Federal Cannabis Regulation: How the U.S. Can Learn From What Happened in Canada

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When the Canadian bill legalizing the sale of recreational marijuana was passed in October 2018, the industry was split into two—on one side, there were businesses that resisted regulatory requirements (at Qredible®, we call them the ‘rascals’ of the industry), while on the other side, there were businesses who embraced them. 

In the four years since, the results of each side’s decisions have been clear: those who embraced and complied with regulatory requirements saw a dramatic increase in revenue leading to more jobs and a booming industry. 

The ‘rascals’ who resisted, however, did not fare well. Communities in cities all over the country watched many of these formerly established, successful companies close their doors.

In the U.S., the regulatory landscape of the legalized cannabis, CBD, and hemp industry is dizzying at best and turbulent at worst. Overall, the government is moving in the direction of federal legalization, with an increase in regulation posing a unique, bilateral moment for businesses currently operating in the space.

On one hand, rapidly-evolving regulations pose a threat to businesses that either willingly or mistakenly fail to keep up with the changing requirements. On the other, businesses that heed the government’s push for increased regulation have the opportunity to widen the gap between themselves and their competitors.

In this article, we will discuss the impact of federal regulation on the Canadian cannabis industry in order to understand the importance of keeping up with regulatory changes, and how Qredible is here to help legalized cannabis, CBD, and hemp businesses do just that.

Cannabis Regulation in Canada

Prior to federal cannabis legalization and regulation in Canada, the country had permitted medical use of the drug since 2001. Businesses operated under the regulations set out in the Marihuana for Medical Purposes Regulations and The Access to Cannabis for Medical Purposes Regulations

Under these laws, dispensaries intended for the sale of medical cannabis were largely under-regulated—aside from the occasional police raid—and operated in a similar way to many of the current U.S.-based cannabis, CBD, and hemp businesses.   

Cannabis became federally regulated on October 17th, 2018 under the Cannabis Act. The impact of this regulatory change was felt by cannabis business owners, employees, investors, and consumers. 

A Framework for the Legalization and Regulation of Cannabis in Canada

Nearly two years before the legalization became law, a Government of Canada task force published A Framework for the Legalization and Regulation of Cannabis. This report outlined the concepts and plans businesses and policymakers would need to understand regarding federal, provincial, and municipal regulations. 

The report highlighted the goals of the bill, including minimizing the harm of cannabis use, establishing a safe supply chain, protecting the public, and improving medical access.

In section three of the report, titled Establishing a Safe and Responsible Supply Chain, the task force laid out recommendations for the production, distribution, and retail of cannabis. They note that “the Government’s principal interest should be to establish an efficient, accountable and transparent system for regulatory oversight of the supply chain, emphasizing the protection of health and safety and reducing diversion to the illicit market.”

Although cannabis had become federally legal, the conditions under which it could be grown, manufactured, and sold to the public became highly regulated. As such, many businesses either couldn’t or chose not to comply with the changing rules. 

Canadian Cannabis Companies Operating Unlicensed: Closures and Losses

In order to apply for a retail license for their medical cannabis company, all merchants were required to close their doors on or before October, 17th, 2018—the day The Cannabis Act came into effect. They would be allowed to reopen upon receiving the proper retail license.

However, a large number of merchants and retailers failed to meet this deadline, therefore rendering themselves unable to apply for the correct licensing. 

Although cannabis access had increased under the new regulations, a large number of previously successful businesses were forcibly shut down by law enforcement in the months that followed. The punishment for failing to keep up with the new laws was up to $100,000 in fines and up to one year in prison.

Canadian Cannabis Regulation: A Missed Opportunity

While businesses that failed to adhere to new regulations faced complicated legal trouble as well as catastrophic losses in revenue, not all businesses suffered as a result of the changes. 

In the year that followed, the new regulations resulted in an increase of more than 6,500 jobs in the cannabis industry. Licensed producers of cannabis in the country reported a revenue increase of 92% in 2018 and 52% in 2019.

The divide between companies that embraced regulatory changes and the rascals that resisted them demonstrates the importance of prioritizing licenses, registrations, and other safe commerce measures in order to successfully navigate this complex and volatile industry. 

Many compliant companies enjoyed the success that was promised as a result of legalization. The rascal businesses that resisted: they no longer exist.

Qredible®: Supporting Businesses in a Rapidly Evolving Landscape

In the U.S., it is estimated that over 428,000 people are employed full-time in the legalized cannabis industry. As the industry becomes increasingly legalized, that number could reach 1.75 million. The potential for revenue loss and closure poses a massive threat not only to individual business owners but also to entire communities and the economy as a whole. 

Qredible was created to support and protect businesses navigating this evolving regulatory landscape by improving access to valuable technological tools that mitigate risk and promote growth.

Rapidly shifting requirements pose massive challenges to businesses in all areas of the supply chain. Qredible was designed to help them avoid fees, fines, penalties, closures, revenue losses, legal conflicts, and reputational damage.

