Five Restrictions that Make Cannabis Businesses Different from Other Businesses
While potentially lucrative, running a cannabis business could be a challenge what with the current limitations and controls imposed upon the industry by certain federal-level restrictions. These strict regulations failed to deter growth in the industry, in terms of the number of businesses and earnings. According to a study called “The State of Legal Marijuana Markets,” industry sales revenues are expected to peak at $22 billion by the year 2020.
Below are five restrictions that make cannabis businesses different from other businesses.
Ambiguous Legal Status
Today, 28 states, the District of Columbia, Guam, and Puerto Rico have passed supportive marijuana laws, however, cannabis and its derivatives fall under the Drug Enforcement Agency’s schedule 1 list of drugs.
Despite the fact that several states and territories have passed their own legislation legalizing medical or recreational marijuana or both, the substance continues to be treated as illegal in accordance with federal law.
Moreover, state and territorial laws are not static and tend to change. There have been cases when consequent laws revised how state programs are implemented. For example, last month, medical marijuana dispensaries in Oregon have been barred from selling recreational pot.
State Reporting Compliance
Retailers use cannabis compliance software allows businesses to monitor sales while ensuring processes are aligned with local and federal regulations. These software programs provide a point of sale (POS) system while tracking sales, revenue, and inventory. An effective compliance software provides a monitoring feature compatible with statewide requirements.
State reporting rules involve a local enforcement division monitoring every marijuana plant, from seed to sale. These divisions often use RFID to track each pot-producing plant in the state. The process involves monitoring the progress of the plant, location, planned use and intended consumer. Businesses are also often subjected to product testing and inspections to ensure compliance.
Since marijuana continues to be illegal, federal law has put in place regulations limiting banks and financial institutions from dealing with cannabis businesses. Should banks decide to work with a cannabis business, the US Department of Treasury’s Financial Crimes Enforcement Network has established a set of guidelines to assist the bank in identifying if their transactions are legal or illegal.
Basically, cannabis businesses are restricted from getting a loan from a bank or any financial institution. Transactions are often run on a cash-basis in many retailers and dispensaries since many financial networks refuse to provide ATM services to cannabis businesses.
This particular restriction is connected with compliance verification requirements for various cannabis-related businesses. Many state laws and regulations require the implementation of a compliance-level security system within the business location. The set up often includes a surveillance camera with the required resolution and footage storage capability. This is to ensure that the system will be able to protect the high-risk and high-value product and also monitor the business for potential illegal activity.
Unlike in other retail businesses where consumers can buy in bulk, cannabis dispensaries have to conform with state regulated purchasing limits. Basically, they can only sell a certain amount of recreational or medicinal marijuana per customer. Despite the sales cap for retailers, the industry has grown over the years, with revenue projections expected to increase in the future.
While the future looks rosy for the cannabis industry in terms of potential revenue growth, proponents are closely watching the federal government’s position on marijuana. Changes in laws and regulations will certainly impact a wide variety of businesses, from dispensaries, agricultural farms, to providers of ancillary services.