All businesses must adhere to tax rules and regulatory compliance, but for cannabis companies, the laws are significantly more challenging to navigate. The cannabis industry has specific tax rules that differ from other sectors, and failing to follow them can result in severe financial and legal implications.
At Green Space Accounting, we know that managing your finances as a cannabis company can be much more complicated than the average start-up. Keeping a compliant financial system in place is not always easy with constantly changing state laws and regulations.
Here are a few tips on how to avoid compliance issues with your budding cannabis business.
Have Your Business Documentation in Order
One of the first steps to staying compliant is to have all the appropriate financial information and licensing for your business on hand.
Always be prepared with copies of your cannabis license, information from your seed-to-sale tracking system, and your point of sale software records. Having this paperwork, along with legal documents like operating agreements, Articles of Incorporation or Organization, and EINs will ensure that you have a fully compliant relationship with your bank, as well as local and state government.
It’s also a good idea to have detailed records on all sales transactions within your business, especially ones dealing with cash. Cash is used more frequently in cannabis dispensaries than in other retail industries. Having proper cash-handling procedures in place can save you from theft and keep you ready for any unexpected auditing.
Stay up to Date with State and Local Regulations
It’s important to remember that regulations surrounding cannabis change over time, so monitoring your state legislature and all applicable state and local agencies is crucial to keeping your business compliant. By making yourself aware of the rules for the cultivation, manufacturing, and distribution of cannabis, you can avoid the risk of fines or legal action and build a better relationship with your local government, law enforcement, and, most importantly, customers.
One way to stay up to date with regulatory compliance laws is to consume state and industry news surrounding cannabis daily. Not only do these publications keep you informed on business and consumer trends, but they also avoid complicated legal jargon, speaking directly to business owners in a way that’s easy for them to understand.
Another great way to stay on top of state and local cannabis laws is to network and build relationships with your local regulators. While maintaining compliance internally is the biggest goal, creating an ongoing relationship with the regulators in your area can help you better understand the changes within the industry and the steps you can make to conduct business more transparently.
Develop SOPs, Training, and Reporting Systems
Think of these SOPs as a set of rules that all employees need to abide by to keep your company’s production, sales, and accounting processes consistent and safe. Having a set of standard operating procedures can help you recognize potential compliance issues and fix them before they occur. These procedures can include an employee handbook on proper handling and storage of cannabis consumables to installing a seed-to-sale tracking system for inventory management purposes.
The best way to stay on top of your SOPs is to create reports, checkbooks, and logs in all aspects of your operations to show regulators that you are a transparent business that has a complete understanding of your state’s compliance laws. Frequent compliance training sessions are also an effective way to educate your entire team on the legal and tax regulations associated with your business.
Cannabis Payroll
To avoid issues concerning payroll, installing time tracking software for employees is also a great way to keep your staff organized and stay on top of the 280E tax code. The 280E law denies cannabis businesses federal income tax deduction for operating business expenses, which means that the wages for some employees may be deductible, and some may not be. By introducing software where employees can specify the tasks they’re doing and track the salaries they’re receiving, you’ll stay compliant with the tax code and better understand the productivity your team is generating.
Frequently Audit your Business
Hiring an outsourced accounting team to audit your cannabis business is a great way to avoid any potential risks regarding compliance. Auditors serve as an additional, unbiased set of eyes that will examine all areas of your organization and identity aspects that might need improvement.
If you are looking to stay on top of the legal and tax regulations for your cannabis business on a tight budget, self-auditing your company is a great way to check whether or not your training, bookkeeping, and SOPs are being appropriately implemented.
Entrepreneurs who belong to the National Cannabis Industry Association can receive discounted access to an acclaimed compliance management platform created by Simplifiya, which gives licensed operators a self-audit checklist that helps them identify, track, and mitigate potential issues before it’s too late. The platform also provides templates for creating SOPs customized for each license type and tied directly to your state regulations.
The Bottom Line
Whether you are a start-up, a growing business, or a multi-state operator, complying with federal and state compliance laws is essential. By following the above tips and staying transparent with your employees, partners, and investors, you’ll be ready for any audit that comes your way.
Whether you’re looking for cash flow management, business planning, or internal controls, our team is dedicated to helping you achieve peace of mind when it comes to your company’s finances and compliance. We understand that the financial side of your business can be daunting, complicated, time-consuming, and most of all: stressful. You don’t need to go through it alone. Our team is prepared to help you achieve your financial goals. Whether you’re looking to earn more revenue, scale your business or achieve a little peace of mind, you can trust Green Space Accounting to guide you.
Member Blog: Cannabis Compliance Pains and How to Solve Them
Amid increased anxiety and stress resulting from one of the most turbulent years in recent history, Americans everywhere have been turning to cannabis products to help them make it through. Bearing witness to a 71% increase in cannabis product sales nationally, according to industry experts at Leafly, the U.S. cannabis industry grew beyond expectations in 2020.
While dramatic increases in product demand may seem like a cannabis business owner’s dream, maintaining compliance with unstable and unstandardized cannabis regulations can bring on more than a few nightmares. Every state seems to have different guidelines, requirements, and procedures than the next, with some in-state laws differing even between municipalities.
Although maintaining compliance may seem like an unnecessary challenge without an immediately obvious return on investment, the real nightmare for cannabis operators begins once they’re found in violation. Non-compliance consequences usually include huge fines, the temporary loss of business, and even business license forfeiture.
As a cannabis professional, you know that regulatory compliance isn’t optional and instead, an absolutely critical function of every cannabis operation. From cultivators and manufacturers to distributors and retailers, no business in the seed-to-sale supply chain can expect longevity in this industry without a plan that ensures adherence to local, state, and federal laws.
The Most Common Cannabis Compliance Issues
One of the most common complaints regarding regulatory compliance involves the amount of time you have to spend on compliance: maintaining adherence, staff training, and preventing non-compliance violations. Let’s face it, this is a burden that doesn’t seem to directly correspond to a return on investment, particularly if you are a smaller cannabis business operating on thinner margins than some of the big guys. When time is among the most valuable things you have, wouldn’t you rather focus on front-end concerns that yield the more obvious benefits to the bottom line?
Often it’s the level of cannabis regulation complexities that takes so much time and energy to overcome. Without approval and regulation on the federal level, requirements can drastically vary by state, subject to rapid changes by state and local legislatures. Maintaining compliance becomes a more significant challenge if you are a growing business with an eye toward expansion into more than one location in multiple jurisdictions.
Together with medical privacy requirements, food safety, occupational safety, tax regulations, and other conditions, it seems like you’re spending more time investing in learning and implementing compliance initiatives than in product, facilities, or operational investments.
COVID-19 certainly didn’t make any of this easier. These regulations have proven to be the most unstable, with many state and municipal governments behaving inconsistently, seemingly unsure of what they were doing week to week.
On top of existing regulations before the pandemic, many cannabis businesses found ways to quickly adapt to new health regulations, mandatory facility closures, and point of sale changes. Dispensaries once focused on efficient customer service in limited-space shops now have to ensure social distancing, customer turnover, enhanced sanitation, and new capacity limits.
Alleviating Compliance Pains through Preparation
The hard truth of the matter for cannabis businesses moving forward is that regulatory compliance will continue to be one of the most critical leadership focus areas. With more states poised to follow legalization trends in the next few years and lasting changes from an ongoing pandemic, the complaints concerning regulatory compliance are likely to get louder and more frequent.
However, you can meet these challenges through systematic planning and the right cannabis tools to continue growing within the industry while striving for perfect compliance records.
