A tracking tag that will be attached to a cannabis plant is shown at Colorado marijuana business Northern Lights. Marijuana is required to be tracked from seed to harvest and into sale through the state Marijuana Enforcement Tracking Reporting Compliance system, or METRC. (Seth McConnell, Denver Post file)

Cannabis industry org forms to “be ready” for national legalization

Cannabis is joining the ranks of the financial, advertising, real estate and alcohol industries with the formation of its first self-regulatory organization.

The National Association of Cannabis Businesses (NACB) launched Thursday with a powerhouse leadership team and an ambitious plan: Develop and enforce national standards that will increase compliance and transparency, spur growth, and shape future federal regulations. The NACB’s slogan is “Be ready,” in anticipation of federal legalization of cannabis.

The cannabis industry is on a historic growth trajectory even as its businesses operate in a fractured regulatory environment and in the face of uncertain federal policy, NACB president Andrew Kline told The Cannabist.

“What we’re saying is, ‘Let’s take control,'” he said. “Let’s set our own standards so we’re not limited by varying state regulations or subject to what the feds come up with.”

Andrew Kline. (Courtesy NACB)
Andrew Kline, president of the National Association of Cannabis Businesses. (Courtesy NACB)

“The formation of NACB is absolutely a coming of age moment for cannabis,” said Ean Seeb, co-founder of Denver Relief Consulting and a member of the group’s advisory panel. “The industry has reached a stage where businesses are no longer only beholden to state regulations and obligations. It’s time to take the next step to be proactive so that when – not if – marijuana is legalized, we’re prepared.”

Self-regulatory organizations (SROs) are industry-financed, non-governmental groups working to supplement and replace regulatory activities that might otherwise emanate from local, state, and/or federal agencies.

Kline brings decades of experience operating in highly regulated environments, having previously served as a special counsel in the Federal Communications Commission’s enforcement bureau. Prior to that, he was a senior advisor to Vice President Joseph Biden; he also was an assistant U.S. attorney.

A D.C. insider and self-described “student of history,” Kline said he was drawn to the position because, “Cannabis legalization is the purest form of democracy I’ve ever seen.”

Related: International org takes on creating safety standards for cannabis industry

Colorado businesses and the lessons they’ve learned from the state’s “mature” regulatory regime will play an important part in the NACB’s initial efforts, Kline said.

“The state has been at it longer than anybody else, so it provides the largest window into what works and what hasn’t worked,” he said.

As the NACB concept developed over the last three years, the group enlisted two prominent players in Colorado’s cannabis industry to serve on its six-member advisory panel: Ean Seeb, co-founder of Denver Relief Consulting, and Adam Orens, co-founder of Marijuana Policy Group.

Seeb cited Colorado’s pesticide testing and enforcement as an example of a state-developed system that could be exported to a national level. “The state recognized early that clean cannabis was a public safety issue,” he said. “And the testing standards it developed are replicable in other states as we see in Oregon, for instance. But it’s also scalable to a national level,” he said.

Three Colorado businesses are among the NACB’s seven founding members: Boulder’s Green Dot Labs, Denver’s Local Product of Colorado and Pueblo’s Mesa Organics.

The founding businesses are models of state-level compliance and they’ll be pioneers in the NACB’s development of a first-of-its type digital compliance certification platform, NACB chief legal officer Douglas Fischer told The Cannabist. The technology is being built in partnership with IBM and will provide member businesses with real-time compliance management and supply chain tracking.

“It will create an auditable and transparent trail of data for consumers, state regulators, investors and — someday — federal agencies, that shows the business is compliant now and has been compliant historically,” he said.

Beyond providing financial institutions with the data to complete their due diligence, developing a national compliance regime and digital compliance platform that is efficient and effective has the potential to unleash the cannabis industry, said Jim Parco, owner of Mesa Organics and an economics professor at Colorado College.

“Compliance is expensive and time-consuming,” he said. “We’re not in the cannabis business; we’re in the compliance business. If we do it right, we get to sell some cannabis. You wouldn’t believe what I go through to get a clone from my greenhouse to our store, for instance.”

Jumping into the type of self-regulatory environment favored by the financial, advertising and alcohol industries doesn’t faze Parco. He said he was encouraged that the industry would look to Wall Street where the Financial Industry Regulatory Authority (FINRA) regulates the New York Stock Exchange, the NASDAQ and the American Stock Exchange.

“Cannabis cannot be so insular that we miss an opportunity to learn from other highly regulated industries how to make our own (industry) better,” he said.

A cannabis SRO could learn from the history of the Distilled Spirits Council, Seeb noted. That SRO formed in 1970 when three Prohibition-era alcohol-industry groups merged.

“Similar to cannabis, those founding SROs represented a substance that was legal and then made illegal through prohibition,” Seeb said. “When prohibition was overturned, these groups helped spirits navigate the new regulatory and taxation landscape.”

Ultimately, cannabis has been legalized at the state level because voters have approved of doing so in a regulated fashion, Kline said. The nascent cannabis SRO is a logical next step in nationalizing standards to help shore up that consumer and voter confidence.

“It’s an exciting time and a rare opportunity where an industry with such amazing growth potential is on the verge of professionalizing,” he said. “If we do this right, we can take the industry to a place where national standards and regulatory certainty allow businesses to do what they do best.”