Due to the sheer volume of statutes, regulations, and other guidelines cannabis businesses must comply with, developing a comprehensive cannabis compliance program is challenging. However, legal complexity may be one of many causes.
Prioritizing enforcement over providing compliance resources to licensees may also contribute to compliance struggles. When a jurisdiction legalizes cannabis, extensive resources are devoted to developing a regulatory structure and licensing process. After granting licenses, the remaining resources are commonly allocated to inspections and other enforcement measures. Meaningful compliance resources to help new licensees keep their doors open are rare. Focusing on enforcement and a gap in compliance outlets sets the stage for a contentious relationship between regulators and licensees.
Should the cannabis industry accept the adversarial relationship that often forms between regulators and licensees as the status quo, or should it reframe its approach to cannabis compliance?
Feasibility Of Cannabis Compliance Resources
Providing access to ongoing compliance resources could improve the relationship between regulators and licensees by equipping licensees with tools to enhance their compliance programs. Increased compliance know-how may reduce the frequency of inspections and the severity of any resulting punishment that drives a wedge between regulators and licensees.
But is this a realistic proposal? According to Alena Rodriguez, technical consultant at The GMP Collective, funding these resources may be an issue.
“States are already heavily resource-constrained and can barely enforce their regulations, let alone teach people how to comply with them. Do we increase taxes or licensing fees to pay for it? Not a great idea for a struggling industry. State appropriated funds? Well, that would be great. However, the reality is funding compliance resources and education for the cannabis industry is probably #99 on a list of 100 of things people want state funding for,” she says.
Lobbying for policymakers for funds may not be the answer. Rodriguez believes rescheduling cannabis may provide cannabis businesses with capital to provide internal compliance resources.
“So, maybe the most effective way to have financial resources to educate and train industry employees on compliance, quality, and safety is for cannabis to be rescheduled to Schedule III, at least. Without 280E, plant-touching businesses will have more cash back in their pockets, that could be partially used to hire trained compliance and quality professionals or pay for training for their current employees,” Rodriguez says.
Money isn’t the only challenge. The logistics of providing compliance resources may also be complicated, according to Eduard Linetskiy, founder of CCBC Group Inc.
“As of late, I think certain states have tried hard to provide resources from the application phase by hosting online training and in-person seminars.. Unfortunately, at scale, effectively providing more resources becomes very complicated, as it would be in any major industry,” he says.
However, outsourcing to third parties may address logistical issues and is common in other industries, Linetskiy explained.
“I believe that the state/local jurisdictions should partner with third parties to deliver on-demand mandatory training including periodic retraining for all industry participants. This is common in many industries from finance to food services. Standard training programs that are jurisdiction specific, which are required prior to access to the industry, at least at the ownership level, could properly align knowledge and accountability at the highest level of the organization,” he says.
Funding to pay for third-party services may once again present a challenge. Linetskiy suggested that the “Cost for the training should be part of the licensing fee/pulled from the tax revenue.”
According to Kimberly Stuck, founder, and CEO of Allay Consulting, exposure to legal liability may also limit the resources a regulator can provide.
“Regulatory bodies are limited in how they provide resources due to liability. A regulator is only allowed to evaluate if something they see meets compliance standards, and they are not allowed to tell an operator how they can meet the standard. They are not allowed to solve problems, or give advice when it comes to non-compliances,” she says.
Stuck experienced this limitation firsthand as a public health investigator for the Denver Department of Public Health and Environment.
“When I was a regulator I was unable to give advice, recommendations, or solve problems for operators. The onus was on the operators to read regulations, interpret them, and implement compliances in the company,” she says.
What compliance resources should be provided if funding, logistical, and liability concerns are overcome?
Providing an open forum for regulators and licensees to communicate may be one option, according to Lezli Engelking, founder, and president of the Foundation of Cannabis Unified Standards.
“One simple step forward would be to provide open listening hours where anyone can call in during a specific time periods a couple of times a month,” she says.
Engelking explained that listening hours open direct communication between regulators and licensees.
“Providing this access would help decrease the complaints we hear across the country from companies not able to get a response from the regulatory agency that oversees them. They could then print out a list of the questions and answers from each session and post them on the website for anyone to access,” she says.
