• Taylor H.

Cannabis Business Consulting

Updated: Nov 6, 2019



Not very long ago, the concept of a cannabis business involved shady deals with unmarked plastic bags in dimly-lit back alleys, inconspicuous hand-shakes with dollar bills, and futile efforts to escape the long arm of the law. Today, in states where cannabis is legalized, citizens’ access and usage of cannabis now closely resembles that of the nineteenth and early twentieth century, before the first attempts at federal prohibition. During those times, cannabis was freely available at drug stores in liquid form, as a refined product called hashish, was a common ingredient in patent medicines and over-the counter concoctions as a cure for nervousness, headaches, melancholy, rheumatism, confusion of thought and so forth. In fact, Vanity Fair advertised Hasheesh Candies, at the time a candied cannabis confection or now known as an edible, as “a pleasurable and harmless stimulant” in their 1862 issue.


It’s no secret that for thousands of years, marijuana was not only legal, but an important agricultural crop among cultures throughout history that held commercial, medicinal and spiritual value. The cultivation of cannabis, specifically hemp fibers, can be traced back to at least 12,000 years ago[i], which places the plant among humanity’s oldest cultivated crop. The farming of hemp was highly encouraged and widely cultivated for the fibers to make clothing, rope, paper, linens, food, medicines, building materials and more.


Fast forward to the 21st century where the legalization, expansion and growth of the cannabis industry has been compared to the way broadband internet spread in the 2000s and even the dot-com boom. But with the rapid shift in state laws and public opinion, it’s worth mentioning the speed with which cannabis was made illegal.

Over a century ago, prohibition of cannabis in the United States, specifically hemp, a variety of the cannabis sativa plant, began at the state-level in the early 20th century. In 1913, California, Maine, Wyoming and Indiana were the first states to issue a ban on marijuana and in 1937, the federal government passed the Marijuana Tax Act, which levied a fee on commercial transactions involving cannabis, hemp, or marijuana. By that time, every state had laws in place that made the general possession or sale of marijuana illegal and punishable.


Some have argued that the intention of the Marijuana Act was to reduce the hemp industry, with efforts and influences from Andrew Mellon (President Hoover’s Secretary of the Treasury and DuPont’s primary investor), Harry J. Anslinger (Mellon’s nephew-in-law and head of the Federal Bureau of Narcotics and Dangerous Drugs), William Randolph Hearst (newspaper publisher and politician), and the Du Pont family (one of the wealthiest families in America). To these financial tycoons, hemp was declared dangerous and a threat to their lucrative enterprises, specifically the Du Pont family’s new synthetic fiber, nylon, that was competing with hemp. Others dispute a link between hemp and nylon, claiming the development of nylon was to produce a fiber that could compete with silk and rayon. While it’s difficult to say and easy to point fingers, the anti-marijuana laws were uncontroversial and passed with an absence of legislative debate and public outcry.

The controversial debate over the years has been largely shaped by propaganda portrayals of drug use reinforced by politicians and advocacy groups who supported them. Newspapers and magazines influx of “yellow journalism” published melodramatic and sensational stories associating marijuana with murder, torture and mindless violence.


In 1936, the film Reefer Madness was released. Originally devised as a morality narrative to warn parents against the dangers of cannabis. It was an exploitation film, a lurid melodrama about a group of dope-smoking teens who descended into a hell of murder, suicide and madness brought on by the infernal herb. Reefer Madness was just the beginning of the annual crusade against narcotics and the number of sensational crimes disingenuously tied to marijuana was not based on evidence or actual events but blossomed from the vivid imaginations of journalists charged with sensationalizing the story of drug use and addiction. Convincing the country that cannabis posed such a danger to society that only prohibition could save it was never going to be easy, but the Federal Bureau of Narcotics succeeded in creating an anti-cannabis campaign that left an indelible mark on the American psyche by exploiting their worst fears: addicting, personality-

destroying, violence-causing.[ii]


The assumptions about the ill effects of cannabis use had persisted for decades without any significant reconsideration. The media campaigns against drugs persisted well into the 1990's, in every medium imaginable, from television to t-shirts to milk cartons, as a cause purportedly absent of political overtones. Following the anti-drugs campaigns of recent years, it is fascinating to note that today’s liberalization efforts have largely succeeded not by trying to shift attitudes about drugs, but by redefining marijuana as medicine and by focusing on the economic and social costs of the incarceration that has resulted from drug laws.


History has a tendency to repeat itself, but what about historical events unraveling in reverse? With the current state-level push toward legalization, the biggest contradiction of all is that since the century-long drive for prohibition was initiated – which is becoming increasingly more difficult to explain or justify - cannabis has become progressively popular. Today, ten states and the District of Columbia has legalized cannabis for recreational use, while 22 states have legalized the use of cannabis for medicinal purposes. From the shadows, cannabis retailing has moved from street corners and back alleyways to state-of-the-art dispensaries. [iii]






FINDING THE GOLD IN THE GREEN RUSH

From tech moguls, lawyers, politicians, law enforcement officials, celebrities and more, there is no shortage of people who are not only advocates for recreational and medical marijuana, but who are seeking ways to invest in the cannabis industry. Legalization opened the doors for many entrepreneurs who are willing to wade through the reams of complex and constantly-changing cannabis landscape to capitalize on the blooming market.