Proactive Regulatory Compliance with Qredible® 

Businesses in Qredible will have an easier time passing through regulatory requirements as they arise. Not only will they have a comprehensive picture of how their operation is performing with regard to compliance, but they will also be able to actively monitor their licenses, registrations, and certifications for compliance-related risks and concerns. This effectively limits the risk of legal action or repercussions as a result of an expired license or inapplicable registration. 

Using AI compliance monitoring, your team can electronically track and monitor marketing content and product labeling. You will be warned about violative language that could easily become a target for opportunistic plaintiffs’ lawyers and watchful regulatory agencies. 

Leveraging machine learning and artificial intelligence has enabled Qredible to create a virtual resource that saves businesses from expensive legal and compliance bills. 

I wonder: how many Canadian companies were forced to exit the business as a result of the rising cost of compliance? A recent survey found that over 86% of Canadian companies had at least one compliance violation in their online messaging, suggesting that many were unable to afford or simply did not prioritize compliance services that could have protected their business. 

Protecting Everyone in the Supply Chain

There are many benefits for merchants, suppliers, and other cannabis companies in Qredible. But, by supporting these businesses through changing regulations—and by encouraging proactive compliance—Qredible is also helping protect ancillary businesses.

These businesses include: 

  • Landlords
  • Banks
  • Insurance companies
  • Trucking and logistic companies
  • Venture capital and private equity companies

Landlords leasing space to dispensaries that fail to adhere to compliance standards could be subject to fines and fees and even lose their ability to operate their business. 

Other ancillary businesses such as financial institutions and transportation companies benefit from the ability to validate and verify their business partners’ compliance with regulations. Using Qredible, they can access the critical documentation they require. And because the platform is blockchain enforced, they can do so with confidence knowing the documentation can be trusted.

Ultimately, those who stand to lose the most from poor business practices are consumers. With the increasing presence of fentanyl across the country, the threat to public health is very real. Qredible is currently available to businesses, but will soon be accessible to consumers. 

The increased access to validated information will empower consumers to make better purchasing decisions. This will disincentivize corner-cutting in the industry and encourage businesses to engage in better practices, resulting in safer commerce for all. 

It is not the intent or mission of Qredible to tell consumers which company or brand to purchase from, but rather to provide a central digital repository to learn and research the brands that interest them. Similarly, CARFAX does not make judgments about which car to buy, but it provides important details on specific brands and vehicles. Consumers can then make informed decisions with that knowledge.

Making Compliance More Affordable

As it currently stands, the industry has quality control standards for legalized cannabis, hemp, and CBD products. With medicinal CBD products especially, federal regulations are stringent. There are countless rules regarding what a company can or cannot say in its labels, marketing, and messaging. These are all very important to ensure that consumers are not misled. 

In the past, companies had to hire a high-priced attorney to manage, monitor, and address any disputes with regard to messaging and public reputation. With Qredible, much of this job can all be done automatically with artificial intelligence—at a fraction of the cost. 

One of the main reasons consumers continue to purchase black- and grey-market cannabis is the price. And it’s always cheaper to sell unlicensed… until you get caught. Qredible allows businesses to protect themselves from potential risk while raising the value of their product without sacrificing their competitive price point. 

Regulatory Advocacy for a Safer Industry

We believe in proactivity when it comes to compliance. Catching, diagnosing, and solving quality control issues before they lead to revenue loss, legal conflicts, and reputational harm. 

By doing this in advance of anticipated legislation, we help drive good quality regulatory framework through technology. Our plan is to work proactively with state and federal regulators—they have their hands full in a big and rapidly expanding industry. 

The FDA, for example, does not have the resources to maintain the same level of control as they do over pharmaceuticals. They and the industry at large need affordable tech solutions like Qredible to promote safe commerce and better practices. We are hyper-focused on ensuring that the industry becomes safer for all participants and to that end: knowledge is power!

The Future of the Legalized Cannabis, CBD, and Hemp Industry is in Qredible® 

Ultimately, Qredible is here to advocate for and support the success of the entire industry. We believe in protecting businesses with valuable technological tools. Our goal is to advocate for the industry’s best interest when it comes to important policies and regulatory decisions.

The future of Qredible is in building meaningful relationships with governments and regulatory bodies. That foundation of trust will streamline the introduction of new regulations that the industry desperately needs to thrive, without suffering the same losses as were seen in Canada.

When the rascals in Canada failed or refused to participate in the new changes impacting the industry, they paid a dire cost. They are no longer in operation. But it doesn’t have to be that way. The years following federal regulation in Canada saw many positive growth trends that make me feel optimistic about the future of the industry in the U.S. as well. 

I believe that the future of the cannabis, CBD, and hemp industry will be in Qredible: trust, transparency, and support. Join us and you’ll see what I mean. 

Qredible is the only digital registry of verified and validated legalized cannabis, hemp, and CBD brands. Want to be in Qredible? Get started today.

Brian Fitzpatrick

Brian Fitzpatrick

Brian is the Chairman and CEO at Qredible.

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