Even though California made the landmark decision to legalize the medicinal use of cannabis in 1996, in the last few years the pace at which new states began to follow their lead has increased exponentially. It is also significant that many of these new states sought to institute a system that was not only a legal medical marijuana system, but one which is regulated and overseen through officially recognized state authorities. This marked a definitive moment in the history of cannabis legislation as it was the primary factors that lead to the Department of Justice’s federal memorandum recognizing compliant medical and adult use cannabis states to govern themselves. In turn, this enabled industry professionals and entrepreneurs to invest resources into commercial cannabis ventures, with the security of knowing that as long as they remained within compliance, will not be in violation of federal law. Between the ground breaking decision away from total federal cannabis prohibition and the host of new medical and adult use states’ legislation coming on-line over the next two years, more and more people are interested in becoming involved in the legal cannabis industry than ever before.
Colorado and Washington set the example by passing measures for legal adult use of cannabis in 2013, and will have regulated storefront establishments in 2014. Illinois has followed suit and will also have legal adult use in 2014. Following these states’ leads, Alaska, Arizona, California, Oregon and Pennsylvania are working to become recreationally legal. Many more states are working to become medicinally legal including Connecticut, Massachusetts, Minnesota, Montana, New York Ohio and Rhode Island.
With all these states slaked to pass marijuana legislation,
In light of the painfully long and confusing process of medical or adult use legalization, entrepreneurs eager to get their feet wet in the industry often have to play an agonizing waiting game before they can begin operations. A few things prospective canna-business owners or operators can start doing in anticipation of the finalization of their states’ medical or adult use legalization and regulation are to know the law, stay informed, start the talent acquisition process, and prepare documentation, protocols, and procedures.
1. Know the Law
The first thing that any prospective canna-business entrepreneur should have on their radar is the local, state and federal laws regarding production, sale, and distribution of medical or adult use cannabis. There are several websites we recommend for information acquisition pertaining to legislation and regulation in your state: National Organization for the Reform of Marijuana Laws (NORML) Norml.org, National Cannabis Industry Association (NCIA) thecannabisindustry.org, Americans for Safe Access (ASA) safeaccessnow.org, Huffington post huffingtonpost.com, and the Marijuana Policy Project (MPP) mpp.org. These websites will give you a broad understanding of how the upcoming rules and regulations will be instituted. Further, these websites provide hyperlinks to the bills and constitutional amendments passed in each state.
For example, HB1 is the bill that Governor Quinn signed into Illinois law. Rules and regulations will be written 120 days from the effective date of the bill, or January 1st, 2014. Right now, entrepreneurs can read HB1 and start documenting each item currently established within the state legislation. By identifying rules and regulations early, companies can integrate proposed protocols and procedures in compliance with the final state regulations as they become available. Another way to identify potential legislation is to look at other state models that have already been successful in the process of regulating legal cannabis. Colorado is one of the best examples because it has one of the most strictly regulated and structured oversight processes in the world. Between the Seed-to-Sale video surveillance system, manifested transportation protocol and the strict Marijuana Inventory Tracking System (MITS,) Colorado regulation can serve as the framework for understanding how an infrastructure for cannabis regulation can be successfully implemented.
On the other hand, although California pioneered legal medical marijuana legislation in 1996, the current lack of direction and oversight from state legislation has proven to be problematic for the federal justice system. On top of being knowledgeable on individual statutes, obtaining up-to-date information pertaining to which debilitating illnesses have been authorized for MMJ use in your state is of primary importance. Start researching approved illnesses in model states, as well as the various ways MMJ can cure or provide alleviation to the symptoms of prospective patients.
2. Stay Informed
Legislation is just one of many topics and specialties that a successful medical or adult use marijuana production or dispensing facility needs to intimately understand. Other topics of significant importance include but are not limited to:
- Medical research on the endocannabinoid system, and how cannabis interacts with the body is going to be germane to an understanding of marijuana and marijuana infused products. A good source of knowledge of the current understanding of the endocannabinoid system in America is Dr. David Allen MD, Ignorance Is Not Bliss article.
