Navigating Cannabis Compliance: A Guide to Operating in a Regulated Market
As the cannabis industry continues to evolve and expand, operating within a framework of commercial compliance is becoming increasingly essential. Whether you are a cannabis business owner, an aspiring entrepreneur, or simply someone interested in understanding the legal landscape, understanding cannabis compliance is crucial for success.
In this section, we aim to provide you with a comprehensive guide on cannabis compliance, offering insights into the regulations, laws, and best practices that govern the industry. From understanding requirements to acquire a cannabis license to navigating product labeling and employee training, we will shed light on the key elements required to operate responsibly and legally in a regulated market.
By following regulatory guidelines and demonstrating a commitment to cannabis compliance, businesses can build trust with consumers, ensure consumer safety, and contribute to the overall growth and legitimacy of the cannabis industry.
Here is a list of categories and themes to keep in mind when navigating the realms of compliant cannabis business. Although we do not exhaustively expound on each number here, this list provides an excellent road map to understanding the in’s and out’s of the compliance game.
- Overview of Cannabis Regulations:
Understanding US federal, state, and local regulations governing the cannabis industry. See overview of cannabis regulations for an in depth look at this topic.
- Licensing and Permitting:
Navigating the process of obtaining the necessary cannabis licenses and permits to operate legally. See the know your jurisdiction section for more information.
- Security and Inventory Control:
Implementing robust security measures to prevent theft, diversion, and unauthorized access to cannabis products. See Securing Your Cannabis Business for a more in depth look at common measures needed in operating compliant cannabis businesses.
- Product Testing and Quality Assurance:
Exploring the importance of laboratory cannabis testing, quality control, and meeting product safety standards. Our section on lab testing goes into more detail on standard operating procedures and industry standards for laboratory testing, especially for potency.
- Packaging and Labeling Requirements:
Complying with strict packaging and labeling regulations to provide consumers with accurate information. See here for California requirements or here for Canadian requirements.
- Advertising and Marketing Compliance:
Adhering to advertising restrictions, cannabis marketing guidelines, and responsible promotional practices.
- Employee Training and Compliance:
Ensuring employees are well-informed about the regulations, trained in responsible practices, and aware of compliance obligations.
- Record-Keeping and Reporting:
Establishing efficient systems for record-keeping, inventory tracking, and timely reporting to regulatory agencies. Metrc is the most common hurdle businesses face in terms of tracking and reporting. See our section on metrc for more information, or check the metrc website for the most up to date practices and protocols.
- Tax Compliance:
Understanding tax obligations, collecting and remitting taxes, and complying with financial reporting requirements. Welcome to 280E! See this site for more information the 280e tax code.
- Environmental Responsibility:
Incorporating eco friendly practices, waste management, and sustainability measures to minimize environmental impact. In California, a large part of this is observing CEQA guidelines.
- Compliance Audits and Inspections:
Facing regulatory audits and inspections with confidence, ensuring all compliance requirements are met.
- Ongoing Regulatory Updates and Adaptation:
Staying up-to-date with evolving cannabis regulations and adapting operations accordingly.
Cannabis compliance is not merely a legal obligation but also a fundamental aspect of responsible business operation. By proactively understanding and adhering to the ever-changing regulatory landscape, cannabis businesses can foster trust, maintain consumer safety, and contribute to the industry’s positive development.
Below we have expounded on several themes explored in the list above that we think are most crucial in understanding the steps towards compliant operations, and to help cultivators make the best steps forward in the realm of compliance.
Overview of Cannabis Regulations:
Overview of Cannabis Regulations: Understanding Federal, State, and Local Regulations Governing the Cannabis Industry
The cannabis industry is rapidly evolving, and navigating the complex web of regulations can be challenging for businesses and individuals involved in the cannabis space. Whether you are a cultivator, retailer, or consumer, understanding the varying regulations at the federal, state, and local levels is crucial. In this blog post, we provide an overview of cannabis laws and regulations, and explain the key points to consider in each regulatory framework.
