Cannabis Compliance: Key Driver in US Cannabis Industry

The cannabis industry has grown steadily in recent years, becoming a multi-billion-dollar business sector. In our country, 38 of the 50 states have legalized marijuana for medical purposes, with 24 for recreational use. Statista estimates this market will be valued at almost $50 billion in the next five years!

But this industry is very complex. Cannabis businesses are subject to laws and regulations that are constantly changing and can be difficult to keep up with.

Most states have set strict laws to oversee cannabis cultivation, processing, quality, distribution, handling, delivery, and sales. For example, almost all require businesses to report to a specific regulatory track-and-trace system, but some use Metrc and others BioTrack.

Moreover, there's a significant discrepancy between federal and state laws. Even though many states have legalized it, cannabis remains illegal at the federal level because it's still considered a Schedule I drug.

All of this creates a complex regulatory landscape where only one thing can help cannabis businesses survive and succeed: compliance.

Understanding cannabis compliance is key to keeping your operations running smoothly! Every step of the cannabis supply chain is subject to strict oversight, so you should understand and comply with the set of rules and guidelines that apply to your business.

But don't worry, we won't let you down! We'll help you learn all about cannabis compliance and how to ensure transparency to prevent legal issues that can greatly affect your business. Read on!

The Cannabis Industry Landscape in the US

The US cannabis industry encompasses smaller, state-level markets, and each has its own regulations and licensing requirements. Since cannabis is still considered illegal at the federal level, this fragmentation presents unique opportunities for businesses. However, it also comes with challenges.

As mentioned above, this industry has experienced steady advancement and is expected to continue growing at a 12.10% CAGR through 2030. Much of this achievement is attributed to legalization.

In certain states, such as Florida and Pennsylvania, medical marijuana markets are maturing, while newer recreational markets in other locations, including New York and New Jersey, are just taking shape.

The stigma against cannabis use is also fading. More and more people are now aware of the medical benefits of cannabis and its potential for significant tax revenues, which has driven increasing public acceptance and recognition.

Different businesses can join and succeed in the cannabis industry, including cultivators, processors, manufacturers, distributors, and retail operators. Ancillary services – particularly those offered by testing laboratories, technology providers, and packaging companies – can also become very busy in this market. However, each segment faces unique compliance challenges, including the following:

• Due to federal prohibition, cannabis businesses don't have access to traditional banking services, nor do they enjoy the same tax benefits as other companies. Consequently, they're forced to operate primarily in cash.
• Interstate commerce also remains illegal for this industry, which forces cannabis businesses to establish separate operations in each state they serve. This usually requires bigger investments and more labor.
• There's still a stigma regarding cannabis use in some regions, especially when it's for recreational purposes, which can affect people's perception of cannabis products and impact sales.
• Regulations and laws are constantly evolving. Therefore, cannabis operators must strive to keep up with the latest developments, implement industry best practices, prepare for potential audits or inspections, and comply with changing requirements to avoid harsh penalties.

Not only do these challenges pose more obstacles for cannabis operators compared to other business owners, but they also contribute to the complexity of the overall regulatory landscape. That's why compliance is so important in this industry.

Cannabis Compliance: A Pillar of the Legal Cannabis Industry

We've made it clear that cannabis compliance is essential for businesses that grow, process, distribute, sell, or deliver marijuana, but what exactly is that?

Essentially, "cannabis compliance" refers to adherence to laws, regulations, or standards set by governments at the federal, state, or local level for all cannabis-related activities.

Cannabis compliance usually encompasses different areas, such as:

• Licensing and permitting
• Zoning
• Product testing
• Cannabis Quality Assurance (QA)
• Financial reporting
• Labeling and packaging
• Inventory tracking and management
• Security measures
• Marketing and advertising

Although strict and changing regulations can be overwhelming and stressful, compliance isn't meant to give you headaches. Actually, it serves many key functions. Some of these are:

• Preventing contaminated or unsafe products from reaching consumers to protect public safety
• Creating a legal market where licensed businesses can operate and succeed
• Preventing the diversion of cannabis products into the illegal market
• Facilitating tax collection and avoiding fraud
• Building trust with consumers, financial institutions, and regulators

In a nutshell, cannabis compliance isn't just a legal obligation but a crucial step for your growth and stability in this industry. Non-compliance can lead to negative consequences. Any business that violates any regulation can be subject to strict penalties, which can range from hefty fines and license suspension to criminal charges.

