Looking at Cannabis Compliance, where to begin and how does it all work

Stephen Hyduchak
May 28 · 3 min read

The word cannabis and compliance being used in the same sentence is a very new thing. Cannabis prohibition is finally coming to an end and as with any new emerging market; governments create many rules, regulations and guidelines that change everyday. Most cannabis companies started were small, but now booming businesses almost overnight that are confused and aren’t sure where to turn for compliance. Here we will discuss some broad points of compliance in the space.

How To Be Canna-Compliant

Step 1… stop saying “marijuana” and use the word “cannabis” instead. All jokes aside, I just wanted to check everyone’s pulse and make sure the compliance word didn’t put the audience to sleep yet.

There are a few points that get quickly overlooked in a cannabis-based businesses:

  1. Retailers — Training for employees is tough due to high turnover rates and the sensitive nature of the roles. These things range from handling/viewing of Personally Identifiable Information (PII) of customers and regulatory requirements around purchase amounts, “smurfing,” etc. Budtenders that are trying to be knowledgable and helpful; unfortunately, sometimes give incorrect information when customers have customers. This can create liability for themselves, employers and employees.

“Smurfing” is when a customer simply purchases the maximum daily allowable marijuana products (one ounce of flower in Colorado, for example) in one dispensary, then heads on over to another and buys more.

2. Taxes — Different rates for adult use, corporate business and local taxes can vary. It is very important from a tax standpoint to have these logs accurate and up-to-date.

3. Distribution — This is the really tricky category and one that involves the most risk for the businesses involved. Since cannabis is still federally prohibited, it gets tricky when transporting cannabis to service vending machines across sometimes, state-lines. Ensuring that licensing and the supply chain is accurately traced will be crucial under an audit.

4. Compliance Officer and teams — Cost is the biggest burden here for new start-ups. Regulatory compliance and a new officer role, usually brings some hefty salaries, especially in emerging and hot markets. There are software options that can help “bootstrapped” companies reduce cost in the early days, but it becomes about risk mitigation and protecting the investment of the business and growth.

5. Everything else — businesses have to worry about things like wifi security, data security and e-commerce customer security until customers receive product. Questions like:

  1. How is my business protected from liability, physical and digital?
  2. What is uptime on servers my data is hosted on?
  3. Are proper disclosures and data standards upheld?
  4. How are biometrics secured and used for customer check-in to retail stores and delivery services?

Seek help from experts in the niches that give the must headaches for the business

The internet offers a lot of great value for entrepreneurs and new businesses, but some things are worth the fees. Compliance violations can overtake any cash reserves to the business; providing the level of diligence upfront to the regulator, will show you took the reasonable steps necessary to protect all the facets of your business.

Stephen Hyduchak

Written by

Blockchain, AI and Cannabis keep me up at night. CEO of Bridge Protocol and Aver.