Navigating Authority - Part 1
Written by CMG News Contributor, Sebastian Wicker
In my first article, we briefly touched on the structure of the American cannabis market. It’s a unique, and often strange, space to operate in; more so than most other industries. But in many ways, that’s part of what draws people to it. It’s always new, always changing, and there’s never a dull moment. But what does it actually take to get licensed? In this article, we’ll take a general look at how regulatory oversight is structured and some of the items you can expect to come across.
State vs. Local – Who’s the Authority?
Let’s say you wanted to apply for a dispensary license. Regardless of what state you want to do this in, you’re going to have to submit - at minimum - two applications. One for the state regulatory authority, and one for the local government.
In general, the state level application is for authorization to participate in the regulated market. If you want to legally sell cannabis products you have to follow certain protocols on tracking those product movements while they’re under your control. Additionally, there’s a long list of other items you’re responsible for, like odor mitigation and security measures. Your application is more than just filing documents to move forward, it’s a promise to the state that you won’t jeopardize their efforts to grow a new industry. The state, through a combination of legislation and regulation, dictate what license types they will recognize (dispensary, delivery-only, social consumption, manufacturing, infusion-only, cultivation, testing labs, and etc.). These license types and their allowances will vary by state.
On a local level, your applications are for ensuring you understand state level requirements, will adhere to local level ordinances (zoning and building permits), and generally won’t be a nuisance for being allowed to do business in that town. You can expect requirements for addressing how your business is going to benefit the town in meaningful ways, typically explained through your community impact plan.
The order you approach these applications depends on your state. If you have doubts on where to start, start with the state level authority and go from there. By the end of the process, you’ll have to file with both.
State Level Oversight
When we talk about a “regulatory authority,” we’re usually talking about an entity created through legislation to run a state program. In California, it’s known as the Bureau of Cannabis Control (BCC), in Massachusetts it’s called the Cannabis Control Commission (CCC), and in Florida it’s called the Office of Medical Marijuana Use (OMMU). In some states, however, they just opt to increase the powers of an existing agency or department. For example, Illinois’s central licensing authority is the Illinois Department of Financial and Professional Regulation (IDFPR). In the end, the “regulatory authority” is whomever controls licensing and their associated regulations. Read whatever they’re making available on their sites and sign up for their newsletters so you don’t miss a beat.
This is straight-forward enough, but not all states have just one authority that issues licenses. And sometimes, not just one authority that issues regulations. As you can already imagine, this quickly becomes a headache depending on how many licenses (and what types) you’re applying for.
Local Level Oversight
For your local level application, you’re never just dealing with one department. It’s not unusual to have to submit 10-12 printed copies of one application. The reason being is that there are many more voices involved in local permitting. This can include the planning department, building and inspections, conservation, police department, fire department, water & sewage, electric, etc. Again, who’s involved in the review process varies wildly by the county or city.
Often, we see localities break up their application into two parts: a site permit and a special permit. Your site permit is for just that; the use of the land and/or building adhering to local zoning and building codes. The special permit, however, is for addressing the fact that you are a unique business with special needs or impacts. These typically focus on how you plan to meet state level regulations and how you will react in a worst-case scenario. The town is often looking to make sure you understand the level of commitment and that your presence won’t have a negative influence. They want to make sure your customer flow won’t cause street congestion, that you have procedures in place to address smell complaints, and that your security measures are preventing people from consuming products on the property.
The Standards & The Trends
States often look to one another to see what has worked and what hasn’t. It’s all trial and error at the end of the day, but that trial and error has led to some recurring patterns across regulations. For example, community impact plans are relatively universal. You’ll be hard pressed to find an application process that doesn’t address how the business will integrate and benefit the locality. Certain reporting thresholds are also consistent, such as 2% for inventory discrepancies. You’ll probably need a diversity plan; how will you be representative of the community you’re located in or benefit disproportionately impacted groups? Security systems must have indoor and outdoor video cameras with a 60-90 day record history. Product destruction must make the products indistinguishable and unusable. And most importantly, track-and-trace. Every state has a system for tracking product seed to sale. These are all standard requirements or thresholds.
There are some newer trends of note though, specifically within environmental responsibility. For example: indoor cultivation is certainly the best way to maintain quality control over your product and mitigating pest risks which can wipe out a harvest, but indoor grow lighting traditionally takes a lot of power. 1000-watt High Pressure Sodium (HPS) vapor lights are a popular and cheap lighting source compared to LEDs, but they aren’t efficient and generate a fair amount of heat. In response, states are now imposing Lighting Power Density (LPD) limits per square foot. This makes some grow models incompatible without use of LEDs or more efficient (and expensive) lighting.
In Part 2 of Navigating Authority, we’re going to look at a real example of competitive licensing (also known as merit-based licensing). From there, we’ll look at life after receiving your provisional license and the hurdles you need to overcome to open your doors for business.
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.