seemingly unconnected problems become each other’s solutions.
Historically, people across the country have consumed cannabis, and the vast majority of it was grown in a few locations that are particularly well-suited to the plant. It is highly likely that a fully-matured nationwide legal market (one which must account for not only interstate, but also international competition) will ultimately be best served by the same general market dynamics. The only question is: how long will we allow the artificial market boundaries around each state to decimate local capital, curb access for patients and consumers, encourage investments that are attractive short-term but disastrous long-term, and prop up the illegal markets that pose a public health risk?
Interstate trade between states that allow some form of legal cannabis would provide much-needed relief on a number of fronts for cannabis businesses, and could be structured in such a way to support social equity efforts. With a little guidance on enforcement and thoughtful programs and agreements between states, there is a path to legal interstate commerce even before cannabis is removed from the Controlled Substances Act. The state of Oregon has already passed legislation allowing for the export and import of cannabis products provided that the Federal Government allows it. This could be either through legislation such as the proposed Blumenauer/Widen State Cannabis Commerce Act, or though DOJ enforcement guidance (whether from the Attorney General or the relevant local U.S. Attorney’s). There are multiple paths that can lead to the end of banned interstate trade, and it seems increasingly inevitable that we will see legal cannabis trade across state borders in the near future. For most operators in the cannabis industry, and for all patients and consumers, this will be a good thing, and can’t come soon enough.
Gabriel Cross is a Founder and CEO at Odyssey Distribution, LLC, a distributor for locally-owned craft cannabis producers and processors in Oregon. Gabe worked in the sustainable building industry for a decade before starting Odyssey and brings his experience with sustainability and systems thinking to his work in the cannabis industry. Odyssey manages logistics, sales and marketing for boutique producers so they can focus on creating great craft cannabis products for the Oregon market.
Five Reasons Why NCIA’s Industry Socials Were A Huge Success
At the end of 2018, NCIA’s events team looked ahead at how to make our line-up of 2019 events even better and respond to an increasingly popular demand for more networking opportunities. As a team we dreamed up how to make a B2B networking series that was not only delivered maximum ROI, but was super fun and fit the cannabis industry culture.
Ultimately, we devised what might be the magic elixir of networking events. Artsy venues, delicious drinks and food, live local music, old-school Nintendo, giant Jenga and Connect Four. We even threw in a raffle-wheel contest to win limited edition NCIA merchandise. The result? NCIA’s January Industry Socials were a total hit. Although there are many, here are the top five reasons why NCIA’s Industry Socials were a huge success.
1. Impressive Attendees
Throughout January, Industry Socials kicked off with a West Coast Tour in Seattle, WA, Portland, OR, Las Vegas, NV, Salt Lake City, UT and Phoenix, AZ. We were excited (and a bit nervous) about the turn-out for the Utah Industry Social in Salt Lake City, since the exciting passage of Utah’s Proposition 2 happened only a few months before the event. As NCIA’s Aaron Smith remarked “we’re excited to bring our world-class industry events to new markets like Utah, and later this year in Missouri, North Dakota, and Texas!”
Overall, January’s Industry Socials turned out about 500 impressive cannabis industry professionals and advocates, representing 250 current NCIA member companies! Even better? We saw more than 75 attendees in the brand new Utah market!
2. Incredible Feedback
The post-event survey results are in and they are stellar! The majority of survey respondents reported that they would highly recommend the event series to a friend or colleague.
More than 50% of survey respondents said they made between 11-20 new contacts at the event and that at least three of these contacts were potential sales deals.
When asked what the biggest return on investment of the event was attendees stated:
“Getting to know our local business community.”
“The low key but targeted exposure in our local market.”
“Continued relationship building and network expansion.”
“We gained a lot of insight into the industry and where we fit as a company… the insights we gained were invaluable.”
“Foot in the door to get involved in rule making and learning about the application process in Utah.”
Kyle Rooney from Have A Heart, Sustaining Members with adult-use dispensaries in four states, says that “attending NCIA’s new Industry Socials is a chance to network in a more personal and low-key environment. National conferences are great, but these events provide a platform to talk to people in the regions that you want to connect with.”
RizePoint, who became members of NCIA just a week before the event in Salt Lake City, attended with several team members. Ed McGarr, RizePoint’s Vice President of Sales and Marketing says, “We began working with cannabis companies last year to advise on food safety, quality control and management for adult-use and medical cannabis edible products. NCIA’s Industry Socials provide a forum for us to connect with the industry and learn from them, as well as gain new business contacts. The event was priceless relative to networking and establishing ourselves further in the cannabis industry. It was refreshing that NCIA helped to establish the networking opportunities in a new, emerging market like Utah.”
3. Innovative Networking and Entertainment
Introducing a retro arcade station including Super Mario and PAC-MAN at our Industry Socials was the brilliant idea of our events team. Now that we know how fun it was, we’re seriously considering having it as an NCIA event standard.
But seriously, we now know that a cash bar is not the only way of lubricating conversation and community building. Adding fun games like Nintendo, giant Jenga and Connect Four is another way cannabis industry professionals can “connect” in an authentic, fun, and meaningful way. If more networking happened while playing a competitive game of PAC-MAN, the business world would be a much better place.
Additionally, at every event we had talented local DJ sets and interactive activities like a raffle-wheel and Polls Everywhere with cannabis industry trivia. As a value-added complimentary activity at our Nevada Industry Social, attendees had the opportunity to participate in two private tours of the world’s only immersive cannabis museum, Cannabition!
4. Our Sponsors and Partners
From helping us spread the word, to investing in NCIA’s Industry Socials, none of these amazing events could have happened without the help of our sponsors and partners.
Lastly, a huge thank you to our promotional partners: Growers Network, Cannabis Collaborative Conference, Utah Patients Coalition, Epilepsy Association of Utah, Marijuana Policy Project and TRUCE Utah.
5. Setting the Stage for 2019 Events
To kick off 2019 with a successful inaugural event series sets the stage for an incredible year of NCIA events. We are looking forward to hosting the next tour of Industry Socials in new cities and markets again in April and August.
But, you don’t have to wait until April to attend more NCIA events. NCIA’s March Cannabis Caucus series is kicking off soon, followed by the most impactful cannabis industry advocacy event of the year – NCIA’s 9th Annual Cannabis Industry Lobby Days.
Lastly, thank you to our nearly 2,000 member-businesses and to all event attendees for supporting NCIA’s mission. NCIA’s event revenues support the work we are doing to lobby at the federal level on your behalf on Capitol Hill and to build public support for the cannabis industry.
If you were at the January Industry Socials, be sure to check out our Facebook album and tag yourself!
Member Blog: Advice for Surviving and Thriving in the New Era of Legal Cannabis From Those Who Have Climbed The Mountain (Part 1)
The challenges facing companies pioneering a new industry where each state deals with its own issues are numerous. The importance of strategic business planning and the ability to predict future problems are essential to survival.Colorado, Washington, and Oregon have each dealt with their unique issues and challenges but there are also common problems that every cannabis business experiences: burdensome regulation, unfair taxation, and banking prohibition to name a few. Building your company and brand is dependent on your ability to maneuver your company through the obstacles that will arise in your state market while also planning for a future of legal interstate commerce through a change in federal policy. To place your company in a position to be successful, you should understand the past to predict the future.
Quick Summary of Cannabis History
The history of cannabis is long and distorted, however a few basic points of what brought us to the current state of federal prohibition and individual state markets should be noted for context.
