Written By CMG News Contributor, Sebastian Wicker
When I speak to people outside of the cannabis industry about everything that goes into starting a compliant business, I am often met with similar responses - that they’ve never encountered something so strict, or that the government policies I’m describing to them seem overly unfair or extortionist. On both counts, they are correct and there is a long history behind this. Yet, until we see legislative and regulatory changes, it is the nature of the beast we must deal with. Those who fail to acknowledge these regulatory realities before they get into the business often fail before they even start, costing themselves tens to hundreds of thousands of dollars (sometimes millions) in mistakes. In my line of work, a consultant who helps people navigate the licensing process from beginning to end, there is no room for cutting corners; only creative solutions.
Over the course of the next few articles I’m going to walk you through some of the areas that my company touches on a daily basis. The goal here is that, regardless of your background, you’ll be able to get some insight into where you or your company might fit into the bigger picture. Be warned, I’m going to talk about both the good and the bad, so this conversation won’t always be flattering. That being said, I firmly believe in this industry and the people who strive to make it successful, effective, and ethical. I’ve seen firsthand the good it can do for consumers and communities when done right and I work to see those models repeated across the country. So, to give this all some context, let’s take a look at how the United States operates.
Before anything else we need to talk about the terminology. When people talk about cannabis or marijuana in the US, they are referring to a plant from the Cannabis genus being grown for the principal psychoactive cannabinoid (THC) found in the flower. The industry is finding that THC is by far not the only aspect involved in achieving the commonly associated “high” (see Entourage Effect), but it is the key component. This is in contrast to what is referred to as “hemp.” Hemp is derived from the same genus, but the strains selected are grown specifically for other cannabinoids (of which there are 113 with the most commonly known being CBD), seeds for oil or animal feed, fiber, and more. As a best practice to avoid confusion, we only use the term cannabis to refer to the restricted industry for THC.
On a federal level, cannabis is still listed as a Schedule-1 drug. This is defined by the Drug Enforcement Administration as:
“…drugs, substances, or chemicals are defined as drugs with no currently accepted medical use and a high potential for abuse. Some examples of Schedule I drugs are:
heroin, lysergic acid diethylamide (LSD), marijuana (cannabis), 3,4-methylenedioxymethamphetamine (ecstasy), methaqualone, and peyote.”
Based on this, it is federally illegal to buy, sell, transfer, possess, or consume cannabis. While in most instances federal law takes precedent over state law, the US operates in what political scientists refers to as a “marble cake” structure. Meaning that there are areas that are unquestionably federal domain and areas that belong to the states or localities; but depending on the topic the lines can quickly become blurred. Enter cannabis.
Not accounting for territories and whether a tax-and-regulate structure has been implemented, 34 states have legalized medical cannabis in some meaningful capacity and 11, plus Washington D.C., have legalized recreational use. And yet, not a single one of these states are allowed to move cannabis products across state lines. To those overseas who are looking at the US market, this structure can be baffling. However, it’s best understood through a phrase popularized by US Supreme Court Justice Louis Brandeis - to paraphrase, states are the laboratories of democracy. Every state that has legalized cannabis is exploring what regulatory framework works best for them without interference from other state markets. That isn’t to say they don’t trade notes with one another, and they often borrow certain pieces of regulatory language, but ultimately, they are each an independent and isolated market.
In my next article, I’ll get into some comparisons of the various regulatory frameworks and what it takes for a business to become a licensed operator. We’ll also look at the trends starting to arise in the industry and what that might mean for the industry’s future. Please note, nothing in these articles should be considered to constitute formal legal or financial advice. If you are looking to enter the space, even from an ancillary perspective, I strongly encourage you to consult with a professional before diving in.
Sebastian is a Regulatory Compliance Specialist and Technical Writer. He is the Founder and CEO of LTF Consulting, a company that provides project management, licensing, and compliance services to the legalizing cannabis industry. If you would like to contact him directly, you can reach him at firstname.lastname@example.org.