The cannabis business, whether serving the medical or adult-use marketplace, is a lucrative industry that continues to see investor interest as federal legalization becomes a possibility down the road.
And yet there are numerous challenges facing growers, processors, retailers, and others in the supply chain — many of them caused by the lack of federal backing and the certainty a national cannabis program would bring. Without legalized cannabis at the federal level, there are barriers that cannabis companies face, such as a lack of standards governing everything from food safety of cannabis edibles to variations in what forms of cannabis can be sold from state to state.
Without federal approval, cannabis companies are vulnerable to the whims of officials in multiple jurisdictions, such as when cash was seized from armored vehicles transporting money from cannabis sales in California and Kansas. (More on that later.)
Companies that operate in several states, known as multistate operators (MSOs), must have a business model that accounts for these variations from state to state. This blog from ImEPIK will look at five major complications MSOs face, at least until a federal standard is applied through legalization.
Be Local — Even Though You Aren’t
Cannabis laws are complicated enough when a business has to master a single state’s laws. Many state laws have allowed jurisdictions to opt out of legalized sales, so there’s no blanket availability even when states approve adult use. Cannabis companies should have in-house legal experts who are knowledgeable about the laws for each state in which they operate or contract with legal firms in each state to handle issues that will arise.
Replicate Successful Training Programs
Training is one area that can be standardized, to a degree, at MSOs. For example, food safety rules in the states with adult cannabis use vary. Still, any operator, including an MSO, will benefit by implementing a food safety plan based on the Food and Drug Administration’s Food Safety Modernization Act. It’s unknown what the final food safety laws for cannabis edibles will look like, but adhering to the same standards as FDA-regulated food gives companies an enviable position when cannabis is approved nationally. Standard training for delivery drivers, retail jobs, and cultivation site employees should also be considered.
Provide a Quality Product
This should be the obvious goal of any company, regardless of the product or service, but it needs to be a mantra for MSOs and the programs serving the states in which they operate. All companies that cultivate a product for state medical and adult-use cannabis programs can only market the cannabis product in that state. While having a single grow operation to supply all jurisdictions in which an MSO operates is easier for quality control, scaleability, labor management, and keeping overhead costs manageable, companies should have a network of suppliers and distributors they trust in each state. Product consistency could continue to be an issue, however, because cannabis cannot be controlled like products manufactured on a factory line.
Watch Out for Highway Robbery — Literally
MSOs have found that they can face legal issues when their operations which are legal in one jurisdiction brush up against law enforcement in an adjacent jurisdiction. A case in point: In 2021, a sheriff’s deputy in Dickinson County, Kansas, stopped an Empyreal Logistic’s armored vehicle and seized about $166,000. The money, collected from legal medical cannabis dispensaries in Kansas City, Mo., was on its way to a Colorado credit union. Similar seizures from the same company in California, a state that has legalized adult-use cannabis, totaled $1.1 million. The government has returned the California cash, but the cases highlight how the whims of officials — even in states where sales are legal, such as California — can wield power based on personal beliefs. While Empyreal Logistics provides banking services and does not transport cannabis, the company has been a target due to weak protections with the lack of federal laws backing the industry.
From MSOs to Boutique Dispensaries, ImEPIK Allows Firms to Tailor Food Safety Programs
ImEPIK’s food safety training program is 100% online, allowing MSOs to offer their employees a standard program that can be customized to the current knowledge level of each training participant. The ImEPIK cannabis training has three levels:
- Level I: GMPs and the Pyramid of Edible SafetyProduce
- Level II: The Edible Safety Plan
- Level III: Preventive Control Qualified Individual online course.
ImEPIK also offers special pricing plans for multiple enrollees, an option for MSOs to ensure employees receive the same training in different states.