The most impactful steps you can take as a cannabis business include acknowledging the significance and planning for 100% compliance. Not only does compliance protect your business from incurring hefty fines and licensure consequences, but regulations also work to protect the safety of customers and staff.
Regulatory compliance isn’t just about avoiding fines and protecting a business’s finances — it’s about providing a quality product consistently in a safe and secure environment. Tainted products can injure consumers, while children and animals are at risk of accidental consumption resulting from insufficient packaging.
As a cannabis operator, once you adequately acknowledge the implications of maintaining compliance, you can begin developing a plan to make it happen. Depending on the scope and size of your operation, requirements specific can vary from one cannabis business to the next. If you run a cannabis business with front-end sales, for example, you may be required to follow regulations that a delivery-only company would not be required to follow.
Ensuring your compliance plan focuses on the applicable statutes for your business type will save time, energy, and vital resources. Consulting with cannabis compliance experts is an economic investment every cannabusiness owner should make. They’ll teach you about meticulous record-keeping while helping you examine local regulations and understand the requirements specific to your business type.
Vice President of ERP Sales, Frank Nisenboum,is a trusted advisor at c2b teknologies who has guided organizations of all sizes enabling them to establish a technology presence and expand their business through technology. His proven ability to analyze the current and future plans of a company and work with team members to subsequently bring technology solutions to the organization result in improved processes and controls that assure continued growth and profitability.
Frank has worked in the ERP and CRM software selection, sales and consulting industry for almost 25 years. His strong ability to understand, interpret and match the needs of an organization to the right solution make him an asset to all of his clients.
c2b teknologies integration and engineering experts have partnered with leading cannabis industry experts to develop a software solution that provides a complete cannabis operations system. The best-in-class solution not only handles tracking of seed-to-sale activities but encompasses your entire cannabis operations with compliance needs handles along the way. Our passion for solving problems drives us to deliver innovative solutions for everyone we work with. Visit c2btek.com for more information.
Member Blog: Cannabis Partnerships – The Importance of Building a Successful Business
The grass roots of the cannabis industry fostered, often through necessity, a strong sense of community and encouraged innovation and sharing of techniques and methods to cultivate the various strains of cannabis. Learning from what has come before and working together in a sense of community is still as applicable today as the industry becomes more commercialized across the globe. The pioneers of this community have evolved into a more diverse group of entrepreneurs, across many dimensions that provide a rich base of skills and knowledge that has been shared and cultivated into a matrix of businesses and relationships.
Applied DNA Sciences entered into the cannabis space in 2018. We joined NCIA and exhibited at our first NCIA trade show, Cannabis Business Summit & Expo, in San Jose that year. I wasn’t sure what to expect and the type of conversation that may occur. The doors opened on the first day, and our molecular spaying chamber attracted attendees, which led to an engaging discussion about the platform and its benefits. The surprising aspects were the various businesses at the show, researchers-PHD level, cultivators, processors, dispensaries owners, new license holders, state government, and others. They also represented a range of how many years they are involved in cannabis, from over 20 years to just getting involved, and there to learn. This first show demonstrated how important it is to be very engaged in the industry and associations like NCIA, but equally important are the partnerships that you need to form to provide solutions that are required to meet the needs of industry and consumers alike.
Partnerships form across many aspects of the cannabis business. While our technology may have been at first intimidating, as we shared our vision with this expanding network we have been fortunate to find businesses, entrepreneurs and subject matter experts who share our passion about what this industry needs to become. We have teamed up with several companies ranging from cultivation specialists, software platforms providers, business and government consulting entities, just to mention a few. The key to these agreements is the complementary nature both entities can provide to address business needs such as regulatory compliance, material and product traceability, brand differentiations, IP protection, risk mitigation, anti-counterfeiting and diversion, proof of origin, and a host of others.
As the industry continues to grow we know not every partner will remain static in their business goals, or even if they can survive the ever-changing landscape of regulation or the fluctuations of the market. The key to strategic alignment however comes from working with partners who share the vision of what the industry can be; safe for everyone, transparent in both chain-of-custody and financials, and most importantly accessible for those who need it. Companies in this space must be nimble, adapt to both the present conditions but remain steadfast in their ultimate goals.
So you think you found a strategic partner, who shares your vision. Now what? The complicated patchwork of U.S. legalization does not make your next steps as easy as it should be. Especially when you are considering moving your brand or differentiated products into new states and territories. The great hands-on experience, craftsmanship, and care of what makes your product special cannot be transported beyond the narrow lines of where it has been licensed, so often you are rebuilding or replicating with a partner in a new market. Possible of course, but often met with unforeseen issues in supply chain control and distribution. Even in the case where you are using technology unrelated to the physical product (cultivation systems, seed to sale, or logistics), each state or even county may require a different tracking system, API, or competing system to connect with. The multifaceted mosaic that makes up the community of growers, farmers, and entrepreneurs in the cannabis community is a hotbed of passion and innovation, finding opportunity is not the problem, translating this to success is the work.
Outlining a list of mutually agreed-upon goals and milestones is critical to success. Establishing a set of metrics to evaluate the progress of the partnership allows for quick adjustments if required. A critical tactical approach that may seem insignificant is to have a set weekly status call to help with relationship building and reviewing the progress plan will help keep the momentum moving forward. Also, having executive leadership involved provides quick decision-making, adjusting strategies, and deploying both human and financial resources effectively against prioritized engagements.
The cannabis industry is maturing each year and will see faster advancements when regulations sort out over the next several years. It’s essential to establish your partnering strategy now, so you can get critical relationships in place with solid execution plans and prepare to implement your joint solutions with minimum friction.
John Shearman is Vice President of Marketing and Cannabis Business Lead at Applied DNA Sciences, and has over 30 years of deep enterprise and advertising agency experience across all marketing, sales and IT disciplines. John’s experience allows him to advise on structuring sound strategies that address business goals and objectives. His extensive technology background stems from working with several leading technology companies throughout his career. John spearheads Applied DNA Sciences Cannabis vertical leading the vision, strategy, and product development for this emerging market. John also oversees the marketing for the entire company driving the marketing strategy for its other core verticals.
Committee Blog: Future-Proofing Your Business – How Adopting Industry Standards Improves Your Bottom Line and Reduces Your Risks
By developing and adopting standards now, operators in the cannabis space can avoid unnecessary future expenses they might incur when needing to rework established facilities to meet upcoming federal standards or third-party compliance
Upton Sinclair’s The Jungle in 1905led to the Pure Food and Drug Act in 1906. The food sector has matured through additional governmental regulations, industry-led initiatives, consumer and trade guidelines and standards, and more recently, the Food Safety Modernization Act. Over one hundred years of progress helped to ensure what is arguably the safest food supply in the world. By comparison California, in 1996, 24 years ago, legalized Medical Cannabis. Since then, 36 states have legalized cannabis for medical or adult use. Confusingly, that is 36 different sets of regulations, none harmonized. And no consensus on how FDA will regulate cannabis when it is descheduled.
But investors and producers in the cannabis sector are seeking direction on how to future proof their businesses so they can manage the transition from fragmented state-level regulations to rigorous federal oversight. Developing and adopting cannabis industry best practices may be the greatest insurance available.
NCIA’s Facility Design Committee is one of the few groups beginning this effort. The group has representatives from operations, regulatory compliance, quality, equipment vendors, design and construction, and allied industries.
Standards can focus on several areas. Because the cannabis industry deals with substances that are ingested into the human body, standards that support consumer health and safety are paramount. Much of the current practice in the food sector, organized under the topic of current Good Manufacturing Practices (GMPs), can port over to Cannabis with some adjustments. These practices protect consumers and your brand. GMPs have, as a foundation, many aspects of facility and process design, but standards for these don’t yet exist. However, by developing and adopting standards now, operators in the cannabis space can avoid unnecessary future expenses they might incur when needing to rework established facilities to meet upcoming federal standards or third-party compliance. They also can control their own destiny, in effect, by establishing approaches that later can be considered as regulators write the rules in the future.
