A new report from Freedman & Koski, a consulting firm specializing in marijuana legalization and community engagement, envisions the next frontier in the cannabis sector as advances are made to existing regulatory and technology systems and current regulatory challenges and industry uncertainties are overcome.
The report details the problems that plague the current framework of the industry, which the authors define as “Cannabis 1.0.” This framework was marked by a lack of access to banking and other financial services, transportation issues, environmental problems, and water and energy limitations.
The authors conclude that, to overcome these challenges, all sector stakeholders must embrace technology and innovation, especially concerning compliance with state rules mandating that every milligram of THC be tracked from “seed to sale.”
“Cannabis 1.0 has advanced into a multi-billion dollar industry because of all the progress in the states, which are, as has often been said, the laboratories of democracy,” said Freedman & Koski Co-Founder Lewis Koski, who co-authored the report and previously served as the Director of the Colorado Marijuana Enforcement Division during the state’s legalization of cannabis. “The rising influence of tech start-ups in the sector have set the stage for the Cannabis 2.0 era, have helped to remove some of the sector’s unpredictability, and will supercharge its future growth. Federal legalization will not happen anytime soon, but tech companies are paving the way through their data-intensive solutions and will ensure the industry is prepared to capitalize on it and grow when it happens.”
For Cannabis 2.0 to truly take hold, the authors argue that the federal government must comprehensively reform federal laws such as: amending IRS codes so cannabis industry operators are not penalized by section 280E; amending the Bank Secrecy Act and regulations administered by the Federal Reserve, FDIC, National Credit Union Administration, and other agencies to provide access to traditional financial products; and changing regulations so that the U.S. Department of Agriculture and Environmental Protection Agency treat cannabis like other agricultural products and promulgate rules that enhance, complement, or narrow state-level regulations.
“We predict that Cannabis 2.0 is helping to create a tech-driven and agile industry that responds to a shifting and uncertain policy environment, offers workarounds for the lack of federal legalization, and meets the demands of regulators, business owners, and consumers,” said co-author John Hudak, who is a consultant at Freedman & Koski and also serves as deputy director of the Center for Effective Public Management and a senior fellow in Governance Studies at the Brookings Institution. “Private-sector tech companies are leading the way, and it’s time for the federal government to follow.”
View the report.