Cannabis Regulators: Who Watches The Watchers?

Owners of highly-regulated businesses know all too well that their regulators are human. We practice marijuana business law in a number of different states, all of which are highly regulated by one or more state agencies. And those agencies, and the people within them, make mistakes from time to time that directly impact our cannabis clients. Sometimes the errors are simple, like a lost document that we then need to resubmit, causing only a few days delay. Other times, the agency error’s consequences  are more severe. In one case, a state agency three times approved one of our marijuana license applicant’s physical location, only to then be revoke the approval after discovering that the location was too close to a recreation center — a center for which we had specifically requested approval multiple times. The applicant had to move, after having already spent tens of thousands of dollars on build-out, most of which is unrecoverable.

This is where things can get frustrating and increasingly tricky. Licensing and regulatory agencies do not always fix their mistakes in a way that is fairest to the victims of those mistakes. Also, the same people that made the mistakes often continue to review the applications or monitor the businesses.

So you are left with a choice. Do you sue the agency that caused your business to lose $30,000 through no fault of your own? If you do this during the licensing process, you could be putting your entire license at risk. Remember our original premise — regulators are human. Agencies hate being sued as much as anyone. They are not above the defensiveness, stubbornness, and spite that litigation brings out in defendants everywhere. Getting an agency to issue you a license to produce or sell marijuana after you have sued that same agency may be a risky proposition.

Still, agencies usually do not have the right to negligently cause limitless damage to your cannabis business without you also having a right to some sort of remedy. If your company loses $30,000, you want to be able to get that back if you can. But instead of suing in these situations, it is often better to try to resolve the situation at a relatively informal level with the regulatory body. This is where experienced cannabis lawyers come in handy; they have spent so much time working with the regulators that they often can accomplish things just by knowing who to ask and what to request. If the informal method fails to lead results, going through a formal appeal process within the agency is usually the best next step.

Thankfully, agency errors are relatively rare and when they do occur, regulators generally try to remedy them in a way that does not unnecessarily harm the parties they are regulating.  However, when agencies take wrongful actions that harm you, it is important to protect your rights in a way that best positions you to move your business forward.