As operators themselves, a number of our committee members have felt the direct impact of product recalls due to a lack of clear delineation at the intersection of cannabis and food safety regulations. Depending on the scope of the recall, a company can be crippled by not properly understanding and adhering to a common set of standards across the industry, especially when concerning safe food handling practices and similar regulations that control consumable product manufacturing. For example, one of our committee members had to recall a batch of infused gummies because public health regulators used safe food handling regulations to determine that the gummies were exposed for too long in a potentially contaminated environment during the setting process. Had the operator adhered to standards commonly used in food production, they would have avoided the costly impact of the product recall. With nearly 15% of flower failing tests for yeast and mold in Colorado, the cannabis industry has become no stranger to costly recalls.
Standards not only minimize risk to the consumer and the business, but also improve quality and consistency. Improve employee NPS (Net Promoter Scores). Reduce cost and production downtime. Increase the inherent value of the business. And offer a brand message that increases sales.
Nearly all related industries follow best practices, known as cGMPS (current Good Manufacturing Practices), which can be adopted for our industry. If we look to examples from the food sector, you find mature and professional regulations at the federal level and experienced inspectors from USDA, FDA and state departments of Health or Agriculture, as well as global standards from the International Organization for Standardization (ISO) and the World Health Organization (WHO), initiatives from trade customers such as Global Food Safety Initiative (GFSI), equipment certifications from European Hygienic Equipment Design Group (EHEDG), NSF International, and 3-A Sanitary Standards. This constellation of resources is not yet published for the cannabis sector.
Join us in this exciting journey. Become involved, and stay aware of and ahead of the pending regulations. We don’t have 114 years to get this right!
The Facilities Design Committee (FDC) focuses on providing NCIA members and regulators a framework and information about facilities design options through which legal producers can plan for GMP level production as the market transitions from a state to a federally regulated industry.
Member Blog: Changes in California Packaging Regulations are Coming – Are you Prepared?
Just when you thought you had a grasp on the tangled web of regulations governing California’s legal cannabis market, the packaging rules are changing again on January 1, 2020.
That’s right around the corner… so if you are a manufacturer, grower or producer, you need to pay attention or face consequences that could include product seizure, loss of revenues, and delays in getting compliant packaging on the shelves.
In a nutshell, current regulations in California allow that either the product must be in a child-resistant container, or it must be placed in a CR exit package.
New regulations, taking effect on January 1, mandate that all products must be in a certified child-resistant container. Moreover, edible products must be in a child-resistant re-sealable package.
While this will allow dispensaries to start offering interesting, branded shopping bags, it means that product packaging must be compliant and in place by the first of the year.
Accordingly, if your packaging currently does not meet the upcoming regulations, you are rapidly running out of time to replace it with new, compliant solutions.
Unfortunately, the fact is, it takes time to get new packaging designed, printed, shipped, fulfilled, and placed on shelves… Lots of time.
Let’s take a look at a typical timetable:
Creative
Getting your new packaging designed, revised, and approved. 2-4 weeks.
Sampling and Refinements
Once the design is complete, you’ll receive samples, which takes an average of 2 weeks.
Then, your team will analyze the packaging, and if necessary, the designers will make any refinements. 1 week.
Mass Production
Printing the packaging can take up to 8 weeks, depending on the supplier, season, and complexity of packaging.
Transit
A lot of printing these days is done overseas, where costs are lower. However, shipping times are much longer and can take 6-8 weeks to arrive. This includes loading and unloading, customs clearing, and ground transport.
Fulfillment
Getting your products into your new packaging takes time. Allow 1-2 weeks for this task, depending on the quantity and complexity.
Transit to Distributors and Stores
Finally, you’ll need to get your product to distributors and stores. Count on at least 1 week for each.
Summary:
If you add up the various steps – each critical to the process – you will see that your project can realistically take 20-26 weeks. That’s up to 6 months!
There are ways to trim this timetable, but inevitably, they start adding expense to the project. Accordingly, the best practice is to start the process at least 6 months before you need your packaging on the store shelves.
Granted, this schedule is for producing a premium packaging system. There are lower-cost solutions available, but these inevitably make your product look cheaper. This is especially important if you want to build an upscale brand and position your product as a luxury item.
The best advice is to contact a packaging professional as early in the process as possible and discuss your options, costs, and timetables.
Don’t start thinking about packaging a few weeks before a regulation change… get ahead of the game and start the process early to enjoy the most options, best results, and lowest costs.
CEO Kary Radestock
Kary Radestock, CEO, launched Hippo Premium Packaging in March 2016 offering an array of services to the cannabis market, including: Marketing Strategy, Brand Development, Social Media, Public Relations, Graphic and Web Design, and of course, Printing and Packaging. Radestock brings over 20 years of award-winning print and packaging expertise, and leads a team of the nation’s top brand builders, marketers and print production experts. Hippo works with businesses looking for a brand refresh or an entire brand development, and specializes in helping canna-business get their products to market in the most beautiful and affordable way possible. Radestock’s Creative Collective of talent and experts, allows her to offer world-class solutions to support the unique needs of the Cannabis Industry.
Member Blog: What The Cannabis Market Can Learn From The Energy Sector About Overcoming Market Complexity
by Mike Elliott, Business Development Executive at DCM
In an industry where change is a constant, cannabis companies face big challenges when it comes to brand-building, communications, and bringing products to market. The sector’s complexity is only increasing, which is compounded by its continual evolution, along with tight, varied, fluctuating regulations, and in some cases, less-than-informed consumers.
While the path forward may seem uncharted, in fact, similar market challenges exist in other verticals. With the right strategies and tools, these hurdles—including rigid regulatory conditions—can be overcome. If you’re looking for a roadmap for success, look no further than the U.S. energy sector – specifically, utilities.
The recent shift toward deregulated electric and gas markets has created an environment strikingly similar to that of cannabis. Both sectors grapple with strict, unpredictable regulatory governance. Both must comply with state-by-state variances and prohibitive marketing. And both face the challenge of communicating with customers who are often unfamiliar with the sector’s legislation and production processes.
By gaining an understanding of these obstacles, cannabis operators can improve their own market and regulatory navigation. Following are a few key lessons learned from energy.
For both energy suppliers and cannabis providers, regulation and compliance are determined at the state level. State-by-state laws vary widely and become increasingly complex when factoring in additional local and municipal regulations—not to mention continual review and change. This complexity has a direct impact on communications and brand management. Rules on communication and packaging—including, for cannabis, dosage—can diverge greatly and shift quickly. And there are few signs of this framework getting simpler.
Energy suppliers have addressed this complexity through variable, highly responsive communication platforms that can—very quickly and at scale—accommodate unique market requirements.
For cannabis companies, similar success depends on razor-sharp management, including automation of intensive, often spreadsheet-based processes that are manually maintained and prone to error. Robust, technology-driven platforms can now deliver a wide array of materials efficiently and accurately across different markets, all while ensuring airtight compliance with each market’s specific regulations.
New opportunities call for a fast, location-specific response
Both energy and cannabis businesses must be agile and flexible when responding to new market opportunities. In adapting to fluctuating, state-by-state rules surrounding contract terms and conditions, energy providers have learned the hard way how inefficiency and error can delay market entry and reduce sales potential.
