It is the plant many people love to hate. Marijuana, cannabis, weed, pot – whatever you call it (according to Wikipedia there are more than 1,200 slang terms, and more than 2,300 names for individual strains) – it is not going away. 

As the stigma associated with cannabis erodes, the industry from cultivation, through processing, manufacturing, and transportation to retail is booming. Also, the acceptance of cannabis as treatment for several illnesses has spurred the “wellness” market for CBD oils, tinctures, and edibles furthering eroding the stigma and fueling the boom. As of this writing, 33 states, DC, Guam, and Puerto Rico have legalized marijuana in some form. 

In Chaos, Opportunity

With so much of the U.S. legalizing cannabis there are numerous compliance streams to navigate. and the number of laws at the state, county, and municipal levels are staggering. Then there are the numerous financial and regulatory hurdles cannabis companies must get past. Add to this that most cannabis companies are mom-and-pop shops operating as all-cash businesses and you have a recipe for compliance disaster. 

Central challenges facing this industry are the patchwork of legislation and regulation at almost every level of government, licensing issues, and environmental impacts. Non-compliance can, and does, put these folks out of business. Many may be one audit away from being shut down. 

Despite these obstacles – perhaps because of them – many, including major organizations like Deloitte, who recently purchased Cannabis Compliance Inc, see opportunity. It’s big business: Global sales of cannabis reached $15-Billion in 2019.

If you are an Information Governance professional you’re concerned with compliance. So are the folks in cannabis, they just don’t know how to navigate it as well as you do. It’s not their core competency, it’s yours. Herein lies the opportunity for Information Governance professionals.

The Many Faces of Cannabis Compliance

Cannabis compliance comes in many forms, that fall under five main categories:

1) Environmental

• Energy: Indoor grow operations, which is how most marijuana is grown, takes a lot of electrical power. In 2015, the average electricity consumption of a 5,000sq ft Grow House in Boulder County, Colorado was 41,808 kilowatt-hours per month. Indoor facilities can have lighting intensities similar to hospital operating rooms. This is 500 times greater than reading light levels. The link between cultivation and energy consumption, although not commonly on a legislature’s agenda, is becoming increasingly more relevant with more states opening the door to both medical and recreational usage. 
• Water: Concerns include overwatering, quality, and filtering. 
• Air Quality: Extraction facilities must be sealed to avoid leaks and the air must be scrubbed or filtered. Finally, 
• Industry Waste. Waste must be disposed of properly. In Colorado, for example, cannabis waste must be “unusable and unrecognizable” before it enters the waste stream.

2) Financial

Banking is the elephant in the cannabis room. While the industry needs banks to conduct its business, banks need to comply with federal anti-money laundering laws. Since marijuana remains illegal under federal law, any contact with money that can be traced back to state marijuana operations could be considered money laundering, exposing a bank to significant legal, regulatory, and operational risks.

3) Legislative

Federal legislation could have far-reaching compliance implications for this industry.

• SAFE: While The Secure and Fair Enforcement Banking Act would allow marijuana companies access to the federal banking system by creating protections for financial institutions that serve legitimate cannabis-related businesses, it now sits with the Senate, having been passed by the House of Representatives last September 2019. 
• STATES: The Strengthening the Tenth Amendment Through Entrusting States Act would fully protect state-legal marijuana programs from federal interference. Introduced in the House in April 2019, it has bipartisan support but is currently in subcommittee.
• MORE: If passed, The Marijuana Opportunity Reinvestment and Expungement Act would remove marijuana from the federal Controlled Substances Act nationwide (similar to the federal legalization of hemp). The measure is not likely to make it to the full House for consideration until later this year.

4) Quality

Molds, mycotoxins, and bacteria…oh, my! A big challenge is consistency and standards regarding dosage levels in edibles, THC levels, and strain reliability. This makes compliance with state rules and regulations, monitoring the chain of custody, and following Good Manufacturing Practices standards  very difficult.

5) Regulatory

The regulating entities are numerous, most states have several. Here are but a very few regulating authorities impacting the cannabis industry:

• Federal:  DEA, FDA, FTC, NFPA, and OSHA
• State:  
  • Alaska Alcohol and Marijuana Control Board (AMCB)
  • California Bureau of Cannabis Control (BCC)
  • Colorado Department of Public Health and Environment (CDPHE)
  • Massachusetts Executive Offices of Health and Human Services (EOHHS)
  • Oklahoma Medical Marijuana Authority
  • Washington State Liquor and Cannabis Board (WSLCB)

The issue? Convoluted, contradictory, and difficult to comprehend regulation. 

One piece of cannabis regulation concerning retail is more than 1,000 pages including addenda. The regulators don’t seem to understand them either. I was informed that when a California cannabis company’s Director of Compliance asked the BCC for clarification, the BCC responded that no one in their office was qualified to respond and to seek legal counsel!

Bringing Order from Chaos

There has been increasing pressure for more cannabis research as a growing number of pharmaceutical, life sciences, and healthcare companies move into cannabis. 

Last August the DEA announced it was expanding its production quota for legal marijuana to facilitate scientific and medical research. As of this writing, ClinicalTrials.gov showed 258 completed federally approved cannabis studies, with 24 more in active status.

The ramp-up of approved research is yet another sign that cannabis is here to stay. These are all signs of an emerging industry ripe with opportunities for IG. The challenges can appear overwhelming, but this is our strength. Information Governance experts can help navigate these complex compliance waters.