As more states vote to legalize some form of marijuana, sales of legal cannabis have skyrocketed. According to New Frontier Data, the market is forecasted to exceed $22 billion by 2025 with a compound annual growth rate of 14.7% – and it’s no doubt that such a growth rate will attract the attention of investors. While it’s still relatively difficult to invest directly in legal cannabis through public equities, venture capital firms and private equity funds have raised hundreds of millions of investment dollars. Backed by PayPal founder Peter Thiel, Privateer Holdings, a private equity firm focused on the cannabis industry became the first in the industry to cross the $100 million mark in Series C funding with companies such as Bob Marley’s Marley Natural and Leafly in its investment portfolio.


Former U.S. House Speaker John Boehner (R) and former Governor of the State of Massachusetts Bill Weld (L) joined the advisory board of Acreage Holdings, a New York cannabis business with marijuana cultivation, processing, and dispensing operations in 11 states. Boehner, formerly staunchly opposed to marijuana reform efforts, and Weld said in a joint statement they, “believe the time has come for serious consideration of a shift in federal marijuana policy.”


According to the 2018 Marijuana Business Factbook released by Marijuana Business Daily, sales of medical and recreational marijuana in the United States is projected to reach $22 billion by 2022. New Frontier Data, a data analytics firm focused on the cannabis industry, forecasts that if legalized on the federal level, the cannabis industry could create an entirely new tax revenue stream for the government, generating millions of dollars in sales tax and payroll deductions. Between 2017 and 2025, it’s estimated that the federal government would reap $51.7 billion in sales tax from the cannabis industry.



STATE LEGALIZATION

More than half of the United States has legalized some form of cannabis, whether it be recreational, medical, or CBD-only for qualifying medical patients. Other states have opted for a middle ground of decriminalization rather than full-fledged legalization. 10 states and Washington, D.C. have legalized recreational cannabis for adults over the age of 21.


These states are:

In the United States, the non-medical use of cannabis is decriminalized in 13 states (plus the U.S. Virgin Islands). Every state that has legalized some form of cannabis use has its own unique set of laws and regulations that are state-specific.



Recreational or “adult-use” Marijuana: the term “adult-use” comes from the idea that not all patrons of a cannabis dispensary are consuming cannabis solely for medicinal purposes, but rather for pleasure. Cannabis provides a myriad of unique benefits that are mistakenly characterized as “getting high.”[iv] These include its ability to extend patience and promote self-examination; to awaken a sense of wonder and playfulness, and openness to spiritual experience; to enhance the flavor of a meal, the sound of music, or the sensitivity of a lover’s touch; to open the mind and inspire creativity; to bring poetry to language and spontaneity to a performer; to catalyze laughter, facilitate friendship, and bridge human differences.


Medical Marijuana: refers to cannabis and cannabinoids that are recommended by a doctor for the relief of symptoms for certain medical conditions. Medical marijuana isn’t used to cure diseases, using it may not change the outcome of a certain disease, but it can ease certain symptoms and improve the quality of life for patients. Medical marijuana can be effective in treating: chronic pain, nausea, muscle spasms, seizures, glaucoma, migraines, anxiety, insomnia, inflammation, depression, mood disorders, post-traumatic stress, neuropathic pain to name a few.


States with only Medical Marijuana Programs:


A doctor’s recommendation, a medical marijuana certification and additional documentation required by the state is needed in order to purchase and use medical marijuana from a dispensary.


Cannabidiol (CBD) and Low-THC: Cannabidiol is one of the 400+ ingredients found in cannabis but lacks the psychoactive effects most commonly associated with cannabis; in other words, it’s non-intoxicating. Many states have passed CBD-only laws legalizing the use and possession of certain CBD products for specific, qualifying medical conditions. These laws are state specific and often limit the legal possession and use of CBD products with minimal tetrahydrocannabinol (THC) to children with epilepsy, seizures, nerve and muscle afflictions.


Decriminalization: refers to a policy in which individuals caught possessing small amounts of cannabis for personal consumption will not face criminal prosecution, receive a criminal record or a jail sentence; instead will be subject to only some type of lesser civil penalty, such as a fine (often how a minor traffic violation is treated). To be clear, decriminalization of marijuana is not the same as legalization of marijuana. Decriminalization refers to a state repealing or amending its laws to make certain acts criminal, but no longer subject to prosecution.



FEDERAL AND GLOBAL LEGALIZATION

Legal on one level, outlawed on another. At the federal level, cannabis remains a Schedule I narcotic under the Controlled Substances Act, where Schedule I substances are considered to have a high potential for dependency and no accepted medical use. Although legislation advocates have been lobbying legislators for decades to reschedule marijuana, there have been no large-scale clinical trials on marijuana to prove the drug has medical value to the federal government. These studies are infinitely more difficult to conduct when a substance is strictly regulated by the federal government as a Schedule I drug, leaving any proposed legislation trapped in a catch-22.


Unfortunately, federal law always takes precedence over state laws. The Department of Justice under former President Barack Obama said it would allow state-level rules to stand without much federal interference so long as the states tightly regulate the drug and make efforts to keep it from children, criminal drug cartels and other states.