Faced with similar circumstances, cannabis producers need the support of automated, location-specific marketing – technology that efficiently allows for customized, regional messaging across multiple markets and channels while ensuring locked-down branding and regulatory compliance.
Perception is everything when it comes to reaching consumers
With deregulation, utility companies realized that many consumers were uninformed regarding the legislative changes and were unaware of product availability and their own ability to shop around. Educating consumers was key – and communicating to them a value proposition that would distinguish each provider’s offering from that of the competition.
While cannabis is not entirely unfamiliar to many consumers, the dialogue around legalization and products remains similarly dogged by a lack of information and general misunderstanding. Cannabis companies must now shift those perceptions and educate potential customers on product safety and use. Producers must look at developing innovative communications supported by tools like automation, multi-channel communications management, and 1:1 marketing. These can help target, personalize, and monitor communications to better connect with consumers.
With little room to communicate, companies need to get creative
Utility companies are highly restricted in not only how they can make changes to billing and service charges, but also how they can market to consumers. The scenario is the same for cannabis companies, though regulations are even more complex and restrictive, with federal prohibition blocking most traditional means of advertising, including social and digital channels.
Cannabis companies can combat these restrictions with genuinely creative thinking backed by a thorough understanding of the rules. That means combining market knowledge with creative expertise in a way that skillfully complies with regulations without breaking them. At the same time, creativity and customization cannot hinder efficiency. The right tools must be in place to make sure everything works together – for example, a platform that lets users customize branded collateral for different segments and channels, allowing for both efficiency and creativity – consistency and customization.
The bottom line: the stakes are too high for non-compliance
Fines for non-compliance in the energy sector can reach into the millions. Likewise, stiff penalties are levied for non-compliance in the cannabis industry. The financial implications can be devastating for cannabis producers – even more so if it comes to relabeling or pulling product from store shelves. To compound the risk, publicized mishaps can deliver a serious blow to consumer confidence for brands trying to win consumer trust. With that in mind, navigating the highly regulated cannabis landscape takes careful planning, constant oversight, and the ability to stay ahead of evolving regulatory requirements.While the opportunity is promising, it requires tools, technologies, and strategies that streamline processes, mitigate risk, and increase speed-to-market. Charting your course depends on careful planning, trusted advice, and experienced partners – along with the ability to learn from those who have been there and done that.
Mike Elliott is a Business Development Executive specializing in cannabis at DCM
From brand strategy and consumer insights to dynamic labeling and POS solutions, DCM helps build, protect, and bring to market North America’s largest cannabis brands. Learn more at http://www.datacm.com.
Partner Blog: Legal Education – The Cannabis Regulatory Rounds Presented by INCBA
The International Cannabis Bar Association (INCBA) is excited to present the fourth iteration of our in-person educational partnership with the National Cannabis Industry Association’s Cannabis Business Summit and Expo.
This year, INCBA is thrilled to showcase a full day set of educational sessions on July 22, 2019 in San Jose, California that sets the bar for legal education in the cannabis industry and offers 6.5+ credits of Continuing Legal Education (CLE) in select jurisdictions. Already renowned for presenting the highest-quality legal education in the legal cannabis, INCBA has continued to refine and enhance our in-person educational offerings, and we have something special in store for our attorneys at NCIA’s #CannaBizSummit this year.
Instead of focusing on substantive topic areas (like IP, finance, or real estate), we have decided to offer a special set of sessions focused on regulatory issues that face each business type that operates in this unique industry. Loosely based on license type, our educational sessions will focus on specific stops on the vertical stream of commerce, beginning with specific issues related to cultivators, moving through multi-state manufacturing and distribution, and then addressing to E-commerce. We will take a close look at the current bottleneck in many jurisdictions – testing laboratories – and at labor and workforce considerations that affect businesses across all the above license types. In short, we are giving you what you need to know to serve your clients in the cannabis industry no matter where their focus lies.
And, just to make sure you get those valuable nuggets of information, we have made sure that every panel features a regulator that can speak directly to the concerns that you must address when advising your client. INCBA has become known for featuring the top practitioners in the country on each of our panels, and now you get to watch them discuss their approach to regulation with the people in charge of enforcement.
In addition, INCBA is excited to present the most substantively and jurisdictionally diverse set of panels that we have ever featured. No more than two attorneys from any given state sit on a panel, which means that we will be covering topics that are relevant across state lines. And, because California’s regulatory system has come online this year, it serves as the perfect foil to compare and contrast differences in jurisdictions, failures and successes of regulatory structures, and the major pain points your clients face – no matter from what state they hail.
To make sure we end the day on the right note, and to ensure that you have the opportunity to create the lasting connections that will serve you throughout your practicing career, INCBA will be hosting one of our signature after-parties at the beautiful Mosaic Restaurant and Lounge at the Sheraton Hotel in downtown San Jose. After a long day of education, come to Mosaic to network with some of the best cannabis attorneys around. The party includes light bites and drinks, as well as Bocce ball and Giant Jenga. Find the panelists you enjoyed the most, see old friends, and make new ones to lay the foundation for a lifelong successful practice in this special industry.
As the first (and only) specialty bar association that exclusively serves the business needs of the cannabis industry globally, INCBA is the hub where cannabis industry lawyers come together to connect with each other, share information, and learn the tools necessary to further their clients’ interests in the legal cannabis industry. As Steve Shain of Hoban Law Group recently proclaimed – “It’s not whether you can afford to be here, it’s whether you can afford to not be here.”
As 2018 came to an end, the FINAL proposed text of the permanent regulations for California cannabis were submitted to the Office of Administrative Law (OAL) by the three regulatory agencies – the California Department of Food and Agriculture (CDFA), California Department of Public Health (CDPH), and the Bureau of Cannabis Control (BCC). The cannabis regulations submitted to the OAL are currently undergoing a 30-day administrative review to ensure alignment with MAUCRSA and statutory requirements. These “final’ regulations shall become effective immediately upon approval/adoption which should be on/before January 16th 2019.
What “final” means in this evolutionary process of California cannabis regulations is debatable, as there are already several Assembly and Senate bills queued up to be put through the legislative tango and all three of the regulatory agencies have indicated that there will be further clean-ups and clarifications of the “permanent” regulations. Although there will assuredly be changes ahead, this is a highlight reel of where California Cannabis stands now.
For those that dug into the October redrafts, much of the substantial changes that occurred in that version carried over into the final proposed text. Here we will highlight the top eight changes impacting cannabis businesses in California.
The Final Statement of Reasons from the BCC, which also included responses to pertinent comments received during the previous 15- and 45-day comment periods, is where some greater clarity about the regulatory changes and intents can be found. It is by spelunking into these deeper caverns of reasoning where the sweet ore of further clarity can sometimes be extracted.
Here are 8 highlights for anyone interested in California cannabis.
1. Ownership and Financially Interested Parties
In October we saw the expansion of the definition of ownership and financially interested parties that clearly sought to capture the identification of any and all warm bodies that stand to direct, control, or financially benefit from commercial cannabis. While there were some changes in sections §5003 and §5004 between the previous and current version, the scope and intent remained the same. One particularly vague line §5003.b.6.D “Any individual who assumes responsibility for the license.” was removed from the BCC’s definition of owner, this very line turned up over the in the CDPH’s update in §40102.a.4.D.
The Ownership and Financially Interested Parties disclosures dovetail into the White Labeling issues (See #2) in that “Brand Owners” that may be licensing IP to contract manufacturers have been impacted by the prohibition on non-licensees conducting commercial cannabis business with licensees. In the response to comments in the FSOR was this gem of insight, “In response to commenter’s questions, if a licensee includes as one of their owners a brand-owner, the licensee can produce the branded products because in this case the licensee is not engaged in commercial cannabis activity on behalf of an unlicensed person. Because the owner of the brand is an owner of the licensee, there is no unlicensed person involved.” Of course, before everyone runs off and adds brand-owners as owners of their contract manufacturing business, let’s take a moment to reflect on the value and critical importance of a well-drafted contract.
