This week, the National Cannabis Industry Association (NCIA) hosted their annual Cannabis Business Summit in Oakland, California amid some alarming news in Washington. On Monday, a letter written by U.S. Attorney General Jeff Sessions back in early May made its way into the news, where he writes to Congress asking permission to prosecute medical cannabis businesses. The following day, U.S. Deputy Attorney General Rod Rosenstein spoke to the Congress Appropriations committee, saying that, “From a legal and scientific perspective, marijuana is an unlawful drug- it’s properly scheduled under Schedule 1.”
Those two statements identify the crystal-clear anti-cannabis stance of the two most senior-level officials at the Justice Department, a position that should alarm cannabis legalization advocates.
The former president of Mexico, Vicente Fox, a prominent legalization advocate, gave a press conference at the NCIA event, where he gave reporters his thoughts on cannabis and drug legalization, the Trump administration and Attorney General Jeff Sessions. To be blunt, he called Sessions crazy and Trump destructive and ignorant.
“I don’t know what happened to this administration,” Fox told a room of reporters. “A large majority of US states have already approved the use of medical cannabis, which I think is a great thing,” says Fox. “The state of California by itself produces more marijuana than what we do in Mexico. There is a conflict between the frameworks of law… there is no consistency in public policy.” To be clear, the former Mexican president advocates legalizing all drugs, attributing the violence in Mexico to the failed War on Drugs. “I don’t think prohibition has worked and we [Mexico] have paid a huge price for that.”
Former Mexican president Fox’s focus on international politics during that press conference sheds some much-needed light on the violence and other externalities linked to organized crime and the black market drug trade. “We are going to stand firm against what is going on- it is not only the fate of the United States, it is the fate of the whole world,” says Fox. “It is a real shame for this nation in front of the world- we are all pissed off out there hearing this crazy tweeting and crazy public policies that has nothing to do with the soul of this nation… No nation can isolate [themselves] behind a wall and still succeed.”
According to a press release, the National Association of Cannabis Businesses (NACB) launches today, becoming the first self-regulatory organization (SRO) for the cannabis industry. With their mission to help compliance, transparency and growth of cannabis companies, they will lead member businesses in establishing voluntary national standards, addressing issues like advertising and financial integrity.
A team of experienced legal regulatory professionals will lead member businesses through a process of developing those standards. Andrew Kline, president of the NACB, was a senior advisor to Vice President and then-Senator Joseph Biden, served as an Assistant United States Attorney in the District of Columbia and in the Enforcement Bureau of the FCC. Their chief executive officer, Joshua Laterman, began working on NACB three years ago, but before that he had two decades of experience as general counsel at global financial and investment institutions. Doug Fischer, their chief legal officer and director of standards, spent the past nine years in cannabis law and financial regulation and enforcement at the law firm Cadwalader Wickersham and Taft.
According to the press release, SROs have proven to be effective in other industries at limiting government interference and overregulation, while preserving public safety. FINRA (Financial Industry Regulatory Authority) is an example of an SRO that serves the financial industry. It is a non-governmental organization that helps regulate member brokerage firms and exchange markets, working to help their members stay compliant with regulations set by the Securities and Exchange Commission. Much like the rapid growth of the financial markets over the past 30 years, the cannabis industry is experiencing exponential growth while regulators try to keep up.
“The cannabis industry is on a historical growth trajectory that is expected to continue for years to come, but even the most established, well-run businesses recognize that the future favors the prepared,” says Josh Laterman, CEO of NACB. “As other industries have experienced with their SROs, establishing and committing to voluntary national standards will enable cannabis business owners to demonstrate impeccable business and compliance practices to consumers, regulators, banks and investors.”
According to Doug Fischer, chief legal officer and director of standards, they will focus on a variety of topics that align with the federal enforcement priorities. So these standards might not cover some of the product safety and quality aspects that ASTM International and FOCUS touch on, rather addressing issues like advertising, financial integrity, preventing diversion across state lines, prevention of youth use and corporate responsibility. Another important distinction to make is that an organization like ASTM International sets standards, but the NACB as an SRO is tasked with enforcing them as well.
