4. Regulations and other State Sanctioned Insanities
(Early generation cannabis barcodes from 2015 in Quincy WA. Now of course they require much more info.)
Do one thing every day that scares you.
Regulations are perhaps the most challenging and, for good reason, the most feared aspect of the legal cannabis industry.The good news though, is that there’s hope, and miracles do happen, as we can attest to, from personal experience. We’ve run multiple legal cannabis businesses at the same time, in different markets, locations, and states, and have never even once, received an administrative violation!
No, the secret to our success at evading tickets, was not bribes.
We also didn’t sacrifice a virgin, drink unicorn blood, or sell my soul to the devil.
Instead, we employed the much more difficult approach of attempting to stay in compliance.
However, in many operational situations, there were times when it wasn’t clear what compliance meant. In these cases, I’d often have to default to my best understanding of the rules themselves, the context of the rules, and then additionally consider the perception of the regulators to whom we would be answering to.
Avoiding trouble for us had as much to do with knowing how to present well as it did with our freakish adherence to the rules.
By considering the optics for state agencies, we presented them with what we thought they wanted to see; a clean, professional, and organized business. By doing this, we have been able to avoid most of the scrutiny that would have led to a violation in the first place.
You have to think about things from enforcement’s point of view. They’re very busy. Nearly every day, they go out and have to visit or inspect a large number of facilities. If you make their job easy for them and make everything orderly and presentable, they won’t need to kick the tires or check under the hood, because they’ll prioritize their time to applying more scrutinize on the farm down the road, where from all outside appearances, it’s run by a bunch of dirty hippies, that smoke pot all day at work in violation of the rules, and don’t have their shit together in general. In all likelihood, this farm will be a jackpot of egregious behavior for the ticket book.
Another key to avoiding trouble in the first place is to maintain a good relationship with your enforcement agent. Be proactive and reach out to them if you have a question, or don’t understand something. Let them know right away if you’re having a camera or traceability malfunction.
They’ll appreciate you communicating with them and your efforts to remain in compliance, and most likely they’ll be more willing to cut you slack and give you the opportunity to address and correct problems without getting a violation.
In order to surmount the regulations though, you must first be able to comprehend them. This is far easier said than done…
Trying to make some kind of rational sense out of the rules, can be broken down into two problematic and equally baffling, categories:
- What Local/State/Federal regulations DO SAY.
- What Local/State/Federal regulations DON’T SAY.
While some regulations are straightforward, many rules about cannabis oversight are gray, murky, ambiguous, and/or vague. And that’s just the rules that are actually in writing!
Which rules are the most important to grasp?
What about the letter of the law vs. the spirit of the law?
The rules of enforcement vs. the policies of enforcement?
Generally speaking, there can be a huge contradiction in terms of how the rules are written and how they are enforced. It’s critically important to get as much intel as you can, to figure out the difference.
In some states, the ‘who, how, when, where, and why’, of enforcement, are questions left up to the discretion of the individual inspector or enforcement officer who is assigned to police your jurisdiction.
It’s a good idea to contact a cannabis lawyer in the area you plan to operate in to find out how enforcement is handled. If they already represent cannabis operators in that county, they may have experience dealing with the specific agent that would be assigned to you and may have a functional understanding of how that individual interprets the rules.
Context is also important in ascertaining what specific rules mean, understanding why they’re there, and how they apply.
For instance, one could ask the question, “What the f%*k were the ACLU (American Civil Liberties Union) and the Washington State legislature thinking when they prohibited vertical integration, and out-of-state investment money from the Washington State cannabis market?”
I could answer, “They were thinking that they wanted to prevent big business from coming in and taking control over the market… Either that or they were just really, really high.”
While I thought that banning vertical integration and outside investment were decisions that have backfired spectacularly, allowing the retail stores to unfairly control the market while paving the way for big business regardless; at least I understood why they did it.
If I wasn’t at least aware of the State’s motivations, then I might have joined the ranks of the bitter never-would-be ganjapreneurs, and disillusioned ex-industry members, who have become convinced that regulations are all part of a massive conspiracy.
The plot goes like this – the regulations exist only to make our lives miserable and were designed specifically so that anyone who had ever had the misfortune or was stupid enough to think of starting a cannabis business would suffer so greatly that no one would ever dream of doing it again. Thus, saving society from the perils of pot legalization.
The truth, however, is far less sinister, even if the results can be the same. The truth is that most lawmakers are trying their best but most of them have no idea what they’re doing most of the time. A majority of them actually want us to be successful, despite the well-intended, yet disastrous, obstacles they place in our path.
For instance, in 2012 at the time Initiative 502 passed, legalizing cannabis in Washington State, most of the employees at the State Liquor Control Board (LCB) were about to be out of work. Voters in Washington had recently passed an initiative opening up State liquor licenses to private retail establishments. Previously, liquor was only allowed to be sold at State-owned liquor stores that were run by employees of the LCB.
Legal cannabis literally saved the LCB!
So how would it then in turn serve the interests of the LCB to police cannabis out of existence?