2. §5032 (b) The So-Called “White Label Prohibition”
5032.b shall go down in infamy as one of the more talked-about sections of the BCC’s regulations. This simple sentence, “Licensees shall not conduct commercial cannabis activities on behalf of, at the request of, or pursuant to a contract with any person that is not licensed under the Act,” brought with it a level of confusion and white-hot panic regarding the inferred white label prohibition contained therein. October’s version had more explanatory examples for the types of “on behalf of, at the request of, or pursuant to” activities that the BCC was talking about, such as, “procuring or purchasing cannabis goods from a licensed cultivator or licensed manufacturer. Manufacturing cannabis goods according to the specifications of a non-licensee, Packaging and labeling cannabis goods under a non-licensee’s brand or according to the specifications of a non-licensee, Distributing cannabis goods for a non-licensee.” This language was removed in the final version submitted to the OAL and is one of the examples of where the FSOR is enlightening.
From the BCC’s FSOR: “Initially, the Bureau determined that it was necessary to assist licensees with determining what types of activities may or may not be allowed under the Act and its implementing regulations. The initial proposed change identified certain transactions that would generally be considered commercial cannabis activities under the Act. However, the Bureau has determined that inclusion of the clarifying example transactions is causing more confusion. Accordingly, the Bureau has decided not to move forward with the proposed changes which identify examples of specific commercial cannabis transactions.” The definition of “commercial cannabis activities,” therefore, is an important one, and we can refresh ourselves on that one (Business and Professions Code §26001.k) “‘Commercial cannabis activity’ includes the cultivation, possession, manufacture, distribution, processing, storing, laboratory testing, packaging, labeling, transportation, delivery or sale of cannabis and cannabis products as provided for in this division.”
This has been a hot, hot topic, and there have been some great analysis articles of this provision that dig further into solutions and scenarios related to this section. Get thee to Google and find out more!
3. Option to label THC/CBD post-final testing by Distributor
This was a big win for the industry! A substantial percentage of testing failures for “label claims” are due to products, previously required to be labeled with THC/CBD content prior to final testing (the one test that counts!) not falling within the 10% allowable variance threshold. It’s common knowledge that the science of cannabinoid testing is still getting dialed in, and the labs have some serious challenges in hitting the same tiny target twice. Especially when they are dealing with the vast array of cannabis product matrices, and an industry that it still learning about important things such as homogenization. The good news is, the CDPH now allows products to be labeled for THC/CBD content after that all-important final test, which should eliminate well-upwards of 50% of the product failures in California and ensure a steadier supply chain.
4.Regulation of Technology Platforms
The cannabis industry has always been a place of innovation and loophole-finding. These regulations are an attempt to close some of those loopholes that seem to have created a situation where unlicensed tech platforms were enjoying the privileges of licensed commercial cannabis without undergoing the slings and arrows of local/state licensure and regulation. Seeing themselves outside of the regulatory purview, certain business claimed that agencies such as the BCC had no dominion over their activities. Well, they may have wanted to wait until the ink dried on the final regs before making such an assertion, as now it seems the BCC has expanded its reach to embrace all kinds of advertising, facilitating, and delivery platforms.
5. Delivery to a Physical Address
This was (potentially) a huge win for patient access, however, it remains to be seen how this truly shakes out. When the BCC added the line that “a delivery employee may deliver to any jurisdiction within the State of California” it caused some serious outrage from municipalities that have banned commercial cannabis activity, the League of Cities, law enforcement, and others that saw this as a huge overstepping of the local authority ensured by Prop 64 and MAUCRSA. The LOC even launched a “wandering weed” campaign, in response to which it seems that a subsection that includes “a restriction on delivering cannabis goods to a school providing instruction in kindergarten or any grades 1 through 12, day care center, or youth center” was added to the regulations, for clarity. Whether the OAL will approve as is, and how this interacts with local bans, tax requirements, and law enforcement, and lawsuits… stay tuned! While the BPC (§26090.e & 26080.b) explicitly prohibits a local jurisdiction from preventing delivery, and transportation, of cannabis goods on public roads, it does not prevent localities that have banned commercial cannabis in their area from adopting ludicrous tax rates for deliveries that would in effect ban via taxation delivery in their area.
6. Sale of Non-Cannabis Goods (aka No Hemp)
While the seeming victory of the Farm Bill has folks leaping with joy for the future of hemp, statements from the FDA and other agencies have certainly rained on the parade of many a CBD vendor. Add to that the collections of California cannabis regulations that in effect eliminate hemp-derived CBD from cannabis dispensaries and products.
“In addition to cannabis goods, a licensed retailer may sell only cannabis accessories and any licensee’s branded merchandise.” (BCC §5407)
This limitation for retail (and retail delivery) is further clarified in the BCC’s FSOR in their responses to comments:
“Cannabis retailers are licensed to sell cannabis goods. The definition of cannabis within the Act explicitly excludes industrial hemp products. Industrial hemp is regulated by the California Industrial Hemp Program under the California Industrial Hemp Farming Act.”
“A retail license from the Bureau authorizes the retailer to sell cannabis goods and cannabis accessories. A retail license from the Bureau does not authorize licensees to sell items that are unrelated to cannabis.”
Combined with the retail prohibition on non-cannabis products, this trifecta from the CDPH extends that prohibition to manufacturers:
“A manufacturer licensee shall only use cannabinoid concentrates and extracts that are manufactured or processed from cannabis obtained from a licensed cannabis cultivator.” (CDPH §40175.c)
“Except for cannabis, cannabis concentrate, or terpenes, no product ingredient or component shall be used in the manufacture of an edible cannabis product unless that ingredient or component is permitted by the United States Food and Drug Administration for use in food or food manufacturing, as specified in Everything Added to Food in the United States, or is Generally Recognized as Safe (GRAS) under sections 201(s) and 409 of the Federal Food, Drug, and Cosmetic Act.” (CDPH §40305.a)iii. “Except for cannabis, cannabis concentrate, or terpenes, topical cannabis products shall only contain ingredients permitted for cosmetic manufacturing in accordance with Title 21, Code of Federal Regulations, Part 700, subpart B (section 700.11 et seq.) (Rev. March 2016), which is hereby incorporated by reference.” (CDPH §40306.a)
For now, it seems, non-cannabis derived CBD is DOA in CA.
7. Child Resistant Packaging (CRP) Requirement
Heads continue to spin (and cannabis business’ cash to hemorrhage) in response to the changes in the packaging requirements. As of July 1, 2018, all cannabis products were to be in child-resistant packaging, and retailers had converted back to the statutory requirement that all exit packaging was to be “opaque,” allowing them to use reusable totes and paper bags to satisfy this requirement. In the October regs, we saw a pivot that allowed for a seeming “grace period” for the child-resistant requirement to return to being able to be satisfied by the retail via CR exit bag. Some confusion remained as to whether products that were already IN child-resistant packaging would have to be put INSIDE of child-resistant packaging for the next year. The addition of the statement from the CDPH, “Until the date specified [1/1/20] the child-resistant package requirement [§26120] may be met through the use of a child-resistant exit package at retail sale.” (CDPH §40417.d) suggests that the significant ecological impact of CR packaging within CR packaging MAY be avoided, however, most legal counsel will probably be advising retail clients to use the CR exit bag to avoid potential liabilities. Viva Kafka!
