Beginning in 2019, I served as the lead prosecutor in regulatory enforcement actions at the Maryland Medical Cannabis Commission, where I worked closely with the Commission’s investigators and compliance professionals to develop enforcement procedures to help guarantee a safe and reliable medical cannabis marketplace. During my time as a cannabis regulator, I had an invaluable opportunity to help shape the local regulatory landscape, foster productive relationships between government and industry, and observe emergent cannabis regulatory systems across the Northeastern and Midwestern U.S. I hope that the three notes below can provide some insight as to how licensees can orient themselves for a productive present and profitable future. These observations are mine alone.
The “unregulated market” of the past can create significant personnel problems for licensees in the present. It is to be expected that many of the job applicants for employment with any given licensed cannabis grower, processor, or dispensary have had experience operating within the illegal market that preceded the present regulatory regimes. This can create some hidden risks for licensed cannabis business owners of any size.
I recall several cases in which low-level employees were the source of serious enforcement actions for their companies. In one instance, a master grower who described his main professional experience as an “unregulated grower” in another state lost his license by attempting to defraud the regulator. He kept two books: the nutrition log he presented to the inspectors, which showed organic, chemical-free cultivation methods, and the true and accurate nutrition log he kept hidden, showing that he was in fact applying prohibited pesticides to crops being cultivated for medical use – a potential health hazard for sensitive patients. Not only did the grower lose his license and risk prosecution, but his employer, by order of the Commission, had to destroy all potentially tainted plants – hundreds of thousands of dollars’ worth of product. In another case, a worker at a processing facility pocketed small amounts of cannabis flower for after-hours smoke breaks in a nearby park. He lost his license permanently. Although non-medical possession is mostly decriminalized in Maryland, diversion of any amount of medical cannabis remains a crime.
After the expense and reputational damage that resulted from legal process, both employers instituted additional protocols and controls to prevent any such future regulatory violation. My impression is that these employers, both of which were businesses owned and operated by seasoned professionals, expected that their licensed employees would conduct themselves as professionals in any healthcare field should, with due regard to public safety and their companies’ public image. The overwhelming majority of workers do. But it was the few unprofessional employees, both of whom with experience in the illicit marijuana trade, who saw the regulators as the stand-in for the police forces they would have worked to defy and outwit in the illegal market. This viewpoint costed their employers dearly. To avoid such incidents, licensed businesses should offer training on the changed expectations and new rules that come with a regulated marketplace and cultivate an attitude of openness and cooperation with the regulator. At its best, the relationship between regulator and licensee is not adversarial. It is symbiotic.
Think Like the Canadians: “Cannabis = Tobacco + Pharmaceuticals.” The newness of the legal cannabis market in the eastern and central parts of the U.S. is itself a source of many of its challenges. Despite detailed statutes, regulations, bulletins, and guidance materials, licensees commonly have questions for which the state-issued rules provide few answers. Legalization within the U.S. began in the Western states, where regulators take a comparatively relaxed approach. The West Coast, where the counterculture of the 1960’s established a stronger and more permanent foothold, is more at ease and more accepting of cannabis use in general. By contrast, I recall that a licensed dispensary in a small, rural county had to deal with local police repeatedly attempting to raid their premises on the pretense or presumption that any place where marijuana is sold must be a hub for criminal enterprise. The authorities in the Mid-Atlantic and Middle West will, at least for the time being, view legal cannabis sales with a more suspicious eye. So, what is a licensee to do when the law does not provide a clear answer for them. Licensees can help themselves by using the same method used by regulators at Health Canada.
Early in my tenure as the Commission’s prosecutor, I met several government officials at Health Canada in Ottawa. These devoted public servants were tasked with implementing Prime Minister Trudeau’s original campaign promise of a nationwide legal cannabis market in a short period of time. Their resulting laws and regulations were efficiently drafted, disseminated, and implemented through a straightforward and effective plan: although the regulation of cannabis was new to the Canadian federal and provincial governments, all government stakeholders had deep and regular experience regulating pharmaceuticals and tobacco products, medicinal and recreational products found everywhere. Tobacco and pharmaceutical regulations serve as easy models to follow due to widespread experience with those regulatory structures. In the nascent cannabis markets of the U.S., a similar approach is available to fill in the regulatory gaps wherever they may be found. Modeling standard operating procedures and company policies on rules designed for pharmacy or tobacco production can guarantee acceptable levels of public safety while local governments across the country continue to develop experience and competency in cannabis regulation. By applying this “Canadian Formula,” licensed cannabis business can also tangibly demonstrate their good faith commitment to public health and safety.
Now is the time for the cannabis industry to develop a productive relationship with regulators. I end this blog post on an optimistic note. I believe that the cannabis industry presently has ample opportunity to self-govern and, by so doing, positively influence how state and local governments will regulate the industry. Trade and bar associations can create standards, manuals, and trainings for best practices and collectively work to hold their peer companies to high standards. An industry that proves itself to be a responsible actor, capable of collective self-governance, and eager to build partnerships with state and local governments, will find itself more welcome in new markets – states where legalization is still somewhat distant but where local authorities would nonetheless be eager for the jobs and tax revenues that legal cannabis can bring. The cannabis industry can do much to shape for itself a bright future.
Matthew J. McCarthy was the lead prosecutor in regulatory enforcement actions at the Maryland Medical Cannabis Commission from 2019-2021. He joined Duane Morris as Special Counsel in 2021. He can be reached at mjmccarthy@duanemorris.com. The observations above are those of the author alone.