It’s summer of 2018 and the commercial cannabis market is heating up.  As licensing continues, more and more cities and counties are enacting regulatory programs, continuing to expand the marketplace.  And the transition period is over.  Starting just a few days ago, as of July 2nd, every licensed commercial cannabis business must comply with all the regulations of operating a cannabis business in 2018.  The regulations are fierce and unforgiving.  Between the three licensing agencies, there are hundreds of pages of emergency (soon to be final) regulations.  And that is just the beginning.  California cannabis business is the most highly regulated industry on the planet. We haven’t fact checked that, but challenge anyone to prove us wrong.

Beyond the emergency regulations, and not to mention the long list of other laws governing California “unregulated” business, there are the underlying California cannabis codes (BPC, HSC, TRC, and so on) governing all aspects of cannabiz, along with multiple lateral state agencies’ rules and regulations to follow.  Oh … and your local cannabis laws also must be complied with.

Take for instance a typical pizzeria business in California.  You have the routine CA business laws to comply with (Employee/HR, Payroll, State/Local Tax, etc.) and maybe some detailed regulations from the Health Department.  Not too difficult, not too painful if a small mistake is made.  You can give a patron food poisoning and face nothing more than a scathing review on Yelp.

Now take a state licensed cannabis distributor.  All the same routine biz laws as the pizzeria. AND …

Stiff local permit and operational compliance. Permit and license renewals. Operations: security compliance, recording (video and documentary), motor carrier permit and compliance, insurance compliance, waste management compliance, reporting compliance, shipping/transport compliance, vehicle compliance, employee compliance.  Products: packaging/labeling, quality assurance, product reconciliation (req’d every 14 days).  Testing Compliance: sampling, video recording and retention, chain of custody. Excise and Sale/Use Tax compliance (FTB, CDTFA). Track and trace compliance. And there are so many more legal requirements  to list but we have been told a blog post should be rather short.

Take a look at California Code of Regulations, Title 16, Division 42. for 122 arduous pages of regulations that must be complied with by a distributor.  It seems an unfair task to require any business to accomplish such a burden, but compliance is not optional.

The State’s enforcement arms have already begun monitoring compliance.  And history proves that state agency enforcement branches are vigilant, active, aggressive and effective.  State fines and/or penalties in other California regulated industries can begin mounting easily into the hundreds of thousands of dollars and shockingly reach the tens of millions.  And city/county fines and penalties are similar and often piggy back each other compounding the damage to the business.

The state cannabis codes and regulations are structured and intended to produce the same results.  One compliance violation can lead to exposure and additional citations, multiplying the monetary penalties (and potential de-licensure which is fatal to the business).  The cost to defend the violations can also be painfully expensive.

California state agencies have often been called predatory in their proliferation of violations, fines and penalties.  But true or not, that is immaterial.    Because there is an ultimate defense to such an attack.  Operational compliance.  No longer can a cannabis business afford to neglect regulatory compliance.  Get ahead of the state and establish compliance control.  Your business depends on it.  And the cost of a full time Chief Compliance Officer or retaining a qualified attorney will save you $$$$ in the short term and long run.  Avoidance of just one violation can justify the cost of the preemptive management for years to come.

We aim to help you avoid not just one, but any compliance violation, by providing and implementing a tailored system of operational compliance designed to forge your business a path free from regulatory roadblocks.

For more information regarding Regulatory Compliance Control, contact Jasun Molinelli or Adrian Lambie.