In the CDPH’s Statement of Reasons, they said “This is necessary to comply with the packaging requirements in Business and Professions Code section 26120 while providing licensees with time to comply with packaging requirements.” Compliant operators were left somewhat confused, as they had been required to comply with these packaging requirements since July!
8. OSHA Training for Everyone!
All three regulatory agencies added the following requirement for OSHA training:
“For an applicant with more than one employee, the applicant shall attest that the applicant employs, or will employ within one year of receiving a license, one supervisor and one employee who have successfully completed a Cal-OSHA 30-hour general industry outreach course offered by a training provider that is authorized by an OSHA Training Institute Education Center to provide the course.”
This will be an additional training requirement, on top of existing state and local training requirements for cannabis operators. And remember, all that training documentation must be kept, like all other records, for seven years!
As with everything in life, more will be revealed as we get deeper into 2019.
Juli Crockett is a member of the NCIA’s State Regulations Committee and is Director of Compliance at MMLG. Slides from Juli’s recent Workshop on this topic are available for download here. You can also watch the workshop video in its entirety on MMLG’s Facebook page.
Member Blog: News Flash – Quirky Cannabis Regulations Unchecked
California Bureau of Cannabis Control (BCC) Proposed Final Regulations:
There are some quirky cannabis regulations seldom discussed by industry professionals which have a hidden impact on your business operations. Most business owners are, as they should be, preoccupied with the more prevalent draconian-styled regulations, like license fees, taxation, and testing.
Obviously the state has public safety concerns with the legalization of marijuana, but has the state overreached in its mission to craft “robust regulations” for the industry. Upon review of 142 pages of proposed regulations, we opted to shine light on what we consider to be quirky cannabis provisions that have gone unnoticed by cannabis business owners. Some are laughable, others insulting; and as to the remainder, the state’s regulation of your cannabis business simply never ends.
The California Bureau of Cannabis Control BCC proposed final cannabis regulations are currently under review of California Office of Administrative Law AOL to complete the rulemaking process. After considering the following, one might ask, what exactly were the rule-makers thinking when they wrote these provisions?
California Quirky Cannabis Regulations
No. 1No Naked Employees
5806 Attire and Conduct
No licensee shall employ or use the services of any “host or other person to mingle with the patrons” … “in the sale or service of cannabis goods in or upon the licensed premises while such person is unclothed or in such attire, costume, or clothing as to expose to view any portion of the male or female breast below the top of the areola or of any portion of the pubic hair, anus, cleft of the buttocks, vulva, or genitals.” Nor shall the licensee encourage or permit any person “to touch, caress, or fondle the breasts, buttocks, anus, or genitals of any other person.”
– Cannabis Strip Club?
No. 2Beware Of Fake Buyers
5805 Minor Decoys
“Peace officers may use a person under 21 years of age to attempt to purchase cannabis goods, for the purposes of enforcing the Act, and to apprehend licensees, employees, or agents of licensees who sell cannabis goods to minors.”
– Entrapment?
No. 3Your Coffee Cup Is Regulated
5041.1 Branded Merchandise Approval
If a licensed distributor, retailer, or microbusiness “wishes to sell branded merchandise” – goods other than cannabis such as clothing, hats, pencils, pens, keychains, mugs, water bottles, beverage glasses, notepads, lanyards, cannabis accessories – “the licensee must receive written approval from the Bureau.”
To obtain a approval, the licensee must submit a written request and provide a photograph to the Bureau. Notably, there appears a discrepancy in the language of the regulation 5041.1 as to whether or not approval is required for all items listed in §5000(b) definition of “branded merchandise.”
Is this kindergarten?
No. 4$500 State Fee To Modify Your Reception Area
5014 Licensing Fees
An application and licensing fee of $500 is charged for “Physical Modification of Premises.”
Alterations or modifications to the premises include, but are not limited to: “the removal, creation, or relocation of a wall or barrier; or changing the activities conducted in or the use of an area identified in the last premises diagram provided to the Bureau.”
Hidden fee for commercial lease space improvements?
No. 5Cannabis Goods Intended For Disposal Must First Be Destroyed On The Premises Except Vape Cartridges Filled With Cannabis Oil
5054 Destruction of Cannabis Goods Prior To Disposal
Cannabis goods intended for disposal must remain on the licensed premises until destroyed into cannabis waste. The licensee must restrict access to the cannabis goods intended for disposal, store the disposal goods separate from the other goods, and first destroy the goods “on the licensed premises.” This includes separating the cannabis goods from any packaging, or container rendering it “unrecognizable and unusable.”
However, the licensee is not required to empty vape cartridges of cannabis oil prior to disposal, “provided that the vape cartridge itself is unrecognizable and unusable at the time of disposal.”
Statutory rhetoric?
No. 6 You Get One Chance, With One Lab, To Test Your Cannabis
5305.1 Re-sampling
Once a cannabis sample has been obtained for testing by the laboratory employee – which sampling must be “video recorded with the batch number stated verbally or in writing on the video at the beginning of the video and a visible time and date indication on the video recording footage” (§5305) – a licensed distributor may not have another licensed testing laboratory sample or re-sample the same batch for regulatory compliance testing without the Bureau’s blessings, e.g. you must first making a written request to, and obtain, the Bureau’s written approval to re-sample the same batch (§5705(g).)
Unnecessary barrier to quality control leading to heightened chance for product recall?
No. 7 Unfettered Discretion To Audit Your Business 24/7 Without Notice
5037 Record Retention
Licensees shall keep and maintain all business records related to commercial cannabis activity for at least 7 years to and including (a)(9) “all other documents prepared or executed by an owner or their employees or assignees in connection with the licensed commercial cannabis business.”
(d) All records are subject to review by the Bureau anytime . . . . Prior notice by the Bureau to review records is not necessary. The Bureau may review records outside of the licensee’s standard daily business hours.”
– Something Unconstitutional About This, Right?
No. 8 Ultimate Veto Power Over Renewal Of Your Retail License
5019 Excessive Concentration
Even if you satisfy all licensing regulatory requirements on both the local and state levels – the Bureau maintains the exclusive discretion to deny you a license and/or deny renewal of your license if the Bureau determines that (a) “an excessive concentration exists in the [geographical] area” where you operate.
Excessive concentration applies when either of the following conditions exist: “(1) the ratio of licensees to population within the census tract or census division in which the applicant premises is located exceeds the ratio of licensees to population in the county in which the applicant premises is located . . . . (2) The ratio of retail licenses or microbusiness licenses to the population within the census tract, census division, or jurisdiction exceeds that allowable by local ordinance . . . .”
Should the Bureau deny your license on this basis, the burden is on the you, the applicant licensee, to (f) “provide reliable evidence establishing, to the satisfaction of the Bureau, that a denial of a license would unduly limit the development of the legal market so as to perpetuate the illegal market for cannabis goods.”
Unreasonable evidentiary burden and extraordinary cost on applicant licensee to conduct an economic field study on an illegal market that is, in effect, a legal impossibility to achieve under any circumstances.
The list goes on. While the California BCC has clearly satisfied its commitment to promulgate “robust state regulations” for the industry, one wonders about the state’s definition of robust.
An experienced corporate litigator having worked in both the private and government sectors, Attorney Robyn Ranke has taken a modern business approach to the cannabis industry and in working with cannabis business startups. Throughout her legal career, Robyn has represented a diverse base of business clientele in a variety of industries involving both complex and novel legal matters. Her diverse experience as a business litigator provides a valuable legal platform from which she is uniquely postured to address the regulatory hurdles, costly pitfalls, unique business transactions, and business litigation risks that confront California cannabis business owners today and into the future as state regulations continue to evolve.
