How to Ensure Cannabis Compliance to Protect Your Business License

Obtaining a cannabis business license is no walk in the park, regardless of which state you’re a licensed cannabis operator in. Once you have that license, protect it like it’s your baby. 

In early 2021, a San Francisco area marijuana testing lab filed a lawsuit against the California Bureau of Cannabis Control after the lab’s license was revoked. The company claims their right to due process was violated because there is no appeals process for license revocation. 

The top reason for license revocation is lack of cannabis business compliance. Failure to comply is often unintentional, but that doesn’t change the ramifications which can be severe, especially in situations where there is no appeals process.

Cannabis Industry Outlook

According to top cannabis market researcher, New Frontier Data, “By 2025, 42% of the total annual U.S. cannabis demand is projected to be met by legal purchases in regulated marketplaces. This is a 24% jump from 2020.”

Increasing demand for legal cannabis is great news for industry cultivators, manufacturers, retailers, investors, and marketers. The biggest stress point remains the complexity of cannabis business compliance, which is generally regulated by one or more organizations in each legal state. Your ability to adhere to all requirements of cannabis regulatory compliance for various administrative bodies could be the difference between keeping or losing the license you worked so hard to obtain. 

Recent Examples of Cannabis Business License Revocation

Cannabis business licenses can be revoked for a number of reasons, most of which involve lack of compliance. Even if your license is ultimately reinstated, the inability to operate your business for any amount of time could be detrimental in a rapidly expanding industry.

Nevada Improper Use of State Seed-to-Sale Tracking

The Nevada Cannabis Compliance Board conducted a routine inspection of a dispensary  in Reno in 2020 and found that the company was not properly utilizing the state’s mandatory seed-to-sale tracking system. The company also failed to enter eight product line inventories into the state’s system. 

Other violations included failure to keep a camera malfunction log, and lack of documentation for a semi-annual security measures audit. The complaint also stated that not all employees had proper agency cards.

California Producers Fail Zoning Requirements

Proper zoning permits and cannabis business licenses are required to comply with state industry regulations. In 2021, three California central-coast producers failed to adhere to zoning guidelines or obtain proper permits to operate or expand in their respective areas, inciting license revocation, license surrender, and fines for non-compliance. 

Missouri Businesses Not Opening Fast Enough

As a state new to cannabis legalization, the initial Missouri permit process included more than 2,100 applicants for 370 cannabis business licenses in 2019. The 2020 pandemic prevented many permit holders from moving forward with business formation. 

Failure to have a “commencement inspection” conducted by the Missouri Department of Health and Senior Services within the original allotted time frame caused 29 cannabis business license revocations in early 2021. 

Pennsylvania Cultivators Lack Documentation  

In 2019, Pennsylvania cannabis cultivators had their license revoked after failing to produce documents showing where their product had been sold, and failing to maintain security cameras. The revocation followed a surprise inspection conducted by the Pennsylvania Department of Health. 

Protecting Your Business License with Cannabis Compliance

The most crucial element of protecting your cannabis business license is ensuring compliance with all state, local, and federal regulations. Easier said than done. 

If you are a cannabis grower, manufacturer, retailer, wholesaler, or marketing professional, you understand how important it is to read between every single line… then re-read that line, take a screenshot of the line, ask questions, email it to yourself, print it out, highlight it, and carefully file it somewhere that it is easily accessible.

It’s a process, to say the least. Here are a few ways to ensure cannabis compliance to protect your business license.

Self-Audit Regularly

Every state with a regulated medicinal or recreational cannabis industry has specific record requirements. Periodic self-audits help to identify needs and discrepancies before they become a problem. Had the Nevada dispensary or California producers self-audited, they may have prevented license revocation for lack of regulatory compliance. The cannabis business compliance target is always moving. Self-auditing can ensure you hit the mark. 

Create Standard Operating Procedures (SOPs)

SOPs serve as a set of procedural instructions that convey a clear roadmap of how the business should function. Standardizing what you do, whether it is lab testing or customer retail  transactions, can reduce opportunities for costly mistakes and inconsistencies. A detailed cannabis SOP may have helped the Pennsylvania identify gaps in security and sales procedures before they were found in violation. 

Documentation Compliance

As a general rule, throw nothing away. You may need it later. Unlike many other businesses, cannabis professionals are often required to keep all source documentation down to the transactional level. Organization of documents is key because you may be asked to produce various documents at the drop of the hat. 

The Nevada dispensary mentioned earlier was asked to produce records of proper sales tracking, camera logs, and security audits, but was unable to do so. Organized documentation is crucial for successful cannabis business compliance. 

The Future of Cannabis Business Compliance

The 2021 New Frontier Data report examined recent cannabis market trends and cast new projections, asserting that by 2025, 5.4 million Americans (or 2.4% of U.S. adults) will be registered patients in medical cannabis states.

Consumer demand for legal cannabis is undoubtedly increasing as it becomes more acceptable to mainstream culture. As the industry expands and changes, so will your need for detailed, accurate compliance. 

Need Help Protecting Your Business License?

The team at Simplifya understands that you didn’t enter the cannabis industry because you are passionate about compliance. It’s okay. We are, and we are dedicated to helping you understand the complex regulatory landscape and make cannabis business compliance easier through user-friendly software. Sign up for a demo and you’ll receive a free trial to discover how our cannabis compliance solution can simplify your management!

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