Cannabis use as medicine dates back to 2700 BC in China, and has been used throughout history. In 1850, it was added to the U.S. Pharmacopeia. Prior to state and then Federal prohibition, cannabis was an elixir/tincture used in many common household cough/cold syrups and other medications for stomach-aches, asthma, depression, and many others. In the 1930s, cannabis was regulated as a drug in all states, and in 1937, the passing of the Marihuana Tax Act regulated it federally. Then in 1970, the Controlled Substances Act determined cannabis to be a Schedule 1 drug meaning it has no medical benefit and a high risk for abuse. From 1970 to 1996 the manufacture, use, or possession of cannabis was illegal in all fifty states.
CALIFORNIA
In 1996, California became the first state to legalize the medical use of cannabis through Proposition 215. California was the first domino to fall and further background of the early days of California medical cannabis will be addressed in later blogs in this series focusing on California. Over the next twenty years, 37 states have joined California with medically legal cannabis, and nine states have passed and implemented legal “recreational” (now referred to as “adult use”) cannabis programs.
OREGON
Oregon was the second state to pass medical cannabis in 1998 and that was the start of this author’s journey through the cannabis industry. Prior to 1998, Oregon had been a bastion of black market cannabis cultivation due to its climate and wide open spaces especially in rural southern and eastern Oregon. After 1998, the state “protections” offered by medical cannabis state law allowed the cultivation industry to flourish. However, as opposed to California the state was more focused on growing weed and selling it around the country rather than setting up a distribution system to the medical patients of Oregon. This led to some of the early challenges of the medical cannabis program in Oregon. At this time, the Oregon population was relatively small compared to the state’s cannabis production. Oregon was on its way to being one of the largest cannabis producers in the country. But because cannabis was so easily accessible there was little effort put into a healthy distribution system to Oregon patients. Most patients either grew for themselves or had a designated “grower” and that is where I started in the industry.
OREGON: FORMATION OF RETAIL ESTABLISHMENTS
As a nurse who had self medicated with cannabis for ADHD, I began growing for patients because I wanted to provide others with access to the amazing health benefits of cannabis. This was the common way most patients accessed their cannabis. There were no dispensaries when the program started and patients who didn’t have a grower were relegated to barter trade types of acquisition. In 2005, the Oregon Legislature allowed growers to be reimbursed for the cost of production and in 2010, the first dispensaries began to pop up. However, it wasn’t until 2012 that legal retail entities were allowed. This lack of a retail access point for patients was one of the first impediments to the program and allowed states like Colorado and California to take the mantel on progress of a robust program of medical cannabis distribution.
COLORADO
In 2000, Colorado became the sixth state to allow medical cannabis with Amendment 20. Its medical program remained low key until 2010 when the Colorado Medical Marijuana Code was created, which provided for licensing of production and retail establishments. This change was a giant step to the progress of cannabis legalization.
Colorado followed the early model presented in California and began implementing licensed retail establishments for card carrying medical cannabis patients. Retails stores began to flourish and this laid the groundwork for the establishment of the Adult Use program. In 2012, Colorado became the first state to legalize what was originally referred to as recreational cannabis now called “Adult Use” cannabis, which allowed the sales of cannabis to all adults aged twenty-one and older and the boom began. Colorado’s medical program developed into a rapidly growing Adult Use system and with the new federal guidance of the Cole Memo in 2013 canna-businesses began growing rapidly.
COLORADO: SEED TO SALE TRACKING
The primary language of the Cole Memo highlights a “robust tracking system” of all products produced and sold. The Cole Memo did not provide protections for cannabis businesses but provided guidance that helped assure businesses of some safety from federal interference. With the advent and implementation of a tracking system we could now be assured of where products came from and be able to track them back to their origin.
COLORADO: LAB TESTING
Once tracking was in place, lab testing for the safety of the consumer came to the forefront of industry progress. This was one of the first problems Colorado realized it had with its blossoming industry. As opposed to Oregon which required all products sold through its immature dispensary system since 2012, Colorado had not required lab testing of all its products until 2016 after several large quarantines and destruction of unsafe contaminated products. Many Colorado producers struggled with new pesticide regulations and was an early sticking point to growth of the industry. Over the first years of Adult Use cannabis program, Colorado struggled with the infancy of a brand new industry and how to regulate it and consequently, businesses suffered.
Other early challenges that the first legal state dealt with were allowable dosages and changes to dosing, as well packaging changes and the look of products, specifically how or if the products were attractive or marketed to children. The obstacles of a new industry most directly affect the businesses and their bottom lines. These are important points to consider when strategizing your business model and planning for inevitable changes to regulations. The time spent preparing for a system that will change will go a long way to ensuring for success.
WASHINGTON
Now let’s talk about Washington.
Washington was the third state to approve medical cannabis but had problems with implementation due to legislative issues. As multiple pieces of legislation were offered, adopted, and repealed, the lack of clarity prevented the medical cannabis industry from launching. Washington passed its adult use cannabis program at the same time as Colorado in 2012. In Washington, the two major obstacles the industry faced were licensing issues and taxes. A previously existing strong medical program in Colorado allowed for a seamless transition to an adult use program, but that was not present in Washington and this added to difficulties with implementing an adult use program.
Because the industry was just getting off the ground, both states relied on their medical programs as a foundation to the adult use. However, Washington’s medical program was murky and disorganized which lead to complications, Washington also limited licenses and put unfair taxes on the industry. These two factors aided in keeping the black market as the primary driver of the industry, rather than pulling people or businesses into a controlled, tracked, and regulated system.
280E TAX CODE
This provides a nice segue to one of the challenges all cannabis business face: unfair taxes in the 280E tax code. Internal Revenue Code section 280E specifically denies a deduction or credit for any expense in a business consisting of trafficking in illegal drugs “prohibited by Federal law or the law of any State in which such trade or business is conducted” which translates to only “Cost of Goods Sold” as the only deductible expenses. This means administrative costs, executive salaries, marketing and advertising, banking fees, etc., are non-deductible expenses for any cannabis business and subjects them to much higher taxes as most normal business deductions are prohibited. This challenge is one all cannabis businesses deal with and must be factored into financial modeling.
BANKING
While we are on the the subject of taxes and non-allowable deductions, banking is the other major challenge all cannabis businesses face. Due to federal policy around an illegal substance, FDIC insured institutions force canna-businesses to operate in all cash for fear of prosecution under racketeering and money laundering laws. There are a handful of financial institutions, credit unions, or state banks that offer “Enhanced Monitoring Accounts” for cannabis companies. However, they are highly priced and rare. The average cannabis bank account is likely to run $1,000.00 a month, just to have access to banking services, not including additional fees. This $12,000 a year budget line item, while not only expensive, is not a tax write-off per 280E tax code.
One can quickly see from just these two major hurdles or challenges to the industry, normal operations can be difficult. These obstacles are not to be taken lightly; they can be addressed but it must be factored into operating procedures, financial planning/budgeting, and strategic vision.
NOW BACK TO STATE SPECIFIC ISSUES
As Washington and Colorado dealt with its issues, Oregon voted to approve “Adult Use” cannabis in 2014. Using Colorado and Washington as a guide, Oregon implemented their system with more deliberation and vision based on what had been experienced in the first two states. But as was seen with the unique challenges in the first two states, Oregon encountered an entirely different set of problems. Oregon currently faces a massive oversupply problem which has affected all facets of business across the industry. In normal business and supply and demand economics, if an area is oversupplied, business move their products to where the demand is higher or the supply is lower. However, cannabis remains a federally illegal product and therefore interstate commerce remains illegal.
