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6 Compliance Risks to Avoid as a Cannabis Business Owner

In many states throughout the country, cannabis is legal. But this legality is often ambiguous and contradictory—especially because the federal government still considers it a “schedule 1” drug. To avoid fines and other legal consequences, you must pay excessive taxes and comply with a host of complex policies that vary from city to city and state to state.

From cultivation to sales and delivery, compliance at every step is critical to the preservation of both your license and reputation. To help you navigate this new legal terrain, take a look at these 6 major compliance risks to avoid in the cannabis industry.

1. Invalid Licenses

No business is more regulated than either medical or recreational marijuana. As such, the licensing requirements are extensive.

Depending on your location, you may need a:

  • Business license;
  • Retail license;
  • Dispensary license; and/or
  • Cultivation license.

You will likely need additional documents on municipal and state levels. All of this documentation must be fully up to date, and all fees must be paid on time. Whether you don’t have the license you need or your license has expired, the consequences may be the same: the end of your business.

2. Insufficient Security Measures

Depending on state law and local ordinance, your dispensary will likely need more than just video surveillance and an alarm system. Your company must properly surveil all inventory at every stage of the distribution process, and even the smallest inventory discrepancy can result in a serious fine.

3. Violation of Product Safety Regulations

Most states require cannabis packaging to be childproof. Additionally, each individual item must have sufficient, clearly marked labels. Be sure to learn what your state requires in terms of safety, packaging, and labeling of cannabis products, and stay on top of changes.

4. Customer/Patient Privacy Violations

To prevent a data breach that compromises your clients’ information, be sure to implement sufficient security measures. Whether a customer’s privacy is violated or you lose records of transactions or inventory, you could face penalties on a civil or even criminal level.

5. Serving Underage Customers

Failing to recognize a fake ID is one of the most common compliance risks in the cannabis industry. Law enforcement frequently has underaged individuals attempt to purchase a product with a fake ID to catch non-compliant dispensaries. If this happens to your business, you will likely be “outed” on social media, and your reputation may not recover.

6. Overselling

Each customer is only permitted to buy a certain amount of cannabis in a single transaction. “Looping” is when a customer purchases the maximum amount of product possible, only to return immediately afterward to repeat the transaction. Generally, individuals do this so they can redistribute the product illegally. If you fail to catch looping customers or simply sell more than the legal maximum, both you and the customer may be sent to jail.

Compliance Is Key to Success

A single misstep can ruin your reputation, result in serious fines, and even shut down your business. To properly comply with all local and state cannabis policies, be sure to do your research and plan ahead. This preparation will help your business survive regulatory scrutiny and experience inhibited growth.

If you have additional questions or would like fully personalized legal counsel and representation, don’t hesitate to get in touch with Purdy & Bailey, LLP. We have 50+ years of combined experience, and we are ready to put this experience to work for your livelihood.

Call (858) 360-7080 or contact us online today. We can begin with a free consultation.

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