Attorneys, Consultants Navigate ‘Wild West’ of Marijuana Regulation Compliance

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It’s not hard to picture Steve Meister walking into a meeting and giving advice like an Old West quick-draw artist shooting from the hip. He talks about laws and the regulatory environment in which California cannabis businesses are operating at a rapid pace, throwing in a few warnings and metaphors along with his advice

Things are changing fast in the cannabis industry, particularly in California, where Meister owns and operates Meister Law Offices, a criminal defense legal firm whose clients include cannabis businesses.  

Meister works with cannabis businesses’ attorneys and consultants to assess compliance from a criminal law perspective, helping these experts navigate the emerging twists and turns in the unfolding cannabis regulation landscape – as well as potentially keeping cannabis business owners out of jail.

“It’s the wild west in the wild west,” said Meister, a criminal defense attorney and a former Los Angeles County prosecutor.

Meister began building up his expertise on the cannabis industry when he started consulting with health care companies to ensure those practices were working within the law. That’s where he developed a process by which he would visit medical practices to help them evaluate their operation and make sure they remained compliant. He also worked with doctors around marijuana recommendation issues, eventually making a natural transition to the cannabis industry.

“It’s all about avoidance and prevention,” he said.

Even though recreational cannabis is now legal in California, there’s a lot to be said for that statement.

A company could be out of compliance for a regulation that its officers or managers don’t even know about, they could then be considered to be engaged in illegal “trafficking” because of cannabis’ status in the eyes of the federal government, and they could face criminal prosecution.

Photography by Gina Coleman

Being in the dark about local or state cannabis laws and regulations isn’t difficult.

Regulations in one city may be different than regulations in another, and then there’s state laws and regulations to consider – and from more than one regulating body. And new local ordinances are constantly being drafted by public entities across the state to help bring cannabis in or effectively keep it out.

“What they’re facing is uncertainty and inconsistency,” Meister said when asked to describe the biggest hurdle cannabis businesses face.

Meister described a “backlog,” talked about around the industry for some time, at varying cities and at the state level that is keeping many cannabis businesses out of the game and on the sidelines for months, or in some cases indefinitely.

The biggest hurdles that cannabis businesses face are at the local level, not at the state level, said Alex Traverso, a spokesman for the state’s Bureau of Cannabis Control (BCC).

Despite broad public acceptance of recreational marijuana, roughly 65 to 70 percent of cities and counties in California still ban all commercial cannabis activity, according to Traverso.

More than 10,000 applications have been received between the BCC, the California Department of Food and Agriculture, and the California Department of Public Health. Of those, the state has so far collectively issued more than 6,500 licenses, he said.

“At this point the bottleneck is really with cities and counties,” Traverso said. “The bureau and the other two licensing authorities are processing applications expeditiously as long as applicants have received local approval.”

One of the most talked about local bottlenecks is in Los Angeles, which, with its 4 million-plus residents, became the nation’s largest city with recreational pot after the City Council voted in 2017 to allow sales.

However, the city has been criticized for its slow licensing process, as the city’s Department of Cannabis Regulation (DCR) has been more focused on issuing temporary licenses to medical cannabis dispensaries established before the state rolled out its recreational cannabis program on January 1.

“If you’re an applicant, what you’re seeing is it taking a long time,” Meister said. “I think if you’re an applicant, it’s probably smart to plan for a six month wait.”

According to Meister, the city has stopped accepting all applications for now. Spokespersons for the city’s DCR did not return a call for comment.

Meister, who has frequent dealings with DCR staff, acknowledged the process in L.A. is jammed up, but he said it’s not for lack of interest to issue licenses.

“I do know that the city is dedicated to making it happen,” he said. “They’re just understaffed.”

Meanwhile cannabis businesses must figure out how to deal with cities like L.A., as well as the state. And depending on what a business does – a retailer, laboratory, distributor, transportation – they must first figure out which agency regulates them. Some are regulated at the state level by the Department of Health, some by the state of Department of Agriculture and some by the Bureau of Cannabis Control.  

Meister isn’t alone in making a living from helping those in the cannabis industry navigate the maze of laws and regulations.

Another operator in this space is ezGreen Compliance, a tech firm offering enterprise compliance and point-of-sale software for licensed medical cannabis dispensaries and cultivators. The Fort Lauderdale, Florida-based firm also assists its customers with the Health Insurance Portability and Accountability Act (HIPAA).

The firm announced Tuesday, June 12, 2018, that it has recently “executed strategic partnerships with a major technology solution” in the cannabis industry that will offer its compliance products and services to its customer base of 1,000 dispensaries across the U.S.  

In Meister’s line of work, he’s more concerned about how regulatory noncompliance would be interpreted as criminal activity.

A cannabis distributor out of compliance could be considered to be trafficking marijuana, or retailer out of compliance could be considered to be unlawfully selling marijuana.

“Prop. 64 covers possession and use, but it doesn’t necessary cover all activity,” he cautioned.

And there is no shortage of regulations that can trip people up.

“It’s a highly regulated industry, just like pharma, just like alcohol, just like medical supplies or healthcare, now add cannabis to that,” Meister said. “Because it’s heavily regulated there are a million ways to screw up, or for regulators to see it that way.”

For now, local and state regulators are busy dealing with regulations and licensing, but enforcement efforts will be stepped up at some point, he said.

“The model that they’re going to use to enforce the regulations are the same ones that they have used in other industries,” he said.

He used the health care sector as an example. An inspector visiting a business who sees evidence of noncompliance will note it, evaluate it and determine whether it’s a serious violation. If it is a serious violation, and other violations are found, regardless of how minor they area, it could add up to overall what regulators would consider an environment of noncompliance.

In health care, regulatory noncompliance can be a theory of criminal activity, according to Meister.

When cities and the state get their regulatory systems ironed out and move out of the wild west of dealing with a flood of applications and figuring out their own frameworks and start focusing more on enforcement of regulations, cannabis companies will need to take compliance seriously, he said.

“It may not have happened yet, but it’s going to happen,” Meister said.

About Author

Don Jergler is the Regional West Editor for Insurance Journal and a veteran business and real estate reporter. He has contributed coverage for the Long Beach Press Telegram, Long Beach Register, Los Angeles Times Custom Publishing and a variety of trade publications.

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