Board Letter from Regina Thurman

The last few weeks in the medical marijuana industry here in Arkansas have been contentious to say the least - and it looks like we’re not done yet!

As the leading advocate for cultivators, distributors and related businesses, we have been busy working with the media, association members and the industry at large. It’s important to us that we understand the needs and wants of the industry and learn how we can best serve association members. We want to support fair implementation of policies and provide the right resources for those who, ultimately, serve patients. We have a passionate group of leaders who are here to collaborate and ensure the sustainability of this industry.

We are here to work with policymakers to protect and support our industry and to serve as a resource to the public and news media about the importance of this new economy. We expect a seat at the table as we continue to establish best practices. Arkansas may be new to the medical marijuana industry, but we can do this right and serve as a model to other states as we advance appropriate legislation, regulation and implementation. As the industry evolves, we will continue to host events and education opportunities for both our members and the general public.

Support Promised by Trump

President Trump has promised to support congressional efforts to protect states that have legalized marijuana, according to Senator Cory Gardner of Colorado. Uncertainty has prevailed since January, when Attorney General Jeff Sessions directed U.S. attorneys to use prosecutorial discretion in enforcing federal marijuana restrictions on states where cannabis has been legalized, a rescindment of previous Justice Department guidelines. 

https://www.washingtonpost.com/politics/trump-gardner-strike-deal-on-legalized-marijuana-ending-standoff-over-justice-nominees

Banking for an Emerging Industry

Since Arkansas voters passed the Medical Marijuana Amendment in November of 2016, entrepreneurs have been working feverishly on business plans for cultivation facilities, dispensaries, testing facilities and other marijuana-related businesses or “MRBs.” No wonder. In 2017, legal cannabis sales topped nine billion dollars in the 29 states (plus the District of Columbia) where state law permits the sale of marijuana for medical or recreational purposes, or both. Yet, many of these state-legal MRBs do not have access to bank accounts or traditional financial services.  What’s going on here and why? And how will this impact Arkansans wishing to purchase medical marijuana?

One obvious legal conflict is that banks are federally regulated, while marijuana is still considered a Schedule I controlled substance under the Federal Controlled Substances Act. The vast majority of banks have opted not to bank MRBs because of the risk of of hefty fines for non-compliance with federal banking regulations. Under the Bank Secrecy Act and other anti-money laundering laws ("BSA/AML"), banks are required to report all suspicious illegal activity to FinCEN, a division of the U.S. Treasury. Most state-legal markets transact largely in cash, even giving rise to the cottage industries of cash transportation and security, which have become a significant part of most dispensaries’ operating budgets.

However, a handful of banks across the country have been accepting deposits from the cannabis industry, thanks to FinCEN-issued guidance on how to report their dealings with state-legal cannabis enterprises without running afoul of their obligations under BSA/AML. This guidance doesn’t address the myriad of other legal issues that surround the conflict between state and federal law, but it did provide a framework under which a few banks have begun to serve the industry.

The FinCEN guidance was prompted by the Justice Department’s 2014 release of the Cole Memos, which set forth law enforcement priorities with respect to state-legal MRBs. Before then, it was not uncommon to hear of MRBs disguising the true nature of their businesses in order to open bank accounts, or even for them to bank offshore.  Though generally well-intentioned, these strategies could easily implicate business owners in money laundering or fraud.  Even today, many business owners still believe they have no other option, especially if they want to be able to accept payments electronically, which is exactly how the vast majority of consumers now prefer to pay.

Further muddying these murky waters, Attorney General Jefferson Sessions recently rescinded the Cole Memos.  However, the FinCEN guidance for banking MRBs remains in place as of today.  This policy dissonance continues to keep major financial players from serving the industry, including Mastercard and Visa. However, innovators have stepped up to fill the void. The banks and payment companies that choose to work with MRBs are generally smaller, regional organizations, using technology to assist with their compliance and regulatory filings. These smaller entities are able to bring financial services to this high-growth industry, and cannabis cash is slowly being removed from the streets and placed into the banking system where it belongs.