Oregon’s unique problem originated from two main issues:
Oregon had already established itself as a cultivation mecca
The regulatory authority decided against a cap on licenses
This lack of license caps has allowed the number of licensees to explode and thereby allowed the oversupply issue to occur and continue to grow. As stated, this is not a problem exclusive to cultivator/producers. Because of a 75% drop in value, cannabis attorneys, electricians, HVAC, security companies and other ancillary businesses are not getting paid. The oversupplied market and decreased revenue has reverberated across the industry and driven otherwise thriving companies into bankruptcy.
As you can see, each state deals with its unique challenges when implementing its Adult Use cannabis program, while we all deal with some issues that affect us all. The key to thriving… or surviving is to prepare your company to deal with the current challenges shared by us all and predict the challenges that your business will face in your state while preparation is taken for a national and international market.
James Schwartz RN, BSN, LNC, is an experienced medical legal consultant and CEO of CascadeHigh Organics with 20 years experience cultivating legal cannabis. James is a self-described organic minimalist cultivating in the most sustainable manner. James believes in clean cannabis and its use as a wellness drug. His Oregon licensed cultivation, Cascade High, has been featured in Dope Magazine and on the cover of Oregon Leaf’s Sustainability issue (March ‘18). James was featured as the Inaugural Stoner Owner by OR Leaf in Dec 2018. He has articles published by Dope Magazine about Cannabusiness and the Pharmaceutical Industry (May 2017), as well as a medical cannabis article in the Jan. 2019 Healthcare issue of OR Leaf. James is currently on the NCIA Cannabis Cultivation Committee and has presented Cannabis topics to multiple audiences at conferences including Cannabis Science Conference, PDX Hempfest, Cannabiz Convention, CBD Expo and Webinar series, Cannabis Collaborative Conference(CCC), Cannabis Nurse Conference, NCIA and educational industry mixers. His business, legal, medical, and agricultural knowledge provides a unique perspective on the industry. James has lobbied for Cannabis on both the national and state level with Oregon Cannabis Association and is a fierce advocate for the plant and all who use it.
Member Blog: Tackling Oregon’s Cannabis Oversupply Problem
When Oregon’s recreational marijuana program launched in 2016, the state chose not to limit the number of cultivation licenses that would be awarded. It also opted not to limit the amount of cannabis that each licensed cultivator could grow. Over the first 12 months of adult-use sales, the state issued licenses and expanded the industry.
Things were going fairly smoothly until the 2017 cannabis harvest brought in more than 1 million pounds of cannabis. For a state with just 4.1 million residents who purchased one-third of that amount in 2016, it became clear quite quickly that Oregon’s cultivators had grown more cannabis than the state’s retailers could sell. As a result, prices for legal marijuana dropped.
Unfortunately, the state didn’t learn from its mistake and the 2018 harvest brought 5% more cannabis than what was harvested in 2017. An even bigger surplus caused prices to plummet further, and many licensed growers were forced to go out of business or sell their licenses to larger companies with deeper pockets at extremely deep discounts. Those big companies could withstand price drops while smaller licensees cannot.
One of the biggest problems Oregon faces as a result of its cannabis oversupply problem is exactly the opposite of what its lawmakers wanted to happen when the recreational marijuana program was developed – many growers returned to the black market where they could still sell cannabis for a profit.
Possible Solutions to Cannabis Oversupply
As prices continued to fall and the cannabis oversupply problem continued to grow, suggested solutions came from multiple sources. Three options rose to the top as the most commonly cited. First, Oregon could cap the number of cultivation licenses it granted. With a large number of applications waiting to be reviewed and licenses to be granted, the problem with growing too much marijuana was poised to get even worse.
Both Washington and Colorado had some success solving their cannabis oversupply problems when they stopped awarding new licenses. In 2017, Washington had a 60% larger supply of cannabis than it did in 2017, which caused marijuana prices to fall in 2018. Business owners were very vocal about the need for changes to the state’s canopy limits and cultivation facility sizes. The state decided to stop issuing new cultivator licenses to solve the problem.
As the graph from the Cannabiz Media License Database shows, the number of active cultivation licenses in both Washington and Colorado varied by only 1% between January 1, 2018 and December 31, 2018. Contrast that to Oregon where the number of licenses grew by more than 26% during the same time period.
The Oregon Liquor Control Commission (OLCC) argues that only the state’s legislature can create a cap on the number of licenses issued in Oregon, but it did stop reviewing applications and issuing licenses in June 2018. While the OLCC claims the reason is because it had a large backlog of applications, it can also be assumed that the moratorium on issuing new licenses would help to quell the surging supply of cannabis in the state.
The second possible solution to the cannabis oversupply problem in Oregon is to reduce the canopy size for each license. In April 2018, Oregon modified cultivation licensing rules so new cultivators would have more limited canopy space for immature plants than existing cultivators.
The third suggested solution is to do nothing and let the market adjust and correct itself. For the most part, this appears to be the approach that Oregon is taking. While it did implement a rule in 2018 that required cultivators to notify the state of their harvests, which could bring an inspector to verify that the cultivator is adhering to cultivation rules, the state’s cultivators are still in a wait-and-see situation.
What’s Next in Oregon?
The OLCC has been doing research related to its oversupply problem and is expected to present its findings to the Oregon legislature this year. Many people assume placing caps on cultivation licenses will be on the table during those discussions.
In the near future, Oregon’s lawmakers will need to develop a strategy to deal with the oversupply problem, and it will likely include a combination of the suggested solutions. For example, a license or canopy cap and improving accessibility to marijuana products combined with allowing some consolidation to happen in the market should help to curb the oversupply problem.
Susan Gunelius, Lead Analyst for Cannabiz Media and author of Marijuana Licensing Reference Guide: 2017 Edition, is also President & CEO of KeySplash Creative, Inc., a marketing communications company offering, copywriting, content marketing, email marketing, social media marketing, and strategic branding services. She spent the first half of her 25-year career directing marketing programs for AT&T and HSBC. Today, her clients include household brands like Citigroup, Cox Communications, Intuit, and more as well as small businesses around the world. Susan has written 11 marketing-related books, including the highly popular Content Marketing for Dummies, 30-Minute Social Media Marketing, Kick-ass Copywriting in 10 Easy Steps, The Ultimate Guide to Email Marketing, and she is a popular marketing and branding keynote speaker. She is also a Certified Career Coach and Founder and Editor in Chief of Women on Business, an award-winning blog for business women. Susan holds a B.S. in marketing and an M.B.A in management and strategy.
Member Spotlight: Phylos Bioscience
This month, NCIA highlights Phylos Bioscience based in Portland, Oregon. Co-founder and CEO Mowgli Holmes is a molecular and evolutionary biologist and was a National Research Service Award Fellow from Columbia University. He is a founding board member of the Cannabis Safety Institute and the Open Cannabis Project, and is Chair of the Oregon State Cannabis Research Task Force.
Phylos Bioscience
Member Since:
May 2015
Business Category:
Analytical Testing Laboratory
Tell me a bit about your background and why you launched your company?
In 2013, the industry was just starting to blow up, but it had basically zero science. There was a really clear need for a company focused on studying the cannabis genome — one that would be able to make genetic tools available to the industry.