Federal Cannabis Regulations:
At the federal level, cannabis remains classified as a Schedule I controlled substance under the Controlled Substances Act (CSA). This means that cannabis is deemed illegal and subject to federal prosecution. However, there have been significant developments in recent years that have allowed for more flexibility and a shift in enforcement priorities. The three main factors shaping federal cannabis regulations are:
- Cole Memorandum: In 2013, the Cole Memorandum was issued by the Department of Justice (DOJ), providing guidelines to federal prosecutors regarding enforcement priorities in states where medical cannabis and recreational cannabis has been legalized for use.
.The memorandum outlined eight priorities, such as preventing the distribution of cannabis to minors and preventing drugged driving, and stated that federal resources would not be focused on compliant businesses operating within state regulations. Link to Cole Memo.
- 2018 Farm Bill: The passage of the Agriculture Improvement Act of 2018, also known as the Farm Bill, legalized the cultivation of hemp, a variety of cannabis containing negligible levels of THC (0.3% or less). This led to the removal of hemp-derived products, such as CBD, from the list of controlled substances. Additionally, seeds do not contain THC, and are thus viewed as being universally below .3% THC, as was echoed by the DEA Memo listed below. However, the production and sale of cannabis with high THC content still fall under federal prohibition. For more info, see here.
- SAFE Banking Act: The Secure and Fair Enforcement (SAFE) Banking Act aims to address the banking challenges faced by cannabis businesses. If passed, this act would provide protections for financial institutions that choose to work with state-legal cannabis businesses, reducing the reliance on cash transactions and improving financial transparency.
Additionally, though not federal law, a recent development in de facto policy has been formative in the way that seeds and tissue culture are viewed:
2022 DEA Memo: The Drug Enforcement Administration (DEA) has officially confirmed that any genetic material, including seeds and tissue culture, is not subject to regulation under the Controlled Substances Act (CSA) if it contains less than 0.3% delta-9-THC.
In response to an inquiry from the Law Offices of Omar Figueroa, the DEA issued a formal statement on December 20, 2022, clarifying the control status of cannabis seeds, tissue culture, and genetic material. The DEA explicitly stated that “any seed, tissue culture, or other genetic material with a delta-9-tetrahydrocannabinol concentration of no more than 0.3 percent on a dry weight basis falls within the definition of ‘hemp’ and is not regulated under the CSA.” Conversely, genetic material exceeding this threshold, with a delta-9-tetrahydrocannabinol concentration higher than 0.3 percent on a dry weight basis, is classified as marijuana and subject to control under schedule I of the CSA.
For a more comprehensive review of this memorandum, see Omar’s site here.
State and Local Cannabis Regulations:
While federal law sets the overall context, individual states have primary authority over the regulation of cannabis within their borders. The laws and regulations regarding cannabis can vary significantly from state to state. Key aspects of state and local regulations include:
- Legalization Status: States have taken different approaches to legality of cannabis. Some have legalized both medical and recreational use, while others have only legalized medical use. Understanding the specific laws in your state and county is crucial to ensure compliance. Please see our state status for more information.
- Licensing and Permitting: States have established licensing and permitting systems for cannabis businesses to operate legally. These regulations cover various aspects, including application procedures, fees, background checks, and operational requirements. Compliance with zoning regulations and land-use restrictions is also vital. In most cases, licensing and permitting processes are overseen by state departments of agriculture. County bureaucracy often also has a hand in permitting, oversight, and enforcement.
- Monitoring and oversight: As states roll out legislation authorizing legalization, the question of operational monitoring is often 3rd partied to groups like Metrcc, who place heavy burdens on licensed cannabis businesses for reporting in granular detail every single movement of plant material by weight, throughout the cultivation process to the point of sale. See our metrc section for more information.
- Testing and Quality Control: Many states require mandatory cannabis testing of products by accredited laboratories to ensure consumer safety and product quality. Testing typically involves analyzing potency, contaminants, and the presence of pesticides or heavy metals. Legal limits and thresholds, as well as what is required to be tested for, vary from state to state.
- Packaging and Labeling: State regulations often stipulate strict requirements for packaging and labeling, including child-resistant packaging, clear labeling of product potency, cannabinoid content, and health warnings. Adherence to these guidelines is crucial to maintain product compliance.
