More than 900 cannabis-related bills moved through state capitols and Congress in 2018, and there are already about 600 bills for 2019 sessions, according to Marijuana Moment’s Legislative Tracking Tools. Each state has its own regulations regarding the forms cannabis can be sold in, how it needs to be monitored, tested, packaged or advertised, and those rules are in flux as states figure out the best way to regulate the plant.
The industry is comprised predominantly by small businesses, so while changes are generally made for good reasons, each can result in a financial burden. For example, when Colorado decided all THC-infused chocolate had to display the THC symbol on the food itself so people would not mistakenly eat an “edible,” chocolate producers had to throw out their custom-made chocolate molds, and design and order new ones.
Last year, Colorado’s Marijuana Enforcement Division changed cannabis warning label verbiage from “Contains Marijuana. Keep out of reach of children” to “Contains Marijuana. Keep away from children.”Ari Cohen, vice president of operations for Dixie Brands, one of the industry’s larger companies, said this seeming small change resulted in the need to develop new labeling for Dixie’s entire product portfolio. The company had over six months to comply but still had to work to make sure inventory levels of the original packaging and finished goods were significantly reduced prior to the deadline.
Dixie Brands sells cannabis-infused products in 4 states, employing about 100 people at their headquarters in CO, with Q3 2018 revenue of $2,435,000 (about double the sales of Q3 2017.) Like other cannabis companies, it is not allowed to deduct typical business expenses on its tax returns because the plant is still illegal at the federal level, so changes need to be made knowing there is less financial leeway than businesses in other industries.
Multi-state operators, companies like Dixie Brands that grow or sell cannabis in more than one state, have an especially complicated time with the changing regulations. They seek to establish a unified set of operating procedures, suppliers and product lines while obeying different sets of laws. “Consistency of the brand in terms of product, packaging and distribution is absolutely critical,’ as firms seek to go national, said Nick Kovacevich, CEO of KushCo Holdings a large provider of ancillary products and services for the cannabis industry. Still, those companies need to balance uniformity with individual state requirements.
The National Cannabis Industry Association’s map shows which states have legalized adult use of marijuana, which allow medical use of some sort, and which are still prohibition states. Many states, like California, are in transition between legalization on paper and a fully functioning market. And so the rules will continue to evolve.