In addition, a company that fails to remain compliant can build a bad reputation, erode consumer trust, struggle to stand out among competitors, and lose its appeal to investors or partners.

In other words, the cost of non-compliance in an already complex and challenging industry can be fatal to a business.

The Role of the Cannabis Compliance Managers

More complex regulations and changing laws have created the need for dedicated professionals to manage the crucial legal aspects of running a business, leading to the emergence of cannabis compliance jobs.

The cannabis compliance manager has become a prominent figure, for example. This professional plays a crucial role in the management of a cannabis business by focusing on successfully understanding and navigating the intricate regulatory landscape.

What a Cannabis Compliance Manager Does

A cannabis compliance manager should oversee how business operations are handled to ensure every aspect adheres to relevant laws and regulations. These are the common tasks of this professional:

• Develop cannabis compliance policies
• Implement compliance procedures
• Educate and train staff on cannabis compliance requirements and procedures
• Perform inspections and conduct internal audits for compliance
• Handle relationships with regulators and law enforcement
• Oversee cannabis inventory management and tracking from seed to sale
• Stay up to date with changing regulations and industry best practices

A cannabis compliance manager doesn't work alone but teams up with virtually every department within a cannabis business.

For example, this specialist can work closely with your cultivation and processing team to ensure you are properly tracking and reporting products from seed to sale or to check if your procedures adhere to the strictest quality control standards.

Compliance managers also collaborate with finance departments to oversee reporting and optimize tax management, with security teams to implement the right protocols to ensure safety, and with sales or marketing experts to comply with advertising restrictions, packaging requirements, and consumer protection laws.

As the cannabis industry evolves, having a skilled and experienced compliance manager by their side becomes more important for cannabis business operators. These experts are shaping standards and play a crucial role in the industry's legitimization.

Essential Traits of a Cannabis Compliance Manager

As one of the most important cannabis compliance jobs, the manager is the connection between a business's operational side and the regulatory landscape. These professionals must fully understand both topics – all aspects of running a cannabis business and the related regulations. This knowledge is key to turning complex legal requirements into actionable policies.

Expert cannabis compliance managers must also have a unique skill set that is tailored to the demands of this industry, particularly the following:

• Strong analytical and problem-solving skills to interpret regulations and identify any issues that may affect compliance
• Solid communication to clearly explain laws and regulatory requirements to business owners and staff members at all levels of the organization
• Attention to detail to avoid oversights that may pose compliance risks or lead to other major legal problems

Besides such skills, cannabis compliance managers typically have other qualities, such as a strong educational background (with degrees in several fields, such as law, public policy, or business administration), and specialized certifications.

State-Specific Compliance in the Cannabis Industry

As explained above, one of the biggest challenges for cannabis businesses when it comes to compliance is the varied and fragmented regulatory landscape across different states.

There are similarities or common areas between most states, including the following:

• Licensing: In all states, cannabis businesses are required to obtain appropriate licenses for each cannabis-related activity, whether it be cultivation, processing, distribution, or retail.
• Testing: Cannabis products must be tested for different factors, such as potency or contaminants, before being sold to consumers.
• Packaging and labeling: Most states have set strict rules to define how cannabis products must be packaged and the information their labels must display.
• Inventory: Most states require cannabis businesses to monitor products' movement at each stage of the supply chain, from seed to sale.
• Security: In almost all states, cannabis businesses are urged to implement safety measures and install specific security equipment to prevent theft and diversion.
• Marketing and advertising: Cannabis businesses must also comply with restrictions on how cannabis products can be marketed or advertised or the channels that can be used for these purposes.

Although some cannabis regulations are similar in different places, each state has its own rules for related activities.

For example, California and New York have a strong focus on the environmental impact of cannabis operations, so many of their regulations address water usage and resource management.