But I think it just so happened that I was one of the very few scientists at the time who was between jobs, and had a background in genetics, roots in Oregon, and an unashamed enthusiasm for weed. I was the right mix of New York and Oregon at the right time. Or the right mix of geneticist and hippie.
Most scientists are still too freaked out by cannabis to dive in. Isn’t that silly?
What unique value does your company offer to the cannabis industry?
Our team of scientists has the expertise to leverage genomic data into products and technology that growers really need. But what’s most unique about Phylos is that we have a genomic database of different cannabis varieties that is significantly larger than any other. It took years to collect it, and it took the help of the American Museum of Natural History, as well as a huge amount of trust-building in the industry. This database is the foundation of everything we do, and it would be very hard for anyone else to recreate anything like it.
Cannabis companies have a unique responsibility to shape this growing industry to be socially responsible and advocate for it to be treated fairly. How does your company help work toward that goal for the greater good of the cannabis industry?
We actually do a ton of “activist” stuff. We started a nonprofit to drive rational safety testing guidelines (Cannabis Safety Institute). We started another one to block big corporations from patenting cannabis varieties (Open Cannabis Project). And for more than a year I hung around the state capital constantly, helping to write the laws and rules that structure the Oregon industry, and serving as the Chair of the Oregon State Cannabis Research Task Force. We drafted laws that helped small growers, and laws that supported cannabis research, and we wrote the study that led to Oregon’s strict pesticide testing rules.
In general we’ve just let ourselves get dragged into this very politicized industry, and tried to fight for the idea that legalization should mean that the people who started this industry should be legalized, not replaced.
What kind of challenges do you face in the industry and what solutions would you like to see?
We’re lucky because we’ve always found ways to do our work while still staying federally legal. So obviously the whole industry needs banking, 280E relief, protection from the federal government, etc. But Phylos doesn’t directly need any of that — we just need it because we want the industry to be strong and sustainable. The biggest problem for us is the lack of research, and the federal government’s continuing unwillingness to make real cannabis research possible. And actually that’s one thing that could be fixed easily if there was just the will to do it in D.C.
Why did you join NCIA? What’s the best part about being a member?
Well, the conferences are some of the best out there. And there’s a real sense that instead of them just being another commercial conference, they’re actually run by an organization that is fighting for the industry, and taking on the hard challenges of federal lobbying and so on. I’m also on the NCIA Scientific Advisory Committee, and it’s great to see the commitment throughout the organization to working for things (like reasonable testing regulations) that the whole industry needs in order to function.
Member Spotlight: Yerba Buena Farms
In this month’s member spotlight, we check in with the team at Yerba Buena Farms, based in Oregon. Yerba Buena was recently named one of the top 100 green companies to work for in Oregon. Operations Manager Laura Rivero tells us more about their company and the way they manage their staff through self-care “wellness days” and volunteering for charitable organizations.
Yerba Buena Farms
Cannabis Industry Sector:
Cannabis Cultivation
NCIA Member Member Since:
May 2017
Tell us a bit about your background and why you launched your company?
We launched YB with the intention of bringing a holistic approach to the cannabis business. These include fair labor practices, research and innovation, organic practices, sustainability, and bringing a diverse group of people together to achieve a common goal.
What unique value does your company offer to the cannabis industry?
Our company is focused on consistency and quality in both our product and business practices while maintaining full compliance and integrity. We are helping to set standards across the board, elevating the cannabis industry as a whole and inspiring others.
Cannabis companies have a unique responsibility to shape this growing industry to be socially responsible and advocate for it to be treated fairly. How does your company help work toward that goal for the greater good of the cannabis industry?
We do the right thing every day and with every decision. It is not always about the bottom line and the ability to cultivate a socially responsible organization is a key benchmark in our organization. We have been recognized in every sector of the industry and beyond for exemplary practices, and we are committed to pushing the envelope to increase the standards for other businesses, regardless of their industry. We were the first (and so far only) cannabis company to make the 100 Best Green Workplaces in Oregon, placing 9th, and shining a light on this industry as a potential leader in sustainable business practices.
We participate in organizations that are helping push forward positive change and standards, such as the Cannabis Certification Council (CCC), which is dedicated to setting national organic and fair labor standards for cannabis, the Oregon Cannabis Association (OCA), which is dedicated to protecting the cannabis industry on local, state, and federal levels, and we are part of the Resource Innovation Institute (RII), which leads in sustainable design and resource efficiency for the cannabis industry.
In addition to participating in other organizations that are making a difference, we understand that it all truly starts within our own organization. We are committed to paying our employees a family wage and provide excellent health benefits that are covered 100% by the company. We have monthly wellness days to promote self-care and teach personal wellness strategies, as well as regular get-togethers and team building events. Our team volunteers with many charitable organizations in order to give back to our community in a more meaningful and interactive way. We provide in-depth training to all of our employees on all areas of cannabis in order to increase the ambassadorship of our company. We take the opportunity and responsibility to be leaders in this industry and help to shape it to become a legitimate and respected part of the national economy, reducing the unfounded stigma, and allowing cannabis to change the world for the better.
What kind of challenges do you face in the industry and what solutions would you like to see?
Access to information both internally and externally. The industry does not have modern operating systems to adequately manage the business of cannabis production, forcing us to create our own solutions internally at great expense. Externally, banking and taxation are two areas where YB would like to see national solutions.
Why did you join NCIA? What’s the best part about being a member?
We joined NCIA because of the work accomplished and in progress on a national and state level. NCIA has represented this plant for years, and we are excited to support these efforts. The information provided by the NCIA regarding market trends, pricing, state-specific data, etc., is incredibly valuable.
For the month of September, we’re highlighting NCIA members MindRite PDX, a marijuana dispensary located in northwest Portland, OR. Owners Shea and Jaime Conley manage a true “mom-and-pop shop” in the cannabis industry, with the intention of representing the industry respectfully and responsibly. Most notably, within the last year they agreed to allow TV host John Quinones from “What Would You Do?” to make their dispensary the center stage for an experiment into whether passers-by would illegally buy cannabis for actors pretending to be underage.
Cannabis Industry Sector: Cannabis Providers
NCIA Member Since:
January 2016
Tell us a bit about you and why you opened MindRite PDX?
Shea and Jaime Conley, MindRite Dispensary
My husband Shea and I are the co-founders and sole proprietors of MindRite Medical Marijuana Dispensary in Portland, OR. Each of us has had a passion for cannabis and its medicinal benefits for almost our entire lives. We have both received many benefits from cannabis over the years, from general stress reduction to complete medical relief of my grand mal seizures and his migraines. We both previously worked in retail and hospitality for many years and had success managing, growing, and creating a positive work environment for our employers, but often felt unsatisfied and unrewarded.
When we realized we could enter into the cannabis industry together, following our passion for the products and realizing a dream of helping our community through a new avenue of health and wellness, while fulfilling our entrepreneurial spirits, we jumped in head first. Now we are successfully living and working in our own neighborhood and are excited to be at the forefront of the Oregon craft cannabis industry.
How does MindRite PDX provide unique value to cannabis consumers?
