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Lessons new cannabis entrepreneurs can learn from maturing legal markets

When it comes to cannabis compliance, there is no such thing as a “gray market” – you are either operating illegally and at risk of closure, or you are in compliance and on the road to reaping the benefits of participating in the growing legal market.

As newer legal cannabis markets mature, enforcement will increase and tactics will become more sophisticated.

The recent emergency suspension of two cannabis licenses in Washington give a preview of the types of enforcement cannabis business owners in California and Oklahoma can expect in the near future.

gray cannabis market
The gray cannabis market does not exist.

During a traffic stop on September 20, 2018, local police officers found traced and untraced cannabis products. After receiving a warrant to review the seized text messages from the driver, officials determined the products originated at a cultivation site licensed to North Coast Concentrate and that staff knew about the diversion of the illegal cannabis to the black market. This resulted in the issuance of an emergency suspension of North Coast Concentrates’ licenses and the seizure of hundreds of pounds of cannabis and concentrates as well as 2014 cannabis plants.

The case points to lessons for cannabis operators in maturing legal markets:

  1. Law enforcement will likely use techniques like seizing text messages to show connections between licensees and the black market

  2. Emergency short-term suspensions will be followed by possible license revocation or requirements that owners found responsible leave the business

  3. Violations may result in seizures of not only the illegal cannabis in question, but all cannabis legally owned or found at the property

  4. Increased enforcement will likely result in an increased number of emergency suspensions – we’ve seen an increase over the last year from one suspension in Washington in 2017 to six in 2018... so far

The great news is that cannabis entrepreneurs can reduce risk by making sure to build cannabis compliance into their business plans from the beginning.

And once you are up and running, companies like Highroad will help keep risk low by auditing operations regularly, armed with the latest updates to regulations.

There is no such thing as a gray market in the cannabis industry. You are either compliant or illegal.

Profitable compliance is possible, and in fact it’s the only way to make money in cannabis for over the long term.

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