“From our perspective, businesses have been having a hard time navigating the complex state regulations, particularly those operating in multiple states,” says Fischer. “That is further complicated by the current administration not solidifying their stance on recreational cannabis.” The Cole Memo put out under the Obama Administration set clear federal enforcement priorities, allowing cannabis businesses and states to identify ways to avoid federal government interference or prosecution.
The current administration has done nothing but fuel regulatory uncertainty. This is particularly important given this week’s news regarding the leaders at the Justice Department making inflammatory and threatening statements regarding legal medical cannabis. “It causes these businesses, who should be focused on their own day-to-day operations, instead focusing on complying with what they think the federal government wants and regulatory compliance with state regulations,” says Fischer. “We can help solve that problem by making it easier for companies to become compliant, not only with state regulations but federal guidance as well. This has been proven by other SROs, that if we set our own standards and abide by them, federal regulators might be guided by the industry’s self-policing in determining how to regulate the cannabis industry.” According to Andrew Kline, it could also provide a window of opportunity for better banking access.
The founder and CEO, Joshua Laterman, used to work in the banking industry and recognized the need for a cannabis industry SRO. “He saw an incredible opportunity in a projected $50 billion market by 2026, and as a former banker he saw the opportunity for banks to do business in the industry, but they don’t know who to trust,” says Kline. “Starting a self regulatory organization can help fill that void, allowing companies to identify and put a stamp of approval on a segment of the population that is uber-compliant, therefore giving banks a view into who they should and shouldn’t do business with.” While it won’t immediately resolve the many issues associated with cannabis businesses’ accounting, the NACB could be a major help to smaller businesses looking to prove their worth. “The important point here is that based on the experience of our team, we know what is important to the federal government, and we understand that members will be shaping standards with us, so we will also guide them to federal priorities,” says Kline.
Fischer says a self-regulatory organization is always driven by the industry and needs of the members, but they have the added unique challenge of working in a web of competing governmental interests. “Self-regulatory organizations can shape the future of regulation; we don’t know if or when federal prohibition will end, but if it does, the government is going to look at a variety of areas for regulations,” says Fischer. “We might be able to help shed light on our self-regulating nature and if we can demonstrate the best practices for specific areas, states and even the federal government could look to that, giving our members an advantage.” According to their press release, licensed cannabis growers, dispensaries or any other ancillary business may apply to become members. Some of the founding members include Buds & Roses, Etain, Green Dot Labs, Local Product of Colorado, Matrix NV, Mesa Organics, among others.
Those rules cover everything from sampling standard operating procedures to detection limits for pesticide analytes, which some say are absurdly strict as is. According to Jeffrey Raber, Ph.D, chief executive officer of The Werc Shop, a cannabis consulting firm located in Monrovia, CA, these rules will immediately raise prices. “The regulations are quite extensive and will undoubtedly drive the costs of patient medicine upward,” says Raber. “Regulations are not intended to be so detailed in these fashions, but are supposed to provide the floor and specific framework upon which operators can build best practices and differentiate themselves from others in a competitive market that drives prices downward.”
“Comparable guidance from other states operating today, and even federal regulations, are not nearly as specific in certain aspects,” says Raber. “While there are some very good parts to the current draft, and the bureau has certainly aimed to provide strong consumer protections, as they should, the idea of benzene even being mentioned or possibly permitted, or a completely cold transportation chain being required, and pesticide levels so low it pushes the limits of the most sophisticated and modern analytical equipment while going far past sensible EPA limits, strongly suggests there is work to be done to dial back the current position and make for far more workable and fully balanced regulations before they are fully finalized.”
It is important to note that nothing is set in stone yet. The bureau will hold four public hearings throughout the month of June for the lab testing rules. In addition to that, concerned stakeholders can send written comments through June 20th.
Dave Egerton, vice president of technical operations at CW Analytical, a cannabis-testing lab based in Oakland, is pleased they are finally regulating the market, but definitely plans on providing some feedback to change the rules a bit. “CW Analytical applauds the state’s efforts to regulate laboratories and the cannabis industry in general,” says Egerton. “…Many aspects of the proposed regulations for labs will make for a marked shift in the way our businesses operate, but the motivation behind them is well-intended.” His sentiment is consistent with many who operate cannabis laboratories and other stakeholders who see these proposed rules as overreach.