MindRite has developed a reputation for having the best medicine selection in Portland (voted Best Medicine Selection, Dope Magazine 2016). First, we set out to source our craft cannabis from across the entire state of Oregon, getting product from a select variety of micro-climates and elevations that provide some of the best natural environments for quality cannabis in the United States. We pride ourselves on having unique, small-batch strains that aren’t easily found elsewhere and supporting the small grower who has been honing their skills and refining their products for years. We have established strong relationships with some of the best grows in Oregon and through these relationships we’ve managed to keep cost to a minimum, translating that savings to our patients and now customers. We have had the same pricing structure and the same flower prices since the day we opened, not including the mandated taxation. Essentially, we are able to provide the highest echelon of product at the most affordable prices for our guests.
Secondly, we have made our customer care equally as important as the quality of our products. Our amazing staff shares our passion for cannabis, our desire to educate our neighborhood, and our commitment to providing safe, professional access to all things cannabis. When we originally opened, the staff decided as a group to pool all gratuities from patients (and now guests) into a charity fund, donating all of this money to a local charity of our choice. MindRite loved the idea and has fully matched every donation, helping our city by giving back several times a year.
In this last year, your place of business was featured twice on the popular television show “What Would You Do?” with John Quinones. Can you tell us what that experience was like and any lessons you learned from participating?
“What Would You Do?” TV still photo
The show was doing a special Portland edition and looking for a dispensary that was willing to participate during October 2016, for the first month of recreational cannabis sales. After many conversations regarding the content and overall tone that our business, but more importantly the cannabis industry as a whole, would be portrayed in, we decided to move forward with the shoot. We made it clear that we wanted to present the true cannabis consumer, the professional environment that cannabis can be provided in, and the importance of the medicinal benefits of the cannabis plant as well. Only after the entire production crew became daily guests at our shop (while scouting and shooting other scenarios in town) did we feel comfortable moving forward with the show.
The show’s premise is to see what someone will do in an unusual situation, using hidden cameras and actors to portray these awkward moments with the general public. They set up hidden cameras throughout our corner and inside our waiting area, having several actors (who were of legal age) pretending to be underage and asking passers-by as well as customers to purchase cannabis for them. We realized the risks we were taking with our business and the industry but felt confident in our community’s integrity and respect for safe access to cannabis.
Overall we were very happy with the final outcome of the show and felt that the risk of negative portrayal was well worth breaking the stigmas that have been deeply ingrained for many years about cannabis across the country. The producers did not tell us that the actors would also be offering additional money to coerce people to make purchases for them; we would have absolutely said no, as that is baiting and doesn’t accurately reflect the social experiment they were trying to depict. Regardless, it will continue to take mainstream media’s influence and cooperation of cannabis industry leaders to change unnecessary stigmas and misconceptions of this amazing plant and the people that benefit from it everyday.
Why did you join NCIA? What’s the best part about being a member?
Jaime and Shea Conley with Congressman Earl Blumenauer (D-OR)
We were introduced to NCIA through a personal friend [NCIA’s Bethany Moore] who had been working with NCIA for a few years. While we were building out our shop for opening, she invited me to an NCIA member networking event in Portland. It was an eye-opening experience to be in a room full of cannabis providers and consumers who were the leaders in every facet of the cannabis industry.
Seeing such a diverse, well-organized, and professional group was inspiring and fueled our passion to move forward. I can describe it best by saying we had “found our tribe” in every way. That has been the biggest benefit to becoming a member of NCIA – networking and participating with the business professionals of this ground-breaking industry!
Member Spotlight: New Economy Consulting
NCIA’s member spotlight for the month of February takes us to Oregon, where we speak with Sam Chapman, co-founder of New Economy Consulting, a political and business consulting firm for the legal cannabis industry. Sam’s background includes consulting for statewide political campaigns, small business development and media relations, as well as direct involvement as a lobbyist for drug policy reform at the local, state, and federal levels. Having Sam in the room at an NCIA event always raises the dialogue with his insight and expertise, and we’re glad to have him as part of the NCIA community.
Cannabis Industry Sector:
Regulatory Compliance and Consulting
NCIA Member Since:
December 2013
Who does New Economy Consulting work with?
NEC provides a range of services and support to cannabis entrepreneurs, investors, and local governments. We specialize in drafting state license applications, writing and navigating local regulations, screening compliant real estate, regulatory compliance support, and political advocacy.
The New Economy Consulting Team
How do you serve your clients?
On behalf of our clients, NEC handles all aspects of licensure for retail, wholesale, production, and processing facilities. We provide clients with a holistic approach, encompassing services from locating and screening compliant property, to compliant buildout design and supervision, to local and state compliance inspection support.
What makes NEC unique?
NEC is unique in that our business consulting services are directly informed by our active political lobbying. Our researchers maintain a finger on the daily pulse of regulatory movement in the industry at both the state and local level. We strategically deploy our proprietary research in support of our client’s business ventures. An example of where NEC goes above and beyond for clients is in tracking the local regulations of over 90 Oregon counties and cities. This body of research allows NEC to quickly and confidently screen property and determine that property’s compliance with current and expected rules and regulations.
Sam Chapman, NEC co-founder
What has been NEC’s largest impact on the Oregon cannabis industry?
Before I co-founded NEC, I helped write and pass HB 3460, which legalized and regulated medical dispensaries in Oregon. NEC has successfully championed many pro-industry causes including raising more than $30,000 in support of Measure 91, legalizing the adult use of cannabis.
What should clients know before contacting NEC?
NEC is a boutique firm with a strong commitment to our clients. We choose our client and partner relationships with care. Our ideal client is well-capitalized, with business experience inside and out of the cannabis industry, has a clear vision of their project goals, and shares in our vision of creating and maintaining an industry to be proud of. We take great pride in contributing to the new marijuana economy while simultaneously supporting and shaping social justice reforms at the state, local, and federal level.
You work primarily in Oregon, which is an evolving landscape when it comes to marijuana policy and regulations. Can you briefly summarize the important regulatory frameworks that exist for business owners, and what changes are on the horizon for this market?
The Oregon Legislative Committee on Marijuana Legalization is considering many changes to the existing recreational program, including the potential removal of the residency requirements for recreational licenses. The committee has historically been hesitant to allow out-of-state majority ownership of Oregon marijuana businesses. However, many committee members have recently expressed that they now view residency requirements as a barrier for local business to raise much-needed capital.
While there is no guarantee that the current residency requirements will be eliminated, NEC has already begun to identify current and future market opportunities available to out-of-state business owners and investors.
Why did you join NCIA?
NEC enthusiastically joined NCIA as a member in 2013 and supports NCIA’s strategic lobbying at the federal level and especially their focus on our industry’s need for banking reform and 280E tax solutions. We strongly feel that the National Cannabis Industry Association is the tip of the spear when it comes to fighting for the federal reforms that affect all marijuana businesses on a daily basis.
by Michelle Rutter, Government Relations Coordinator
This year is arguably the most crucial yet for the burgeoning cannabis industry, especially as it relates to policy. Although NCIA primarily advocates for cannabis reform at the federal level, what happens in each individual state is vital to the stances Members of Congress take on our issues.
Members of Congress care deeply about issues that directly affect their specific state or district. It’s imperative that more states enact cannabis reform legislation so that more Members have a vested interest in protecting their constituents. While cannabis reform is sweeping the nation at an almost unprecedented rate, it takes time for politicians in Washington, D.C., to catch up with public opinion back home. If all of the federal lawmakers representing just the 15 states mentioned below were to vote positively on pro-cannabis legislation, it would add up to more than 180 Representatives and nearly 30 Senators.
Take a look below and see what’s coming up next in 2016. Remember that by becoming a member of NCIA, you are adding your voice to the coordinated and unified campaign at the federal level to allow cannabis businesses access to financial services, fix tax section 280E, and ultimately end federal cannabis prohibition.
