No matter how federal legalization works out, inevitably there will be some friction. Licensing and compliance vary widely in state-regulated legal cannabis. When federal legalization happens, there are many different models and case studies to consider.
Current Compliance and Licensing Landscape
Compliance Tracking:
Licensing Approaches:
Each stakeholder in the supply chain may have a different idea of how things should be mandated when federal legalization occurs, but there are a few hopes and concerns many of us share as an industry.
Hopes:
Concerns:
Modeling the Federal Program after a Successful State Market
Oregon has one of the best cannabis economies in the US. Not only did they survive a significant market glut in 2019, but they also have flourished with an open licensing scheme. Oregon contracts with METRC as the track and trace compliance platform, which universally is seen as a burden on businesses, hampering operations and costing licensees substantially each year. Federal banking and interstate commerce will only make the economy in Oregon stronger. The state passed a law in 2019 that halts the issuing of cannabis licenses when experiencing an oversupplied market, putting the state ahead of the curve as they champion these issues. They also approved a measure that, with federal approval, Oregon farmers can sell their goods to other regulated states.
Pros:
Cons:
Creating an Entirely New Compliance System
If the federal government wants to emulate what states have attempted to date, they can design and implement (or contract for) a federal track and trace system. With federal legalization, we should also anticipate a Federal Excise Tax and some level of reporting to ensure this tax is collected. The industry should also expect federal guidance on testing standards, health claims (the FDA will be looking at this closely) and quality requirements (GMP, FSMA, etc.).
The Federal Government Can Let States Handle It Themselves
This would seem like a solution where everyone benefits, but if states are allowed to handle the markets themselves, fragmentation could hamper small businesses. Like alcohol, we could see state-run retail, which would limit job creation and access to the market. Navigating a patchwork of state requirements will create regulatory burdens for companies who want to sell on a national scale.
Executives are split on whether they welcome or rebuff the idea of federal cannabis legalization. We welcome a legal open market with banking, diverse business owners and interstate commerce. Though, it’s hard not to be concerned about how federal mandates could stifle an industry in its infancy.
Businesses should prepare for the inevitable. Whether it’s this year or four years from now, cannabis prohibition will be end. When that time comes, each individual cocompany will need to have their supply chain ready to meet demand and survive yet another regulatory change for the industry. 2021 represents our opportunity as an industry to drive the conversation and regulatory landscape in the most rational, business-friendly manner, while still safe-guarding consumer, medical and social justice interests. How do we do this? Work through trade organizations and share your stories and insights with politicians, and the industry can have a huge impact on how life after prohibition shapes-up.
Colton Griffin is CEO of Flourish Software, a technology provider of enterprise supply chain and inventory management software built for cannabis, CBD and hemp operations. He may be reached at [email protected].
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