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Puff, Pass, Prosper: The Insider’s Guide to Operating a Consumption Lounge | 12.20.23 | Committee Insights

The cannabis landscape is experiencing a swift evolution, with one particularly captivating facet garnering considerable attention—cannabis consumption lounges. In a recent webinar titled “Puff Past, Prosper: The Insider’s Guide to Operating a Cannabis Consumption Lounge,” (or Designated Consumption Establishment) hosted by the National Cannabis Industry Association (NCIA), industry luminaries and entrepreneurs convened to exchange experiences, insights, and forward-looking perspectives on the future of cannabis consumption spaces.

NCIA Voices: Insights from Industry Leaders

Brian Hart, a panelist and member of NCIA’s Retail Committee, serving as moderator kicked off the conversation by introducing himself, shedding light on his background in the cannabis industry. Notably, Hart is venturing into the world of hemp beverages with his latest project, Vitam Group. His insights into the challenges of starting a cannabis-related business added a valuable entrepreneurial perspective to the discussion. Another panelist, Brian Anderson, an architect with 29 years of experience and Founding Partner of Anderson Porter Design, shared his extensive involvement in various facets of the cannabis space, including cultivation, manufacturing, and retail. Anderson’s emphasis on the design and architecture of consumption lounges brought a unique angle to the conversation. Richard Fleming, the founder and CEO of Altered State Cannabis Company, provided a glimpse into his journey from the legacy caregiver market to plans for a designated consumption establishment. Fleming’s personal story exemplified the transformative power of the cannabis industry. Ace Castillo, the founder and CEO of Banyan Tree Dispensary in Fresno, California, brought a regional perspective to the discussion. His journey from operating a dispensary under Prop 215 to his current ventures highlighted the evolution of the industry and the importance of enhancing customer experiences in consumption establishments.

Legal Considerations and Operational Challenges

The webinar delved into the intricate legal considerations and operational challenges associated with consumption lounges. The panelists emphasized the diverse landscape of rules and regulations across states and localities, with licensing requirements varying significantly. Federal challenges, including 280E taxes, posed additional hurdles for cannabis businesses.

State-Specific Insights

The discussion took a deep dive into the Californian market, where the Department of Cannabis Control does not directly regulate consumption lounges. Instead, local jurisdictions play a crucial role in granting licenses. The complexity of navigating both local and state regulations was highlighted, shedding light on the intricacies of the Californian cannabis landscape.

Insights into Cannabis Consumption Lounges

The panelists provided valuable insights into the definition and various forms of consumption lounges, ranging from health and wellness spaces to venues hosting diverse events. The panel stressed the importance of defining the underlying business model, reflecting the diverse approaches to operating such establishments.

Customer Experience and Community Building

Creating a positive customer experience emerged as a central theme, with an emphasis on dynamic and engaging environments. Brian Anderson suggested incorporating community spaces and rooms for rent, contributing to the overall positive atmosphere. The concept of consumption lounges as community spaces was explored, highlighting the potential for meaningful social connections.

Urban Environments and Cultural Shifts

Brian Anderson, leveraging his architectural background, provided insights into the demand for community spaces in urban environments. The discussion touched on the cultural shift in the perception of cannabis, emphasizing the role of consumption lounges in normalizing cannabis use. The positive social activity aspect of cannabis was underscored as a key contributor to changing societal perceptions.

Advocacy for Equal Treatment and Responsible Consumption

Advocacy for equal rights and privileges for cannabis consumers compared to alcohol consumers was a recurring theme. The panelists emphasized the responsibility of stakeholders in promoting responsible cannabis consumption. The importance of destigmatizing cannabis through collective efforts was highlighted, with designated consumption establishments playing a pivotal role in this cultural shift.

Community Engagement and Benefits

Engaging with the local community emerged as a critical factor for the success of cannabis-related businesses. Dispelling stereotypes and contributing positively to local economies were emphasized as essential components. The concept of community rooms and public benefits was discussed, showcasing the potential positive impact of cannabis businesses on the broader community.

Funding Challenges and Insurance Considerations

The challenges faced by social equity applicants in securing funding for their businesses were acknowledged. Richard Fleming shared insights into the difficulties of obtaining insurance coverage for consumption lounges, stressing the need for comprehensive coverage and collaboration with underwriters.

Conclusion

In conclusion, the NCIA webinar provided a comprehensive exploration of the complexities, challenges, and opportunities associated with cannabis consumption lounges. The webinar illuminated the legal intricacies, operational considerations, and cultural impacts of consumption lounges. It underscored the importance of responsible consumption, community engagement, and advocacy for equal treatment. As the cannabis industry continues to evolve, the webinar served as a compass, guiding stakeholders toward a positive and inclusive future.