The United States of Cannabis
Arizona activists remain ahead of schedule and have nearly gathered the 150,000 signatures needed to put the state’s Campaign to Regulate Marijuana Like Alcohol initiative on the November 2016 ballot. (The campaign ultimately aims to collect 230,000 in order to insure against signature drop-off.) It’s estimated that Arizona’s adult-use market could be worth up to $480 million.
With a multi-billion-dollar cannabis industry in California alone, passing an adult-use legalization initiative in the state is vital to ending federal prohibition. The most prominent full retail initiative gathering signatures for the November 2016 election is the Adult Use of Marijuana Act, which is backed by billionaire Sean Parker and the Marijuana Policy Project.
Legalize Maine and the Marijuana Policy Project have joined forces to legalize adult-use cannabis in 2016. Legalize Maine has already collected 80,000 signatures. Only 61,000 signatures are necessary to place the measure on a statewide ballot, but the organization’s goal is 95,000, to insure against drop-off. The deadline to submit signatures is February 1st.
Last August, a pair of cannabis advocacy groups separately filed paperwork to get adult-use legalization on the 2016 ballot in Massachusetts. The state recently confirmed that a measure to legalize recreational cannabis next year has enough valid signatures to force the legislature to consider the measure. If the legislature decides to pass, then the campaign will have to collect another 10,792 signatures to formally make the November ballot.
There’s no question that adult-use legalization will be on the ballot this year in Nevada. Initiative Petition 1, which would tax and regulate marijuana similarly to alcohol, has been certified for the 2016 ballot. Backers had previously collected nearly 200,000 signatures to either force legislators to enact their initiative or put it on the ballot. When state lawmakers abstained from voting on the issue, the measure was automatically forwarded to this year’s ballot for a popular vote.
In Florida, the group United for Care received clearance from the state Supreme Court for a 2016 ballot measure that would legalize medical marijuana. The group nearly succeeded in legalizing medical marijuana in 2014, garnering 58% of the vote but falling barely short of the state’s constitutionally mandated 60% margin needed to pass,
The nation’s capital continues to debate cannabis. In December’s federal budget bill, the taxation and regulation of marijuana in Washington, D.C., was blocked by Congress again, though possessing and gifting cannabis remains legal in the city.
This month, Hawaii will begin accepting applications for medical cannabis businesses. The bill signed into law last summer opens the door for up to 16 dispensaries on the islands.
It was recently announced that Illinois saw approximately $1.7 million in medical cannabis sales during November and December of 2015. There are already petitions being circulated in the state that would expand the law’s qualifying conditions.
Maryland will award cannabis cultivation, processing, and dispensary licenses this summer. Industry advocates were pleased with the amount of interest the state’s program garnered: more than 1,000 applications were submitted.
Officials in Michigan have approved language for three different adult-use cannabis legalization initiatives for the 2016 ballot. In order to have the best chance of passing, it’s important for these groups to coalesce behind one initiative.
At the end of 2015, New Hampshire began issuing medical marijuana cards to qualifying patients. It’s expected that the state will open medical dispensaries in 2016.
After a long and arduous journey, New York’s medical cannabis program became operational this month. The cannabis industry expects the program and the law’s qualifying conditions to expand this year.
In the first week of 2016, Oregon began accepting adult-use cannabis business license applications. The state has no limit on how many licenses they will decide to award.
Vermont may become the first state to legalize adult-use cannabis through the legislative process in 2016. The proposed bill would allow for up to 86 storefronts and five different business license types.
Bonus: Election 2016 – Yes, We Canna
As we all know, a new president will be elected this November, and with that a new administration will assume power next January. It is very crucial that Congress pass more pro-cannabis legislation before then.
It’s probable that Attorney General Loretta Lynch will be replaced in 2016 or early 2017. This is important because it is the Department of Justice that enforces and prosecutes federal marijuana laws.
Another possibility for 2016 is that the acting head of the Drug Enforcement Administration, Chuck Rosenberg, could be replaced as well. Rosenberg is notorious for his gaffe last year when he called marijuana “probably” less dangerous than heroin.
On New Year’s Eve, officials from the Substance Abuse and Mental Health Services Administration posted a notice on the Federal Register that calls for a report “presenting the state of the science on substance use, addiction and health” to be released in 2016. Industry advocates are hopeful that this report could be the first sign of re- or de-scheduling cannabis from the Controlled Substances Act.
During 2016, NCIA will continue working with D.C.-based public affairs firms Heather Podesta + Partners, and Jochum Shore & Trossevin PC to magnify our efforts to address the industry’s top federal priorities: access to basic banking services and fair federal taxation.
In addition to NCIA’s lobbying and advocacy efforts, NCIA exists to connect and educate our members on all facets of the cannabis industry. Our industry supports tens of thousands of jobs, tens of millions in tax revenue, and billions in economic activity in the United States.Our core mission is to ensure that our members are treated like businesses in any other American industry. Join NCIA today to get involved and be a part of the cannabis revolution!
Do you have questions regarding any upcoming events in your area or others across the country? Reach out to events@thecannabisindustry.org any time with your questions, comments, or concerns.
Interested in sponsoring one or a series of events in a particular region throughout the year in order to gain valuable exposure for your company to our nationwide network of established business owners? Please contact Brian Gilbert at brian@thecannabisindustry.org for more information on series rates and associated discounts for packages.
Interested in speaking at the upcoming Cannabis Business Summit? Please contact brooke@thecannabisindustry.org for more information on remaining opportunities.
NCIA Member Profile: MBank
In the course of less than a week at the end of January, Oregon-based MBank went from announcing that they would be doing business with cannabis companies in Colorado to breaking the news that they would be retreating from Colorado for the time being, unable to support the infrastructure required to offer these services in the state. As NCIA’s first bank member, we sat down with CEO Jef Baker to ask a few questions and get to know them better.
Cannabis Industry Sector:
Financial Services
NCIA Sustaining Member Since:
December 2014
One of MBank’s brick and mortar locations in Lake Grove, Oregon.
How does MBank uniquely serve the cannabis industry?
One of MBank’s goals is to serve the underserved. We recognize that serving the cannabis industry very much meets that objective. With that mission in mind, we set about figuring out how to provide banking services. We’re a little unique in that way as a bank has to be creative and innovative in order to go about solving problems.
Why should cannabis industry professionals looking for financial services use MBank?
While we recognize there are very few banks legitimately operating in this space and therefore few good choices for cannabis industry professionals, our hope is people choose to bank with us for the same reason anyone does. That means they understand what we’re about and hopefully appreciate wanting to partner with someone that has a vision they agree with. Beyond wanting to change the status quo with regards to banking, we also take great pride in customer service through treating people with respect.
NCIA’s primary mission includes advocating for equal access to banking, but many banks in this country are reluctant or not willing to work with cannabis business owners. What are your thoughts on the future of banking in the cannabis industry? How will this situation improve for the industry going forward?
Smaller banks will most likely lead the way as they tend to embrace innovation a little more than larger institutions. As banks successfully demonstrate their ability to serve this industry, more banks will follow. If there are additional changes at the federal level, that most likely would generate more banks entering this space.
What are some of the challenges that banks have to deal with to do business with the cannabis industry?
CEO Jef Baker inside one of MBank’s Oregon locations.