- Taxes and Financial Requirements: State and local governments impose taxes and fees on cannabis businesses, such as excise taxes, sales taxes, and licensing fees. Compliance with tax obligations and financial reporting requirements is essential.
- Advertising and Marketing: States regulate cannabis marketing and advertising of cannabis products to prevent underage consumption and misleading claims. Understanding the restrictions on promotional activities is vital to remain compliant.
Navigating the complex landscape of cannabis regulations requires a thorough understanding of the federal, state, and local frameworks that govern the industry. While federal regulations remain restrictive, many states have implemented their own regulatory systems, allowing for legal cannabis operations to thrive. As regulations continue to evolve, staying informed and compliant with the latest rules and requirements is essential for businesses and individuals within the cannabis industry.
Here is a list of the current cannabis legal status in each U.S. state:
- Alabama: Medical use is legal with restrictions. Recreational use is illegal.
- Alaska: Both medical and recreational use are legal.
- Arizona: Both medical and recreational use are legal.
- Arkansas: Medical use is legal with restrictions. Recreational use is illegal.
- California: Both medical and recreational use are legal.
- Colorado: Both medical and recreational use are legal.
- Connecticut: Both medical and recreational use are legal.
- Delaware: Both medical and recreational use are legal.
- Florida: Medical use is legal with restrictions. Recreational use is illegal.
- Georgia: Medical use is legal with restrictions. Recreational use is illegal.
- Hawaii: Medical use is legal with restrictions. Recreational use is illegal
- Idaho: Medical use is illegal. Recreational use is illegal.
- Illinois: Both medical and recreational use are legal.
- Indiana: Medical use is legal with restrictions. Recreational use is illegal.
- Iowa: Medical use is legal with restrictions. Recreational use is illegal.
- Kansas: Medical use is illegal. Recreational use is illegal.
- Kentucky: Medical use is legal with restrictions. Recreational use is illegal.
- Louisiana: Medical use is legal with restrictions. Recreational use is illegal.
- Maine: Both medical and recreational use are legal.
- Maryland: Both medical and recreational use are legal.
- Massachusetts: Both medical and recreational use are legal.
- Michigan: Both medical and recreational use are legal.
- Minnesota: Both medical and recreational use are legal.
- Mississippi: Medical use is legal with restrictions. Recreational use is illegal.
- Missouri: Both medical and recreational use are legal.
- Montana: Both medical and recreational use are legal.
- Nebraska: Medical use is illegal. Recreational use is illegal.
- Nevada: Both medical and recreational use are legal.
- New Hampshire: Medical use is legal with restrictions. Recreational use is illegal.
- New Jersey: Both medical and recreational use are legal.
- New Mexico: Both medical and recreational use are legal.
- New York: Both medical and recreational use are legal.
- North Carolina: Medical use is illegal. Recreational use is illegal.
- North Dakota: Medical use is legal with restrictions. Recreational use is illegal.
- Ohio: Medical use is legal with restrictions. Recreational use is illegal.
- Oklahoma: Medical use is legal with restrictions. Recreational use is illegal.
- Oregon: Both medical and recreational use are legal.
- Pennsylvania: Medical use is legal with restrictions. Recreational use is illegal.
- Rhode Island: Both medical and recreational use are legal.
- South Carolina: Medical use is illegal. Recreational use is illegal.
- South Dakota: Medical use is legal with restrictions. Recreational use is illegal.
- Tennessee: Medical use is legal with restrictions. Recreational use is illegal.
- Texas: Medical use is legal with restrictions. Recreational use is illegal.
- Utah: Medical use is legal with restrictions. Recreational use is illegal.
- Vermont: Both medical and recreational use are legal.
- Virginia: Both medical and recreational use are legal.
- Washington: Both medical and recreational use are legal.
- West Virginia: Medical use is legal with restrictions. Recreational use is illegal.
- Wisconsin: Medical use is legal with restrictions. Recreational use is illegal.
- Wyoming: Medical use is illegal. Recreational use is illegal.