- Understanding the various cannabinoid profiles found in cannabis and cannabis infused products is also of special significance, as it is the primary indicator for patients seeking illness or symptom alleviation. Laboratories like CannLabs in Colorado can help identify proper cannabinoid profiles to treat special cases such as children, or patients with severe illness.
- In recent years, research and development on how the human bodies’ endocannabinoid system interacts with cannabinoid profiles to contribute to various illness cures or alleviations.
- Ethan Russo, MD and The International Cannabinoid Research Society is a great place to begin familiarizing yourself with other non-psychotropic cannabinoids
- Alternative delivery methods make the therapeutic effects of cannabis available in forms such as gel caps, vapor, juices, tinctures, and topical salves that can be both smokeless as well as not intoxicate patients.
- Juicing: In raw form, Cannabis leaves and flowers are concentrated with non-psychoactive, anti-biotic, anti-fungal, anti-viral, antioxidant, anti-inflammatory, immune-regulating and anti-cancer nutrient compounds including lesser-known Tetrahydrocannabicannabidiol (CBD), and Tetrahydrocannabivarin (THCV) both of which are proving to be therapeutic substances capable of preventing and/or reversing a multitude of chronic and debilitating illnesses.
- Basic understanding of cannabis cultivation:
o Agricultural and horticultural text books
o Innovators and advancements in hydroponic technology
3. Start the Talent Acquisition Process
Talent acquisition is also going to be extremely important. The expansive nature and broad scope of a modern commercial cannabis production or dispensing facility requires an incredible array of expertise and ability. Only with a sophisticated team of owners, board members, advisors, managers, and employees will a company truly be able to succeed in such a complex industry.
Experts are needed in areas ranging from medical advisors, doctors and pharmacists to agricultural and horticultural advisors, market analysts, mechanical engineers, electrical engineers, HVAC and water specialists, as well as labor, production, trim, and plant crews; just to name a few. Other positions of consideration include laboratory technicians, cannabinoid isolation scientists, extraction specialists, laboratory analysts for batch testing, and all of the individual experts necessary for an array of research and development programs. The diversity of talent and expertise necessary for proper staffing and operations is staggering.
Lawyers, lobbyists, and consultants will also be the primary candidates for advice on sorting, charting, projecting and understanding the dynamic shift from total cannabis prohibition to fully functional and regulated systems of industrial manufacturing and dispensing. Retain skilled lawyers who specialize in the practice of medical and adult use marijuana law for understanding the nuances of what is often confusing legal documents; as well as how they apply to your situation, in your location.
Lobbyists are also going to be a powerful ally. They can advocate legislation in favor of a responsible and reliable regulatory system during the provisional drafting process.
Getting ahead of the law, and informing the public as well as legislators about these issues, is the best way to ensure the drafting of realistic and reasonable regulation. Being a proactive member in establishing legislation ensures quality medication to the patients, non-diversion of medicine to the state and responsibility to the public.
Finally, look to experienced consultants like Quantum 9, Inc.| Quantum9.net, Denver Relief, iComply, 4front Advisors and other established firms to help you understand and anticipate the complexities of the newly emerging commercial cannabis industry. These firms have extensive experience in the design, production, infrastructure, and operation protocols required for modern, legal, industrial agricultural manufacturing facilities. From AutoCAD design, and automated hydroponic irrigation systems, to sophisticated inventory tracking and point-of-sale systems, reputable and experienced consultants have been through each and every aspect of the legalization and regulation process hundreds of times over. The expertise, guidance, and problem solving abilities these firms can bring to an industrial cannabis project often mean the difference between license acquisition and failure, or between data driven protocols and guesswork. The complexity of expertise required for the successful operation of these ventures, as well as the rapid speed at which medical and adult use cannabis regulation is established and revised, as often as a few times per year in some states, can be incredibly overwhelming.
4. Prepare Documentation, Protocols, and Procedures
Legal documentation is a key area. First of all, corporate structure will affect all future business. When setting up your company, a few of the many questions to be addressed are:
- How will equity shares will be split between the principal partners?
