As any business in any industry knows, compliance is vital to staying in business.
In the cannabis industry it’s paramount.
“Compliance is not just how we protect our businesses and ensure that our ability to operate on Monday continues Tuesday. It is how we’re able to expand legalization throughout the world,” says Jordan Wellington, the Chief Compliance Officer for Simplifya, a developer of regulatory compliance software for the cannabis industry.
On a macro level, compliance is important because “it’s really an integral part of the big picture of legalization and the idea that regulating the cannabis industry like a regular business is a far superior policy than prohibition and forcing all the economic activity into the black market,” Wellington adds.
On the micro level, it can literally be the difference between opening and closing.
“There are few industries in which a $12 an hour frontline employee can bring down a multimillion-dollar operation in the way they can in cannabis,” says Wellington, who is also vice president of government relations at VS Strategies and an associate at Vicente Sederberg LLC, a Colorado-based law firm that is one of the leading practitioners in the cannabis industry.
Which means compliance is “critical in a big-picture sense as well, because compliance is the linchpin that will allow cannabis businesses to do things like access the banking system, obtain insurance or discounts on insurance and most landlords insist on compliance as part of leasing a property to a cannabis business,” he adds.
What’s unique about compliance for the cannabis industry?
- There are special cannabis-focused regulations. For example, all producers of an agricultural commodity are subject to general pesticide regulations, however cannabis cultivators are typically subject to special pesticide regulations in addition to the general ones.
- Cannabis businesses, like several other highly-regulated businesses, also have their own dedicated enforcement officers. Like gaming, liquor or food handling, there’s a special group of enforcement officials focused on cannabis in addition to general enforcement officials. Wellington points out that in addition to the pesticide enforcement division of the Department of Agriculture in Colorado, the Marijuana Enforcement Division has its own officers.
What should New Jersey expect regarding compliance issues as the medical marijuana market is expanded and the adult-use recreational market may become reality?
- There are certain safety procedures and regulation issues that every state addresses, including: extraction, limitations on pesticides, labeling, packaging requirements.
- But each of those issues vary from state to state. For example, practically every state that has a cannabis program, requires some sort of child-resistant packaging. But not every state requires that child-resistant packaging to be opaque.
“That’s a detail that tends to vary from one state to another,” Wellington says. “Yes, you can get a jump start on understanding things before the regulations come out, but the more you delve into the minutiae and the details, the more you’re going to see variation from state to state. I would never suggest anybody print a bunch of labels before the regulations come out.”
In preparation, Wellington offers this advice:
- Read regulations from other states to understand what is typical.
- Read New Jersey’s current regulations and think about how it might change.
- Start to understand the system you need in place to maintain compliance whether it’s self-auditing, good document management and hiring and training staff appropriately.
Make sure you have systems in place and support tools – whether it’s an in-house compliance officer with experience in a regulated market or software like Simplifya to help you get started.