“Unfortunately, some of the regulations as written will create undo burden upon the industry and carry a strong probability of limiting supply to medical patients,” says Egerton. “During the current review period, CA laboratories will be providing feedback on some of the details within the law in order to streamline their quality assurance goals into a more tenable document that still protects patients.” That public comment period is a crucial part of the rulemaking process, as the rules will most likely change after cannabis laboratories’ voices are heard.
The lab was accredited to ISO/IEC 17025 – General Requirements for the Competence of Testing and Calibration Laboratories, so they are now able to test for pesticides in cannabis and other matrices, according to the press release published today. “WSDA sought this accreditation to ensure our clients can have absolute confidence in our testing methods and lab results. The information we produce drives enforcement cases and policy decisions,” says Mike Firman, manager of the WSDA Chemical and Hop Laboratory. “We want to do everything that can be done to make sure our data is reliable.”
The A2LA Cannabis Accreditation Program is essentially a set of standards for quality in testing cannabis and cannabis-based products, such as infused products, tinctures and concentrates. ISO 17025 accreditation is quickly become a desirable certification for laboratories. Many states strongly encourage or even require ISO 17025 accreditation for cannabis laboratories. California recently released a set of proposed lab testing regulations for the cannabis industry that specifically requires an ISO 17025 accreditation in order for laboratories to issue certificates of analysis.
Because each state’s requirements for laboratories testing cannabis varies so greatly, A2LA works with state regulators to craft their accreditation program to meet each state’s specific requirements. “A2LA is excited to play such an important role in the accreditation of cannabis testing laboratories and is pleased to see ISO/IEC 17025 accreditation expanding into additional states,” says A2LA General Manager Adam Gouker. “Priority must be placed on ensuring that cannabis products are tested by competent laboratories to convey confidence in the results – a cornerstone which underpins the safety to all end-users.” A2LA is currently accepting applications for cannabis laboratories working to receive accreditation. Labs that already have ISO 17025 accreditation and are in a state with legal cannabis, have the ability to expand their scope of accreditation if they are looking to get into cannabis testing.
Last week, the American Society for Testing and Materials (ASTM International) approved the formation of a committee to develop standards for the cannabis industry. ASTM International is a standards development organization that develops voluntary consensus-based standards for industries. United States regulatory bodies and the World Trade Organization have recognized the organization’s standards in other industries.
On March 1st, the non-profit announced the formation of a committee for ““creating technical standards and guidance materials for cannabis and its products and processes.” So now that the vote has passed, what is the next step? They will begin the process of member training, appointment of leadership and writing the bylaws. ASTM will have two online briefings before their official meeting for the cannabis committee (D37) in June. Those meetings will discuss how the committee was formed and how it’ll be structured. The first official meeting of the cannabis committee will take place June 11th and 12th in Toronto.
Voluntary consensus-based standards means there is a balance of interests, an appeals process and an overall consensus has been reached. The areas of focus for the cannabis standards include indoor and outdoor horticulture and agriculture, quality management systems, laboratories, processing and handling, security and transportation, and personnel training, assessment and credentialing. Many standards will be developed under each of these broad categories. A large component of consensus-based standard development is openness…so anyone who wants to participate in the development of the standards is welcome and encouraged to do so. They are still looking for participants from the cannabis industry and those interested can register here.
Lezli Engelking, founder of the Foundation of Cannabis Unified Standards (FOCUS), says this is terrific news for the cannabis industry. “To have a global organization like ASTM, that federal governments actually work with and respect, is a huge stride forward for the cannabis industry,” says Engelking. “FOCUS is thrilled to be working with ASTM.” FOCUS and ASTM International have a derivative work license agreement that provides ASTM the FOCUS standards to use as a baseline for developing their standards. “FOCUS will continue to certify cannabis businesses to the FOCUS standards, but we will be able to add in the ASTM standards to our certification platform,” says Engelking. “It helps us expand our depth and reach in tools for our clients.”
FOCUS standards and ASTM standards are both voluntary consensus-based, meaning it is the businesses and stakeholders participating that ultimately write the standards. The organizations’ staff does not actually contribute to and develop the standards; they are more like a vehicle for the industry and stakeholders to come to a consensus, according to Engelking. “ASTM does the same thing that we do for the cannabis industry, just on a much larger scale,” says Engelking. “Its role is to fulfill the development, not actually develop it.” Because of that, ASTM and FOCUS standards can work in harmony.