Think about the legislatures that have already gotten addicted to the cannabis tax revenue our industry is bringing into their State’s coffers. What value would there be for them in designing a system that was set up to fail, when they have already been spending the tax money like drunken sailors on an orgy of policy wishes?
The reality is that while the conspiracy version is a popular theory in this industry and is somewhat entertaining, it is actually quite nonsensical and misses the mark completely.
The plain truth is that most lawmakers are trying to make this work, but will continue making terrible decisions if they are not properly informed or receive enough feedback from current or would-be stakeholders.
Not all oversight is created equal though…
Having trouble following this yet?
Reach out to the legal experts @ My Pipe Dreams to help you sort through the chaos!
When they legalized cannabis in Colorado in 2012, they were concerned with how they would stop people from out of state, from stocking up on products to smuggle back and sell in their own markets.
While the State went with a transaction limit that can be easily gamed through ‘looping’ which just basically means maxing out the amount you can buy at one store, and then going back into another store or even the same store to make another max purchase.
Mark proposed to the State a system that would give each consumer a card with an anonymous user number that would prevent consumers from buying more than the permissible amount.
Mark even offered to develop this technology for the State for free.
And they turned him down!!!
The head of the Marijuana Enforcement Division (MED) in Colorado rejected Mark’s proposal, explaining, “It’s not our job to stop people from breaking the law. It’s our job to catch them and put them in jail!”
Through research and staying involved with current events, you can gain a fuller background on the ideas and concepts that lawmakers grapple with when crafting the regulations pertaining to the industry. This, in turn, will give you a greater insight into how much space you have to operate in, within the boundaries of the rules as they are written in your State.
That can be especially important when there are unforeseen flaws, holes, and failures that occur as the State rolls out its systems and experiments with different regulatory models.
Typically, there’s at least a five-day period of chaos and insanity in the cannabis market, that is caused by a State implementing or updating a new regulatory model or traceability system. In the cannabis industry, this five-day period of bedlam, uncertainty, and madness is referred to as ‘Monday through Friday’.
While dealing with regulations can be, and usually is, a living nightmare, the flip side of it is that the regulations present a challenging barrier for entry that scares would-be competitors off from entering the space. If you can master your understanding of regulations, then you will have a strong competitive advantage over the field.
Regulations, though, have an innate value beyond just enabling you to out-suffer, and endure more miseries than your competition.
The regulations, while burdensome, expensive, and often feel anti-business and painfully excessive, are ultimately the safety net and security blanket of the legal cannabis entrepreneur.
Regulations are what keep the cannabis industry above the precipice of the black market, paving the way for a stable future over the next decade.
Despite the push back against over-regulation however, it is the regulations themselves that give States and eventually will give the Federal government the vehicle they’ll need to end this crazy drug war.
That being the case, the Cannabis Industry Insiders can’t overstate the importance of staying compliant and being a good actor in your market.
Get High on Your Own Supply… After Work
None seemed to think the injury arose from the use of a bad thing but from the abuse of a very good thing.
If you worked as an employee at a pharmaceutical plant that manufactured Oxycontin, or another controlled substance, would you have the expectation that you’d get to pop free pills all day long at work?
Or would you expect to get sauced as you were operating the high-pressure distillery at the Jim Beam factory?
Ludicrous examples, we know, but try telling that to employees, managers, partners, and possibly even your lawyer, in the legal cannabis industry.
Unlike the black or even the gray markets, in a highly regulated industry, there is a laundry list of serious liabilities that are constantly hanging over your head as licensee or partner, like the sword of Damocles.
The following are some of the many reasons that it’s a bad idea to use cannabis, or allow your employees to, at a cannabis business:
A Violation of State Cannabis Regulations
Worry is the interest paid by those who borrow trouble.
Getting high, letting your employees get high, or even being high at work, are likely prohibited practices in your state that can land you in hot water with your cannabis regulators. What a buzzkill!
OSHA (Occupational Safety and Health Administration) and State Regulation
If you could kick the person in the pants responsible for most of your trouble, you wouldn't sit for a month.
Virtually every aspect of the legal cannabis industry involves the use of some kind of dangerous machinery, tools, and/or equipment.
At a legal cannabis farm, we used tractors, orchard ladders, trimming equipment, post-pounders, nail guns, etc. We had to build and install structures, heavy tarps, electrical wiring, conduit, irrigation piping, and so on.
Have you ever seen someone split their head open like a ripe watermelon while pounding in a t-post? It may sound very funny, but it is actually quite sobering.
At our cannabis lab, Troy and I dealt with high-pressure extraction and distillation. They are stored and processed with deadly solvents, using equipment that can and does explode. See any garage BHO Lab in your neighborhood.
At some cannabis retail stores, the security guards carry firearms.
Now generally speaking people that are stoned are less violent than the sober population, but even if they didn’t mean to shoot you in the leg when they’re high, most people make more…
Mistakes
You can't arrest me, I'm a rockstar.
Some people may be more functional than others while high, but let’s be honest with ourselves, it’s only a small minority of people that have better attention to detail when they’re stoned. The quality of work produced in your business is at stake.