Member Blog: Raising The Bar – Setting New Standards and Building Public Trust
In 1991, professors Harry G. Levine and Craig Reinarman published an article in the healthcare journal The Milbank Quarterly titled, “From Prohibition to Regulation: Lessons from Alcohol Policy for Drug Policy.”
In their study, they note the quiet effectiveness of an industry that has regulated itself without issue since 1934.
“The leaders of the major alcohol industries, just like other members of the economic establishment, have a strong investment in maintaining order and obedience to law. Now, many decades after national alcohol prohibition ended, it is easy to forget that all this was the outcome of self-conscious public policy and not the ‘natural’ result of market forces or national zeitgeist.”
As recreational cannabis laws continue to evolve, our industry—everyone from cultivators to regulators to entrepreneurs—continues to navigate uncharted territory. As we do, we would be wise to lean on the lessons of history and those responsible for managing and maintaining the alcohol industry in guiding our future. Here’s what my study of history leads me to believe:
Regulation Standards Must Do More to Protect the Consumer
I once had an English teacher who doled out chapter quizzes rather than assigning a culminating test or paper after we’d finished the book. Cram for the quiz by reading a CliffsNotes synopsis, or interrogate your more well-read friends on chapter highlights and chances were you’d pass the quiz.
It’s not unlike today’s state testing policies in which cultivators can breathe a sigh of relief knowing that if they simply do what’s needed to ensure the sample they have submitted for testing passes, their entire strain is in the clear.
The result of these kinds of regulations is a frenzy of activity focused on what’s needed to pass, rather than a shift in behavior focused on producing an altogether better product that is cleaner and safer for the consumer. A similar story goes for process validation. Submit batches for testing over a series of weeks and a passing grade ensures that your cultivation process can be considered “contaminant free.”
If our ultimate concern is public health, regulators should consider avenues that result in testing more product, more often. While there are certainly roadblocks that make this far from easy—namely the cost to cultivators and availability of labs for testing—steps in this direction would signal to consumers that shortcuts and workarounds won’t be tolerated.
An FDA-like approach to health and safety are needed to reshape our industry
Levine and Reinarman note that at the time of the prohibition repeal, producers of alcohol, “had to be regulated to ensure that products were safe and of a uniform alcohol content.” These regulatory efforts, “directly reshape[d] both an entire industry and the conditions under which its product are consumed.”
Sounds familiar. While state laws are slowly shifting to allow for greater medical and recreational use, the laws that shape the conditions under which cannabis can be cultivated, sold and consumed are still in flux. Not only do we have to add our voice to the conversation as those laws are being shaped, in doing so we have to advocate for both the industry and the consumer—with lawmakers and in public forums—showing our commitment to safety and uniformity.
That means instituting strict yet sensible FDA-like requirements that center on production, procurement and handling, as well as manufacturing, distribution and consumption of the finished product. It also means implementing common-sense standards like wearing protective gear in our grows, conducting regular analysis of critical control points like storage, packaging and distribution areas, and instituting a contamination kill-step before cannabis extraction is complete.
Reshaping the conditions in which we operate and aligning them with standards already in place for like-minded industries will do for us what it once did for alcohol: move us from an industry continuing its uphill battle for legitimacy to, “something routine and manageable, a little-noticed thread in the fabric of American life.”
We must recognize our responsibility and be conscious of the impact of our choices
Our industry is overflowing with individuals who treat cannabis not as a career, but a lifestyle. It isn’t just about the plant itself. We embrace it for what it represents and how it reflects our core attitudes towards humanity and our planet. Now it is also affording us the opportunity to make a profit in a legal and legitimate way.
As tempting as it is to be swayed by potential profitability, we can’t afford to lose ourselves in the process. Like the leaders of the alcohol industry, we have to be self-conscious about the precedent we are setting. If we can balance passion with profit, we can take pride in being pioneers who reshaped our country’s attitudes on cannabis.
If we take this moment for granted, if we fail to responsibly grow and sell our product, we do more than just damage our businesses; we lose the ability to influence lawmakers and further sway public opinion. Rather than driving cultural change, we will be at fault for failing to take advantage of a moment ripe for change. Now is our time to create our legacy and set the standard for years to come; to evolve our industry from legal to legitimate by being its leaders.
If we play our cards right today, our country may look back at this moment, as Levine and Reinarman suggest, and judge our previous attitudes towards cannabis prohibition much like alcohol prohibition, “repressive, unjust, expensive and ineffective.” With history as our guide, we have a chance to shape our future. Let’s take advantage of it.
Jill Ellsworth is CEO and founder of Willow Industries, which uses ozone-based technology to clean and purify flower and trim while maintaining a plant’s medicinal properties.
Jill is a Registered Dietitian Nutritionist (RDN) with a Master of Science in nutrition, dietetics, and food science.
The following topics are areas to be aware of while creating and designing packaging. Using these tips can save you time and money in the process of creating or selling cannabis products.
Originality of content – Imitating consumer packaged goods for your packaging design through parody of a popular brand logo or using parody in packaging design can lead to serious issues. Use packaging is an opportunity to define your brand.
Lead times – Timing and shipping are usually underrated factors that can cause headache and unnecessary costs. Depending on the complexity of the packaging, if tooling is be required, this can easily add six weeks to your delivery time. Is your packaging being produced domestically or internationally? How much space will packaging use and where will it be stored?
Issues compliance labeling on design – If you are creating a product to be sold at a dispensary, make sure to consider additional labeling that will appear on the final product delivered to customers at retail. There needs to be enough surface area or clever design to make sure your packaging identity isn’t lost amongst compliance stickers. If you are a retailer, it is important to educate salespeople about where to place required labels to not obscure important information that may be on the packaging.
Adaptable – Rules change constantly. Your company’s strategies to deal with changing regulations should include packaging and labeling. You could predict and order units based on when regulations go into effect, or start with packaging that goes beyond current standards. As a retailer, can you find a way to insist the brands you carry comply with child resistant standards or order more exit bags? Going above and beyond current regulations can save you money and elevate your product.
It is important to have packaging graphics that get noticed at retail. Consumers often skim shelves quickly looking for brands that are known to them or graphics that catch their eye. With limited space in dispensaries it is important to have branding that is well presented in the packaging. Creating packaging that represents your brand is best done early in the process so that it is not rushed and attainable lead times for desired packaging can be met. In our industry, states can update packaging guidelines at any time, make sure your final packaging adheres to all regulations structurally and graphically.
Member Spotlight: Simplifya
In this month’s Member Spotlight, we spoke with Marion Mariathasan, CEO of Simplifya. The company provides tools for scheduling, audit management, and tracking issues, giving users a 360-degree view of their compliance. The company was founded in 2016 by partners from Vicente Sederberg, the law firm that led Colorado’s Amendment 64 campaign, and investors with proven track records in tech start-ups.
Cannabis Industry Sector: Information Technology and Software
NCIA Sustaining Member Member Since: October 2016
Marion, tell us a bit about your background and why you launched your company?
I immigrated to Kansas from Sri Lanka when I was 9 years old. I attended both University of Kansas and Emporia State University studying Architecture, Computer Science and Computer Information Systems. After graduation, I took on my first technical role with a medical software company. Since then, I’ve been fortunate enough to have held management and executive level positions with incredible companies – large and small. In addition, I’ve been blessed with the opportunity to have either founded or be involved with many new startup-ups over the years.
Most recently prior to Simplifya, I was one of the founders of a tequila brand. After years of building and distributing the brand nationally, in 2015, we took an exit from the tequila business.