According to a press release, the State of Delaware has chosen BioTrackTHC as their partner in seed-to-sale tracking software. Delaware’s Department of Health and Social Services (DHSS) signed a contract with BioTrackTHC for the tracking and patient registry software.
In 2016, Delaware issued a request for proposals for “the Delaware Enterprise Consolidated Cannabis Control System,” which encompasses the statewide patient registry and seed-to-sale traceability systems. “Our sincerest thanks to DHSS for choosing Team BioTrack,” says Patrick Vo, CEO of BioTrackTHC. “DHSS has been wonderful to work with throughout the contracting process, and we look forward to partnering with them to provide the tools and data they need to continue overseeing the industry and protecting their patients.” BioTrack’s software was selected as the winner of a number of government contracts in other states previously for the same role.
Their software is currently used in government traceability systems in Washington, New Mexico, Illinois, Hawaii, New York and the city of Arcata, California. The press release states regulators will have the ability to view the retail data “including plant counts and usable inventory, lab results, transportation, and point-of-sale data—to perform periodic audits and ensure compliance.” The patient registry will also provide better patient accessibility through the new software with a faster turn around time and automated application processing.
BioTrackTHC provides technology solutions for businesses and governments to tracking products throughout the supply chain to the point of sale. The software systems help businesses remain compliant with regulations and monitor data for things like inventory management.
You’ve heard it in a lot of campaigns to legalize cannabis on a state level and even as the name of a bill in Congress for legalization on the federal level. The Marijuana Policy Project through their campaigns in several states, along with activists, politicians and lobbyists, have used the phrase “Regulate Marijuana Like Alcohol” as a rallying cry to pass legislation reforming cannabis laws. This isn’t an attack on them; those campaign names serve the cause well, moreover it was the name of successful campaigns in Massachusetts, Maine, California, Alaska and Colorado among others. It is a relatable and fair comparison, helping to normalize the concept of adults using cannabis in a legal environment.
But that feeling of validation is short-lived after lawmakers write the actual regulations. In reality, I don’t think a single state can confidently say they actually regulate cannabis like alcohol. Most states do not allow public or social consumption of cannabis; many people that would like to enjoy cannabis in a social setting are restricted to the confines of their home.
Voters in Colorado passed Amendment 64 in 2012 with this language in the very beginning of the bill: “In the interest of the health and public safety of our citizenry, the people of the State of Colorado further find and declare that marijuana should be regulated in a manner similar to alcohol.” If you look closely, you can see how important phrasing is when it comes to the specific regulations. The key words here are “a manner similar to alcohol,” not exactly like alcohol. That language is critical to understanding how regulators address the double standard.
The most obvious way lawmakers regulate cannabis like alcohol is through a tiered system of license holders: manufacturers, distributors or wholesalers and retailers. Many states might set a limit on potency, just like they do with alcohol, according to Pamela S. Erickson, former executive director of the Oregon Liquor Control Commission. Both of the drugs are taxed and there are usually regulations for both governing the advertising of products, such as preventing targeting youth or encouraging high consumption. Regulators might limit the store hours or locations for both cannabis and alcohol. Beyond those similarities, there are a number of areas where cannabis is over-regulated and alcohol is seemingly under-regulated. It is very possible that much of this has to do with the power of the alcohol lobby. In 2016, the alcohol industry spent over $26 million on lobbying efforts, according to the Center for Responsive Politics, a non-profit, nonpartisan group that tracks lobbying efforts. During election season, the alcohol industry spent more than $11 million on campaign contributions. There are several examples of the alcohol industry actively fighting legalization efforts, including paying for anti-cannabis ads in a Politico newsletter and even funding opposition campaigns. While this doesn’t exactly pertain to the regulation of cannabis versus alcohol, it gives you a glimpse of how deep their coffers go and the amount of influence they have on politics.