The Obama administration chose to enforce the federal law as leniently as possible in states where voters elected to legalize marijuana under the guidance of the Cole Memorandum; however under the Trump administration, Attorney General Jeff Sessions has launched a new war on cannabis legalization by rescinding the Obama administration’s laissez faire approach. Sessions said in a statement that the move will allow federal prosecutors “to use previously established prosecutorial principles that provide them all the necessary tools to disrupt criminal organizations, tackle the growing drug crisis, and thwart violent crimes across our country.”


The federal government is stunting much-needed research, keeping institutional investment at bay and blocking exportation. However, politicians at the top of both Democratic and Republican parties have spoken out about their support for decriminalizing marijuana at the federal level and have introduced new legislation in the United States Congress in an effort to reform marijuana policies. The following pieces of legislation have been introduced in Congress:

  • Senate Bill 2667: Hemp Farming Act of 2018 – remove hemp from the Controlled Substance Act and allow the plant to be grown and sold as an agricultural crop. (Introduced April 12, 2018)

  • House Bill 5050: Sensible Enforcement of Cannabis Act – prohibit the Justice Department from prosecuting people using medical or recreational marijuana in states where its legal (Introduced February 15, 2018)

  • House Bill 4815: Marijuana Justice Act of 2018 – eliminate criminal penalties for people who import, export, manufacture and posses marijuana with the intent to distribute. (Introduced January 17, 2019)

  • House Bill 1810: Small Business Tax Equity Act of 2017 – Amend the federal tax code to allow marijuana businesses in compliance with state laws to take business-related tax credits and expenses (Introduced March 30, 2017

  • House Bill 1841: Regulate Marijuana Like Alcohol Act – remove marijuana from regulation under the Controlled Substance Act (Introduced March 30, 2017).

  • House Bill 1227: Ending Federal Marijuana Prohibition Act of 2017 – remove marijuana from the controlled substances list and leave legislation up to the states. (Introduced February 27, 2017)

  • House Bill 975: Respect State Marijuana Laws Act of 2017 – Amend the Controlled Substance Act to remove penalties for people who produce, possess, distribute, dispense, administer, or deliver marijuana in compliance with state laws. (Introduced February 7, 2017)


One hurdle the United States Congress may face is international drug policy treaties. Many countries, including the United States, signed on to three major international drug policy treaties requiring participants to limit and even prohibit the possession, use, trade, and distribution of drugs outside of medical and scientific purposes, and must work together to stop international drug trafficking. The treaties are:



The U.S. currently drives 90% of global cannabis sales, but the share will drop to 57% by 2021. Legal cannabis is going global with Canada leading the way. According to new report from the Brightfield Group, a cannabis market research firm, the international market for cannabis is projected to hit $31.4 billion by 2021 with a compound annual growth rate of 60% as other countries liberalize their marijuana laws.


  • In 2013, Uruguay became the first country to fully legalize marijuana where the drug is legal to cultivate, distribute and consume. Uruguay also legalized the sale of recreational cannabis in pharmacies, making it the first country to ever move cannabis via drug store retail.

  • Canada is the second country in the world – and the first G7 nation – to legalize recreational marijuana nationwide. Prime Minister Justin Trudeau announced that adults will be able to purchase and consume cannabis legally from authorized suppliers in Canada as of October 17, 2018. Canadian cultivation facilities have been ramping up their operations in hopes of securing long-term exportation contracts with markets in Europe and South America.


BANKING IN THE CANNABIS INDUSTRY

The cannabis industry is a multi-billion-dollar industry, but it’s important to note one urgent issue facing the legal market – banking. The all-cash nature of the cannabis industry makes it exceedingly difficult for business owners to open and maintain bank accounts, thus creating unique burdens for cannabis business owners. Many owners can go through several bank accounts opening and closing throughout a single year. Some have made strides to conceal or disguise involvement in cannabis-related business activity to secure an account by utilizing a management holding company with a non-descriptive name, claiming to engage in commercial activity unrelated to cannabis. Even if a company can secure a bank account under false pretenses, after a few months of large cash deposits – which often have a lingering scent of marijuana – the bank will investigate and consequently close the account.


The majority of the banking system refuses to serve the legal industries among the nine states where recreational cannabis is legalized, leading to all-cash transactions which have increased the risk of robberies and makes it increasingly difficult to create a safe environment for both employees and customers. Among the other operation and logistic hurdles cannabis business owners face, owners are forced to pay vendors and their taxes in bags of cash.


There lies a complex web of federal regulations that deter banks and financial institutions from working with legal cannabis businesses, specifically businesses that cultivate, manufacture, distribute or dispense cannabis products. Why? Because cannabis remains a Schedule I illegal drug at the federal level under the Controlled Substance Act. Federal law prohibits the distribution and sale of cannabis, rendering financial transactions from cannabis-related businesses as funds derived from illegal activity. As a result, banks, including state-charted ones, are reluctant to provide traditional services to cannabis businesses with fear of criminal prosecution for “aiding and abetting” money-laundering activities from criminal enterprises and directly violating the Bank Secrecy Act (BSA), which requires financial institutions to assist federal regulations in detecting and preventing money-laundering activities.


Because federal and state laws about cannabis are not harmonized, any financial activity from a state-licensed cannabis business is, by federal definition, funds derived from illegal activity. However, banking institutions can work with cannabis businesses, so long as they file reports and comply with a heavy set of regulations. The Financial Crimes Enforcement Network (FinCEN) from the United States Department of Treasury outlined their expectations regarding marijuana-related businesses stating that banks are required to file Suspicious Activity Reports (SARs) even in states where cannabis has been legalized and conduct due diligence when assessing the risk of providing services to cannabis-related businesses.