Our challenge is to make sure we support and serve customers who understand that compliance is critical. We feel it is extremely important to ensure we implement strong policies and procedures, especially for new lines of business. The systems created are not designed to be intrusive or overbearing, but they are developed to help us manage risk, as we interpret it, as well as those that regulate us.
Do you still want to do business in Colorado, or other states?
The reason we are one of the first banks to so aggressively enter this space is part of our mission is to serve a completely underserved market. We very much want to serve customers in Colorado but have discovered we need to build our program to better handle the huge volume there.
How do you characterize your relationship with regulators on marijuana banking?
It is our belief that regulators do not object to their banks providing services to the cannabis industry. We believe they do have a high expectation of their banks developing strong compliance programs in this area. This is new and we are all learning together. It is critical for us to have a strong relationship with our regulators.
Why did you join NCIA?
MBank currently offers banking services for the cannabis industry in Oregon.
We believe this organization wants to see the cannabis industry be treated fairly by helping ensure that quality banking services are available. That is right in line with our mission of serving the underserved. Our position is not one that supports legalization or advocacy for legal matters (that is for others), but rather a focus on providing an industry banking services they deserve, which means both access to services as well as treating people with respect. We believe NCIA is an organization that will allow us to further and pursue that vision.
If you are a member of NCIA and would like to contribute to the NCIA blog, please contact development officer Bethany Moore by emailing bethany@thecannabisindustry.org.
Guest Post: Marijuana Victory in Oregon! Now What?
Oregon passes Measure 91, legalizing cannabis for adults on November 4th, 2014
By Ford T. Pearson, Flip-Side Magazine
[Editor’s note: Congratulations to everyone who worked so hard on the Measure 91 campaign to pass legal cannabis laws for adults in Oregon. The initiative passed with 52% of the vote. Well done! – Bethany Moore, NCIA]
Measure 91, Oregon’s adult-use marijuana legalization initiative, is likely the most elegant articulation of US regulated marijuana enterprise to date.
To be fair, Flip-Side Magazine’s paradigm of what is a good piece of marijuana legislation is heavily skewed by the economic opportunity it presents for stakeholders. While it’s clear the authors of Measure 91 remedied many of the flaws within Colorado and Washington state’s still new marijuana programs, where the measure really excels is the astounding potential for commercial endeavor.
Wholesaler category
“’Marijuana wholesaler’ means a person who purchases marijuana items in this state for resale to a person other than a consumer in this state.” —Measure 91
Measure 91 includes four stakeholder categories for which you can apply for a license. Like Washington’s I-502 categories, Measure 91 categories include producer (grower), processor, and retailer licenses. But Measure 91 also includes an exciting new category: wholesaler. The wholesaler license category, missing from Washington’s marijuana program, will make life easier for Measure 91 producers/processors and expand employment within Oregon’s marijuana program. As Washington’s I-502 producer/processors are now learning, selling marijuana can be an extremely daunting task. Even with just 66 of the planned 334 retail stores open, many I-502 processors are surprised at how time-consuming it is to manage and reconcile the preferences of 66 different buyers. Under Washington’s I-502 rules, processors have to sell directly to retailers or hire third-party marijuana sales or strain acquisition consultants to facilitate sales activities for them. Those consultants have to provide their services within a very narrow definition of activity in order to keep the transactions compliant with I-502 rules. Among the restrictions they face is the inability to actually purchase and resell marijuana the way a traditional wholesaler would. Oregon’s Measure 91 wholesaler category provides a remedy for that specific limitation and adds an entirely new facet of economic opportunity to Oregon’s implementation of a regulated, legal marijuana industry.
No “tied house” prohibition
“The same person may hold one or more production licenses, one or more processor licenses, one or more wholesale licenses, and one or more retail licenses. ” —Measure 91
Measure 91 allows for a completely vertically integrated marijuana organization. For example, under its generous licensing scheme, Measure 91 stakeholders could own several producer/processor operations, a couple of wholesale operations, and dozens of retail outlets throughout the state. Allowing this kind of structure not only increases economic opportunity, but also creates an environment that can eliminate inventory volatility and would enable micro-chains to provide consistent and reliable access to the most marketable strains of marijuana and marijuana products.
No residency requirement!
Perhaps the most significant characteristic of Measure 91 is that it does not require stakeholders to be residents of Oregon. Both Colorado’s and Washington’s programs restricted engagement (including investment from speculators) of their legal marijuana industries to residents of the state. I have to admit, when I first learned of this characteristic of Measure 91, I was disappointed. I’ve spoken to literally hundreds of I-502 applicants and licensees, and every single one of those was a small, usually family-run, business. Once Washington’s cannabis program catches its stride, those families will lay claim to their share of a half-a-billion-dollar-a-year industry, and that’s a beautiful thing.
After considering it, I think the benefits the non-residency characteristic presents likely outweigh the negatives. True, one could worry about giant companies coming into Oregon and buying up all of the strategic locations and/or resources needed to grow Oregon’s new marijuana industry, and that’s certainly possible under Measure 91 rules. However, even if that did occur, those out-of-state entities would rely upon locals to implement their plans and this would create significant employment and economic opportunities for those people. Also, and quite ironically, legal marijuana’s primary nemesis, its status as a Schedule 1 drug per federal law, works against large companies investing heavily in Oregon’s program. Federally speaking, not only would those large, out-of-state corporations be breaking the law, but they would also be crossing state lines to do so. There’s a good chance that’s more stress than your typical VP of marketing and development can tolerate. Also, it’s possible that there are quite a few Oregonians with the proverbial rich uncle who lives out of state, so the no-residency requirement would prove beneficial should they decide to engage the industry.
Anthony Johnson celebrates the passing of Measure 91 on November 4th 2014. Photo courtesy of Sam Chapman.
Go with a pro
Consider hiring a cannabis-centric attorney such as Oregon’s Paul Loney or Canna Law Group, or a marijuana enterprise consultant (usually cheaper than attorneys), or both, to guide you through the startup and license application phase.
Know the numbers
Starting up a legal marijuana business ain’t cheap. Many of the mandatory regulatory aspects of a legal cannabis business, such as fencing, surveillance and security, insurance, zoning, etc., can be big-ticket items. In Washington, even a small, Tier 1 Producer operation is easily a $100,000 investment. And if you’re a wannabe retailer, don’t forget inventory cash! Right now in Washington state, there’s a retailer bank-wiring $230,000 to a producer/processor for what is likely a 10-day supply of marijuana. Make sure you’re clear on the cash requirements for implementing your business and make sure you can access that cash. Also, be prepared to show the OLCC precisely where that cash is, and where it came from.
Hang tough!
Enduring bureaucratic scrutiny can be exceedingly frustrating. The hoops through which Measure 91 stakeholders will have to jump are significant, and you may reach a point where you consider just bagging it. Don’t. I know people who’ve quit the I-502 process, and not a single one of them is content with that decision. Don’t forget that you’re fighting for an opportunity that represents potentially generations of prosperity for you and your family.
Ford T. Pearson is Publisher/Editor of Flip-Side Magazine, a sponsoring level member of NCIA since 2014. Ford has significant experience within the legal marijuana industry, including working as a publicist for cannabis-related businesses, and as a consultant helping applicants of Washington’s Initiative 502 legal adult-use marijuana program, Oregon’s HB3460 program, and Oregon’s Measure 91 program.Flip-Side Magazine provides news and resources for the northwest cannabis industry, and is the only marijuana trade publication serving Oregon and Washington cannabis professionals.