Please note that cannabis legality is subject to change, and it is always recommended to verify the current legal status in a specific state. Additionally, in states where cannabis is legal, there may still be certain restrictions and regulations in place for its use and distribution.
Securing Your Cannabis Business: Most Common Practices in Compliant Cannabis Operations
Though practices vary state by state and county by county, and actual levels of threat vary depending on one’s proximity to urban environments vs. remote rural locations, here is a list of the most common security infrastructure needed for managing cannabis compliance for your business.
- Alarm Systems: Install a comprehensive alarm system that covers all entry points, including doors, windows, and any other vulnerable areas.
- Video Surveillance: Implement a robust video surveillance system to monitor both the interior and exterior of the premises. This includes utilizing high-resolution cameras, recording and storage equipment, and ensuring proper camera placement for maximum coverage.
- Access Control: Implement strict access control measures to restrict entry to authorized personnel only. This may involve using key cards, biometric systems, or security personnel to monitor and control access points.
- Security Guards: Employ trained security personnel to patrol the premises and respond to any security incidents or breaches.
- Perimeter Security: Implement measures to secure the perimeter of the property, including fences, gates, and barriers. This helps deter unauthorized access and protects against theft and vandalism.
- Secure Storage: Establish secure cannabis storage areas for your products, ensuring they are locked and protected to prevent unauthorized access.
- Inventory Management Systems: Implement a robust inventory management system to track and monitor all cannabis products from seed to sale. This includes keeping accurate records of inventory movements and implementing procedures to prevent diversion or theft.
- Compliance Monitoring: Regularly monitor and audit security measures to ensure compliance with state and local regulations. This includes conducting security assessments, inspections, and training staff on security protocols.
- Employee Background Checks: Perform thorough background checks on all employees to ensure they meet the required standards and do not pose a security risk to the business.
- Transportation Security: Implement security measures for the transportation of cannabis products, including secure containers, GPS tracking, and trained personnel to accompany shipments.
Again, It’s most important to note that security requirements may vary by state and local regulations, so it’s crucial to consult with local authorities and legal experts to ensure full compliance with the specific requirements of your jurisdiction.
Tracking and Reporting in the Commercial Compliance Landscape
Metrc Cannabis Supply Chain Accountability or Administrative Overload?
Metrc, an acronym for Marijuana Enforcement Tracking Reporting and Compliance, is a system designed to monitor the entire supply chain of the cannabis industry, from seed to sale. The goal is to ensure transparency and accountability in the movement of cannabis and its various forms. While Metrc aims to prevent unauthorized sales and keep products within the licensed marketplace, its implementation has presented numerous challenges for licensed growers. In this blog post, we will explore the pros and cons of Metrc and its impact on the cannabis industry.
The Purpose and Function of Metrc
Metrc was established to track and trace various forms of cannabis throughout the crop cycle, including cannabis seeds, non-flowering plants, flowering plants, bulk unprocessed flower, processed flower, trim, and derivative products such as distillate, crumble, and shatter. By imposing strict accountability measures, Metrc aims to ensure that licensed cultivators benefit from the marketplace they have invested in, while discouraging unlicensed growers from participating in the industry.
The Frustrations and Challenges of Metrc
Despite its intended purpose, Metrc has become a source of frustration and administrative burden for licensed growers. The system demands a significant amount of time and effort, particularly due to the complex and poorly designed Metrc website, where growers must handle all tracking and tracing tasks. Furthermore, the website experiences frequent downtime, adding to the difficulties faced by cultivators. Autoflowering cannabis plants, which are grown at high plant densities per acre, require even more time for Metrc compliance due to the need for extensive data management and reporting.
The Laborious Tagging Process
One of the key aspects of Metrc is the physical tagging of each cannabis product throughout its lifecycle. Cannabis seeds, for example, are tagged with package tags that correspond to specific numbers in the grower profile. Immature plants, before being planted, can be tagged in groups, while flowering plants require individual tags. For autoflower crops, which can have densities of over 17,000 plants per acre, this process becomes expensive, cumbersome, and physically demanding for employees.