Illinois and Massachusetts, in contrast, have committed to addressing historical injustices that stem from cannabis prohibition or the "war on drugs," so both states prioritize social equity in their licensing processes.

These varying regulations present unique and significant challenges for cannabis businesses, especially for multi-state operators (MSOs).

MSOs must understand and comply with different rules in each state where they operate. This means these businesses will likely have to hire more than one cannabis compliance manager or set up separate teams for each location or market, which often leads to increased costs and more operational complexity.

Fortunately, there's a solution for MSOs facing such challenges: cannabis compliance software.

Distru, a specialized cannabis ERP, can streamline compliance across multiple jurisdictions. Our innovative solution is equipped with features and tools that will help you automate compliance-related tasks, such as report generation and recordkeeping, to reduce human error when reporting and free up managers to focus on other issues.

Cannabis Tracking Systems: The Backbone of Industry Compliance

Compliance is mandatory and essential for a cannabis business, but that doesn't mean a regulator will move into your office. So, how will regulatory bodies know you're complying with laws and regulations? This is where seed-to-sale tracking systems come into play.

Seed-to-sale tracking systems are designed to follow every plant from cultivation until it's finally sold to a buyer, creating a form of chain of custody for cannabis products in the legal market.

Metrc and BioTrack are the two most important seed-to-sale tracking systems today. Learn more about each below.

Metrc (Marijuana Enforcement, Tracking, Reporting & Compliance)

Metrc, which stands for "Marijuana Enforcement, Tracking, Reporting & Compliance," is a highly used regulatory tracking system in the US cannabis industry. It was created by Jeff Wells, founder of a company formerly known as Franwell, who has spent over 30 years building software and over 15 developing Radio Frequency Identification (RFID) technology.

The following states and territories use Metrc as their mandatory track-and-trace system:

• Alabama
• Alaska
• California
• Colorado, including industrial hemp
• District of Columbia
• Guam
• Kentucky
• Louisiana
• Maine
• Maryland
• Massachusetts
• Michigan
• Minnesota
• Mississippi
• Missouri
• Montana
• Nevada
• New Jersey
• Ohio
• Oklahoma
• Oregon
• Rhode Island
• South Dakota
• West Virginia

Features and Capabilities of Metrc

Metrc has the following features and capabilities:

• Metrc tags: Businesses are required to place Metrc tags on each plant, product, or group. These tags contain chips that carry data about the specific item they're attached to and transmit that information to regulators.
• RFID technology: Metrc tags use RFID technology to identify each plant or product before reporting, which provides real-time tracking and traceability.
• Seed-to-sale tracking: Metrc tracks cannabis plants across the entire lifecycle, from growth, cultivation, and processing to testing, distribution, and sale.
• Batch tracking: With Metrc, businesses can track cannabis materials in batches and record every step associated with each batch –such as trimming or curing, for example– to accurately monitor its movement, processing, and sale.
• Transfer and transportation logging: In Metrc, businesses can log information on transfers and transportation of cannabis products to ensure all of them are handled legally and securely.
• Integrations: Metrc integrates with multiple solutions, including seed-to-sale ERPs like Distru, state licensing systems, and more.

Metrc particularly stands out for combining RFID tags with serialized barcodes to track plants, products, and batches throughout the supply chain. These powerful technologies let companies monitor, trace, and report the movement of cannabis through all stages of production and provide regulators with transparent business information for enhanced compliance.

BioTrack

BioTrack is another leading cannabis tracking software required by law in several states. Developed by Helix Technologies, now part of Forian Inc., it allows businesses to monitor products from cultivation to consumption and report data to the appropriate regulators.

