Business
How to build bridges between law enforcement, regulators and marijuana business owners
A state’s cannabis regulations can run hundreds of pages and contain even more rules.
But the regulators who create these rules and law enforcement officials who enforce them care the most about three things:
- Preventing diversion to the illicit market.
- The physical security of cannabis operations.
- A potential drain on law enforcement and community resources.
To stay compliant and maintain good relations with regulators and law enforcement, cannabis businesses should focus their security efforts around these three goals.
“In terms of diversion, they want to make sure that you have established standard operating procedures and processes that will prevent anything from happening internally,” said Anthony Vanderhorst, the security director at Florida-based multistate operator Jushi Holdings.
“From the physical security standpoint, the focus is really to stop external things from happening. When you put those two together, you really get that comprehensive plan.”
Outfit for success
Physical security regulations have to do with access-control systems, alarms, cameras and similar measures.
“The city’s biggest concern is they don’t want to have to deal with any losses that are going to occur from you. … They’re looking for a prevention program,” said Tony Gallo, CEO of the Texas-based Sapphire Risk Advisory Group, a consulting firm specializing in cannabis security.
“If you have an employee that’s stealing cash from you, it’s not going to bother (the police). … But if someone’s handing out cannabis to their friends, that’s a different story.”
In addition to insisting that cannabis businesses guard against internal vulnerabilities that could lead to diversion – such as an employee stealing product and then selling it – and preventing external threats such as robberies, local police officials want marijuana operators to be mindful of straining municipal resources.
“They don’t want to respond to a robbery, they don’t want to catch a robber, they don’t want to respond to someone breaking into your store,” Gallo said.
Many local government and police officials believe crime will increase when marijuana becomes legal in their area.
They worry a marijuana retailer will call police frequently to report both legitimate and false alarms, leaving other areas unprotected by police and vulnerable to criminals.
To allay those fears, Vanderhorst recommends that plant-touching companies have comprehensive standard operating procedures (SOPs) related to security, including how to address potential threats as they arise.
“Make sure that through your SOPs and through training – and through either in-house or third-party security that you’re going to provide – that you won’t be a drain on that community,” he said.
Fears ease over time
Gallo noted that what a police department wants to see from a cannabis store often depends on whether the store is in a new or mature market – and whether the police department is familiar with legal marijuana markets.
“Police departments in mature markets that are used to cannabis just don’t want to have to incur any additional costs because of problems that could arise at a cannabis facility,” Gallo said. “Police who are familiar with the industry want to understand, ‘What are you going to do to prevent diversion in my town?’
“On the other hand, we get a lot of towns that have never been involved in cannabis before, and we have to educate them,” Gallo added.
Whether a market is new or old, marijuana executives should also know that if they have multiple facilities, each one will need its own unique security plan.
“It’s always good to have a plan at each operation and look at them individually,” said Kyle Kazan, a former patrol officer with the Torrance (California) Police Department who turned marijuana legalization advocate and founder and CEO of Glass House Brands, a vertically integrated marijuana business in the state.
Observers also highlighted that while some security costs have come down over the years – such as prices for cameras and alarm systems – new markets tend to have more security requirements than mature ones, meaning that businesses will initially spend more money than expected on security.
Those costs can decrease over time, however, as police and regulators learn what is necessary to protect cannabis businesses.
Will there be a day when cannabis businesses won’t need as much security as they do currently?
“Absolutely,” Kazan said, “because in the future, it’s going to normalize like any other product out there.”
New Mexico regulators fined a cannabis operator nearly $300,000 and revoked its license after the company allegedly created fake reports in the state’s traceability software.
The New Mexico Cannabis Control Division (CCD) accused marijuana manufacturer and retailer Golden Roots of 11 violations, according to Albuquerque Business First.
Golden Roots operates the The Cannabis Revolution Dispensary.
The majority of the violations are related to the Albuquerque company’s improper use of BioTrack, which has been New Mexico’s track-and-trace vendor since 2015.
The CCD alleges Golden Roots reported marijuana production only two months after it had received its vertically integrated license, according to Albuquerque Business First.
Because cannabis takes longer than two months to be cultivated, the CCD was suspicious of the report.
After inspecting the company’s premises, the CCD alleged Golden Roots reported cultivation, transportation and sales in BioTrack but wasn’t able to provide officers who inspected the site evidence that the operator was cultivating cannabis.
In April, the CCD revoked Golden Roots’ license and issued a $10,000 fine, according to the news outlet.
The company requested a hearing, which the regulator scheduled for Sept. 1.
At the hearing, the CCD testified that the company’s dried-cannabis weights in BioTrack were suspicious because they didn’t seem to accurately reflect how much weight marijuana loses as it dries.