Last year, the city of Denver passed a ballot measure, Initiative 300, which will legalize the social consumption of cannabis in permitted venues. The Denver Social Consumption Advisory Committee met for the final time last week. That committee designed two styles of permits: one for events and one for established businesses, which would receive a designated consumption area permit (DCA). Those permitted venues must be 1,000 feet from schools, child-care centers or drug rehabilitation centers. They need a waste plan, compliance with the Indoor Air Quality Act and they cannot sell cannabis products. Rachel Gillette, attorney in the cannabis law group and shareholder at Greenspoon Marder, says the legal implications of the initiative are still up in the air. “This was a step in the right direction,” says Gillette. “You can’t pass a law to regulate marijuana like alcohol and then say people can only use it in their home. You are going to run into problems like people smoking on the street. This is why this initiative was introduced.”
The general idea here is B.Y.O.P.- bring your own pot. They cannot have a liquor license, the location cannot be accessible to the general public, they have to submit a detailed security plan and patrons have to sign a waiver to get in, according to Westword. Signing a waiver to get into a bar should seem asinine to anyone, but I have been to some dive bars where a waiver could’ve definitely been useful. The point is that cannabis doesn’t lead to violence or destructive behavior, alcohol is the drug that does that. There is plenty of evidence to support that, including a comparative risk assessment of the drugs, which found alcohol’s danger to be strongly underestimated previously.
Senate Bill 63 in the Colorado State legislature would have been very similar, issuing licenses for “marijuana consumption clubs.” However that bill was voted down last Thursday, largely due to the uncertainty of federal policy, according to ABC News.
Amendment 64 also has specific language saying you cannot consume cannabis in a public space, but that is not exactly the case with liquor, even when you consider open container and public intoxication laws. “In my previous interactions with the state and particularly the liquor licensing authority, they consider liquor-licensed premises to be de facto public spaces but you can’t consume cannabis there, which is why hotels, bars and restaurants explicitly prohibit cannabis consumption, they have a liquor license,” says Gillette. “There is a bit of conflict in the law here.”
Yet other rules, such as mandatory childproof containers for cannabis retailers, seem a bit draconian compared with buying a bottle of twist-off wine from the grocery store. “Childproof packaging isn’t required in liquor stores anywhere,” says Gillette. “Why cant responsible adults be trusted to keep it out of a child’s reach? Unfortunately there is a lot of trepidation to allow responsible adults to be responsible when it comes to cannabis.” In some ways, we are seeing states begin to regulate cannabis very closely to how they would alcohol, yet there is a long way to go. “There is still this nanny state mentality where we run the risk of regulating it to the point of absurdity,” says Gillette. For now at least, we need to be cognizant of the age-old stigma and work to normalize social cannabis use in a legal sense. Until that time comes, we will have to tolerate lawmakers regulating cannabis in a manner similar to alcohol, not exactly like alcohol.
The government of Canada published a press release on April 13th proposing a piece of legislation, the Cannabis Act, which would regulate the industry by July of 2018. The press release puts a heavy emphasis on keeping cannabis away from children, curbing impaired driving and reducing criminal and organized crime profits.
The press release says the legislation would set up a regulatory framework “for controlling the production, distribution, sale and possession of cannabis in Canada.” It would set the minimum age to purchase cannabis at 18, but provinces can increase that minimum age how they see fit. Health Canada, the Royal Canadian Mounted Police, the Canada Border Services Agency and the Department of Public Safety would be responsible for enforcing the regulations.
The Cannabis Act states they plan on implementing a fully functioning regulatory framework by July of 2018. Transporting cannabis across international borders or selling to minors would be serious criminal offenses. If the legislation becomes law, adults could have up to 30 grams of cannabis on their person and grow up to four plants in their home.
Individual provinces would ultimately be the regulating authorities, but if local jurisdictions do not have a regulatory framework in place, the press release says Canadians could purchase cannabis online and have it shipped to them. In addition to establishing the regulatory framework, the Cannabis Act would tighten laws on impaired driving. “Additionally, the proposed legislation would authorize new tools for police to better detect drivers who have drugs in their body,” reads the press release. That would give the police authorization to use oral fluid drug screeners, but cannabis is particularly difficult to detect at low concentrations. It is unclear exactly how that would be enforced and specifically what technology they would use.
In a Facebook post this morning, Justin Trudeau announced the proposed legislation to his followers. “It’s too easy for our kids to get marijuana,” says the Prime Minister. “We’re going to change that.” That mention of keeping cannabis out of reach of the Canadian youth is heavily emphasized in the press release as well.