A bank will regularly file SARs on a cannabis-related business, and the following are likely to apply:

  • Marijuana limited SARS, which means a cannabis business is not violating state law or violating a Cole Memo priority;

  • Marijuana priority SARs, which means the bank believes the cannabis business is violating state law or a Cole Memo priority; and

  • Marijuana termination SARs, which means the bank thinks a cannabis business is a threat to its anti-money laundering system under the BSA, therefore must end its relationship with said cannabis business.

As stated by the FinCen, this due diligence conducted by a financial institution usually includes:

  • Verifying with the appropriate state authorities whether the business is duly licensed and registered;

  • Reviewing the license application (and related documentation) submitted by the business for obtaining a state license to operate its cannabis-related business;

  • Requesting from state licensing and enforcement authority’s available information about the business and related parties;

  • Developing an understanding of the normal and expected activity for the business, including types of products to be sold and type of customers to be served (i.e. medical versus recreational customers);

  • Ongoing monitoring of publicly available sources for adverse information about the business and related parties;

  • Ongoing monitoring for suspicious activity, including for any of the red flags described in this guidance; and

  • Refreshing information obtained as part of customer due diligence on a periodic basis and commensurate with the risk.


The SAFE Banking Act (Secure and Fair Enforcement Banking Act) was first introduced to Congress on June 8, 2017. If passed, this legislation allows cannabis businesses the ability to access the banking system and removes the risk and uncertainty by providing criminal and civil “safe harbor” protections for depository institutions which provide services to a legitimate cannabis business. It also reduces public safety risk by getting the enormous amount of cash off the streets.


California has set to pass a bill to create the nation’s first cannabis-focused bank. California Senate Bill 930 takes a limited approach to provide all the parties with a safe and reliable way to progress forward with the increasing financial headache. The proposed state charter bank would be very limited compared to major national banks such as Bank of America or Chase. The bank would allow licensed industry operators to make deposits and issue checks to be used for the payment of state, local fees, taxes, payment of rent on leased properties and to vendors located in the state.





POTENTIAL CRYPTOCURRENCY AND BLOCKCHAIN SOLUTIONS

Blockchain technology paved the way for growth of cryptocurrency, providing a transparent record for millions of transactions across the globe. Cryptocurrency companies using blockchain technology (mostly associated with Bitcoin) are hoping to bridge the gap between banking and financial institutions and the industry’s financial headache by proposing cryptocurrency and blockchain technology as the cure for the cash-only business. This technology has the potential to also solve the challenges around chain of custody for seed-to-sale tracking of legalized cannabis and give cannabis businesses the ability to project supply and demand, leading to better management of inventory and resources.


A BRIEF INTRODUCTION OF CRYPTOCURRENCY AND BLOCKCHAIN TECHNOLOGY:

  • Cryptocurrency: A digital asset designed to work as a medium of exchange that uses strong cryptography to secure financial transactions, control the creation of additional units, and verify the transfer of assets. Cryptocurrencies use decentralized control system, operating independently of a central bank, and works through an open, distributed ledger technology, typically a blockchain, that serves as a public financial transaction database.


  • Blockchain: a continuously growing list of records called blocks, which are linked and secured using cryptography. Each block typically contains a cryptographic hash of the previous block, a timestamp, and transaction data. By design, a blockchain is secure and resistant to modification of the data and managed by a peer-to-peer network collectively adhering to a protocol for inter-node communication and validation of new blocks.


  • How it works: Transactions, or “blocks” are added in a linear fashion, or “chain,” after they have been certified by other members of the blockchain as valid. Once recorded, the data in any given block cannot be altered retroactively without alteration of all subsequent blocks, which requires consensus of the network majority. All transactions are permanent and trackable to the initial entry, or genesis block.



Cryptocurrencies offer dispensaries and cultivation facilities a safer way to handle cannabis transactions. Using a cryptocurrency, such as Bitcoin, operators can minimize the amount of cash on hand while adding a level of transparency to every sale or transaction. Blockchain, the mechanism behind cryptocurrency, is an incorruptible digital ledger of economic transactions that can be programmed to record not just financial transactions but virtually everything of value. A Seattle-based firm call düber is looking to bridge the gap between banking and the cannabis industry. Duber is planning a new cryptocurrency called dubercoin (DBR) that will be used to reward cannabis consumers, solve payment problems and alleviate some of the safety hazards that come with an all-cash business.


The technology has potential in a different area outside of cryptocurrency – although a small number of dispensaries offer the choice of paying with cryptocurrencies as a viable payment solution and have installed bitcoin ATMs.


  • How it can work in the cannabis industry: A cultivator can input details about each crop (i.e. the date the flower was harvested or pesticide levels throughout the growth cycle). The data can be stored and verified via blockchain technology, and instantaneously shared with all parties on the platform (parties may be cultivation team members, cultivators in other facilities, retailers, producers and even end-use consumers). When the product is ready to be transported from a cultivation facility, the blockchain platform can verify that a distributor is licensed; preventing unlicensed distributors from hijacking your products. Blockchain will maintain all records of a transaction or series of transactions (i.e. purchase orders, receipts, testing and lab results) and ensure that products are being labeled correctly. Members of the blockchain can verify the labeling is correct before it’s attached to the products. In turn, allows regulators a streamlined audit tool and end-consumers transparent information.