In the spirit of collaboration and collective responsibility, the webinar left participants with a renewed sense of purpose. The journey toward destigmatizing cannabis and integrating consumption lounges into mainstream culture requires ongoing dialogue, engagement, and a commitment to positive change. As we bid farewell to the NCIA’s final #IndustryEssentials educational webinar of 2023, the stage is set for the industry to continue prospering, adapting, and shaping a future where cannabis consumption lounges are not just spaces of leisure but catalysts for positive societal transformation.

Unlock the Full Story: Watch the Full Webinar on NCIA’s YouTube Channel Today

To experience the complete coverage and immerse yourself in the nuances of operating a cannabis consumption lounge, we encourage you to watch the full webinar video on our official NCIA YouTube channel. Whether you’re an industry professional, an aspiring entrepreneur, or simply curious about the evolving cannabis landscape, this webinar offers a comprehensive guide to the challenges, opportunities, and cultural impacts associated with designated consumption establishments.

Unlocking Opportunities: Join NCIA for the 2024 Stakeholder Summit Series

As we wrap up our exploration of cannabis consumption lounges, we invite you to become an active participant in shaping the future of the cannabis industry. Joining the National Cannabis Industry Association (NCIA) offers an array of benefits, including exclusive access to invaluable networking opportunities, educational resources, and a vibrant community of industry professionals.

Why Join NCIA?

  1. Networking Opportunities: NCIA provides a platform for you to connect with like-minded individuals, industry leaders, and experts in the cannabis space. Networking is a powerful tool for staying informed, discovering new opportunities, and fostering collaborations.
  2. Educational Resources: Stay ahead of industry trends, legal developments, and best practices with access to exclusive educational resources. NCIA’s commitment to industry education ensures that you are well-equipped to navigate the evolving landscape of the cannabis market.
  3. Advocacy and Representation: By joining NCIA, you contribute to a unified voice advocating for the cannabis industry. NCIA actively engages in policy discussions, lobbies for favorable regulations, and works towards creating a conducive environment for cannabis businesses to thrive.

NCIA’s 2024 Stakeholder Summit Series

Looking forward, NCIA is thrilled to announce the 2024 Stakeholder Summit Series, a collection of events taking place across four different markets throughout the first quarter of 2024 leading up to the 12th annual Cannabis Industry Lobby Days. These summits are designed to provide deep insights, foster meaningful connections, and address the critical issues facing the cannabis industry.

  • Membership Perks: NCIA members enjoy complementary access to all events based on their membership level.
  • Exclusive Pricing: Take advantage of discounted pricing on all sponsorship opportunities through the end of the year.
  • Registration Deadline: Prices for sponsorship opportunities are set to increase on January 1, 2024. Act now to secure your spot at the 2024 Stakeholder Summit Series.

How to Join NCIA

Becoming a member of NCIA is a straightforward process:

  1. Visit the NCIA Membership Page to explore membership options.
  2. Choose the membership level that aligns with your needs and aspirations.
  3. Complete the online application to kickstart your journey as an NCIA member.

Act Now to Secure Your Spot

If you are passionate about the cannabis industry, committed to fostering positive change, and eager to stay at the forefront of industry developments, now is the perfect time to join NCIA. By becoming a member, you not only invest in your professional growth but also contribute to the collective strength of the cannabis community.

Don’t miss out on the opportunity to attend the 2024 Stakeholder Summit Series, connect with industry leaders, and gain insights that will propel your cannabis-related ventures. Act before the sponsorship pricing deadline on January 1, 2024, to lock in exclusive rates and maximize your visibility at these transformative events.

I want to sponsor!

Join NCIA today and embark on a journey of knowledge, connection, and advocacy within the dynamic landscape of the cannabis industry. Your participation matters, and together, we can shape a future where the cannabis community thrives and prospers.

Learn More & Register Now

Navigating the Confusing, Crowded World of Cannabis Payments

When you’re a cannabis retail operator looking for electronic cannabis payment solutions you’re faced with a baffling array of options and it’s hard to pick out the ones you can trust and the ones that you should avoid at all costs. Every potential vendor is going to tell you that their solution is the best (trust me!) so you need to understand the basic landscape of cannabis payment solutions in order to know what questions to ask. There’s a lot of solid vendors out there that only want to help the industry but there are, sadly, those out there that prey upon a lack of familiarity with the crowded, confusing payments landscape to push solutions that are at best unsustainable and at worst fraudulent.

ACH transactions are a way for a person or a business to do direct bank money transfers.

These transactions are conducted on a computer network run by NACHA, the National Clearinghouse Association. Since these don’t run over the networks run by the credit card companies like Visa or Mastercard – known as “payment rails” – these transactions don’t violate their rules. While NACHA hasn’t officially made a statement either way about cannabis, their actions suggest they don’t have an issue processing these transactions over their network.