D.C. UPDATE: The November Election, What Comes Next, and Welcoming a New Staffer
By Michael Correia, NCIA Director of Government Affairs
As we come up on Halloween, I can’t think of a more fitting holiday to give a DC update (as most things coming out of Congress tends to scare us all!)
The election is just around the corner and, in addition to determining the make-up of Congress, there are four very important marijuana ballot initiatives voters will be deciding on. Voters in Alaska, Oregon, and Washington, D.C. will be voting on some form of an adult-use, tax-and-regulate structure (similar to Colorado), and Florida voters will decide on legalizing medicinal marijuana. The passage of all four, in addition to being positive developments in the states, would certainly help our work in D.C. Members of Congress are self-interested and they care about their states and their districts. When more states legalize marijuana, it makes my job easier, as it forces more members of Congress to address the issue.
After the election, Congress will come back for a very short (two week) “lame-duck” session. In that time, they will vote on party leadership posts and determine committee chairs, in addition to funding the government. Because the two issues NCIA members care most about are 280E tax reform and resolving the banking issue, the committees of jurisdiction in the House are the Ways and Means Committee and the Financial Services Committee. In the House, it’s a near certainty Republicans will stay in control; so for Ways and Means, it’s looking like Congressman Paul Ryan of Wisconsin will be Chair, and for Financial Services, it’s looking like Congressman Jeb Hensarling of Texas will be Chair (although both will be challenged by other members). Neither of them have been supporters of marijuana policy reform in the past and have voted in opposition to our amendments when they were on the House Floor earlier this year.
Control of the Senate is still up in the air, and it will come down to 3 competitive seats. The results should be known soon after polling places close, but in Louisiana, if no candidate receives over 50%, then a run off election is held in December. So it is conceivable that control of the Senate may not be determined until December 7. Exciting times indeed! The committees of jurisdiction in the Senate are the Banking Committee and the Finance Committee, and Senate Chairmen are picked based on Committee seniority.
Halloween also happens to be my one-year anniversary with NCIA! And what a year it’s been. I feel as if so much has been done in the past year, but there is so much more to do. I look forward to the upcoming year and am even happier to say that our DC operation is expanding. NCIA has hired Michelle Rutter as our new government affairs coordinator. Having her on board will make me more efficient and effective in my job and will allow me to focus more on strategy, fundraising, advocacy, and taking NCIA to new levels.
Prior to working for NCIA, Michelle was a Research Analyst at a government affairs firm in Washington, DC, where she analyzed and tracked legislation on numerous issues. Michelle graduated from James Madison University in 2012, receiving her Bachelor of Arts degree in Political Science with a minor in History. During her studies, she held a year-long internship with Virginia House of Delegates member Tony Wilt. There, she communicated with constituents, businesses, and government officials alike, facilitating meaningful conversations. Michelle was also a member of a pre-law fraternity where she planned events and hosted social functions that sought to encourage long-lasting professional and personal relationships with members. A native Virginian, Michelle currently resides in the Washington, DC, suburb of Alexandria, VA.
Guest Post: Oregon to Vote on Adult-Use Legalization in November
By Anthony Johnson, OCIA executive director
It’s official! Oregon voters will have the opportunity to join Colorado and Washington in regulating, legalizing and taxing cannabis like beer and wine this November. Oregon has wasted too many law enforcement and judicial resources arresting and citing thousands of Oregonians every year. Nearly 100,000 times over the last decade law enforcement officers have taken time out of their day and the day of cannabis users to either write tickets or actually place someone under arrest. Those arrest and citations, in addition to the added judicial, jail and prison costs are a huge waste of Oregon’s limited resources.
The New Approach Oregon measure will also create a new regulated industry that will allow Oregon’s cannabis industry to follow in the footsteps of the state’s successful microbrewery and winery industries. Under the measure, the Oregon Liquor Control Commission (OLCC) will provide wholesale, retail, producer and processor licenses to qualified applicants for $1,250. This relatively low barrier to entry will allow for small businesses and Oregon mom-and-pop shops to enter the market and compete.
A reasonable one-time tax of $35 per ounce ($1.25 per gram) for flower, $10 per ounce of leaf and $5 for every plant sold will keep prices affordable, letting regulated businesses to compete, and eventually diminish the unregulated, illicit market. The OLCC will collect the tax after the first sale after production, keep enough funds for enforcement and then disperse 40% to education, 15% to state police, 10% to cities, 10% to counties, 5% to drug prevention and 20% to mental health and substance abuse treatment services.
Marijuana use must remain out of public view and cannot be delivered within 1,000 feet of schools. The measure doesn’t impact the Oregon Medical Marijuana Program and allows for limited home cultivation (similar to home brewing of beer). The proposal doesn’t change current driving under the influence laws, landlord tenant relations or workplace rules.
Polls show that the New Approach Oregon measure can win at the ballot box and an experienced campaign team has put together a plan for victory. However, prohibitionists like Kevin Sabet and vested interests such as Big Pharma are going to put up a fight. Please go to www.newapproachoregon.com to donate, volunteer and help spread the word about this important measure that will improve the lives of Oregonians and help set the stage for more states to legalize cannabis in 2016.
NCIA’s 2014 Northwest CannaBusiness Symposium was held in Portland, Oregon on February 1, 2014. The presentation slides for each of the symposium’s speakers are provided here.
Medical marijuana in Oregon: Ashland conference draws packed house | The Oregonian
ASHLAND — If the packed meeting room Thursday at the refined Ashland Springs Hotel is any gauge, interest in Oregon’s medical marijuana industry is, pardon the pun, high.
The Oregon Medical Marijuana Business Conference, the brainchild of Ashland businessman Alex Rogers, opened Thursday morning with a keynote address by Troy Dayton, the man behind The ArcView Group, a San Francisco-based business that, for a fee, pairs marijuana entrepreneurs with deep-pocketed investors.
The sold-out two-day event in Ashland is one of two conferences this week that focus on the business of marijuana – the latest sign that the state’s once-underground industry has moved into the mainstream. Beginning in March, the Oregon Health Authority will register medical marijuana retail outlets, the first effort to regulate an already thriving trade.
Medical marijuana in Oregon: Be a good neighbor, California marijuana advocate tells prospective dispensary owners | The Oregonian
ASHLAND — Medical marijuana retailers in Oregon need to shift their focus from staying out of jail to being stand-up business owners who sweep their sidewalks each morning and donate to local charities, a California marijuana advocate told prospective dispensary owners on Friday.
Don Duncan, the California director of Americans for Safe Access, a medical marijuana patient advocacy group, spoke to about 150 people gathered here for the Oregon Medical Marijuana Business Conference.
The sold-out event is one of two major marijuana conferences being held this week in Oregon. The National Cannabis Industry Association, based in Washington, D.C., will hold a daylong symposium in Portland on Saturday.
by Elise Serbaroli of 
Elise Serbaroli leads Global Business Development at 
Carlos Perea is the CEO and Co-founder of 
Working at NCIA has been one of the greatest experiences of my life. It has allowed me to marry my experiences in cannabis activism with my experiences running a business and building brands. This year we are celebrating the #10YearsofNCIA and looking back at all of the progress our movement has made over the last decade and it is truly remarkable to see how far we’ve come. 
Gabriel Cross is a Founder and CEO at 
Gary Seelhorst
James Schwartz RN, BSN, LNC, is an experienced medical legal consultant and CEO of 
