Knock Knock! Who’s There? Your Licensing Authority.

State agencies across the country are revving up cannabis law enforcement efforts, and the number of businesses now bearing the hefty cost of non-compliance is growing as a result.

In Different States

In just the last month, administrative agencies in Massachusetts, California, and Colorado have all cracked down on cannabis companies. Violations ranged from storing cannabis-infused beverage products in an employee refrigerator to operating without a state license.

In January, the Massachusetts Cannabis Control Commission conducted two unannounced inspections of a single dispensary in the same week. After discovering a bevy of issues that posed “an immediate or serious threat to public health, safety, or welfare” — such as inadequate sanitation controls and products that did not meet pesticide standards — the agency ordered the business shuttered until further notice.

Around the same time in California, the Bureau of Cannabis Control aided in the shutdown of two Los Angeles dispensaries operating without state licenses. Search warrants served on the two retailers resulted in the seizure of more than $250,000 worth of cannabis and cannabis products alone.  

In Oregon, the Oregon Liquor Control Commission ordered two processors to either pay fines or serve suspensions; one must either pay a $2,310 fine or serve a 14-day license suspension for two violations, and the other must choose between a $7,620 fine or a 44-day suspension as a result of three offenses. The Commission also revoked the licenses of two testing labs for allowing employees to take samples of cannabis home, failing to document the transfer in the inventory tracking system, destroying evidence, and encouraging employees to lie to investigators.

Finally, on January 25th, three owners of the now-closed Colorado grower and dispensary chain Sweet Leaf were each sentenced to one year in prison for their involvement in a highly publicized multi-million dollar “looping” sales scheme, which involved taking advantage of a controversial ambiguity in the state’s retail daily purchase limits.

Regulators Are Cracking Down

Clearly, regulators are paying attention — and they’re sending a message to businesses that compliance matters in the process.

Notably, many cannabis-legal states have also enacted regulations that allow them to penalize a cannabis business for non-compliance that stems from another business. For example, although retailers generally don’t (and often are forbidden to) package and label edible products for retail sale, a retailer can nevertheless still be fined by its licensing agency for selling products that were improperly labeled when they received them from the manufacturer or distributor.

With agency enforcement on the rise in a number of states, the importance of compliance measures is arguably at an all-time high as well. Nearly all agencies can cite violations on a “per-instance” basis, too, which means that one small infringement can easily add up to thousands of dollars, even if the infraction itself is minor. For instance, if a business’s delivery sales receipt template doesn’t include a required component — such as the time the driver left the facility — an agency may fine the business individually for literally every single delivery sale that occurred using the non-compliant template. Ouch.

So, if you’re involved in a cannabis business and have not made compliance a priority, now is a good time to ask yourself a single, important question:

If your licensing agency comes knocking, how prepared are you?