The downside with many ACH solutions is that they aren’t necessarily convenient for the buyer. Because a customer or patient can’t just pull out a bank card they are often required to download an app and provide banking details like account and routing numbers. This isn’t necessarily an issue from the second purchase forward, but this can be a bit of a pain for a customer or patient trying to use an app for the first time if they’re not expecting to have to go through an account onboarding process that might take several minutes. The upside to this is that there are platforms that allow the buyer to upload funds via ACH to an eWallet, which, after the initial transaction, will enable them to make instant purchases. Platforms also allow the buyer to automatically replenish their eWallet via ACH, allowing them to always have funds to make purchases. These purchases can also be combined with a store’s loyalty points program.

Questions to ask about ACH solutions:

  • What does a customer or patient need to do to use the solution?
  • How long does it normally take for the funds to transfer, allowing a user to make purchases?
  • Are there any contactless platforms that allow a buyer to purchase the product for delivery or curbside pickup?
  • Do you need additional hardware to display a single-use QR code specific to the transaction?

Cashless ATMs and PIN Debit solutions are among the most common electronic payment methods that allow customers to directly use cards.

To discuss the issues that go along with any card-based solution we need to take a step back and talk about how payments are processed. As previously mentioned, every credit card company has a set of rails used by merchants to process a sale over their network. Each transaction is sent as a packet of information that broadly contains the following information: name of business, location of business, any additional merchant information, and merchant category code (MCC).

Every transaction has to be associated with a four digit MCC used by the merchants to indicate the nature of the business and the transaction. The code that’s traditionally been used by cashless ATMs and PIN Debit solutions is 5912, reserved for pharmacies and “cannabis (where legal to do so)”. This is what’s used in Canada where credit cards are an option but it’s not an acceptable option in the US because the major credit card networks have clarified that their rails cannot be used for the purchase of marijuana. They do so by prohibiting activities associated with “controlled substances, or recreational/street drugs” (VISA) or even more broadly “any Transaction that is illegal” (Mastercard) in their operating agreements.

It’s important to note that you can’t just randomly choose an alternative MCC because miscoding constitutes fraud. You may remember a few years ago that California-based delivery company Eaze was prosecuted in 2019 for using MCC codes associated with things like “carbonated drinks, green tea, face creams and other products” in an attempt to obscure the fact that the network was being used for the direct purchase of marijuana.

It should be noted however that there are a few ATM networks out there that aren’t directly owned by the big credit card companies like NYCE, Allpoint, Star, and Moneypass. These companies have been relatively quiet regarding the use of their networks for the purchase of marijuana products, so there is an argument to be made that if card transactions are sent over those rails they’re not violating any operating rules, but anecdotally we’ve heard that some of these networks aren’t necessarily cannabis friendly and, as private companies, they’re able to change their mind (for or against) whenever they wish.

Questions to ask about Cashless ATMs and PIN Debit solutions:

  • What MCC code is the payment processor using?
  • What network is being used to process the transaction?

Credit cards are notoriously off-limits to cannabis because of the very public positions taken by the major card networks but that doesn’t stop companies from popping up offering credit card processing for cannabis purchases. Let’s clarify here at the outset – there is no way to directly purchase marijuana with a credit card in the United States with a credit card from American Express, Visa, Mastercard, or Discover.

So, with necessity being the mother of invention, some companies are trying out a new strategy to get credit card processing into dispensaries legally. Among them are solutions that take advantage of another MCC code: 6051. This code is associated with the purchase of “liquid and cryptocurrency assets” and some enterprising payment providers are using it to set up a structure where a customer isn’t “technically” buying marijuana. Instead they are “buying” what’s called a “stablecoin”, a form of cryptocurrency whose value is pegged 1:1 to the US dollar.

Questions to ask about cryptocurrency or stablecoin solutions:

  • What MCC code is the payment processor using?
  • What stablecoin is being leveraged?
  • How is the stablecoin preserving its value?
  • What will the offramping of funds from a crypto wallet to my DDA account look like to my bank?

Cannabis retail operators are faced with serious business and legal considerations when determining the payment processing solution provided to patients and customers. What solution will be the easiest for the customer? Is the solution compliant?

The cannabis industry’s evolving legal and regulatory landscape is challenging, especially with bad actors seeking to implement non compliant make-shift payment solutions intended to capitalize off of cannabis businesses seeking efficient and effective cannabis payment solutions. It is essential that you do your due diligence on cannabis payment solutions presented to your business to confirm that it will not cause an issue for you, the business and its patterns and customers. We hope that this article outlines considerations that will allow you to protect your business and its patients and customers.

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