Soon after the exit, I reached out to a good family friend to learn more about the cannabis industry. The good friend happened to be Christian Sederberg of Vicente Sederberg. After a few discussions with Christian and a few others at Vicente Sederberg, it became obvious that the burgeoning cannabis industry needed an enterprise-level software solution to help the highly regulated industry tackle the everchanging compliance needs in a cost-effective and efficient way. After months of discussions and planning, in early 2016, Simplifya was born.
What unique value does your company offer to the cannabis industry?
Simplifya’s Brooke Butler presenting
Simplifya distills complex state and local regulations into a straightforward simple series of yes-or-no questions to generate management and audit reports, identify areas of noncompliance, and hold employees accountable for remediation. Simplifya helps save business owners time and money while providing them peace of mind by staying current with ever changing state and local regulations in real time and streamlining the overlap between jurisdictions and license types.
Simplifya also gives businesses the ability to atomize and store their own customized checklists and SOPs and then assign out those checklists to specific employees enabling companies to monitor business activities and employee performance.
Cannabis companies have a unique responsibility to shape this growing industry to be socially responsible and advocate for it to be treated fairly. How does your company help work toward that goal for the greater good of the cannabis industry?
The cannabis industry at the state and local level has an opportunity to demonstrate that it is worthy of the changes it is seeking at the federal level. There are a number of ways to do this, but creating and maintaining a strong compliance profile is an essential building block. It’s true for regulators, who want to show they are effective with their regulations and enforcement; and for marijuana business owners, who need to overcome the stereotype of being underground operators that don’t care about compliance. By behaving like the best players in other highly regulated industries, and doing things like developing robust compliance programs, actively participating in the rule-making process, and ultimately placing a very high priority on compliance as a path to success, the industry can continue to propel itself toward federal legalization.
Simplifya wanted to be able to provide a simple and affordable tool the industry could use to be able to more easily comply with ever changing regulations and enable them to be able to spend more time focusing on their core business and perfecting their craft.
Why did you join NCIA? What’s the best part about being a member?
One of the first checks that Simplifya wrote when we launched in 2016 was membership dues to the NCIA because we strongly believe the cannabis industry needs strong representation and lobbying power on the national level. We are all working in our own ways to pave the way forward for the cannabis industry and being able to come together as a group of industry leaders with one voice is truly powerful and exciting.
My favorite part of being an NCIA member is the chance to meet all of the other interesting and accomplished men and women that are a part of growing and changing this emerging industry. Many of the NCIA members I met at my first NCIA event shared their own invaluable experiences and insights that helped guide me and Simplifya when we first started this adventure into the cannabis industry. It is so empowering to be a part of an organization like the NCIA that provides forums and regular opportunities for us to help each other grow and succeed.
Member Spotlight: CannaRegs
This month, as we watch nine states vote on cannabis-related ballot initiatives on Election Day, we’re highlighting NCIA member CannaRegs, the company that is responsible for the data that appears on NCIA’s online State Marijuana Policies Map. Co-founder Amanda Ostrowitz prepares now to handle a flood of incoming data as new states begin to implement cannabis laws in the coming months and beyond.
Cannabis Industry Sector: Legal/Technology NCIA Member Since: 2015
Tell me a bit about your background and why you founded CannaRegs.
CannaRegs co-founder Amanda Ostrowitz
Prior to launching CannaRegs in May 2015, I was an attorney specializing in banking regulation. While serving in my position at the Federal Reserve Bank, I was engaged in several conversations regarding the issues of banking and cannabis. With just a few questions in mind, I began to research the rules and regulations of the cannabis industry. Although the questions seemed simple, it required several hours of research and more importantly, I noticed the answers varied by location, and at the state, county, and municipal levels. At that point I realized that I probably would not be able to fix the banking problem, but I had an idea to simplify researching the regulations into a user-friendly online database – CannaRegs was born!
What unique value does CannaRegs offer to the cannabis industry?
CannaRegs offers a unique value to the cannabis industry as the only cannabis-specific comprehensive research platform that aggregates state-, county-, and municipal-level law. Notable features of CannaRegs are:
Searchable Cannabis Rules and Regulations: The law on CannaRegs is searchable using three unique search functions—browse, smart search, and search laws. These search features were created by attorneys to address the difficulties encountered using conventional legal research tools. What previously took hours of research has been reduced to minutes.
No longer do you have to compile binders full of ordinances:CannaRegs’ technology and team of attorneys are constantly monitoring the law, keeping the database up to date. As new regulations and ordinances are adopted CannaRegs is the reliable source for a current amalgamated version of the law.
Rule-making Event Calendar: CannaRegs provides a consolidated schedule of rule and policy-making events happening around the U.S. In the month of October 2016, CannaRegs covered 82 municipal, county, and state-sanctioned meetings specific to marijuana.
Access to Official Publications: Where most databases provide access to the law, CannaRegs goes beyond by providing quick access to any official publications including forms, official guidance documents, industry bulletins, position statements, product recalls, etc.
CannaRegs Resource Tools: CannaRegs provides additional resource documents to help navigate the intricacies of cannabis rule-making.
CannaRegs & NCIA State Policy Map: This resource is the result of a collaboration between NCIA and CannaRegs that provides a detailed summary of each state’s cannabis market and regulations. This interactive resource is free to the public and is a great starting point for learning the basics about each state. CannaRegs keeps this map updated so that viewers are always looking at current information. Click on the map to see this unique member benefit or to sign up for a demo of CannaRegs.
With nine states voting for either adult-use or medical cannabis ballots on November 8, what does this mean in the larger scheme as it relates to your work?
The CannaRegs team of attorneys is prepared to begin monitoring laws and regulations for the nine state-level votes and more than 50 local marijuana ballot initiatives on November 8. It will be a busy time for the team, but it has also been exciting to see the growth in the number of CannaRegs users in anticipation of legalization.
In the larger scheme of things, the results of this election are likely to inform the trajectory of legalization for years to come. It is not just the number of states voting that is key, but also the states themselves.
California has the largest population of any state in the U.S., with nearly 12% of the entire country’s population living there. The results of California’s adult-use vote are likely to have a ripple effect throughout the country.
If California, Maine, Arizona, Massachusetts, and Nevada all approve adult-use, then nearly 25% of the U.S. population will live in states with adult-use cannabis.
If the medical initiatives in Arkansas, Florida, North Dakota and Montana all pass, then approximately 64% of the U.S. population will live in states with robust medical cannabis programs.
If the Arkansas initiative passes it will be the first state in the South to have a robust medical marijuana program. Combine that with the more limited program in Louisiana and it will only be a matter of time before the rest of the South embraces medical cannabis.
Three of the four states voting on medical cannabis are historically red states (Arkansas, North Dakota, and Montana). This is notable because up until now only two historically red states (Arizona and Alaska) have created robust medical marijuana programs. Louisiana has a more limited medical cannabis program than other red states.
Why did you join NCIA? What’s the best part about being a member?
CannaRegs joined NCIA to be able to connect with industry leaders and other cannabis organizations that are committed to best practices in the regulated market. NCIA offers several ways to support the industry in its efforts to legalize marijuana federally. As the most important trade association to the cannabis industry, NCIA has helped CannaRegs to connect with industry peers at annual conferences, networking events, or quarterly caucuses. CannaRegs was also excited to collaborate with NCIA on the creation of the State-By-State Marijuana Policy Map. We always look forward to connecting with other NCIA members, and provide a 15% subscription discount to other member businesses.
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Vice President of ERP Sales, Frank Nisenboum,
John Shearman is Vice President of Marketing and Cannabis Business Lead at 
Jill Ellsworth is CEO and founder of 