Continued Tagging Throughout the Supply Chain
As the crop progresses through various stages, such as harvesting, testing, processing, and sale, it receives additional tags whenever it is divided into smaller lots. This meticulous tagging process aims to maintain accuracy and accountability within the supply chain. However, it further adds to the administrative burden and costs associated with Metrc compliance.
Crucial Accountability or Cumbersome System?
While Metrc generally achieves its intended purpose of providing accountability in the cannabis supply chain, it does so through a poorly designed and implemented system that proves to be burdensome and expensive for licensed growers. The time-consuming administrative tasks and physical tagging requirements can significantly strain resources, especially for high-density autoflower crops.
Metrc, the Marijuana Enforcement Tracking Reporting and Compliance system, was established to ensure transparency and accountability in the cannabis supply chain. However, the system’s implementation has resulted in significant challenges for licensed cultivators. The administrative burden, compounded by a poorly designed website and frequent downtime, along with the laborious tagging process, have led to frustrations and increased expenses for growers. While the goal of maintaining accountability within the industry is commendable, it is crucial to consider the practicality and effectiveness of the systems in place. As the cannabis industry continues to evolve, finding a balance between compliance and operational efficiency will be vital in achieving long-term success.
Know Your Jurisdictions: Navigating Cannabis Licensing and Permitting in the Legal Industry at the City, County, State, and Federal Levels
As the cannabis industry continues to grow and evolve, understanding the complex web of laws and regulations becomes crucial for businesses, consumers, and enthusiasts. A key aspect of this understanding is recognizing the legality of cannabis by U.S. Jurisdiction: city, county, state, and federal. In this blog post, we will explore the significance of each jurisdiction and the implications they have on the cannabis industry. By delving into the intricacies of these legal frameworks, we aim to shed light on the importance of staying informed and compliant within each jurisdiction.
- City Jurisdiction:
At the city level, local governments have the power to enact and enforce their own regulations regarding cannabis. These regulations may include licensing requirements, zoning restrictions, operating hours, and taxation policies. It is crucial for cannabis businesses to be familiar with and adhere to the specific rules set forth by their city jurisdiction. Failure to comply with city ordinances can result in penalties, fines, or even the revocation of licenses.
- County Jurisdiction:
Similar to city jurisdiction, county governments also have the authority to establish regulations for cannabis within their boundaries. These regulations may vary from one county to another, leading to variations in licensing procedures, cultivation limits, or product restrictions. Understanding and following county regulations is essential for cannabis businesses operating in specific counties, ensuring compliance with local laws and avoiding legal complications.
- State Jurisdiction:
State laws play a significant role in regulating the cannabis industry. Every state has its own set of laws, which include licensing frameworks, cultivation guidelines, product standards, taxation structures, and more. Cannabis Legalization by state jurisdictions dictate the overall legal landscape and serve as a guiding framework within which city and county jurisdictions operate. Cannabis businesses must thoroughly familiarize themselves with state regulations to ensure full compliance and avoid potential legal consequences. See state status.
- Federal Jurisdiction:
While numerous states have legalized cannabis in some form, it is critical to note that cannabis remains illegal under federal law in the United States. The federal government classifies cannabis as a Schedule I controlled substance, prohibiting its possession, cultivation, and distribution. Though federal law enforcement agencies have historically prioritized larger-scale operations violating federal statutes rather than individuals complying with state laws, it is essential to understand the potential risks and navigate the industry with caution. See overview of cannabis regulations for a birds eye view of current federal regulations.
In the ever-evolving landscape of the cannabis industry, understanding the different jurisdictions that govern it is crucial for businesses, consumers, and stakeholders. City, county, state, and federal jurisdictions each have their own unique regulations and implications. To navigate the industry successfully, it is imperative to stay informed, comply with local regulations, and ensure adherence to state laws. Furthermore, maintaining an awareness of federal laws helps manage the potential risks associated with the current federal-state legal conflict. By comprehending and respecting the boundaries of each jurisdiction, the cannabis industry can thrive while maintaining compliance and integrity in the eyes of the law.