Given the current political climate and disjointed nature of state and federal law, Arkansas’ newest industry will need to operate either in cash or through an alternative payment method. The good news is that we have a long history of financial innovation. It should come as no surprise that local entrepreneurs are developing new ways of navigating banking challenges for MRBs. 

MediPays is one such alternative available to MRBs in Arkansas. Much like a health savings account, patients can load money into their MediPays mobile wallet to be spent at participating dispensaries. MediPays has partnered with an established and reputable Arkansas bank to launch its closed-loop payment system where patients and MRBs can transact electronically without the costs and risks of cash. MRBs can use MediPays and its partner to bank their money in an FDIC insured account, pay bills, manage payroll, and create financial reporting.

To learn more about MediPays or to ask further questions about marijuana purchases and banking in Arkansas, contact Dan Roda or Brian Bauer at info@medipays.com.

Cannabis Testing: 5 Things To Know

As Arkansas patients eagerly await the day that they can legally purchase their medication, cultivators and dispensaries are working on plans to produce the safest and most therapeutic cannabis possible. Analytical testing of market-ready products by an independent laboratory will both satisfy Arkansas Board of Health standards and confirm that cultivators and dispensaries have accomplished this goal. Cannabis testing is essential to the protection of public health and safety, as well as the success of Arkansas’s medical cannabis industry. 

Here are five things to know about cannabis testing:

There Are No Federal Standards

When it comes to testing cannabis, there are no federal guidelines and each legal state must create their own standards. States with new medicinal programs often lean on states with established protocols for guidance. Arkansas’s testing rules are very similar to a 2017 draft of Oregon’s cannabis regulations.

Name that Strain

Different cannabis strains, cultivars, or varietals produce different medicinal or therapeutic effects. Consumers need an authenticated lab report and guidance from budtenders or doctors on appropriate strains for their conditions, expected side effects, and dosage. Arkansas requires testing for four cannabinoids; THC, THCA, CBD, CBDA. While these four cannabinoids are a good place to start, they paint an incomplete picture. What about the analgesic effects of CBC or the sedative effects of CBN? For some qualifying conditions, more information is needed to determine therapeutic effect. 

Fraud Happens

Some labs will sacrifice ethics to drive business and increase profits. One unethical practice is to fraudulently inflate THC or THCA numbers in states that lack regulatory oversight or testing of  laboratory proficiency. Once a patient determines the dose that works for them, it is important that the potency information is accurate to ensure dosing is consistent. What if they receive 18% THC product that is incorrectly tested or fraudulently labeled as a 25% THC product? At best, they are a victim of fraud. At worst, they are at risk of a serious adverse event when using a medication that is accurately labeled as 25% THC, as it will be much stronger than what they are accustomed to. Patients and cannabis businesses are put at risk by using a lab that alters the numbers.

Experience Matters

Cannabis cultivation is a highly-regulated industry where mistakes can be catastrophic. Tainted product reaching the market could result in fines, product recall, irreparable brand damage, or consumer harm. Working with an established cannabis lab can lower your risk of adverse events. Ask questions before selecting a testing partner. How many years have they worked with cannabis? What is the age and condition of the machinery? How have they established sampling methods? Do they understand regulatory testing for batch acceptance and what criteria are required? Does the lab have experience with every type of cannabis product? It is most advantageous to use an established lab, with historical data, reputable methods, and a true understanding of the cannabis plant and its medicine. You probably do not want to partner with a lab that is learning to test cannabis with your product, financed by your testing fees.

Some Labs Go Beyond Testing

As the needs of cultivators grow, some labs are evolving to offer new products and services to provide additional value. These might include genetic tests to determine plant sex and phenotype and environmental tests to ensure your facility is free from harmful pathogens or banned pesticide residues. Some may offer consulting services, ranging from remediation of failed product plans to troubleshooting an underperforming crop. You can improve deficiencies in your business and avoid regulatory failure by partnering with an experienced lab which can assist in properly navigating the state’s rules. It may even be critical to your success.