Canada’s government officials were looking for new ideas on how to track the chain of custody from seed-to-sale as Canada prepares for the sale of recreational cannabis nationwide in October of 2018. Researchers at IBM proposed blockchain technology to government officials in British Columbia, Canada as a tracking methodology for seed-to-sale for legalized cannabis. The advantage to cannabis businesses is that blockchain allows a better system for tracking sales and managing inventory, and could help government officials better track the source, sale and pricing of cannabis. Cannabis cultivators could use the technology to track inventory and project supply and demand.


IBM contends that use of blockchain technology will enhance visibility of activities and identification of where an asset or product is at any point in time, who owns it, and what condition or state it’s in. IBM claims blockchain can help governments take control of sourcing, selling and pricing of cannabis products, thereby reducing or eliminating illegal sales, assist cannabis producers with real-time inventory management, improve projections of supply and demand, and elicit trends of consumption through data analytics.


It was IBM’s proposal that sparked momentum for the idea of blockchain in the cannabis industry, and many companies are exploring the use of blockchain for point-of-sale and supply chain systems:


  • Paragon, a blockchain platform built for the cannabis industry offers everything from cryptocurrency (ParagonCoin) to a blockchain solution (ParagonChain) designed to expedite and digitize the cannabis supply chain.

  • MassRoots, a cannabis social media hub, is now transitioning to a cannabis focused software company, tying blockchain to its cannabis point-of-sale tracking business, MassRoots Retail.

  • Software company Greenstream is building a blockchain-based supply chain system for the cannabis industry that could be accessed by retailers, suppliers and regulators.

  • Nuvus Blockchain, a Nevada-based software company hopes to create the largest blockchain platform for the cannabis industry with the goal of providing a secure and transparent tracking system for cannabis transactions. The entire supply chain of cannabis would be tracked, offering the chance to provide consumers, doctors, cultivators, retailers and government officials a completely transparent record of the entire cannabis supply chain.


Blockchain in the cannabis industry would instill transparency on the type, potency and potential benefits of different cannabis strains and their effects on the human body; alleviate some of the safety hazards that come with an all-cash business; a transparent tracking system for the chain of custody from seed-to-sale of cannabis products; and offer an alternate method of payment and financial transactions.




CANNABIS INDUSTRY CREATING CAREERS

The cannabis industry is and will continue to be a major economic driver for the U.S. economy, not only generating billions of dollars in tax revenue but providing new job and business opportunities. There is a growing body of evidence to show that a burgeoning cannabis industry creates an upward trend in employment opportunities. According to a study by ZipRecruiter, the total number of job postings for the United States cannabis industry increased by 445% in 2017. The emerging market has generated between 165,000 and 230,000 full-time and part-time jobs, and is expected to employ more people than manufacturing, utilities and government industries.


Chris Walsh, industry analyst and editorial vice president at MJBizDaily said at The Marijuana Business Conference & Expo “to put this into perspective, there are potentially more full-time marijuana industry workers than there are librarians or kindergarten teachers throughout the country – and over 6 times the number of coal miners in the U.S.” The cannabis industry continues to be a positive contributing factor to growth at a time of potential decline in the job market.

A few of the jobs positions in the industry are:

  • Budtender

  • Bud Trimmer

  • Cloning Staff

  • Compliance Officer

  • Flowering Staff

  • Cannabis/ Edibles Chef

  • Extraction Technician

  • Grow Master/ Cultivator

  • Delivery Courier

  • Professional Joint Roller

  • Analytical Chemist

  • Production Staff and Manager

  • Packaging Staff and Manager

The significant growth within the cannabis industry’s legal job market is the result of medical and recreational cannabis laws expanding throughout the United States. However, the industry’s job creation potential hinges on whether more states legalize marijuana.[v]


IMPACT OF MEDICAL MARIJUANA IN HEALTHCARE




FDA Approves its first marijuana-derived drug. Epidiolex, also known as cannabidiol or CBD, will be used to treat rare forms of epilepsy. G.W. Pharmaceuticals achieved the approval for a plant-based medicine related to cannabis for treatment of epilepsy. For the first time in history the federal government has officially acknowledged what has long been obvious to the cannabis industry. Cannabis is a medicine, and the patent holder for cannabis as a medicine is coincidentally the U.S. federal government.

The opioid painkiller and heroin epidemic have led to a record number of deadly drug overdoses.


According to the National Institute on Drug Abuse:

  • Each day, more than 115 people in the United States die from overdosing on opioids.

  • Roughly 21-29% of patients prescribed opioids for chronic pain misuse them.

  • Between 8-12% develop an opioid use disorder.

  • An estimated 4-6% who misuse prescription opioids transition to heroin.

The growing acceptance, accessibility, and use of cannabis and its derivatives have raised important public health concerns, but also has sparked research and growing recognition of the medical benefits associated with cannabis. One of the primary uses of medical marijuana is for pain control as an alternative medicine to opioid painkillers.


