If Colorado’s Stakeholder approach highlights one thing, it is that you need to understand how your business functions in order to identify what actions are or may be subject to some form of regulation. By understanding your business processes (the real world activities), you will be able to identify current regulations and how they impact your actions as well as anticipating future regulatory actions that you want to be aware of while they are being considered rather than after they have been put into effect.
An easy example is labeling and packaging. You will find that there are very specific rules regarding the content (actual words used), size of print, location on label and even color. There are also regulations addressing the content of packaging (e.g., the chemicals and materials used to make plastic containers). When you are creating your product line and planning your roll out, it would be prudent to check applicable regulations before committing to packaging.
The reason to consider these types of issues as part of “strategic planning” is that your decisions can impact budget, staffing, inventory, warehousing, software controls, importing and scheduling. Responsible fiscal management is complex for any business. It is even more complex when you are operating in areas subject to governmental regulations and enforcement.
Protecting Proprietary, Confidential and Trade Secret Information
This is an aspect of participating in governmental regulatory processes during their development or implementation that is often overlooked. Typically, participation focuses on detailed operational aspect of your business. You may be hesitant to reveal certain of your activities or plans to government officials as an individual stakeholder, however, because your input will be based on your own business actions.
It is exactly for this reason that organizations are formed to represent private sector interests. Your interests typically will be allied with those of others in your segment of your industry. This means that positions asserted by an industry organization reflect the views of multiple businesses rather than just those of a single company. Similarly, data submitted to regulators is collective and not limited to one company. You may find that it is easier to protect your confidential information by working with others in your industry, even with competitors.
Consequently, it is worthwhile for you to consider working with related businesses to monitor and participate in the regulatory processes that apply to your business. [See breakout section on Participating in the Regulatory Process]
Participating in Federal, State and Local Government the Regulatory Process
There are several critical distinctions between Federal and state regulatory processes.
Federal - First and foremost is that cannabis is illegal at the Federal level. This means that any involvement with the Federal government may subject you:
- To some type of involvement with Federal criminal charges;
- May result in your being deprived of any standing to participate in the development or enforcement of a Federal regulation; or
- In Federal Court, you may be deprived of any standing to assert a civil claim
Further, just because of the scope and numbers of entities involved at the Federal level, your input in the development of a Federal regulation will be diluted significantly. On the enforcement and compliance side (See Breakout Section on HIPAA enforcement), your business will be best protected if you are represented by your business attorney. Typically, your business will be subject to regulation just the same as many other businesses – the fact that you are in the cannabis industry will not be the determining factor.
For these reasons, the best way to protect your cannabis business is to use your business’s attorney in dealing with the enforcement of Federal regulations. As early in the process as possible, consult your attorney. This will give your attorney the most options to effectively represent your business interests.
State – Insofar as working within your state, in addition to you or your attorney constantly monitoring applicable state regulatory processes, it is timely for the cannabis industry to form a membership organization to represent the various business interests that comprise the industry.
There are many models to evaluate, from lobbying to technical information and research organizations to self-regulatory entities.
Local – State legislatures that have enacted or are considering the enactment of cannabis related laws almost always address the question of whether state or local law will govern activities within a local jurisdiction. This is one of the more challenging and politically charged topics that state legislators must consider. Typically, the law will allow local governments to enact municipal ordinances that are more restrictive than the applicable state law.
For example, if a state law authorizes recreational use of cannabis, the law may also recognize a city government’s right to enact an ordinance prohibiting or limiting recreational use within its jurisdiction through its zoning or other local regulatory jurisdiction.
What's Next - Self-Regulation, Dispute Regulation, and Privacy
Canopy Boulder presents these Green Papers because we believe that information is the foundation for successful businesses. This is particularly true for those operating in controversial markets such as medical and recreational cannabis. Future Canopy Green Papers will address such issues as Self-Regulation, Dispute Resolution and Maintaining Privacy.
Canopy Boulder is an accelerator and investment company operating in the rapidly expanding cannabis market across the country. Companies completing Canopy’s Accelerator Program continue to draw on our expertise and to seek our advice on a continuing basis. Canopy’s advisory and consulting services are also available to businesses that haven’t gone through our Accelerator Program. For more information, please contact us.