Election Day brought a renewed sense of vigor to the market with voters in eight states legalizing forms of cannabis. California, Nevada, Maine and Massachusetts passed recreational cannabis measures, making legalization’s momentum seem exponential.
But November 8th also gave Donald Trump the presidency, and his cabinet appointments, namely Sen. Jeff Sessions as Attorney General, gave many a feeling of uncertainty for the future of federal legalization. Adding insult to injury, the DEA repeatedly stood by their antiquated and ludicrous judgment for cannabis to remain a Schedule 1 narcotic.
A lot of the fervor surrounding public safety could be described as overdramatic or somewhat unwarranted. 2016 was the year of misinformation. Fake news spread like wildfire with people sharing stories like this or this that turned out to be very misleading or just downright false.
States with legal cannabis came under heavy public scrutiny and addressed problems like consumer education, public safety and lab testing. Pesticides became a highly publicized and persistent issue in a number of areas, with some states regulating it heavily and addressing public health concerns. Plenty of new rules were formed surrounding labeling and testing, with Oregon, Colorado and Washington experiencing some regulatory growing pains.
Those growing pains shed light on the need for regulators to craft rules that allow for changes, adding rules where necessary and getting rid of cumbersome rules that might thwart market growth. Rules need to be able to adapt as the industry grows, much like businesses need to adapt to a changing market climate to stay afloat. This is all the more reason why cannabis businesses need to make their voices heard and work with regulators to move things forward.
With so much uncertainty surrounding the future of legal cannabis in America, the word of the year for 2017 should be resiliency. In a social-ecological context, resiliency is “the capacity of a system to absorb or withstand perturbations and other stressors such that the system remains within the same regime, essentially maintaining its structure and functions. It describes the degree to which the system is capable of self-organization, learning and adaptation.”
Self-organization, learning and adaptation are three very important attributes of a resilient system. Without knowing what will happen when Trump’s cabinet takes the reigns of federal agencies, it is important to prepare for the unexpected. Adhering to standards like FOCUS allows cannabis businesses to prepare for unexpected events like recalls or product safety failures.
Those standards could also become the law down the road, as government officials often look to an industry’s voluntary consensus-based standards when deciding how to regulate it. In 2017, a number of state governments will embark on the heavy undertaking of writing the regulatory framework for legal cannabis.
2017 will bring opportunities and challenges to the cannabis industry. The industry’s rapid growth juxtaposed with political, economic and regulatory uncertainties create a climate that requires resilience to be built into the system at all levels. It is critical, now more than ever, that cannabis businesses build strong relationships with industry groups, advocacy groups and regulators to craft the institutional capacity and mutual trust needed to weather the uncertainty ahead.
PA Secretary of Health Dr. Karen Murphy last week announced applications for growers and processors, while dispensary license applications will be available January 17, 2017. License applications will be accepted from February 20 through March 20, 2017. Governor Wolf signed the medical cannabis bill into law back in April of this year.
“We’ve reached an important milestone in the program with the release of permit applications on January 17, 2017,” says Secretary Murphy. The PA Department of Health will issue 12 licenses for growers and processors and 27 dispensary licenses, according to Secretary Murphy’s statement. “The decision for which counties will be issued permits in this first phase was determined by using the department’s medical data, as well as comments from more than 5,000 patients and nearly 900 potential grower/processors and dispensary applicants.”
According to the Philly Voice, the highly populated Southeast region of Pennsylvania will get ten dispensary permits, including three in Philadelphia, two in Montgomery County and one in Bucks, Chester, Berks, Delaware and Lancaster counties each. The state will fully implement its medical cannabis program by 2018, but a temporary program with ‘Safe Harbor guidelines’ was effective in May of 2016, essentially allowing access for patients in the mean time, while establishing preliminary regulatory compliance guidelines.
In last week’s statement, Secretary Murphy also stressed the importance of their Physician Workgroup in developing the regulations. “We cannot underestimate the role of physicians in making sure that patients can access medical marijuana,” says Secretary Murphy. “That’s why the involvement of physicians and health care professionals through our Physician Workgroup is vital to the successful development and implementation of Pennsylvania’s Medical Marijuana Program.” The Workgroup’s recommendations include establishing quality monitoring, training for dosage recommendations while addressing rural and urban access, education and delivery.