Pain is a profitable, multi-billion-dollar business for big pharmaceutical companies, but the issue is doctors primarily prescribe opioid painkillers as a method of pain management. Severe chronic pain is often treated with opioid narcotics, such as Vicodin and Percocet, and analgesics, such as ibuprofen or acetaminophen. Opiates and narcotics are effective in relieving severe pain but are highly addictive and have significant harmful side effects. Analgesics are not addictive but are usually inadequate for reducing or eliminating pain and have long term effects.


Like opioids, cannabis has been shown to be effective in treating chronic pain as well as other conditions such as seizures, multiple sclerosis and certain mental disorders, according to the National Institute on Drug Abuse. However, many medical professionals prefer prescribing painkillers rather than medical marijuana because the opioids have been proven effective for treatment of chronic pain.


The legalization of medical marijuana for chronic pain in many states has resulted in a pain-management revolution for many individuals. Using cannabis to treat pain means many chronic pain sufferers can significantly reduce their reliance on opioids. Data from states where cannabis laws have been passed suggest that even as conventionally used, cannabis may be playing a role in offsetting the opioid addiction epidemic. Studies have shown that cannabidiol have promising results in opioid withdrawal symptoms. According to a study conducted by the University of Michigan, cannabis use was associated with 64% lower opioid use in patients with chronic pain.

Medical marijuana for chronic pain has been shown to be an extremely effective treatment and much safer than opioids. Patients suffering from pain related to the nervous system have found particularly strong improvement in symptoms, whether they smoke cannabis, eat it or use it as an oral spray. With an alarmingly high number of people dying due to an epidemic of opioid overdoses, cannabis is becoming a much more popular alternative for many who suffer from pain daily. In many instances, cannabis has been shown to not only decrease side effects that result from taking opioids and other medications, but also improve the quality of life for many patients.





TYPES OF CANNABIS BUSINESSES


There are five main types of cannabis business licenses for operations that deal directly with the cannabis plant, otherwise known as plant-touching cannabis business.

  1. Cultivation - licensed to cultivate (grow), process, and package marijuana; to have marijuana tested by a testing facility; and to sell marijuana to retail marijuana stores, to marijuana product manufacturing facilities, and to other cultivation facilities, but not to consumers.

  2. Distribution/Transportation - licensed to transport marijuana from a marijuana establishment to another marijuana establishment.

  3. Product Manufacturing - licensed to purchase marijuana; manufacture, process, and package marijuana and marijuana products; and sell marijuana and marijuana products to other product manufacturing facilities and to retail marijuana stores, but not to consumers. Marijuana products include things like edibles, ointments, and tinctures.

  4. Testing - licensed to test marijuana and marijuana products, including for potency and contaminants.

  5. Dispensary - licensed to purchase marijuana from cultivation facilities, marijuana and marijuana products from product manufacturing facilities, and marijuana from other retail stores; can sell marijuana and marijuana products to consumers. Can be medically licensed, adult-use/recreationally licensed, or both, depending on the licensing structure of the state.



NON-PLANT TOUCHING CANNABIS BUSINESSES

The cannabis industry is much more than dispensaries and cultivation facilities. Legalization is sparking a product-development frenzy around cannabis, and the types of consumables are proliferating. With cannabis infused edibles and beverages to bud and breakfasts and cannabis lounges – entrepreneurs are expanding the scope of cannabis businesses by finding new and unique ways to capitalize on the blooming market.


There is an entire ecosystem of businesses developing around and for the cannabis industry and cannabis consumers:


Technology: point-of-sale software, e-commerce platforms, consumption devices, blockchain technology.

Finance: financial institutions specifically for cannabis businesses.

Culinary, Food and Beverage: cannabis chefs, pop-up culinary experiences, private parties, cannabis infused beer, sparkling water, coffee, tea

Healthcare:

Transportation: delivery services (varies by state) but list of dispensaries that have delivery services can be found on:

Ancillary Services:

Education: professional training and education.

Security: Military veterans with Special Operations experience providing facility and transportation security.

Publications:



EDIBLES AND CANNABIS CUISINE

There are many ways to make money in the cannabis industry without growing or selling cannabis flower, just like there are many ways to consume cannabis products. But how in the world will people consume multi-billion dollars worth of legal cannabis? It turns out that people really dig cannabis edibles. According to Arcview Market Research, in 2017, 11.1 million cannabis-infused edibles were sold in Colorado alone. Consumers in California purchased $180 million worth of cannabis-infused food and beverages, which amounted to 10% of the state’s total cannabis sales. That percentage spiked to 18% in February 2018, just one month after recreational sales began, per Green Market Report. Since edibles can command higher prices, edibles often account for 25-60% of a dispensary’s profits.


Edibles continue to garner attention in the cannabis industry, and with solid reason. Edibles have emerged as one of the fastest growing product categories in sales and consumer adoption. In a recent study by High Yield Insights on cannabis consumer attitudes and behaviors, 41% of current users in adult use states reported using more edibles post-legalization. The reason for the explosive growth is that as the cannabis market expands, its attracting and reaching people who don’t want to smoke. Edibles are becoming commonplace and have a wider appeal than smoking cannabis flower, since they’re less conspicuous to consume and provide a discrete, smoke-free experience.