- What is the structure of the company?
- What promises are being made between individuals?
- How will the operation agreement be architected?
- What type of company or corporation will be created?
- How will that company be responsible for taxation?
- What local or county codes or statutes may affect your situation?
A lawyer can help outline how relationships are set up, especially if you’re working with investors. You need to make sure the entity you’re creating is within the statutes of the law. It may even be beneficial to have a lawyer on your board of directors or advisors, who is directly involved with operations. They may even have an equity stake in the company because there’s going to be an extensive amount of writing from the legal team in general. This person can complete the documentation in its entirety, or outsource parts or all of the documentation to a consulting firm like Quantum 9, Inc.| Quantum9.net, Denver Relief, iComply, 4front Advisors.
There are additional considerations to take into account for investors in the cannabis industry. There’s tremendous risk, work, investment, and potentially tremendous reward. Carefully drafted partnership agreements will be paramount. It is equally important to be involved with a like-minded group of individuals who are all in good standing with their communities, state and federal governments. Furthermore, ensure these partnerships and arrangements are reflected within the company’s operation agreement. The issue of federal intervention is still possible for anyone unable to provide evidence of their regulatory compliance.
You will also need a site and facility planning documentation, as well as the need to find land, or a facility; either by purchasing, leasing or constructing. Furthermore, the site of any cannabis manufacturing or dispensing facility is going to be held to an extensive list of regulatory requirements.
These requirements often entail the integration of the city and county codes of health, safety, and compliance; as well state and federal laws, regulations, and permits. If this complex integration of regulatory and oversight bodies does not confuse you, then the cannabis industry is for YOU!
Beginning with building and facility planning, there will be a tremendous amount of security requirements- keypad entry, biometric entry, camera surveillance systems, inventory tracking, etc. In addition, cultivation assets for production and their location will need to fit within the rules and regulations of your state. For instance, the state regulatory and oversight departments may require 24-hour video surveillance coverage of every square foot of the facility. In Colorado, the regulation goes so far as to require both streaming video to the Medical Marijuana Enforcement Division (MMED), as well as offsite data storage of the last 40 days of surveillance.
In addition to planning for the facility itself, if you’re cultivating; you will have to understand cultivation techniques, manufacturing protocol, and facility design. All of this must also be coordinated with the talent of the master gardener, and cultivation team as a whole. On the dispensing side, you’ll need to figure out how the secured areas will work, how the patient check-in procedure takes place, and how patients will be brought into and out of a secured medicine acquisition areas for the point-of-sale.
If you’re an entrepreneur looking to get into the legal medical or adult use cannabis industry, you will also need a significant amount of logistical documentation, including procedures protocols. This would encompass everything required by the state, as well as any manufacturing and dispensing protocols for optimizing sanitation, security, workflow, scheduling, the production line, transportation, etc. This also includes a business plan, procedures for transportation, addressing items such as a diversion of product, and protocols for all standard operating procedures. In anticipation of license application submission, all of this document architecture can be preemptively created so that it can be provisioned within the application for your permit.
All of this, of course, is in preparation of the execution of an application when your state becomes a legal medical marijuana state.
Though it may seem overwhelming to take in such extensive lists of documents and personnel required just for the basic framework of the application processes and operational standards; these are the practices and quality assurance guidelines that will create a solid, profitable and successful company.
Careful attention to the detail involved, not only in the preparation and design process, but also each portion of the application process can mean the difference between an industry leader and a forfeit license.
Rely heavily on the experts on your board, and among your advisers; as well as looking to lawyers, lobbyists and consultants for compliance reassurance, technical support and quality control.
Build a strong team – this cannot be accomplished alone. Strong, extensive cooperative networks are required.
Focus on the patients – it is all about them!
Have fun and be innovative! We are being given a unique opportunity in history – treat it that way!
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[xxi] California Proposition 215, 1996 http://www.cdph.ca.gov/programs/MMP/Pages/CompassionateUseact.aspx