The following states use BioTrack as the mandatory track-and-trace system:

• Arkansas
• Connecticut
• Delaware
• Florida
• Hawaii
• Illinois (soon transitioning to METRC)
• New Hampshire
• New Mexico
• New York
• North Dakota
• Virginia

Features and Capabilities of BioTrack

BioTrack has the following features and capabilities:

• Tracking across the supply chain: BioTrack allows businesses to track cannabis at every stage, including cultivation (genetics, nutrient, yields), processing (raw materials, finished products, quality), distribution (movement from the manufacturer to the retailer), and sales (transactions).
• Customizable workflows: With BioTrack, workflows can be customized according to each business's operations.
• Integrated point-of-sale (POS) system: BioTrack offers an integrated POS to manage sales and payments in dispensaries.
• Lab result tracking: In most cases, BioTrack records and retains QA and testing results, importing this data directly from the lab.
• Transportation manifests creation: BioTrack allows businesses to create transportation manifests, which are required in some states when cannabis products are moved between businesses or locations.
• Compliance reporting: BioTrack generates over 100 customizable reports that can include information on different key aspects (inventory, transfers, sales, and more) and be used to comply with state and local regulations.

BioTrack has become a popular track-and-trace software for several reasons. Its intuitive and flexible interface allows business operators to quickly learn how to use it and adapt the system to their operational needs.

This system uses barcode technology to track cannabis plants and products, which enables the collection of detailed information on items, inventory movements, and sales. Plus, BioTrack features tools for managing patient records in medical marijuana markets.

Cannabis businesses using BioTrack can choose between a government traceability system and a commercial software solution, although the former is mandatory in some states.

Comparison of Metrc and BioTrack

Metrc and BioTrack were both designed for the same purpose: tracking cannabis products across the entire supply chain. But, there are important differences between the two, including the following:

• Metrc has a larger market share than BioTrack. It's used in many more states and territories.
• BioTrack has both a government traceability system and a commercial software solution, but Metrc only offers a government version.
• Although both systems use barcodes, Metrc incorporates RFID technology, which offers added benefits.
• With BioTrack, cannabis businesses can customize and print their own tags. Metrc, on the other hand, requires businesses to order tags directly from the supplier.
• BioTrack only requires post-harvest materials to have an identifier when creating products for retail sale, while Metrc states that it's mandatory for all of them.
• Metrc offers several customization options but tends to be more rigorous in product identification, tracking, and reporting processes, while BioTrack is more flexible.

Distru: Empowering Cannabis Industry Compliance

At Distru, we understand how important it is to enter accurate, up-to-date data into your state's mandatory track-and-trace system to ensure compliance. That's why we've worked hard to integrate the two most popular ones!

Our solution stands out for our live 2-way sync with Metrc, and we're soon integrating BioTrack, too! Here's everything you need to know!

Overview of Distru as a Cannabis ERP Solution

Staying compliant in the complex cannabis world isn't an easy thing to do. Fortunately, specialized software solutions have emerged to help businesses manage their operations, boost efficiency, and drive sales while complying with strict industry regulations.

One such solution is Distru! Our innovative ERP system is specifically designed to meet the needs of cannabis businesses and offers the right features to ensure compliance.

Distru supports cannabis businesses across the entire supply chain by offering the following:

• Inventory management: With Distru, you can track every batch and lot at every stage (raw materials, work-in-progress, or finished goods), monitor stock levels and expiration dates, manage pricing and categorization to create an organized catalog, access your inventory history, and more.
• Order management: Distru manages both customer orders and purchase orders from suppliers, including detailed information on key aspects (order entry, fulfillment, and shipping) and providing real-time updates on their status. Plus, our solution connects with cannabis POS systems for seamless order processing.
• Manufacturing: Distru can double as a cannabis manufacturing software and streamline production management. Our solution allows you to track individual batches of products through each stage, store recipes, build Bills of Materials (BOMs), calculate Cost of Goods Sold (COGs), design and print cannabis labels, and create custom assemblies.
• Quality control: Besides tracking products from seed to sale to identify any issues that may affect quality, Distru allows you to attach test results and cannabinoid information to your packages to ensure your products meet quality standards.
• Financial management: Distru features multiple tools for cannabis accounting, invoicing, payments, and reporting and integrates with the most popular accounting software, such as QuickBooks, Sage, and Xero. With our solution, you can centralize all relevant data, integrate multiple departments (such as sales and shipping) into a single system, manage inventory and cash flow, export payments or invoices, identify revenue drivers, track costs associated with operations or products, and generate key reports (such as profit and loss statements or balance sheets).
• Compliance reporting: Distru generates different reports required by regulatory agencies, helping you prove compliance with regulations during audits or inspections.