In a constrained, regulated market with limited shelf space, Nancy Whiteman, co-founder and CEO of Wana Brands has honed in on the edibles market. Whitman found the sweet spot in gummies by finding products that worked for her customers and delivering a consistent experience. Combined with an explosion of innovation, creative social media marketing, and enticing names, it’s easy to see why so many eyes and dollars have turned to edibles. Wana now commands 50% of Colorado’s growing gummy market and has expanded into Arizona, Oregon, and Nevada dispensaries with Florida and Illinois on the immediate horizon.


The Specialty Food Association named cannabis edibles as one of the top 10 food trends of 2018. Edibles today are mostly candies, from dosed gummy bears to lollipops, mints, hard candy, caramels and more. But the scope of edibles reaches far beyond confection candy and pot brownies, where taste is an afterthought. From cannabis-infused pizzas in Massachusetts, to chocolate spread in California, the possibilities are endless. The shift from stoner snacks to foodies and fine dining puts the focus not only on the buzz the plant creates when consumed but on its flavor profile and pairing capabilities, just like any other herb or wine. Chefs around the country are embracing cannabis and elevating the lowly edible to the same sensory realm as high-end cuisine by curating pop-up dinners, supper clubs and private events where cannabis can shine. Take for instance Wine Industry Network’s event, Wine & Weed Symposium, where they explore the cannabis sensory experience, similar to the sensory exploration and experience wine offers.


You won’t find restaurants that offer full-service cannabis dining just yet, but states that have legalized recreational cannabis are offering licenses and permits that allow chefs to serve cannabis-infused foods in private settings. But for people who live in states where private events are not allowed some chefs are passing on their kitchen secrets to home cooks with cook books, kitchen gadgets and herbal infusion appliances. With appliances like the LEVO and the MagicalButter, cooks can infuse butter or oil with cannabis by adding their ingredients and pressing a button.


Media and entertainment have been pushing the narrative of cannabis normalcy into the homes of more conventional audiences with culinary shows like VICE’s “Bong Appetit” and VH1’s “Snoop and Martha’s Potluck Dinner Party” to Netflix’s “Cooking on High.” Bringing cannabis into the culinary conversations opens the door and minds to consumers who may have been against or misunderstood the potential, versatility and use of cannabis.




HOW IMPORTANT IS A CANNABIS BUSINESS CONSULTANT?

The legal cannabis industry is growing and changing rapidly. As both medical and recreational usage clear hurdles with voters and legislation, increasing competition for a stake in tomorrow’s billions will require cannabis entrepreneurs to optimize every facet of their cannabis business from day one. The legal cannabis industry has made huge strides in a very short time. The industry is projected to generate a massive $22 billion dollars by 2020, and it’s no wonder entrepreneurs and venture capitalist companies see this emerging market as their next big money maker. But the grass isn’t entirely green when it comes to the landscape for starting a new cannabis business; there are several significant challenges and risks that business owners must successfully navigate and overcome.


Many savvy entrepreneurs have started and launched a successful cannabis business off the ground all on their own, so needless to say, it's not impossible. However, many were faced with difficulties securing a license, missed opportunities, costly delays caused by a trial-and-error process of setting up operations and outright failure of some ideas.


The path to a successful and sustainable cannabis business is not an easy one to navigate and filled with many challenges, regulations and roadblocks. It takes a village to plan, launch and operate a successful and compliant cannabis operation. When it comes to accounting, taxes, security, compliance, insurance, banking, legal protections, marketing and government affairs, there are special considerations that are unique to the cannabis industry. Partnering with the right people who have a deep amount of industry contacts and have owned, operated, or worked with a successful dispensary, production or cultivation facility is a necessity, not a recommendation. There are experts in the industry who are willing to help and shed their expertise to cannapreneurs to create a successful and sustainable business, to save you time, money, resources and to provide you with the industry insight needed to succeed.


Operating in this emerging and rapidly changing industry requires experienced partners who can help avoid costly mistakes, who can identify easily accessible opportunities and ultimately, save you time. After all, your time is valuable. A cannabis business consultant can provide clarity about some of the foggy aspects of the cannabis business start-up process, on-going development and the ever-changing compliance regulations. They bring their experience, industry insights, knowledge and resources to help streamline the start-up process, to help plan, launch and maintain operations for a highly successful medical or recreational cultivation, production, or dispensary operation-all without the headaches.


Don’t let these factors dissuade you from starting a new cannabis venture. Cannabis is a movement and the momentum is on your side. More states are legalizing recreational and medical cannabis each year at an accelerating rate. You just need to be smart and seek the right partners to help you compliantly and profitably realize your vision of becoming a cannabis entrepreneur.


This is where The J. Whitney Group, your cannabis business consulting firm, excels. We work with cannapreneurs and groups who have the resources, passion and desire to enter the market, but lack the technical expertise and industry knowledge to plan, launch and operate a successful and compliant operation. We are your mentors. We are your tour guides for trekking this emerging industry. If you are looking to break into the cannabis industry, The J. Whitney Group is here to help you succeed! Every successful business starts with a vision, and we are committed to seeing your vision come to fruition. Our team of consultants can help you navigate the startup process and support you through the on-going development of becoming a successful cannabis business.




WHY HIRE A CANNABIS BUSINESS CONSULTANT?

