In a year of a raging pandemic and social unrest, there was one thing that seemed to bring the country together in full bipartisan support: cannabis. From deep red states like South Dakota to more liberal metropolises like New Jersey, referendums were held nationwide with people overwhelmingly supporting the end of prohibition and, in larger part, taking an axe to the failed war on drugs.
This trend isn’t new. It has been building momentum since the 2012 election cycle with the help of operators breaking federal law, trade associations fighting for cannabis legislation, and national social campaigns like the Wounded Warrior or Last Prisoner projects. Thanks to their tireless efforts, as of a recent 2020 Gallup Poll*, over 68% of Americans now support some sort of cannabis legalization. With American opinion at an all-time high, and a new administration with control of congress vowing to focus efforts on cannabis reform, it’s easy to get lost in the euphoria that comes from what will undoubtedly be “The Golden Age of Cannabis.” I mean, it sounds exciting. More capital will be made available to the cannabis industry at a faster rate and we will witness some large-scale M&A over the coming year(s). Cannabis brands will become household names. Banks will have no choice but to work with operators. And my personal favorite, non-violent drug offenders will get second chances. However, for those looking to profit off the imminent end of prohibition, or cannabis businesses looking to grow profit margins by expanding into new states, a cautionary tale from someone who has witnessed and worked with new cannabis legislation since 2015; looser cannabis legislation often leads to stricter cannabis regulations. With a side of headache. Make sure you’re ready.
On October 1, 2015, Oregon became the first state in the US to pass emergency “adult use” cannabis legislation, allowing their medical shops to sell recreational products under the same license, differing from the previous precedents set in Colorado and Washington. If you lived through it, you may remember not knowing if you could sell the product you had on hand or how you would get that little symbol on all the labels you’d already ordered. You probably stayed up all night the first two weeks of October, wondering if you would be fined or shut down. The truth is, as someone who lived through it, no one knew what to expect. The state didn’t know. Operators didn’t know. The ancillary companies didn’t know. Since 2015, this cannabis legislation state sponsored rollout mayhem hasn’t changed. Look at the two year “maybe we will get fined, maybe we’ll be operational” California rollout in 2018. Or the “let’s change testing requirements, and then have them coincide with a passed adult use initiative” Arizona rollout. Don’t even get me started on the rollouts of the Northeast.
Truthfully, don’t expect these nightmare rollouts to stop anytime soon. While cannabis reform and legalization will happen, I believe it will be two more years, at least, before there is any real “federal blanket” standardization. States were hit hard after 2020, and while the federal government will act fast on de-classification and expungement for cannabis related offenses, they will most likely let states pilot, tax, and roll out their own program before taking it head on. With all that being said … there ARE remedies to these nightmares that will make it easier.
In 2015, the roll out was especially nightmarish because it had been the first of its kind at a time cannabis legislation was severely fragmented and cannabis technology was less than nimble. This fragmented mentality no longer works in 2021. Operators need to invest in technology ecosystems that allow them to eliminate arduous processes and pivot quickly as states adopt new regulations; sometimes as quick as 24 hours. Investors and owners need to be able to access information across the entire company, consisting of multiple marketplaces, that will require solutions and data points that won’t come from just any ‘out of the box’ concept. And finance teams, dealing mostly in cash ledgers, need to work within systems that not only help them day to day but that will be flexible enough to migrate as banking regulations change. Bluntly, as we enter the “Golden Age of Cannabis’’ operators can no longer rely on fax machines, emails, excel sheets and filing cabinets. Operators must be ready with automation, digital adoption, flexibility and solid technology products that will help streamline the overall business and tighten up their standard operating procedures if they hope to survive the new regulations that this era is likely to bring.