Cannabis business regulation is a new and growing area of law. States differ on how and when to regulate, what regulations are necessary for public health and safety, and precisely what is required for compliance.
Compliance is mandatory, and failure to comply could lead to a regulatory enforcement that could threaten your license to operate. It might also lead to litigation by consumers, partners, investors or competitors. In many states, this litigation involves cost shifting, where the losing party pays the litigation bill.
Cannabis business regulation isn’t just complex; it’s young. It’s barely a scaffold, according to one panelist at an Insurance Journal webinar in April. The laws themselves form that scaffold, and regulatory rules and court decisions are only beginning to flesh out the body of law.
The body of law, depending on the state, may seem extremely strict or so lax it’s difficult to know how to comply with it. Yet it’s crucial to maintain compliance with all of it.
The webinar left participants with three main takeaways that apply regardless of what state or states you operate in:
Be aware of compliance issues, especially those that could threaten your license
Regulators may take an aggressive stance to enforcement of cannabis business regulations. That could mean a threat to your license even when the regulations are far from clear. Even if regulators don’t take that stance, non-compliance could still result in litigation. That could be breach of contract litigation from your partners, shareholder disputes, investor claims and product liability claims.
Sit down with your lawyer and discuss what the laws and regulations actually say and make a compliance plan
Where compliance isn’t straightforward, you may need government affairs professionals involved
Whether the laws and regulations seem excessively strict or too lax to follow, there may be various groups attempting to interpret them. There may be several possible interpretations of a law or regulation that haven’t yet been tested in court.
Your lawyer should argue for the interpretation that best supports your argument that you are in compliance. Ideally, your lawyer would have experience with government affairs in addition to litigation to help ensure that your interpretation carries the day.
Use required third-party testing as a defense
Most states require some third-party testing of cannabis products to ensure they are what you say they are. This testing can provide assurances that your product is safe and legal, which can then be used as evidence in regulatory and other disputes.
There is a lot to learn about state-specific cannabis business compliance. Be sure to work with an experienced attorney.