Other solutions may be hiding in plain sight. According to BriAnne Ramsay, Founder of Rocky Mountain Cannabis Consulting, the Cannabis Regulatory Agency in the State of Michigan provides helpful bulletins and webinars that may provide a model for other jurisdictions.
“The state of Michigan, CRA, is doing a great job of releasing bulletins of their expectations and presenting weekly webinars for cannabis businesses with regulators, experts, and legal counsel. This method helps relieve the burden of the regulators presenting all the information themselves, and even better – they review all of your materials for accuracy before presenting them to the licensees,” she says.
Ramsay also mentioned a helpful tool previously offered by the State of California.
“A few years ago California (BCC back then) would provide FAQs on translating the rules and regulations. I feel this was a great resource, however, it was also a problem because licensees used the FAQ to push back on some rules and regulations,” she says.
Even though the FAQs have been removed, Ramsay identified a helpful takeaway.
“The lesson learned here, is the regulating body should have a source-of-truth internal database for all communication to ensure consistency,” she says.
The State of California has also demonstrated a willingness to allocate funds towards local licensing with its Local Jurisdiction Retail Access Grant. The grant provides up to $20 million to local jurisdictions to develop and implement cannabis retail licensing programs. It may provide a model that could be replicated in the compliance context. California also offers its CannaConnect Compliance Hub, which figures to become more robust over time.
David Vaillencourt, CEO and founder of The GMP Collective, suggested that using a standards development organization may help stakeholders align on compliance objectives.
“The other answer that I firmly believe is logical and proven is to get the industry and regulators at the same table in a neutral forum where we can all work together to agree on how to solve the problems by aligning on a common purpose – to make the industry be functional and provide safe products. The industry has been slow on the uptake, much to their loss. And it exists — utilizing a consensus standards development organization (SDO) to create the minimum standards. If we stopped to take a look around us we’d realize that the answer is right in front of us.”
Vaillencourt highlighted his role as Vice Chair of ASTM International’s Committee D37 on Cannabis and emphasized that the organization is open to new members.
“Anyone can have a seat at the table which provides an incredibly powerful voice. The best part is, Health Canada and NIST have been at our table since day 1 (2017 in D37 land). We have numerous regulators at the table. In total, 800 members from academia, industry, government, consumers, and more representing 30 countries are active members of our Committee writing the playbook and hashing out differences on what is the best practice in every facet of the cannabis industry.”
Offering ongoing compliance resources may only be a partial solution to fostering a more collaborative relationship between regulators and licensees. Cannabis enforcement tactics may also need an update to foster a more collaborative relationship between regulators and licensees. Linetskiy recommends a punishment grace period to build rapport between decision-makers and operators.
“My theory has always been that once a licensee opens for business, they should have a 12 month grace period from citations and fines for certain types of infractions. The regulatory body should partner with the operator and conduct regular onsite/remote check-ins to build rapport with the operator and be available for questions. When an operator knows that asking a question about a potential issue won’t result in a fine, they will be more likely to be forthcoming,” he says.
This approach could equally benefit regulators and licensees, according to Linetskiy.
“Establishing a good relationship with a regulator also pays off in the long run if there’s ever a real problem because by that time the regulator will know what kind of operator you are. I believe that 12 months is the proper amount of time for an operator to figure out how to operate fully within the confines of applicable regulations. On the regulatory side, since everyone doesn’t generally open at the same time it allows the jurisdiction to finetune how to effectively provide applicable compliance resources to an industry that continues to expand,” he says.
Attitudes towards cannabis may also need to shift if a more collaborative relationship is to be achieved, according to Engelking.
“Often local and state governments have their own attitudes and beliefs about cannabis, and approach regulation as if it was truly the devil’s lettuce. Sometimes, it is just the personal opinion and beliefs of a single individual inspector or regulator. These folks should be moved into another role, in my opinion. Other times, the actual regulatory program makes it clear they are being forced to regulate this industry and aren’t happy about it. Relationships in either of these instances don’t feel super collaborative, obviously,” she says.
Robust cannabis compliance programs help ensure staff and product safety. They also drive operational efficiencies that build a brand, improve margins, and generate tax revenue. Those are all wins for both regulators and licensees.
The adversarial status quo between regulators and licensees has overshadowed these aligned interests. The cannabis industry should consider reframing its approach to cannabis compliance and work towards a more collaborative approach to identify feasible and mutually beneficial initiatives.