You wouldn't trek the back-country woods in flip-flops and wishful thinking. Chances are you wouldn't last through the night! Partners like us, consulting firms that have emerged from established markets have trekked the rocky road that is the cannabis industry. Our clients have done it before and we know what new businesses or transitioning businesses are likely to face. And, if you face something we haven't seen before, we know how to navigate the waters, and if we can't do it, we can tell you who can.


Whether you want to start a dispensary, production or cultivation facility, securing a cannabis business license in your state is the first hurdle, as the number or license awarded are limited and often merit-based. Each state has their own individual, complex and unique licensing requirements, meaning there is no “one size fits all” or “cookie cutter” business model to deploy to secure a cannabis business license. The contents of a cannabis business application tend to be complex and require a great deal of valid data and other information that must be carefully crafted, presented and explained. Every detail must be correct. The contents must be carefully formatted and organized. Citations and references to state statues must be accurate, thorough, consistent and the writing must be clear and void of all grammatical, spelling and punctuation errors. After all, this is your first impression – and quite possibly your only chance for the foreseeable future to prove to the state that you have the means, the minds and ability to build and operate a successful and compliant cannabis business. The application requires an ability to demonstrate that you are going to be a good operator, that you have industry experience or show that you can execute a well-thought-out business plan, primed for success.


Whether you are in the pre-licensing or post-licensing stage, we provide you with the industry insights and technical expertise to plan, launch and operate a successful and compliant dispensary, production or cultivation facility. We advise on resources to use, assist in selecting vendors, gather information, provide insights on best practices and assist in creating the next steps on the ladder of sustainable growth. For current owners of a cannabis business, a consultant can play a key role improving overall profitability. We customize a plan that aligns with your goals and meets your unique needs, help you improve yields, consistency, quality and/or efficiency.


At The J. Whitney Group, we act as advisors and advocates for your cannabis industry success through every step, and every hurdle of the process. Our expert consultants will be able to help you at every step, from planning and licensing, to hiring and training the right staff, ensuring consistent cultivation and staying in compliance with state rules and regulations. We provide you with the industry insights we have gained through our experience and extensive research. Our professionals will share their expertise on topics such as retail operations, license application, regulatory compliance and operations management.


We work with cannapreneurs like you who have the resources, vision, and desire to enter the market, but lack the technical expertise and industry knowledge to plan and launch a successful operation. We wholeheartedly dedicate our energy, resources, diligence, ambition and intellect to bring the vision of your cannabis business to fruition.


We get a handle on your vision and help you forge the path to making your vision a reality. It's not a simple process, but you know that. While we can't promise completely smooth sailing, we can offer wholeheartedly dedicating our energy, resources, diligence, ambition, cannabis industry knowledge, and intellect to bring the vision of your cannabis business to fruition.



ROLE OF A CANNABIS BUSINESS CONSULTANT

Starting a cannabis business is an adventure and that’s precisely what we are advocating – an adventure, or as we like to call it, a new cannabis (ad)venture. Cannapreneurs are thrill seekers, risk takes, gamblers, they are people who are willing to take a shot in the dark because starting a cannabis business is a shot in the dark from the very beginning. There is no guarantee you’ll be awarded a cannabis business licenses and there is a bigger purpose at stake here than simply growing a plant and selling it. Cannapreneurs are people looking for a challenge, not a smooth-sailing startup process because the industry in riddled with risk and uncertainty, and cannabis entrepreneurs are people who thrive on it. These are people who shake hands with adversity and win the fight through persistence and resilience, but it takes a village to build and operate a successful and compliant cannabis business.


This is where The J. Whitney Group, your cannabis business consulting firm, trusted friend and helping hand comes in. Cannabis is a movement and we are here to build the momentum. We act as advisors and advocates for your cannabis industry success through every step, and every hurdle of the process. We are your tour guides to navigate this road less traveled. We are here to help forge the path because your trail is uncharted and unwritten.


We get a handle on your vision and help you forge the path to making your vision a reality. It's not a simple process, but you know that. While we can't promise completely smooth sailing, we can offer wholeheartedly dedicating our energy, resources, diligence, ambition, cannabis industry knowledge, and intellect to bring the vision of your cannabis business to fruition.


If you had the proper tools, the right supplies, the right gear and the right leaders navigating the trail through the back-country woods, you'd make it out alive and have a thrilling adventure story to dazzle the hearts and minds of friends, family, and elevator-mates, for a lifetime. We can make it through the night, together, because we are paving your road to success.


If you are looking to break into the cannabis industry, The J. Whitney Group is here to help you succeed. We invite you to explore our website for more information and let The J. Whitney Group help you create a cannabis business built for sustainable success.



[i] https://hightimes.com/culture/crimes-reefer-madness/

[ii] http://origins.osu.edu/article/illegalization-marijuana-brief-history/page/0/1

[iii] https://www.ancient-origins.net/history/cannabis-journey-through-ages-003084

[iv] https://www.leafly.com/news/cannabis-101/what-is-a-marijuana-dispensary

[v] https://news.medicalmarijuanainc.com/job-growth-cannabis-industry-grows-447-outpacing-tech-healthcare/

© 2019 by The J. Whitney Group.

All Regional Laws Apply to The JWG Services

Cannabis Business Consulting
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The J.Whitney Group, LLC

8565 S. Eastern Ave. 

Las Vegas, NV 89123

Bldg. 150 | Ste.172

P: 702.623.5543

E: cannabusiness@jwhitneygroup.com