While managing all the red tape and compliance headaches necessary to operate a successful business in a highly regulated industry, many cannabis shops lose sight of the big picture—that the job of regulators is to ensure certain guidelines are followed while also working to make their sector successful.
As most know, because cannabis remains illegal under U.S. law, the regulatory regime overseeing the multibillion-dollar industry is a patchwork of state-by-state laws and regulations. In practice, this has left each state to develop, implement, and enforce its own unique regulatory apparatus to ensure that products are safe and not diverted to the black market, purchases are limited and allowed, taxes are collected, and laws are followed precisely.
Working well with regulators is critical to the success of any cannabis business. Below are three tips to keep in mind to build positive and productive regulator relationships.
Know the job of a regulator
Within the cannabis industry in states where it is legalized in some form, there are regulators that craft the rules and those that enforce them. Legislatures draft and pass laws that enable the cannabis industry to take root. The executive branch, including the governor’s office, health department, and cannabis-specific commissions, then issue and enforce the rules that flow from the laws. If those rules are not followed, law enforcement and oversight regulators get involved and cannabis businesses find themselves in trouble.
The commissions that develop and implement a state’s regulatory framework want to create a system that is efficient and safe. Cannabis businesses have an opportunity to serve as a resource to these commissions and help shape their state’s rules. Growers, processers, and retailers should take the time and initiative to engage with regulators on the issues that impede their businesses. Difficulties that emanate from complex rules are frequently the result of misunderstandings or lack of awareness of how businesses operate on a day-to-day basis. When presented with the facts at the ground level, regulators can explore whether there are industry-wide patterns and amend the rules or ask the legislature to pass new laws or amendments to fix them.
When businesses run afoul of the rules, law enforcement agents investigate allegations. It is wise for retailers to always be cooperative and transparent with such officers.
While many state cannabis regulators may schedule audits for licensing or maintaining licensing in advance, surprise inspections are not uncommon. Therefore, it is critical that cannabis businesses be prepared for an audit at any moment.
In the case of a surprise inspection, a well-trained staff can be the difference between passing, being fined, or even losing a license altogether. A shop’s staff must know the areas of interest for inspectors, key information, the store’s processes, and how to address items on an inspector’s list of questions. This could entail producing a list of the most recent sales, describing the procedures for checking and verifying IDs, or noting appropriate signage.
I recently saw this in person while at a grower’s site that was preparing for an audit. During my tour, I saw firsthand the work undertaken to prepare the necessary information, update the systems, and reduce risk. In inspections of cultivation centers and dispensaries, the most frequent pitfalls are problems with tracking inventory or inaccuracies in reports to the state.
It is important to remember that the mission of a cannabis regulator is to help the sector grow within certain guardrails, not to completely shut it down. States are legalizing cannabis for constructive reasons, whether to make new kinds of medicine available, open up a new industry, or bring new jobs and revenue. Regulators understand the good that cannabis can do for people and communities. A lot rides on the industry’s success, and failure means harm to the state and the citizens it serves. They are in the business of trying to avoid this through the organization and rules they put in place.
To create the best framework and rules for a state’s cannabis sector, regulators must rely on experts from the industry, not just rules that look good on paper but do not work in practice. Business owners can be among the most effective experts because they can provide early warnings about potential industry-wide challenges that demand changes to the rules. From my experience, those responsible for the rules need – and want – to hear their voices.
Indeed, cannabis businesses should view their state regulators as more than rulemakers and enforcers – they are partners. Without clear lines of communication between the cannabis sector and state regulators, the industry will be held back from advancing, which is what everyone wants.