Integration with Metrc and BioTrack

Besides providing the features listed above, our cannabis ERP software ensures your data is up-to-date and accurate in your mandatory tracking system by automatically synchronizing information on both sides, which eliminates the need for double data entry and reduces the risk of errors.

This live 2-way sync is made possible by our integration with both Metrc and BioTrack!

Metrc Integration

Distru seamlessly integrates with Metrc, which offers many benefits to cannabis businesses operating in states where this system is required.

Metrc outage? Don't worry! With our solution, you only have to enter your data once, even if the state-mandated system is down. Distru ensures your information is accurate and updated on both platforms, no matter what.

Keep working. Distru will sync your data once Metrc is back online!

With Distru, you can also generate compliant tags and labels for plants and products, check against Metrc requirements, and automatically report all mandated data, including transfers and sales.

All of your important documents will be ready exactly when you need them. Distru will save you hours managing CoAs, printing manifests, or tracking multiple test results by doing it for you!

BioTrack Integration

Distru will soon offer a similar and equally powerful integration with BioTrack, which is greatly beneficial for cannabis compliance. As of publishing this article (11/18/2024) the integration is not available, thought it is in active development for launch in 2025.

The goal is to have Distru automatically sync with BioTrack, with all of your information on inventory movements, sales, and transfers  up-to-date on both platforms. Besides saving you valuable time, this will reduce discrepancies and errors in reporting.

Creating manifests and other documents required for cannabis compliance can be overwhelming and time-consuming too. Distru automates information transfer to make this process easier and faster.

Our ERP software is built on deep knowledge of industry requirements. Distru's integration will be built to align with BioTrack's unique regulatory requirements and streamline cannabis compliance.

Benefits of Distru's Integration with Metrc and BioTrack

Integrating Distru with your state-mandated track-and-trace system, whether it's Metrc or BioTrack, can benefit you in many ways. Here are the advantages our solution offers when connected to any of these options:

• Data synchronization: Since Distru automatically synchronizes your inventory data with Metrc or BioTrack, there's no need for double manual data entry, which saves you time and reduces errors.
• Compliance automation: From reporting sales and transfers to generating compliant manifests, Distru's integration with state tracking systems can automate several cannabis compliance tasks.
• Real-time compliance checks: Distru can perform checks against state regulations or BioTrack/Metrc requirements in real time and alert you about potential compliance issues before they become larger problems.
• Simplified audits: Since Distru records all transactions and enters this information into the corresponding state tracking system, this integration can significantly simplify the audit process.
• Time savings: Automating data transfer between Distru and your state-mandated tracking system will save you a lot of time since you won't have to spend hours on manual entry or reconciliation.
• Error reduction: By eliminating the need for manual data entry into multiple systems, Distru's integration with state tracking systems reduces the risk of errors and discrepancies, which can lead to costly compliance issues.
• Improved traceability: If data flows seamlessly between both systems, it's easier to trace cannabis products, which enhances supply chain management and supports your compliance efforts.

How Distru Helps Cannabis Compliance Experts

Distru also contributes to this industry's development by supporting cannabis compliance jobs!

For cannabis compliance managers, for example, our solution can be invaluable. Distru serves as a central hub where you can manage all your business operations and compliance requirements, even if you operate in multiple locations.

Our software is designed to reduce the complexity of cannabis operations and improve efficiency. Distru automates many routine compliance tasks, allowing managers to free up time to keep up with regulatory changes, develop regulatory compliance programs, and focus on other relevant issues.

Final Thoughts

Distru's integration with Metrc and upcoming integration wiith BioTrack proves how important technology is for cannabis compliance. The industry is developing, and so are the solutions that businesses and professionals use to adapt to changing regulations and the evolving market.

Integrated solutions like Distru are helping hundreds of businesses comply with cannabis regulations and will shape the future of the industry!