Cannabis Promises to Keep

For most of our clients in Illinois, Nevada, and Washington, the heady days of applying for state marijuana business licenses are behind them. These states have either reviewed or are still reviewing the application submissions, which included operating plans and financials and criminal histories. In those applications, especially in competitive states, the applicants made statements about their businesses intended to make their applications more attractive to state decision makers. Sure, we’ll have a written employee training program and will have a two week regulatory education course for new hires. Of course we’ll perform ongoing financial and security reviews and keep all records on file. Yes, our compliance officer will conduct quarterly compliance audits and will update our compliance manual to prevent future problems. Oh, and we will be donating five percent of our profits to drug education programs in the local schools as well. These statements seemed relatively painless at the time; the applicants just wanted the state to say yes.

Licensees, however, need to realize that these promises are likely as enforceable as any regulation, and if you said you were going to implement something, you actually have to do it.

Most states have inspectors who will be conducting unannounced audits of your new cannabis business. These inspectors will be checking to make sure that you have complied with state rules, but their audits do not have to stop there. They likely will also include a review of whether your business has actually complied with its stated plans. No state wants to approve an applicant to operate a marijuana business based on a plan that the applicant fails to fulfill, and they state that clearly in their regulations. See Washington Administrative Code 314-55-050 (failure to operate in accordance with board approved operating plan subjects license to suspension or cancellation), Nevada Administrative Code 453A Sec. 39(3)(c)(state may suspend or revoke license for failure of medical marijuana establishment to carry out the policies and procedures in the application of the medical marijuana establishment), and Illinois Administrative Code 1290.70(g) and Section 1000.70(f) (Information and plans provided in an application become a condition of the state’s authorization. Dispensaries and cultivators have a duty to disclose any material changes to the application. Failure to comply with the conditions or requirements in the application may subject the dispensing organization or cultivation center to discipline, up to and including suspension or revocation of its authorization by the state).

So, for anyone about to open their cannabis business or who is already open for business, please take a moment to look back at your application submissions. If you promised to distribute employee safety manuals to your employees, you should do it. Now. If you said that you would maintain audited financials, get with your accountant now to plan for it. Getting your license suspended for failing to do what you said you were going to do would be an unfortunate and silly outcome, so stick with your plan. Your state said that you could start running a marijuana business because of your plan, and they will not allow you to do so if you fail to implement it.

Any questions?