Company employees also poorly accounted for why they were making adjustments in the system of up to 24 pounds of cannabis, making comments such as “bad” or “mistake” in the software, Albuquerque Business First reported.
Golden Roots was fined $298,972.05 – the amount regulators allege the company made selling products that weren’t properly accounted for in BioTrack.
The CCD has been cracking down on cannabis operators accused of selling products procured from out-of-state or not grown legally:
- Regulators alleged in August that Albuquerque dispensary Sawmill Sweet Leaf sold out-of-state products and didn’t have a license for extraction.
- Paradise Exotics Distro lost its license in July after regulators alleged the company sold products made in California.
Golden Roots was the first alleged rulebreaker in New Mexico to be asked to pay a large fine.
Source: https://mjbizdaily.com/new-mexico-cannabis-operator-fined-loses-license-for-alleged-biotrack-fraud/
Four marijuana companies, including a multistate operator, have filed a lawsuit against U.S. Attorney General Merrick Garland in which they allege the federal MJ prohibition under the Controlled Substances Act is no longer constitutional.
According to the complaint, filed Thursday in U.S. District Court in Massachusetts, retailer Canna Provisions, Treevit delivery service CEO Gyasi Sellers, cultivator Wiseacre Farm and MSO Verano Holdings Corp. are all harmed by “the federal government’s unconstitutional ban on cultivating, manufacturing, distributing, or possessing intrastate marijuana.”
Verano is headquartered in Chicago but has operations in Massachusetts; the other three operators are based in Massachusetts.
The lawsuit seeks a ruling that the “Controlled Substances Act is unconstitutional as applied to the intrastate cultivation, manufacture, possession, and distribution of marijuana pursuant to state law.”
The companies want the case to go before the U.S. Supreme Court.
They hired prominent law firm Boies Schiller Flexner to represent them.
The New York-based firm’s principal is David Boies, whose former clients include Microsoft, former presidential candidate Al Gore and Elizabeth Holmes’ disgraced startup Theranos.
Similar challenges to the federal Controlled Substances Act (CSA) have failed.
One such challenge led to a landmark Supreme Court decision in 2005.
In Gonzalez vs. Raich, the highest court in the United States ruled in a 6-3 decision that the commerce clause of the U.S. Constitution gave Congress the power to outlaw marijuana federally, even though state laws allow the cultivation and sale of cannabis.
In the 18 years since that ruling, 23 states and the District of Columbia have legalized adult-use marijuana and the federal government has allowed a multibillion-dollar cannabis industry to thrive.
Since both Congress and the U.S. Department of Justice, currently headed by Garland, have declined to intervene in state-licensed marijuana markets, the key facts that led to the Supreme Court’s 2005 ruling “no longer apply,” Boies said in a statement Thursday.
“The Supreme Court has since made clear that the federal government lacks the authority to regulate purely intrastate commerce,” Boies said.
“Moreover, the facts on which those precedents are based are no longer true.”
Verano President Darren Weiss said in a statement the company is “prepared to bring this case all the way to the Supreme Court in order to align federal law with how Congress has acted for years.”
While the Biden administration’s push to reschedule marijuana would help solve marijuana operators’ federal tax woes, neither rescheduling nor modest Congressional reforms such as the SAFER Banking Act “solve the fundamental issue,” Weiss added.
“The application of the CSA to lawful state-run cannabis business is an unconstitutional overreach on state sovereignty that has led to decades of harm, failed businesses, lost jobs, and unsafe working conditions.”
Alabama regulators are targeting Dec. 1 to award the first batch of medical cannabis business licenses after the agency’s first two attempts were scrapped because of scoring errors and litigation.
The first licenses will be awarded to individual cultivators, delivery providers, processors, dispensaries and state testing labs, according to the Alabama Medical Cannabis Commission (AMCC).
Then, on Dec. 12, the AMCC will award licenses for vertically integrated operations, a designation set primarily for multistate operators.
Licenses are expected to be handed out 28 days after they have been awarded, so MMJ production could begin in early January, according to the Alabama Daily News.
That means MMJ products could be available for patients around early March, an AMCC spokesperson told the media outlet.
Regulators initially awarded 21 business licenses in June, only to void them after applicants alleged inconsistencies with how the applications were scored.
Then, in August, the state awarded 24 different licenses – 19 went to June recipients – only to reverse themselves again and scratch those licenses after spurned applicants filed lawsuits.
A state judge dismissed a lawsuit filed by Chicago-based MSO Verano Holdings Corp., but another lawsuit is pending.
Source: https://mjbizdaily.com/alabama-plans-to-award-medical-cannabis-licenses-dec-1/
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