Not only can mistakes in the most serious examples be deadly, but even short of a blood bath, they can still cost your business in ways both big and small.
For instance, you can make a mistake on your traceability reporting and get audited by the state. You can make a mistake on one line item of an invoice and undercharge your business by thousands of dollars. Or even worse, you could set out on a historic adventure to sell cannabis in the lovely green, Emerald City, and instead, somehow wind up running a pot farm, in an arid, desert hellhole, in the land of Mordor where the shadows dwell!
I think that I make enough mistakes when I’m sober, so why increase my chances? If something goes wrong, that will be a self-inflicted wound.
As an employer you need to constantly be cognizant of…
The Example You Are Setting as a Leader.
Good judgment comes from experience, and a lot of that comes from bad judgment.
Ok, we’ve established that you don’t want your employees to be high because they can get hurt and you can be sued or imperil your license. You also don’t want their work product to suffer, and you don’t want them to make mistakes.
These things should be obvious, but maybe the most difficult thing of all is calibrating your own behavior, and setting the right example that will reflect the company culture that you want to create.
Sure, you might be the type of person that wants to cultivate a fun, laid-back work environment, but do you really want to enable a ‘wink-wink-workplace’, in which your employees become desensitized to and cavalier about, regularly disregarding rules and crossing ethical boundaries?
Think about it for a minute. If you have an outlaw culture in which regulations and professional practices are regularly ignored, this will most likely seep through your entire organization.
In this type of culture, expect to see your employees ignoring your own rules and policies as well. In this company, your employees are more emboldened to try to get away with stealing, milking the clock, and other inappropriate behavior.
As a regulated business, you are under the constant scrutiny of one type or another. Even if you are sober, but one of your employees is intoxicated, you could still be held responsible if you are unfortunate enough to receive a surprise…
Inspection
Curiosity killed the cat, but for a while I was a suspect.
Whether it’s a state agency, an insurer, a cannabis banker, or an investor, a surprise or even planned inspection can be nerve-wracking, even if you’ve done absolutely nothing wrong and your facility is in 100% compliance with State regulations.
As operators, we lived with constant anxiety knowing that State regulators or worse could show up, at any time. Staying constantly vigilant and being prepared is key.
An inspector may very well want to grill your employees; not just to see if they are currently high on cannabis, but also to learn of potential violations that have occurred in the past. You want your employees to have your back. And the truth is that…
Not everyone likes weed, even in this industry!
Have you ever noticed that anybody driving slower than you is an idiot, and anyone going faster than you is a maniac?
Just because you work in the cannabis industry, doesn’t mean that you have signed up for mandatory cannabis use, or that you should enjoy getting smoke blown in your face all day.
While some bosses want to be ‘cool’ and let their employees enjoy the fruits of their labor; for other employees, these overly accommodating employers may be inadvertently creating a hostile and/or hazardous work environment. Expect to read about a lawsuit involving this type of situation someday soon, if it hasn’t happened already.
Not Even Tommy Chong Smokes Weed All Day!
I'm as clean as a whistle.
While Tommy stated that he doesn’t actually smoke that much pot, some of the rest of the Cannabis Industry Insiders remain dubious and skeptical of this claim.
If Tommy doesn’t actually smoke that much, how does he stay so Zen, and deal with everyone he ever meets and their grandmothers trying to get him high all day, every day?
“There’s a rule about Tango dancing.” Tommy said in response, “No matter what happens when you’re on the floor, you always have to look like you’re really enjoying yourself and having so much fun because you’re with the most beautiful woman in the world.”
Don’t Be a Dick
The trouble with the rat race is that even if you win, you're still a rat.
One of my all-time favorite rules of thumb, with applications and pertinence spanning across all areas of life and business, is, “Don’t be a dick!”.
Other than mandated inspections, in a complaint-based system, investigators only come out to apply a magnifying glass to your business if there is a complaint against you or a tip that you’re doing something wrong.
In most cases, if a complaint causes an agent to come out to your operation, especially if the visit involves a long drive through bad weather, chances are… they’ll probably find something to write you up over.
The laws are vague, and interpretation of the rules is left to their discretion… so… don’t piss them off, or anyone else for that matter!
On the flip side, if you never cause any problems or generate any complaints, and they do come out to your site and everything on the surface looks in order; then the inspector is less likely to bother even wasting their time at your farm on much more than small talk.
For these reasons and many more, it’s a great idea to not act like a dick, burn bridges or make enemies, because if you are a legal cannabis operator, then you are inevitably a big, exposed target that has a lot to lose.
Key Chapter Takeaways
The Do’s and Don’ts of the Dope Industry
- Do– Take the time to learn about the applicable regulations that will affect your business
- Do– Try to develop solid interpersonal relationships with your enforcement agents
- Do– Keep your business and facility clean and organized so that you will avoid scrutiny and suspicion in the first place
- Don’t– Don’t let cynicism or paranoia about law enforcement become a self-fulfilling prophecy
- Don’t– Get high or let your employees get high at work
- Don’t– Don’t be a dick!